The advent of driverless autonomous vehicles (AVs) and drone aircraft, coupled with the rapid shift to a collaborative economy in which entrepreneurs find ways to monetize unused capacity, will dramatically transform urban areas and disrupt the real estate sector, according to a pair of speakers at ULI’s 2017 Fall Meeting in Los Angeles.
“There is a meteor coming through real estate, and it’s going to create and destroy more value than anything we’ve ever seen,” said Brad Greiwe, cofounder and managing partner of Fifth Wall Ventures Management, a venture capital firm that manages $240 million in assets and focuses on investing in technology solutions for the real estate sector.
Greiwe warned developers and property owners that they need to have a business strategy in place for when AVs reach the market, which he said should happen sooner than many expect.
“The consensus right now is 2025, and it’s going to hockey stick,” he said, providing a visual analogy for the rapid growth pattern and drawing a parallel with tech startups. He predicted that “my 18-month-old son will never learn to drive, and he’ll think that we were crazy for ever having done it.”
Greiwe predicted that vehicle autonomy would alter everything from commuting patterns to how people shop, and even how they store their possessions. He described a scenario, for example, in which people used smartphone apps to retrieve from distant storage facilities infrequently used items, marked with bar codes, with the delivery accomplished by AVs.
The rapid shift to AVs would create new winners and losers in the real estate sector, Greiwe said. Those who stand to benefit include owners of central-business-district office space, which would become more accessible once the fleets of shared AVs envisioned by Greiwe reduce traffic congestion. Other winners could be owners of urban parking lots and suburban malls that could repurposed for other uses. Greiwe also predicted a promising future for rural warehouses, which would become lucrative as last-mile distribution centers for robotic deliveries, and new development with minimal on-site parking.
On the losing side of the ledger, Greiwe said, will be assets such as airport parking lots, suburban office parks, infill self-storage facilities, and roadside motels, which will decline in value because AVs will eliminate demand.
Transportation entrepreneur and author Robin Chase, cofounder of car-sharing pioneer Zipcar and 2017 recipient of ULI’s J.C. Nichols Prize for Visionaries in Urban Development, described a seismic shift to a new economic system. It will be driven by a proliferation of companies in the mold of Uber and Airbnb, providing online platforms in which large numbers of people collaborate to find new and profitable uses for underused capacity of all sorts.
Such collaborative ventures have a competitive advantage over the traditional economy because they combine the financial heft and organizational muscle of giant corporations with the diversity and customization of small businesses, she said. In addition, because they rely on capacity that has already been created, they can grow much more rapidly to take advantage of demand.
Chase cited the example of Airbnb, which grew in its first four years of operation to the equivalent of 650,000 hotel rooms—a capacity that it took the InterContinental hotel chain 65 years to achieve.
But sharing unused capacity does not have to be limited to car rides and hotel rooms, she pointed out. She said new businesses could be established that share all sorts of things besides physical objects—“networks, keystrokes, experiences, even times of day.”
“Think in your own lives and in your companies where there is excess capacity,” said Chase, who describes her economic vision in more detail in her recent book, Peers Inc: How People and Platforms Are Inventing the Collaborative Economy and Reinventing Capitalism.
Sharing-economy tactics such as “slicing,” in which customers pay only for the portion of something that they use, and aggregation, in which a platform provides access to a multitude of small-scale service providers, promise to alter land use, Chase said. She envisions retail space, for example, being sliced to accommodate pop-up vendors so that a variety of different items might be sold in the same place depending on the hour or day. Similarly, a space that accommodated a fitness center by day might be repurposed as a nightclub after hours.
Chase said building owners could profit from selling all sorts of underused capacity, from unneeded space in lobbies to excess heat.
Chase was more ambivalent about the effects of AVs and drones. She said that in an unregulated environment, people might abuse the low cost of operating an electric-powered AV by allowing their vehicles to roam the streets endlessly instead of paying for parking. She also imagined drones being summoned to deliver rolls of toilet paper. “Our streets will be 100 percent clogged if we just let it play out,” she said.
But Chase also envisions using collaborative economy principles to solve urban problems and fight climate change.