The growing popularity of electric vehicles (EVs) is creating new opportunities and challenges. And all the while, the emergence of autonomous vehicles (AVs) and air taxis, such as Uber Elevate, hint at a not-so-distant future in which urban mobility may be even more profoundly changed.
Not surprisingly, all these new innovations promise to have a significant impact on how people live in and move through a city. As commuters, residents and visitors alike adopt emerging methods of transportation, this shift will have a ripple effect on many aspects of urban life, such as city planning and public transportation systems. And there’s no doubt commercial real estate will experience significant changes. In fact, mobility shifts are already making waves in CRE in many large cities.
Implications for CRE
Major metropolitan areas, including Dallas, are beginning to enjoy the benefits of ridesharing programs, e-scooters and dockless bikes—while also grappling with the challenges these innovations present.
Here, we count down the top 10 challenges and opportunities that this shift in mobility creates for cities and for the CRE industry in particular, drawn from Cushman & Wakefield’s recent report, “Mobility Shifts and Commercial Real Estate – Implications of Ridesharing; Autonomous Vehicles; Micro-mobility and Electric Vehicles”:
- Ridesharing, AVs, e-scooters and bikes are changing consumer behavior: Ridesharing is already reducing use of public transit and increasing the number of vehicular miles travelled, which in turn is increasing congestion and pollution. These trends are set to accelerate with widespread AV use.
- First adoption will occur in industrial logistics and manufacturing: Due to the potential safety benefits of technology such as AVs, initial widespread use is likely to be in industrial facilities. This is particularly true in freight and trucking, especially in sparsely populated areas where talent acquisition can be a challenge.
- Private car ownership will survive—for now: Ridesharing hasn’t reduced car ownership yet. As a result, parking demand is unlikely to change for multifamily developments and single-family homes.
- These trends free up space—lots of it. Urban areas should repurpose it—or risk obsolescence: At least 34 percent of existing parking in the U.S. (61 billion square feet) and up to 140,000 gas stations will be at risk of extinction by 2040-2050 as a result of increased AV and EV adoption. How might all this space be repurposed?
- There is fast-growing demand from data centers, cloud computing, entertainment content, high-tech manufacturing, cybersecurity and original equipment manufacturers (OEM): In the Bay Area alone, mobility companies occupied just under 6 million square feet in 2018.
- Companies will enjoy greater location flexibility—but location will still matter: As commute times matter less, companies can open offices in less expensive suburban locations, increasing suburban sprawl. As AVs reach full self-driving capability, expect re-densification of urban cores.
- Potential to erode transit-oriented development (TOD) premiums: TOD premiums might decline or even disappear over time. On the other hand, public transportation systems could be revitalized by self-driving mass transit buses or trains, particularly to combat increased congestion in major urban markets.
- Large, wealthy and densely-populated cities with expensive parking are likely to be early adopters: These include gateway cities, as well as San Jose, Denver, Seattle and Philadelphia that already have early “mobility-as-a-service” (MaaS) adoption. Car-centric cities such as Phoenix, Orlando, Las Vegas and Raleigh/Durham are likely to see less change.
- Widespread adoption is at least a decade or two away due to several obstacles, including regulatory, environmental and legal challenges and overall travel demand:The full impact of regulatory and environmental factors and increased congestion remains to be seen, as do declining overall travel demand and growth of other mobility options, such as the electric scooter and public transportation. All these inject significant uncertainty into the actual trajectory and direction of change.
- To ensure ongoing success, CRE professionals should combine constants like the need for talent, innovation centers and building amenities with data, flexibility and efficiencies: Occupiers still want talent, and talent flocks to large, dynamic urban cities driving change and creating jobs. Building-level soft amenities, services and technologies that straddle hospitality services and data collection from buildings and occupiers (via surveys) are smart bets under any scenario. CRE players who focus on flexibility and efficiencies—and can position assets to adapt to mobility changes—are best positioned to outperform their competitors.
Rapid Change on the Horizon
Source: The Atlantic
So, when will the mobility evolution really start having an impact on CRE? The Cushman & Wakefield report laid out some near, mid- and long-term real estate opportunities. Some of the notable examples include:
- In the near-term(now to 10 years), expect immediate changes to industrial businesses, including the relocation of large warehouses and distribution centers to suburban and/or less costly neighborhoods. With respect to urban offices, anticipate more dedicated waiting areas and/or bikeshare/scooter docks, and dedicated parcel delivery zones to help improve lobby traffic.
- In the mid-term(10-15 years), expect new employee parking space models to increase warehouse efficiency design for industrial CRE. In suburban areas, expect repurposing of parking and offices for bike and scooter storage for short-distance needs, such as office tenants heading to lunch or apartment dwellers going to the grocery store.
- In the long-term(15+ years), expect cities to be redesigned with mobility top of mind. This includes dedicated pick-up spots for autonomous vehicle fleets and a decreased need for truck stops, leading to redeveloped CRE opportunities along major highways.
The Outlook in Dallas
As a commuter city with several distinct, disconnected neighborhoods, such as Deep Ellum and Bishop Arts, and a fast-growing industrial CRE market, Dallas is a prime location for a variety of mobility innovations to take root.
Craig Wilson, Executive Managing Director at Cushman & Wakefield, believes these emerging trends will become more widespread throughout North Texas—but it will take time.
“Long-term I think you’ll see those innovations begin taking hold in Dallas, particularly in and around the Central Business District,” he said. “The growth and explosion of various housing alternatives in the CBD and surrounding areas has attracted a population that is more flexible in terms of transportation requirements, so they have already started embracing new modalities.”
However, Wilson acknowledges that ridesharing and other modes of transportation are easier to implement in tighter geographic areas, and can be more difficult if a person’s daily needs are spread out over a larger geographic area. And that’s what may keep many Texans reliant on their personal vehicles for years to come.
“For example, if it’s 20 miles between your house and your job and there aren’t any public transportation alternatives, then you are likely driving yourself for the foreseeable future,” he said.
Wilson believes the most difficult period surrounding these new technologies will be the near-term future, because office buildings still must provide parking and transportation solutions that support today’s demand requirements.
“A building that provides below-standard parking solutions because of anticipated expansion of future technologies will be at a distinct disadvantage against their competitors who are still providing traditional solutions,” he explained. “Even in the CBD, which is maybe where the most progressive transportation implementations would likely see the most success, you are still seeing major buildings add to their parking capabilities to address the realities of the current demand.”