The Future of CRE…. Parking Lots?

While there are many naysayers regarding the future of driverless cars, past experience tells us that they will become ubiquitous in the decades to come. Just look at these 3 examples of naysayer predictions and their ultimate outcome.

In 1995, Bill Gates famously said “The internet is just a passing fad”. This was in response to a question put to him regarding his lack of concern over Netscape dominating the browser market at the time.

In 1994 the Financial Post (Canada) described e-commerce as a “tele-shopping magical experience,” and the story that followed was a bit dismissive of “the latest fad.”
In 1995 Amazon was launched.

In 1993, in response to rumors, used car dealers across America said that consumer electronics retailer Circuit City “knew nothing about the automobile business and wouldn’t be successful if it ventured into the business”. That year, Carmax opened its first store in Richmond, Virginia.

On the flip side, forward-thinking people like Travis Kalanick (CEO of Uber) and Elon Musk (CEO of Tesla) predict that in the decades to come car ownership will become a thing of the past. That people will prefer to use their smartphones to hail a driverless cab whenever they need transportation. This prediction is supported by insurance industry estimates of fleet insurance costs for driverless cars being a fraction of what they are currently. And also supported by the obvious fact that car ownership is a “money pit” sucking up a large portion of an average person’s disposable income.

So by now I am sure many of you reading this article are asking “OK, so what does any of this have to do with Commercial Real Estate?” Well, I will now make a prediction of my own. I predict that driverless cars will cause major disruption in the CRE industry. Huge parking lots and decks located in retail and urban centers will become obsolete. They will no longer be “highest and best use” of the property.

The storage lots for driverless cars will be better located in the periphery of urban centers, not on prime real estate. In addition to providing vehicle parking while waiting for the next fare, there will be a need for repair and restoration services located at each lot. After all, fleet vehicles do need frequent maintenance and cleaning. These revolutionary developments will be the genesis of an entirely new service industry devoted exclusively to driverless cars. We might call this new business model “Vehicle HoverPorts”.

And for CRE Brokers…? Simply put. Opportunity! Commercial Real Estate Professionals will be the folks that will be handling transactions to sell the obsolete urban parking facilities and to find the properties appropriate for the new driverless terminals.

Vehicle Hoverports… What say you?