Ridesharing and self-driving cars are going to have a major impact on Owner’s existing portfolios in the near future — here’s how to get ready today.
There is growing evidence all around us that the confluence of ridesharing and autonomous vehicle (AV) technology will profoundly change the way we live, work, and move around in the nation’s densest cities. For the last few years, futurists have predicted these changes, which will be largely driven by AI technology, and the “ripple effects” they will have on the built environment.
A rapidly growing list of major brands (Uber, Google, Lyft, etc.) and auto manufacturers (Volvo, Ford, Tesla, General Motors, etc.) are announcing major investments in autonomous vehicles. The general consensus is that the technology will be ready for widespread adoption sometime between 2021 and 2027 — in other words, a massive disruption is right around the corner.
What few seem to realize is just how far-reaching the impact will be. Nearly every aspect of day-to-day life will be affected, which of course, includes transportation, infrastructure, real estate development, and property management. As such, today’s building owners need to understand when and how to prepare their existing properties in order to remain competitive — and profitable — in the future.
The problem of ‘when’
From an Owner’s perspective, the “when” part of the issue is particularly problematic. Why spend (or budget) capital today to address an emerging disruption with A) uncertain effects on the property and its income stream and B) uncertain timing? Many are simply choosing to wait for more evidence about what effects will unfold and exactly when the changes will occur before doing anything.
However, the decision to wait rather than act carries its own risks. Taking prudent planning steps while waiting for widespread adoption to occur can provide a meaningful head start — opting to not take any action will result in a significant competitive disadvantage.
Below, one can find tips for how Owners of larger, existing multi-family, office, or retail projects in dense urban area can prepare for a world of AV and rideshares.
Take inventory: Identify key aspects of your property(ies) affected by the shift to AV and shared riding:
Parking structures: At some point, some portion of the parking structure will face re-purposing to a use other than parking for tenants and their visitors. Key “baseline” information that is needed to evaluate alternative uses includes accurate “as built plans” and specs (e.g., live loads, slope of parking ramps, clear heights, electrical capacity, lighting and life safety system capacity, parking count, gated access limitations, etc.)
Are there nonconforming “grandfathered” conditions that will need to be corrected if the use changes from parking to something else on one or more floors? Will columns structurally support more weight on existing floors or new floors that may be added in the future? This baseline information is relatively inexpensive to put together and forms the starting point needed to evaluate alternative uses later on. It should be part of 2018 asset plans.
Off-street vehicle pick-up/drop-off: As more and more tenants and visitors arrive and depart by shared ride services, regulators are likely to treat larger commercial and residential projects like schools — examining peak period traffic and the resulting queuing and congestion. Owners should work with a third-party traffic engineer to determine current off-street pick-up/drop-off capacity. How many vehicles can your site handle during peak hours versus double and triple the current activity levels?
Curb space allocation (on-street parking and pick-up/drop-off capacity): Determine how much curb space surrounding your building is available and not preempted by public transit stops, bicycle lanes, taxi stands, fire plugs, or other designated uses beyond your control. The sum of your off-street and on-street capacity dictates how much peak drop-off/pick-up you can accommodate.
Buildings located near the concentrations of pick-up and drop-off will have the opportunity to rent parking to ride-sharing providers. Modifications will be required: electrical charging stations, service bays for cleaning and maintenance, automated access and billing — to name just a few. Reach out to ride-sharing services to get their requirements, develop a proforma rent based on associated capital costs.
Monitor the ‘when’
The timing of AV and ridesharing adoption will vary by market area. Densely populated urban areas where the “sharing” economy is already prevalent (e.g., Bay Area, Los Angeles, Seattle, Vancouver, Portland, etc.) may feel the effects much sooner than others.
That said, Owners in many markets are “collegial” competitors. As such, it may be possible to set up quarterly breakfast meetings with competitors where participants share changes in demand they are experiencing at their own projects — unused parking, increased shared ride drop-off and pick-up, etc. This may be the most cost-effective early warning system Owners can use to monitor the “when” component.
Over time, Owners should expect increased investor awareness and concern about how the societal trend away from commuting in privately owned vehicles towards ridesharing in autonomous vehicles will affect the value of their investments. Proactive management teams will begin to formulate answers to these questions ahead of their being asked by their investors.
At the end of the day, this is something the industry needs to start preparing for now. Widespread adoption of AV and ridesharing technologies, at least within certain markets, will likely occur within the next five years — if you wait another two to three years to start tackling this issue, chances are you’ll already be too late.
Gregg Young is a member of the Stanford Real Estate Council and life-time member of the Stanford Professionals in Real Estate alumni association. Gregg is also currently on the Board of Advisors at VIATechnik, a leading virtual design and construction firm.