Driverless cars and real estate: Prediction is very difficult, especially about the future

31 July 2014

Oliver Goodwin

Google's driverless cars have already logged over 200,000 miles in live traffic all over California and the company predicts that is will have driverless cars on sale by 2018. Now, Business Secretary Vince Cable has announced two new measures effectively giving the green light for driverless cars to take to UK roads from January 2015.

UK cities can now bid for a share of a £10 million competition to host a driverless cars trial. Up to 3 cities will be selected to host the trials from 2015 – and each project is expected to last between 18 and 36 months and start in January 2015.

With huge potential societal impact as well as the automotive and insurance industries, what impact might this emerging technology have on the real estate market?

House price rises in an expanding Commuter Belt

Property advisers Savills forecast that house prices in London’s outer suburbs will outpace the London city centre for the first time in a decade as the influx of foreign buyers into London forces families out to the commuter belt. House prices were forecast to increase by 25.1% by 2018 in the “inner commuter belt” – defined as half an hour’s train journey from central London and within the M25, and also including areas such as Guildford and Sevenoaks and prices in the areas within an hour’s commute, defined as the “outer commuter belt”, forecast to rise by 23.3%

However, if the time spent travelling can be reduced by the smart use of driverless cars creating less traffic on the road, if costs can be reduced by sharing use of those cars, there is no parking requirement, and you can get all the connected services you want inside those cars for work and leisure – would you be prepared to travel further or for longer?

As Simon Dehne of Conscious Futures considers, if you could work in the car on the way back and forwards to an office with specialised cars that allow that in comfort, plus use virtual reality technologies to have meetings while you travel – would you travel further?

If you could have a drink on the way home and watch those TV shows that no one else in the family likes watching – would you travel further?

If the answer to any of those questions is yes, it is likely to cause a reduction in price pressures for inner-city living and increase prices for properties considered "commutable" but outside the traditional commuter belt of any City.

Development planning

Parking is always a critical element in any commercial or residential development. The assumption now is that cars come with the people and that this must be accounted for in a development's intended use and lay-out. As a result, we get commercial or residential buildings with sub-terranean garages or vast surface parking.

Using development land for parking spaces or garages is both poor economic use of the land and hugely inefficient for schemes. Up to now though, this has been a necessary evil of any development's land utilisation. Imagining a world with driverless cars and in effect, un-tethering the cars from the people could mean the end, or at least a drastic reduction, in the allotment of land for parking on development schemes. Less parking means less land is required for the same intended land uses. Development plot size reductions would mean less initial capital cost for land purchases or alternatively land be used more productively to cover the initial capital expenditure relating to the land purchase.

With driverless car trials expect to start in a City near you in the near future, only time will tell as to whether society embraces the technological shift but the potential impacts on the use and look of cities is clear and I, for one, am looking forward to the end of parking tickets!