- The suburbs and exurbs are not dead; they may only just be starting to grow.
- Commercial real estate in particular is poised to be completely upended by the driverless car.
- The Fort Hood real estate market is perfectly positioned to reap the rewards of this technological revolution.
Technology has massively impacted American real estate trends in the past. The invention of air conditioning is probably the single biggest reason for the American South’s tremendous economic and population growth in the last half century. Suburbs didn’t exist prior to the invention of the automobile, when commuting became available. The invention of the driverless car will likewise have massive implications for the real estate industry.
Long Live Exurbia
“I want to be 20 minutes from Fort Hood”. “I want to be 30 minutes from downtown Austin”.
Who cares about the hour commute if you are spending the whole time napping?
The largest impact of the driverless car will likely be the near extinction of the “commute” consideration. Currently, the mantra in real estate is “Location, location, location”, but that may matter lot less when you can get things done in the car on your way to and from work – catch up on Facebook, get a head start, making phone calls, playing games or even sleeping.
The result is that many people will broaden their geographic search for the perfect home. Low priced communities that were previously “too far” will suddenly be “just right” and worth the commute. The automobile created the suburbs. Driverless cars will make the exurbs King.
This isn’t just good for exurbia. It’s bad for city dwellers. Their home values were previously inflated by many multiples based just on location and proximity. When proximity matters less, urban home values will fall.
The commute and location won’t be completely irrelevant. There would still be gas expenses. Many people don’t want to be cooped up in a car too long, driving or not. And school districts may still matter. But for most home buyers, driverless cars will open up opportunities.
For our market in Killeen, TX, this future is a very good thing. Killeen is only an hour from the bustling, high priced Austin market, and yet home prices are 1/3 of what they are in Austin. Why? Because we’re still too far away. Driverless cars will make commutes less meaningful, and Austin-ites will flee the dense, pricey city for “exurbs” like Killeen, where their dollar gets them so much more in a home and a better quality of life.
Where Did I Park My Car?
No, where did your car park itself? Maybe at your office? Or maybe it drove itself home after dropping you off? Or maybe off to an out-of-the-way parking garage, all by itself.
Finding a parking space is a pain in the rear sometimes. It won’t be any more.
Urban real estate may find itself losing residents to the exurbs, but it doesn’t mean their quality of life is going to diminish. The driverless car will mean a lot of urban real estate is freed. By one estimate, 65% of Houston is roads and parking lots. Many of these lots can be repurposed into parks, museums or new amenities or housing. City planners can probably scrap most of the downtown street side parking, freeing up road for car lanes and helping with congestion.
The Great Leveling of Commercial Real Estate
Having a business on a busy road is incredibly important in today’s commercial real estate. Commercial renters want to know traffic numbers the same way residential renters want to know number of bedrooms.
What happens when “drivers” aren’t looking at the road anymore, and just sat staring at their phone while their car takes them to a pre-inputted destination? Who is going to see your business on Highway 190 or Stan Schlueter Loop any more? Will the location be worth the same? Probably not.
The change will most impact convenience stores like gas stations, who thrive entirely based on their location. As location matters less and less, they will feel the squeeze. Who cares where the gas station is when your car can drive there itself and likely fill up itself, too? Prime corner lots previously occupied by gas stations then become available to other businesses.
Car Debt Be Gone!
Car ownership will likely plummet. Ridesharing and taxi services like Uber will become incredibly affordable (of course, sans taxi driver). For many, it will be more cost effective to use taxis all the time instead of owning a car.
Even simpler reasons for fewer cars – families that now feel they must have two cars can probably get by with one. The car drops off one spouse in the morning, returning home by itself for the use of the other spouse. Amazing.
The implications for home buyers? Less money spent on car debt means more money for other things in life – like beautiful Texas Hill Country homes.
More Americans have died in car wrecks between 2000 and 2016 than died in every war in the 20th Century, combined (World War 1, 2, Korean War, Vietnam – all of ’em). This isn’t real estate related, but the most amazing about the driverless car is the safety, specifically the extinction of drunk driving, texting while driving, falling asleep at the wheel…. Gone.
This is not the distant future. It is estimated driverless cars will be available in the next decade, and become the only kind of car available by 2030.
It’s incredible to think that my 3 and 1 year old daughters will never have to learn to drive a car. We are only beginning to understand all the implications. These are just guesses. But if I were buying real estate, I would bet on the still greater expansion of the suburbs and exurbia. Killeen is exactly the kind of market poised to reap magnificent rewards from this development, and the impact will likely be more than just a little.