Game changer: How to think about the impact of autonomous vehicles on a real estate investment strategy

Game changer: How to think about the impact of autonomous vehicles on a real estate investment strategy

• Even as the impact of autonomous vehicles on commercial real estate promises to be substantial, this technology presents a challenge for commercial real estate investors, as both the timeline and scale of adoption is unknown.

• What areas of commercial real estate are likely to be affected by the industries that are the earliest adopters of autonomous vehicles, and are we able to foresee the likely impact that adoption will have? And by inverting this question, what areas of commercial real estate are least likely to be affected materially by even the widespread adoption of autonomous vehicles?

• The logistics industry is likely to be an early adopter of automation and self-driving technology. Fuel and labour are the two largest cost components of transporting goods by road, and both costs promise to be reduced through automation, incentivising businesses to explore them. We believe focusing on logistics sites near immovable critical infrastructure — ports, production facilities for goods, or end consumers — will limit the risk of disruption by autonomous vehicle technology.

• In the face of technological disruption, while commentators spend most of their time examining what will change and what the effects of that change will be, we find it often more valuable to focus on what we believe will not change. The world’s densest cities with sophisticated transit systems promise to be the least affected by autonomous vehicles over time.

• Self-driving technology promises to be a game changer for commercial real estate — the question is when. Focusing on industries likely to be early adopters, as well as locations that promise to be the least affected by this technological paradigm shift, will allow investors to develop insightful views on the risks and opportunities presented by autonomous vehicles for their global real estate investment strategies.

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Published on Institutional Real Estate, Inc (IREI), Jan 2019

Game changer: How to think about the impact of autonomous vehicles on a real estate investment strategy

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