In the near future, the real estate sector is likely to be disrupted by a host of technological advances ranging from artificial intelligence, driverless vehicles and the “internet of things,” to virtual reality (VR) applications that enable people thousands of miles apart to interact as if they were in the same room, according to a panel of experts at the 2016 ULI Fall Meeting in Dallas.
But while these advances have the potential to reduce the value of existing properties, they also could create new market opportunities, the forecasters said.
Virtual reality is one example of a technology that could turn into either a destroyer or a creator of value—or perhaps both at once, though in different contexts.
“When you combine VR with super-fast internet, you get to a place where it is really like teleportation,” said Mark Strama, head of operations in Austin for Google Fiber, a branch of the internet services and technology giant Alphabet, the parent company of Google. He described a recent 30-minute virtual reality conversation with a person who was using the same equipment on a college campus in Afghanistan. “It was an amazing, powerful experience,” Strama said.
Such technology could enable far-flung staffers from companies to interact over extremely long distances, almost as if they were at the same headquarters office. That could conceivably reduce the need for corporate campuses and demand for space in office towers in urban cores.
But virtual reality could also enable real estate brokers to easily service and make deals with clients in faraway places. “You can use these tools for marketing remotely,” said Amy Erixon, a principal and managing director at the Toronto-based investment management firm Avison Young. “If you’ve got a space, you can walk someone through it and they can get the feel for the space and even help design it—even if they’re in Hong Kong and you’re in Toronto.”
Dave Bragg, a managing director at Green Street Advisors, a research and analysis firm in Newport Beach, California, that tracks publicly traded real estate companies, said that the rise of driverless robotic vehicles could have a dramatic effect on the value of some properties.
People increasingly will rely upon ride services that use driverless vehicles, which will drive down the cost of travel to just 15 cents per mile, he predicted. As a result, car ownership will decrease significantly, and much of the present 150 billion square feet (14 billion sq m) of parking space in the United States—the equivalent of four spaces for each car—will not be needed.
The effects of this technology may change where people choose to live. In suburbs such as Summit, New Jersey, Bragg said, “people now pay a premium to live near transit hubs. But that could diminish if a person can take a five-minute driverless Uber ride cheaply, and easily get to the train station.”
With robotic vehicles making deliveries of everyday commodity products, properties with “low-value” retail businesses such as convenience and discount department stores will take a major hit, Bragg predicted.
“Driverless [transportation] will solve the last-mile problem” for deliveries for online retailers such as Amazon, giving them a powerful market advantage, if Bragg’s analysis bears out.
But he also forecast that higher-value retail—such as upscale shopping malls—actually will benefit from the driverless revolution because it will be easier for people to go there and shop. Malls with ample surface lots will rise in value more than ones with parking structures, he predicted, because that land will become lucrative for development as hospitality, entertainment, or residential projects.
Bragg also predicted that self-storage facilities will suffer, because people will be able to repurpose home garage space if they no longer own multiple cars. Other prognosticators have taken the opposite view, however, envisioning urban dwellers in micro apartments using former parking garages to store possessions that they don’t need on a daily basis—and perhaps even using robotic vehicles to fetch them for occasional use.
Bragg predicted that driverless vehicles actually could increase the value of office towers in central business districts, because it would be easier to commute to them. But conversely, he envisions suburban office parks decreasing significantly in value.