Have you ever wondered what the guy riding a horse n’ buggy thought the first time a car sped by him? When cars were rare oddities, less than one vehicle in ten thousand, could people imagine highways and cities dominated by millions of them?
Today, it’s easy to understand the value of the automobile. After all, it has fundamentally altered American society - our homes, workplaces, shopping centers, urban planning, vacations, music, movies, and economy, even our sense of freedom.
The driverless car will do it again.
In 2012, Wired Magazine released an article on Google’s “self-driving car.” The article touted the benefits of the driverless car: safety, the ability to track more complicated routes, algorithmically optimized traffic patterns, and so on. What the article failed to mention was the massive impact that the driverless car will have on the global economy.
When people think about the factors that affect real estate values, they usually think about interest rates and the cost of capital, the purchasing power of buyers in the market, and changes in the underlying demographics of an area. In the past several years, however, technological innovations such as the driverless car have greatly changed real estate values and usage.
One of the most commonly used phrases in real estate is “location, location, location.” Locations, however, change over time. The automobile and jet plane greatly impacted the development of cities and suburbs. The rise of the suburbs was due in large part to the advent of the automobile. As automobiles grew in popularity, there was political and economic pressure to expand road networks.
The creation of the interstate system brought a large demographic shift in the United States as affluent and middle-class Americans increasingly migrated out of large cities and into the suburbs.
There are over 600,000 American workers currently enduring “mega-commutes” of 90 minutes daily (one way) or more. Driverless cars will ease the pain of commuting and allow urban renters to flee the high prices of the core to purchase homes in the suburbs and beyond.
The ability of passengers in driverless cars to travel hands-free and stay completely connected will enhance personal productivity and increase the amount of time that commuters are willing to spend in the car. This will completely reshape what were once thought of as unattractive rural or suburban areas to live in. As populations in both suburban and rural areas continue to grow, real estate developers will have to adapt to the new demographic. Builders might try to recreate suburban communities with an urban feel by developing towns with integrated retail, office, multifamily and hospitality.
Other important implications for the real estate industry include a reduction of parking spaces (Forbes estimates that in some U.S. cities, parking lots cover more than a third of the land area) and the overall increase in value for a number of otherwise useless suburban properties.
The driverless car breaks nearly every norm we know just like the invention of the Internet, electricity, computer, and, well, the car did.
1. “Google’s Trillion-Dollar Driverless Car—Part 2: The Ripple Effects,” Forbes
2. “More Americans Moving to Cities, Reversing the Suburban Exodus,” The Wire
3. The NAIOP Research Foundation Newsletter
4. “Let The Robot Drive: The Autonomous Car Of The Future Is Here,” Wired
5. Image Source: etech road, Flickr