Advances in transport affect land values, and it's about to happen again
The link between property and transport has been perhaps the most durable in human history.
Since the ancients, few things have delivered higher land values with more certainty than advances in transport, from roads to canals, railways to highways.
It’s still a no-brainer in the 21st century, says Bridget Buxton, who in 2016 bought a fixer-upper in east London because it’s a short walk to the high-speed London Crossrail, due to open this year. Prices are up 90% in the past five years for homes like hers, far outpacing the whole city.
Now comes the dawn of the driverless car, promising stress-free commutes, urban playgrounds and the end of parking hassles.
But it threatens to complicate the calculations of those buying property.
“Real estate might be the industry most transformed by autonomous vehicles,” says David Silver, who teaches self-driving engineering at Udacity, an online university.
“It could change real estate from a business that is all about location.”
Driverless services – buses, taxis and delivery vans – have already arrived in some parts of the world, but widespread consumer adoption might not be here for a decade.
Almost 50 years passed from the development of Henry Ford’s 1908 Model T before suburbs designed for drivers became popular.
That’s why investors like Ric Clark, chairman of Brookfield Property Partners, the world’s largest real estate investment company, admit they’re involved in guesswork.
They’re just starting to think about what to do with space freed up when cars no longer sit idle for long periods, whether unloved areas without public transport might become more attractive, whether out-of-the-way sites will become valuable locations for warehouses.
Among Brookfield’s $152 billion (about R1.8 trillion) in real-estate assets are malls in the US where most of the space is taken up by parking areas.
Clark says: “For years we’ve thought if there is a better use we could build on it.”
The driverless future offers to free up new neighbourhoods. In New York City, parking covers an area equivalent to two Central Parks, according to estimates by Moovel Lab, a research unit of Daimler.
Google parent Alphabet has imagined such a world in an autonomous-only future. Sidewalks Labs, Alphabet’s urban-development unit, is designing a district in Toronto’s eastern waterfront that could be among the first fully driverless neighbourhoods.
“The fundamental design and experience of the urban street can be transformed,” says Rohit Aggarwala, the outfit’s chief policy officer.
“Your streets become safe, you don’t need physical barriers to protect pedestrians. Think of historic cities where the pedestrian is king.”
Some changes are likely to come sooner. Truckers’ adoption of self-driving vehicles could have a big impact on industrial land values, says Bill Page, business space research manager at Legal & General Group investment-management unit.
In the UK, areas that are popular for delivery companies, like the golden triangle in centre of the country, may take a hit since there will no longer be limits on drivers’ shifts.
“In future you could build logistics in areas that are cheaper,” says Page.
“In the US, an entire network of truck stops, motels and petrol stations could fall in value if vehicles no longer need drivers.” – Bloomberg