Commercial Investment Real Estate September/October 2019 | Page 37

other industries, the economy overall, and, as a result, the
commercial real estate space demand — self-driving cars
being the chief example.
The Road Ahead
fact remains that people still won’t be able to engage in non-
work activities during the commute, such as spending time
with family and friends or engaging in outdoor activities.
Will workers really want to spend more time away from
home to be working in the car?
The market potential for self-driving car technology is enor-
mous. There are 260 million cars, motorcycles, and buses Property Sector Impacts
in the U.S. In 2016, $2.25 trillion was spent on car owner- For office space, it’s theorized that much less parking space
ship, public transportation, rental cars, taxis, limousines, will be required as cars will zip around shuttling people
and black cars. When considering the adoption timeline elsewhere instead of sitting idle while employees work.
for the technology, it is important to understand that most Optimists point out that this will free up previously under-
predictions from industry experts and global automakers are utilized land and space, while pessimists claim the potential
light on acknowledging the significant potential for dispar- loss of NOI for office landlords as income from parking
ity between assumptions and eventual reality. Despite the could be significant.
potential of self-driving technology, challenges exist such as
For multifamily, pessimists posit that self-driving cars
legislation hurdles, cybersecurity risks, and pushback from will induce urban sprawl, negatively impacting the rela-
incumbents like insurance providers.
tive value of urban properties and punishing investors
Many assume autonomous self-driving cars will improve who over-allocated investments to urban cores. Opti-
efficiencies related to commutes. It’s also argued that self-driv- mists argue that reduced parking requirements could
ing cars will increase worker productivity during commutes, boost the potential for housing density and commercial
because passengers could catch up on emails and perform other property. This will create more vibrant environments, and
tasks. Because of these efficiency and productivity gains, it is future development will be less costly thanks to reduced
assumed that people may relocate farther away from a city parking requirements.
center and into the suburbs, increasing commute times while
For retail and industrial properties, shuttered suburban retail
productivity remains steady.
assets will be reborn, either as retail or last-mile distribution
These posited efficiency gains may
be quickly mitigated for the same
New Vehicle Market Share of Fully Autonomous Vehicles
reason lane widening on freeways
High-Disruption Scenario Entails
doesn’t lead to improved traffic times.
• Regulatory Challenges Overcome in Key Markets
In economics, the concept of induced
• Safe and Reliable Technical Solutions Fully Developed
demand, also known as Jevons para-
100 %
High-disruption scenario for
• Consumers Enthusiastic and Willing to Pay
conditional or better autonomy (L3+)*
dox, occurs when technological
High-disruption scenario for
90
progress increases the efficiency with
full autonomy (L4)*
which something is used (reducing the
80
amount necessary for any one task),
but the rate of consumption rises
Ramp-up as AV availability
70
spreads across popular
because of increasing demand.
consumer models
This dynamic is omnipresent in
60
transportation and has even been
Slow consumer uptake
Commercial introduction
referred to as the Iron Law of Con-
driven by low perceived
of full autonomy by new
50
value proposisiton or
tech players and premium OEMs
gestion. Thus, while Marchetti’s con-
negative publicity
following critical incidents
40
stant would tell us self-driving cars
will cause sprawl, Jevons paradox tells
Low-disruption scenario for
Technical and
Manufacturing
30
conditional or better autonomy (L3+)*
us this sprawl will be mitigated due to
regulatory
barriers
capacity for tech
Mass market
delay commercial
players ramps
leaders
more people commuting on roadways.
scale
introduction
up gradually
introduce full
20
of autonomous
autonomy
Whether commuters are willing to
vehicles
locate further from their work envi-
10
Low-disruption scenario for
ronment, the key question is: While
full autonomy (L4)*
15%
productivity could increase, do work-
0
ers really want to spend more time
2020
2025
2030
2035
2040
away from home? Said another way, *Based on the National Highway Traffic Safety Administration's levels of automation
while productivity could increase, the Source: McKinsey
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