REDEFINING LOCATION
Location is a fundamental principle in the appraisal field . If a home was 25 feet from a beautiful ocean access point , many people , even those who aren ’ t real estate experts , would likely think its location makes it very valuable , simply because of its proximity to the water . Likewise , an office building in the heart of a popular business district might be valued more than the same building in a more remote area .
But does the importance of location remain static ? Or is there a dynamic aspect to it , especially with changing environmental
A driverless vehicle would allow an individual to work during the daily commute . Does such a situation allow a worker to live farther from a central work location without incurring as significant a time loss because of the DV ?
and economic issues ? Of course , the impact of the location factor must change — and the repositioning of factors , both favorable and unfavorable , can influence it .
Two recent developments — COVID-19 and the advent of driverless vehicles — have changed how people fundamentally interact with commercial real estate .
DRIVERLESS VEHICLES & REMOTE WORK Consider the impact of driverless vehicles ( DVs ). A DV would allow an individual to work during the daily commute , answering emails , taking calls , etc . Does such a situation allow a worker to live farther from a central work location without incurring a significant a time loss because of the DV ? If so , this changes the importance of location . Similarly , DVs have the potential to increase safety and reduce costs . With these positives , would the value of proximity to a CBD office building be less of a concern ?
Access to transportation that is convenient but does not detract from the use of the residence is a positive factor when examining location . Rapid transit that is accessible ( but not too close to a property so as to detract from the location because of related traffic ) might be considered a positive aspect for a property if it is utilized , while the congestion and noise pollution associated with buses and light rail can be a negative if they are not used . DVs are an important technology with great potential to impact the cost , safety , time , and convenience in assessing a particular asset ’ s location . If you are required to work in a specific office , the location of that office obviously impacts where you choose to live .
Will the widespread adoption of DVs prove to be a major instrument to enhance the value of residential sites further from the business district ? If a worker can have the benefit of a suburban home , providing more room for children to play , etc ., yet still maintain good access to the business district by using a DV , this may enhance the suburban site and possibly lower the value of the site closer to the business district . That is , if the DV allows the worker to commute to the business district , allowing the passive commuter to work while being driven to the business district , this can change the value of surrounding residences , both near and far .
DV technology won ’ t erase the importance of location . But , arguably , DVs will lessen it in some instances . Location could be tempered by DVs as much as residential living locations have been affected by access to buses , trains , or other transportation .
If an employee can work remotely , saving time and resources , and if the employee can access the meetings that were previously available only in person , the location of the employer is less important . And wouldn ’ t it follow that what was once a very valuable location for an office might now be less so ? Both DVs and virtual access to work are two crucial factors that could alter our concept of location when it comes to commercial real estate . So how should we modify the valuation process for assets affected by these trends ?
In a 2019 Forbes article concerning driverless trucks ( DTs ), the point was raised that the value of some locations , used prior to the development of the technology , have been impacted by the DT . The article noted :
“ The U . S . Department of Transportation announced last fall that it will not interfere with the advent of driverless truck usage , but many states and municipalities remain extremely concerned . Immediate push-back came from consumer rights groups concerned with safety and potential cyberthreats , and a significant public fear of autonomous vehicles . I believe if public fear manifests in delays and regulation , then even if the industry is ready to roll out these trucks in the next few years , they are probably many more years away from visiting your neighborhood streets . The logistics industry will be OK with that for now , while focus remains on driverless trucks for highway use only .
“ Ultimately , driverless trucks may certainly impact facilities ’ location decisions in a few important ways . Intuitively , we are inclined to think the technology will allow for fulfillment centers to be in more rural / lower-cost environments , which may be true , but only to the extent those environments can still provide enough labor for the facility to operate . Despite rapid advances in robotics , e-commerce warehouses are labor-intensive , so locations will require a solid labor pool to be available .”
Clearly , the automobile has allowed workers to live farther from the main office , even if working at a central office is required . Additionally , rapid transit and other means
Previous spread , photo by Hrui ; above , photo courtesy Waymo LLC
34 COMMERCIAL INVESTMENT REAL ESTATE MAGAZINE SPRING 2022