PixabayAutonomous vehicles changing real estate – How & where?
CBRE report has considered how autonomous vehicles adoption might affect the office market.
November 27, 2018Real Estate
Autonomous vehicles (AVs) are going to have the greatest impact on US real estate markets since the mass adoption of the car and the expansion of the federal highway system in the 1950s, according to a recent CBRE report, ‘Autonomous Vehicles - Driving Change for Real Estate’.
Working in partnership with 99MPH, a firm that analyses how mobility impacts real estate, CBRE has considered how AV adoption might affect the office market. They hypothesise that outlying locations, including those that are unserved or underserved by public transit, may become more accessible and more desirable. This is because office workers, the report suggests, may be prepared to undertake longer, stress-free commutes - even working or sleeping during their journeys. And as AVs extend the distance that workers are willing to commute, so immediate proximity to the target workforce becomes a lower priority when choosing an office location, although walkable locations may become more valuable.
The advice to owners and occupiers, then, is to focus on creating the most attractive building and work environment possible, because as location becomes less important, so the importance of the building itself increases. Target walkable areas, which are already popular and will probably become even more valuable, and consider a broader geographic range of opportunities for office locations, such as in suburban and exurban locations.
When?
But when will these changes start happening? When will AVs start taking over the roads? Looking at a range of factors - car price, software timing and rollout schedules - the report estimates that by 2030 the amount of road mileage which AVs will capture could be between 10.6% (bear case) and 27.5% (bull case). The early adopters, phasing in AVs as soon as 2020-2022, will be Las Vegas, Phoenix Dallas, Houston and Miami.
However, the report recognises that there are obstacles to the rollout of AVs, not least a potential backlash from crashes and a regulatory crackdown. Recent cases reported in the media include an Uber car that ran down and killed a woman in Arizona, and a man who was found asleep at the wheel of his Tesla, in the middle of a five-lane highway, having been driving the car in semi-autonomous, autopilot mode. Some observers think that these mishaps and deaths should be enough to bring AV industry development to a halt, but so much money has been committed to R&D that such an event is unlikely. Indeed, the CBRE report cites numbers from the Brookings Institution that investment in self-driving cars totalled $80 billion between August 2014 and June 2017 (excluding Asia, one of most active regions in world for AV investment and testing). Furthermore, an inter-state battle is being waged in the US (Arizona and California being the main contestants) to see who can attract AV companies and investment. As the reports states, ‘business-friendly municipalities like Phoenix have already welcomed self-driving service companies’.
Other challenges include hardware, with some industry experts predicting - according to the report - that it could take between $3 billion and $5 billion to build the new factories needed to produce AVs, and that they would not be fully operational until the mid-2020s. In terms of software, the report notes that AVs are only capable at present of operating in ‘relatively benign conditions’, with further development needed for AVs ‘to navigate inclement weather and more complex road layouts.
Software challenges
Though the report does not go into detail, the software challenges of AVs are in fact being addressed. As the industry pushes on, a support community is springing up to make the extra software packages required to make autonomy more sophisticated. In other industries, the software for AVs is already at a sufficient level. For example, Ross Robotics, a privately owned UK company specialising in modular robotics, has been working with the poultry industry to provide a solution for autonomous data collection in poultry houses: amongst other challenges, its vehicles need to avoid running over chickens.
This is not to compare US pedestrians to chickens, but to make the point that industrial and other applications of AVs may be just as important as solutions for transporting people, and ultimately may have a similar impact on real estate. In particular, AVs are changing the way people work: replacing people with AVs in dangerous situations, such as can be found in mining, the oil & gas industry, or in the decommissioning of nuclear power plants (a vast, new market for AVs, with over half of the EU’s 223 nuclear power plants due to shut down by 2025, at a decommissioning cost of over EUR60 billion). The level of AV sophistication needed in these situations can be as challenging as on busy roads, with the deployment of specialised sensors, image recognition, data fusion, analytics and machine learning. In other sectors such as logistics, AVs are forcing down operating costs, while in agriculture, the opportunities to deploy AVs are attracting investment from large companies such as machinery manufacturer John Deere.
Yes, AVs may be about to change the way some people get to the office. But outside of offices - in sectors including industrials, energy and logistics, where their impact may be less high profile - AVs are changing the very nature of work.
Working in partnership with 99MPH, a firm that analyses how mobility impacts real estate, CBRE has considered how AV adoption might affect the office market. They hypothesise that outlying locations, including those that are unserved or underserved by public transit, may become more accessible and more desirable. This is because office workers, the report suggests, may be prepared to undertake longer, stress-free commutes - even working or sleeping during their journeys. And as AVs extend the distance that workers are willing to commute, so immediate proximity to the target workforce becomes a lower priority when choosing an office location, although walkable locations may become more valuable.
The advice to owners and occupiers, then, is to focus on creating the most attractive building and work environment possible, because as location becomes less important, so the importance of the building itself increases. Target walkable areas, which are already popular and will probably become even more valuable, and consider a broader geographic range of opportunities for office locations, such as in suburban and exurban locations.
When?
But when will these changes start happening? When will AVs start taking over the roads? Looking at a range of factors - car price, software timing and rollout schedules - the report estimates that by 2030 the amount of road mileage which AVs will capture could be between 10.6% (bear case) and 27.5% (bull case). The early adopters, phasing in AVs as soon as 2020-2022, will be Las Vegas, Phoenix Dallas, Houston and Miami.
However, the report recognises that there are obstacles to the rollout of AVs, not least a potential backlash from crashes and a regulatory crackdown. Recent cases reported in the media include an Uber car that ran down and killed a woman in Arizona, and a man who was found asleep at the wheel of his Tesla, in the middle of a five-lane highway, having been driving the car in semi-autonomous, autopilot mode. Some observers think that these mishaps and deaths should be enough to bring AV industry development to a halt, but so much money has been committed to R&D that such an event is unlikely. Indeed, the CBRE report cites numbers from the Brookings Institution that investment in self-driving cars totalled $80 billion between August 2014 and June 2017 (excluding Asia, one of most active regions in world for AV investment and testing). Furthermore, an inter-state battle is being waged in the US (Arizona and California being the main contestants) to see who can attract AV companies and investment. As the reports states, ‘business-friendly municipalities like Phoenix have already welcomed self-driving service companies’.
Other challenges include hardware, with some industry experts predicting - according to the report - that it could take between $3 billion and $5 billion to build the new factories needed to produce AVs, and that they would not be fully operational until the mid-2020s. In terms of software, the report notes that AVs are only capable at present of operating in ‘relatively benign conditions’, with further development needed for AVs ‘to navigate inclement weather and more complex road layouts.
Software challenges
Though the report does not go into detail, the software challenges of AVs are in fact being addressed. As the industry pushes on, a support community is springing up to make the extra software packages required to make autonomy more sophisticated. In other industries, the software for AVs is already at a sufficient level. For example, Ross Robotics, a privately owned UK company specialising in modular robotics, has been working with the poultry industry to provide a solution for autonomous data collection in poultry houses: amongst other challenges, its vehicles need to avoid running over chickens.
This is not to compare US pedestrians to chickens, but to make the point that industrial and other applications of AVs may be just as important as solutions for transporting people, and ultimately may have a similar impact on real estate. In particular, AVs are changing the way people work: replacing people with AVs in dangerous situations, such as can be found in mining, the oil & gas industry, or in the decommissioning of nuclear power plants (a vast, new market for AVs, with over half of the EU’s 223 nuclear power plants due to shut down by 2025, at a decommissioning cost of over EUR60 billion). The level of AV sophistication needed in these situations can be as challenging as on busy roads, with the deployment of specialised sensors, image recognition, data fusion, analytics and machine learning. In other sectors such as logistics, AVs are forcing down operating costs, while in agriculture, the opportunities to deploy AVs are attracting investment from large companies such as machinery manufacturer John Deere.
Yes, AVs may be about to change the way some people get to the office. But outside of offices - in sectors including industrials, energy and logistics, where their impact may be less high profile - AVs are changing the very nature of work.
GRI Work Spaces Europe 2019
Further the conversation on the future of workspace and office will be discussed at the upcoming GRI Work Spaces Europe 2019 taking place on 11-12 June 2019 in London.