Commercial Investment Real Estate May/June 2017

Driverless vehicles are coming, and coming fast. Many of the world’s largest and most prestigious corporations are investing billions in the technology. Google has been testing a self-driven Toyota Prius in says Todd Clarke, CCIM, president of NM Apartment California since 2009 and has logged more than two million Advisors in Albuquerque, N.M. “Mass transit is coming miles after expanding its operation to Arizona, Texas, and faster to urban centers because many millennials view cars Washington. Uber began an autonomous vehicle pilot pro- as a waste of resources. It’s not a social activity, and they gram in Pittsburgh in September 2016, while a start-up called cannot text while driving. nuTonomy is running public trials in Singapore and Boston. “Two years ago, I would say the transition would take a Tech giant Apple is pursuing driverless vehicle oppor- long time. Now I think the transition will be pretty quick, as tunities, as are Ford, General Motors, and the majority of in the next 10 to 20 years. I ask myself: What will things be automobile manufacturers. Electric car innovator like if I don’t need four lanes of road? It’s amaz- Tesla Motors already has partial driverless tech- ing to think what the redevelopment potential of nology available; its “Autopilot” software upgrade a four-lane road could be.” is part of a $4,250 technology package available Changing Property Valuations for several of its vehicles. One probable result of these and other changes The public sector also is paying attention. In triggered by the large-scale adoption of driver- 2016, the U.S. Department of Transportation in potential less vehicles is that property value will be judged announced a 10-year, $3.9 billion investment savings for the by different criteria. “to accelerate the development and adoption of U.S. freight “Some areas currently do really well because safe vehicle automation through real-world pilot transportation they’re easy to get to by car, or it’s cheap to park,” projects.” industry. Branson says. “Those beneﬁ ts are less valuable in Nearly 80 years after General Motors’ Futur- ama exhibit at the 1939 World’s Fair foretold “ﬁ ne green an environment where people can hail a robot car and get parkways upon which cars would drive themselves,” autono- where they want to go.” mous vehicle technology is poised to be our next cultural As an example, Branson points to the impact that the revolution. automobile had on real estate at the turn of the 20th century. “There will be new winners and losers, just as there has been Major Shifts in CRE during any other signiﬁ cant transportation technology shift Estimates vary as to when driverless vehicles will dominate that occurred during the past couple of hundred years,” he the landscape, but many experts believe that they will be says. “When we switched from horses and trolleys to auto- a major presence on U.S. roads and in individuals’ lives by mobiles and electric trains, the impact was profound. It had 2025. Should this happen, the changes to U.S. businesses a signiﬁ cant effect on our cities and our real estate values.” and people’s daily lives will come swiftly. While Tom Bothen, CCIM, looks forward to a future “It’s going to require a major shift in human behavior,” of less congested roads and more space with fewer parking says Gunnar Branson, CEO of the National Association lots, he thinks the transition will take longer — 2050s or of Real Estate Investment Managers. “But change takes a 2060s for substantial adoption — because the current cost really long time until it doesn’t. When the shift happens, for adding driverless technology to a car is about $75,000 it’s going to happen very quickly. Sometimes change deﬁ es to $100,000 extra. However, a semi-autonomous Honda Civic is about $20,000 total, indicating that prices will drop our human attempt to control it.” There are many examples of technology that existed, but substantially. took decades to become widely adopted. Branson cites MP3 “Changes will happen more gradually on the roads, but technology, which was patented in the late 1980s. Not until the big push for public transportation is happening already,” a couple of decades after its development did MP3 technol- says Bothen, owner of Bothencharles Real Estate Group, ogy transform the music industry. LLC, in Willowbrook, Ill. “Urban planning, zoning, and When the change comes, some aspects of the commercial building codes will drive the impact of driverless vehicles. real estate industry seem primed to beneﬁ t greatly, while oth- Globally, the population trend is that 70 million people ers are likely to suffer. Where will be the greatest changes? annually are moving to cities. We have to ﬁ nd more efﬁ - “A less car-centric world will affect all sectors of com- cient ways to move those people around, which will be some mercial real estate, especially multifamily, ofﬁ ce, and retail,” combination of driverless cars and public transit.” $168 billion CCIM.COM In April 2016, six of the largest manufacturers in Europe completed a test in which convoys of semi- automated smart trucks arrived at a port in The Netherlands. One of the convoys traveled more than 1,200 miles. May | June 2017 31

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