One hundred years ago, if you were riding your horse down the Main Street in any city in America, you might have spotted an early version of the automobile, or as they were called back then a horseless carriage. Little did you know at the time, but that contraption was going to change life in America in a dramatic way. The automobile changed the way we lived and where we lived. It also changed the way we used real estate. 

We’re about to experience another paradigm shift of the same magnitude. With many of world’s most important companies investing billions in driverless vehicle technology, many experts believe these vehicles will be a major presence on U.S. highways by 2025, just eight short years away. Personal car ownership may become a thing of the past as car sharing and driverless cabs transport people and goods. Real estate will be one of the industries that will feel a significant impact from this new technology.

Since real estate investing is a long-term game, investors need to look into the future to see how this technology will impact their real estate investments. Past experience shows that when a new technology takes hold, some types of real estate benefit greatly and others suffer. We’re currently witnessing the negative impact that on-line shopping is having on retail real estate. Driverless vehicles will change how we use real estate and what types and locations become more and less valuable.

A century ago, most land immediately outside city centers was farmland. As a result of the automobile, those same areas are now suburbs with their own economies made possible by the automobile. Inland cities that were primarily only accessible by train and river boats are now easily accessible by a network of Interstate highways allowing these cities to grow and become major economic centers. Desirable locations like Aspen and the high real estate values that come with that popularity would only be made possible because of mobility made possible by the automobile. Without the invention of the automobile, real estate in towns like Aspen would probably have little value. 

So what could be the real estate investment opportunities in the next century with driverless vehicles? Areas that are now devoted to parking cars may become redevelopment opportunities as parking garages become obsolete as the need for parking is greatly reduced. People may desire to live in more remote places knowing that they can work and relax while commuting. Traffic jams will likely be eliminated as driverless cars communicate with each other on the highways allowing them to travel faster and safer without traffic lights making commuting issues a thing of the past. Physical retailing outlets may become less necessary as driverless vehicles deliver products to customers at their homes and work places. Hotels may become less important as people can sleep in their vehicles as they travel from location to location. Home parking garages may go the way of horse stables and carriage houses as more people decide not to own cars freeing up space for alternative uses. It’s also possible that someone could get in their driverless car in San Francisco in the evening, go to sleep and wake up the next day parked in downtown Aspen ready to hit the slopes; and return to San Francisco that evening in time for work the next day.     

With this new technology about to become reality, an astute real estate investor should look at each investment and imagine how driverless vehicles will impact that investment. Will this new technology likely increase or decrease the value of the property? Are there hidden opportunities if the need for car parking is greatly reduced or eliminated?

Will people need or want to live in certain locations if they don’t need or want to own a car? Will existing patterns of behavior change because of driverless technology? These questions are appropriate for a specific location or an entire community. Investors should ask these questions and start looking at each real estate investment with an eye toward how the value of that property may change, positive or negative, with the onset of driverless vehicles.

William Small, CCIM is the Founder and CEO of Zenith Realty Advisors, LLC, a
commercial-investment real estate advisory and investment firm. If you’re interested in
contacting him, you can reach him at (970) 925-3866 or by email at
William.Small@ZenithInvestment.com