In November 2019, the NAIOP Research Foundation released a report that examined how autonomous vehicles (AVs) could impact the commercial real estate industry in the years ahead, as well as the steps currently being taken by local governments to prepare for that future.
The report’s author, David Dale-Johnson, Ph.D., of the Alberta School of Business real estate program, recently presented a NAIOP webinar to update the industry on this rapidly changing topic.
“It’s going to take us a long time to get there, but we’re on our way,” he said.
Dale-Johnson said there have been dramatic changes in the electric-vehicle (EV) space this year. For example, Tesla recently announced a low-cost million-mile battery that will allow electric vehicles to be competitive with gas-powered vehicles. Dale-Johnson said that sensor technology continues to advance, with infrared sensors being tested as an addition to radar cameras and lidar. (Lidar is an AV technology that uses lasers to measure distances between the vehicle and objects.)
Dale-Johnson said that Waymo, Google’s autonomous vehicle operation, announced its fifth-generation AV in March. It features higher levels of sensors, cameras and lidar. Additionally, Amazon is experimenting with autonomous package delivery.
Smart-city technology is in its early stages as well, Dale-Johnson said. Eventually, it will include sensors placed in traffic lights and street lights that will allow AVs to communicate with their surroundings and operate much more safely. It will be powered by 5G, which should begin rolling out in the next few years.
Where Is the Disruption?
Dale-Johnson said highly autonomous vehicles may not appear on the market until 2030 or later. When they do, disruption will arise from a merger between AVs and the sharing economy. Society will eventually move toward transportation as a service (TaaS) and autonomous mobility-on-demand (AMoD).
“Cars are expensive, as is parking,” he said. “We only use cars about 5% of the time, and about a third of cities are taken up with parking spaces.”
Citing Canadian research, Dale-Johnson said that by giving up owning vehicles, the average household would save $25,000 in capital costs, maintenance and insurance, and parking fees. Developers could also see significant savings from the mass adoption of AVs.
“Building parking as part of a multifamily building or a shopping center or an office building generally does not make economic sense,” he said. “The cost of land and the cost of related construction generally doesn’t offer a return to justify that space, so it has to be picked up by higher rents in the rest of the development.”
Dale-Johnson believes that the technology for EVs, AVs and on-demand autonomous vehicles will converge by 2030.
“When AVs become affordable, the car goes away as the biggest household expense besides housing,” he said.
However, the coronavirus pandemic could have a short-term impact on the growth of TaaS. Dale-Johnson said that market research institute Ipsos found that two out of three respondents to a recent survey would prefer their own car for the foreseeable future.
How Can Cities Prepare?
According to Dale-Johnson, cities are starting to plan for the potential revenue that will be lost from parking infractions and speeding tickets when AV adoption reaches a tipping point. This income could be replaced by user fees based on miles traveled.
“It would be paid by fleets, not individuals,” he said. “It would be factored into the passenger’s costs for using the fleet.”
Additionally, Dale-Johnson said many cities are already working on first mile/last mile solutions to get citizens to rapid transit via AVs. There are also opportunities for autonomous buses instead of expensive rapid transit such as rail systems, and there could be dedicated lanes for autonomous vehicles so that they can be integrated with human-driven vehicles.
As for infrastructure, curb management is crucial, he said. Investments are being made to enhance pick-up and drop-off zones. For example, they should be larger and indented to get them out of the flow of traffic. EV charging stations will need to become more prominent. Smart street lights, smart traffic lights, sensors and 5G infrastructure will need to be enhanced and expanded. Parking and waiting areas for fleet vehicles must be built and maintained.
Parking ratios will be greatly reduced in cities when AV adoption takes off. Many cities have already eliminated minimums.
“Land use planning must account for the reduced need for vehicle parking,” Dale-Johnson said.
Less parking could present more opportunities to redevelop or repurpose properties. For example, shopping malls could become mixed-use, higher-density properties, and parking structures could be repurposed.
Educating consumers about AVs will be a big challenge, Dale-Johnson said.
“Lots of cities are experimenting with providing their communities with an ‘AV experience’ so they can get a sense about the benefits of transportation as a service,” he said.
Right now, consumers don’t seem very excited about this evolution. For example, Dale-Johnson said many people still have “range anxiety” regarding electric vehicles, and gas prices are expected to remain low for the foreseeable future. Those factors could slow adoption of AVs.
