Here’s Everything You Need To Know About How The Future Of Mobility Will Affect Real Estate

Driven by rapid advancements in technology both digital and mechanical, transportation is going through some of its biggest changes in a century. And that in turn will have a huge impact on real estate.

This year, the Urban Land Institute and PwC’s influential Emerging Trends In Real Estate Europe report took a deep dive into how the future of mobility will impact real estate.

Well-connected buildings and places have always been the most valuable, but which buildings are the best-connected could be about to change, the report said. That will be as a result of high-tech changes like driverless vehicles, flying cars or buildings seamlessly connected to transport networks via smartphones; and low-tech changes like bikes, scooters and increased walkability.

The buildings we build and how we build them could change dramatically in the near future. Here are the key trends everyone in real estate needs to be on top of.

Investors Prize Good Mobility And Transport

The real estate industry largely acknowledges the need to understand mobility trends — 80% of respondents to the Emerging Trends Europe survey said changes in mobility are playing a part in their investment decision-making. Transport connectivity is seen as the most important factor driving which cities to invest in.

Investment vehicles are already emerging to take advantage of new transit trends. One investment manager interviewed is looking to raise a fund to take advantage of the rise in ride-sharing, autonomous vehicles and “micro- mobility” forms of transport, such as bikes and scooters.

“Institutional investors are starting to wake up to these trends, but it is slow,” the report said.

The Centres Of Big Cities Will See The Most Benefit

More than 80% of the real estate professionals surveyed for the Emerging Trends Europe report believed that smart mobility solutions would provide the most attractive investment opportunities in global and gateway cities. Just 15% believed these trends would benefit investment most in secondary or regional cities.

Given that the most valuable real estate today tends to be in the dense urban core of major cities, it follows that prime real estate will only increase further in value, the report said. The cities and districts already attracting the lion’s share of global investment will continue to do so as these buildings and areas become even better connected.

“The up-front capital cost of implementing new technology and infrastructure means that smart mobility will be introduced first in dense and mixed-use areas where there are lots of potential users and customers,” one investor said. “That means these solutions are going to the downtown areas of the big cities first, so you can earn back that initial investment fastest, and it means cities will get even denser.”
 
The Death Of The Car Is The Liberation Of The City

New transport solutions change our dependence on cars, which has long shaped our cities and buildings. Major cities are surrounded by suburbs where the car is the principal mode of transport. But the expectation among interviewees for Emerging Trends Europe is that this will change.

As urbanisation continues, cities cannot cope with the number of cars on their roads and the amount of pollution they create. According to IHS Markit, global private car sales will peak in the next decade and start to decline in developed economies like Europe. The trend will be exacerbated by the increasing use of ride-hailing technology, micro-mobility solutions and, eventually, autonomous vehicles.

Cities like Vienna and Brussels have banned cars from some of their historic central areas, and in the new districts being developed by the Copenhagen city government there is parity between bike and car lanes. In London, Amsterdam and Madrid, city authorities have either instituted or are about to institute central zones where only ultra-low-emission vehicles can enter free; drivers of other types of vehicles will have to pay a charge. The uptake of cycling among city populations makes it easier for cities to introduce these policies.

“As city centres become increasingly car-free, and those cars that are [present] give out no emissions, an increasing amount of these areas can be given over to public spaces,” one architect said. “They become more pleasant places to live and work, so they become more desirable. That makes them more valuable.”

A global investor agreed. “As cities move to prohibit car use, we are focusing our investment around public transport nodes, as we see those being the areas where value will increase.”

What To Do With All That Parking?

If it is accepted that, sooner or later, all cities will become less reliant on the private car, the big question already exercising the minds of many in the European real estate community is what to do with the overabundance of existing parking. In the main, they see a huge opportunity to reposition these assets.

Many developers are already converting existing parking spaces into facilities for bikes, as cycling becomes increasingly popular in cities. But this will go further, the report said.

“In the future, developers will need to create buildings where autonomous vehicles can seamlessly enter a building to drop off their passenger, with digital technology allowing the building to know which cars should be allowed in,” one developer said.

Such initiatives can be seen as defensive. But they can be a source of new revenue. Deliveroo has converted parking spaces into “dark kitchens,” facilities from which restaurants can fulfil online orders away from their premises.

One investor-developer is looking to put a series of last-mile delivery hubs in the car parks in its buildings: The space would be rented out to delivery companies, goods would be delivered there at night and then redistributed during the day by bikes and electric vehicles to reduce congestion and pollution.

Austrian developer Signa has taken advantage of the pedestrianisation of the area around one of its Karstadt department stores in central Berlin. It has built walkways directly from the underground metro station into the store to make it easier for shoppers to get there. And because they can no longer drive away with their goods, it has included an underground distribution hub, so shoppers can have their purchases delivered the same day.

Micro-Mobility To Have A Big Impact

Inextricably linked to the expected reduction in car use is the rise in micro-mobility forms of transport, in particular bikes and scooters.

Across the globe, venture capitalists are investing heavily in electric scooter and bike-share companies. From a real estate point of view, micro mobility can add to the value of schemes in multiple ways.

“Scooters and bikes are a great amenity which building owners can provide for tenants,” one venture capitalist said. “It increases the accessibility of your scheme, which increases the value.”

As with other progressive transport solutions, the impact of micro-mobility is likely to be felt first in city centres, where density is greatest. But it could also boost the value of peripheral locations. Real Capital Analytics’ “walkability index” has shown the closer buildings are to amenities, the greater the value. E-scooters can make distant locations which are not close to public transport more accessible by reducing the time taken to get there, and thus increase their value.

“If I’m a business person I can hop on a scooter and go two miles in the time it takes me to walk five hundred yards, without crumpling my suit,” one investor said.

Driverless Cars Allow More Areas Of Density To Spring Up

It is a long way off, but in a world where people are less reliant on private cars or public transport because ride-hailing, autonomous vehicles and micro-mobility have decentralised transport, density can emerge in different places. There will be the potential for the kind of mixed-use districts that currently exist almost solely in dense urban centres with large transport hubs to be distributed around cities more evenly, opening up new areas for development.

“In general, we expect cities to become more polycentric as mobility options become more diverse than today,” one investor said.

The hub-and-spoke model of city development could potentially be challenged.

“We see our biggest impact being in suburban areas, where we can connect places that are currently difficult to get between by public transport,” an executive from an autonomous vehicle technology company said.

Driverless Vehicles Will Impact Logistics First

Some of the more radical changes in mobility are likely to occur first in the transportation of goods rather than people, which means investors in logistics must be ready for the implications.

“It is far easier to predict the changes in business-to-business sectors, like logistics, than in sectors that involve public consumer choices,” one global investor said. “The way people adapt to change is very hard to predict, but the way businesses will react is easier, as ultimately profitability and efficiency are key.”

For that reason, the expectation is that autonomous vehicles will become widely used in logistics before they are used to transport people. The routes from warehouse to warehouse are predictable and therefore easier to automate, compared with the myriad journeys taken by individual travellers. There is a clear profit and efficiency motive for logistics firms to dispense with drivers.

“We think this would concentrate value even more in prime logistics markets,” one investor said. “There would be little need for those secondary locations that are something of a layover. The big centralised logistics hubs get bigger, and there is greater need for last-mile solutions.”

Logistics Will Play A Huge Part In The Battle Against Congestion And Pollution

Logistics also has a crucial part to play in reducing congestion and pollution in cities. UK government research shows that while the growth in car journeys is slowing, van journeys are increasing, and this is causing the overall volume of traffic to rise after a period of relative stability. Cities and real estate owners are already working together to relieve pressure on roads by creating centralised distribution strategies. In London, the West End Partnership brings together public and private sector stakeholders to reduce freight and deliveries coming into central London.

Forward-thinking developers also have the ability to combat this trend. The owner of one office park in Stockholm is controlling all goods vehicles going in and out of the area.

“If you want to deliver there, you have to go through an app that co-ordinates all the distributions into that area,” an investor said. “Over a couple of months, they have got rid of 80% of all the traffic.”

Having specific delivery facilities integrated into residential and commercial buildings means that delivery vans do not block roads, with engines idling and producing carbon emissions. And under pressure from consumers, big e-commerce companies are likely to try and turn their delivery fleets electric as quickly as possible. Logistics facilities will need to have access to enough power to charge up large fleets of vehicles.

Other more futuristic technologies are also likely to influence logistics. British online grocery chain Ocado is working with a startup called Magway on a version of the Hyperloop transport system, which would deliver goods through a network of underground tunnels. The publicly funded Old Oak and Park Royal Development Corp., which is overseeing the development of thousands of homes in north west London, is also a partner and could provide a site for testing the technology.

Hyperloop: A Long Way Off But A Potentially Huge Impact

Further into the future there is Hyperloop, which was originally promoted by entrepreneur Elon Musk but is now moving forward through separate organisations collaborating with local universities and businesses in the U.S., Europe and Asia. Hyperloop has the potential to transform the real estate profile of cities connected by the system — and to make the property around the stations incredibly valuable.

“We would anticipate Hyperloop stations being very large mixed-use schemes that would attract people and businesses towards them,” one architect said. “Imagine having an airport, with all the connectivity benefits that brings, and bringing it into the middle of a city.”

Look To The Skies

The real estate industry must think vertically as well as laterally. U.S. company Skyports is partnering with developers in Los Angeles, Singapore and London to allow drone deliveries to the roofs of commercial and residential buildings. Uber is working on “aerial ridesharing at scale” and claims its vertical takeoff vehicles could be operational within five years.

All of this presents a challenge and an opportunity to building owners. If goods and people arrive at the top of buildings rather than the ground floor, that fundamentally changes the way buildings are configured.

“If your building is one of the first that is accessible by air taxis, that could be a huge draw for occupiers,” one investor said.