Category: Land Use

Changes to the distribution of land uses

AVs and Real Estate – A Guide to Potential Impacts

We have gotten a number of questions about how AVs could be affecting real estate and thought it would be good to do a post that covers some of this.  Below is a brief list of issues to consider.  Look out for an upcoming post that will add e-commerce and sharing economy impacts as well.

  • Parking – if we move towards an even partial model of shared vehicles (i.e. Lyft, Uber, Via, Chariot) there will be a substantial reduction in the need for parking (see earlier posts here and here). Studies have shown this dropping down to as low as only needing 10-15% of current parking spaces (and here). This change would open up a tremendous amount of land for redevelopment (parking is the single largest land use in most cities), hence dramatically increasing supply and – one would think – decreasing land values.  In addition, as parking needs diminish and parking regulations move to requiring less – or no – parking, constructions costs will also drop dramatically.  Parking can cost about 4k$ per spot for on-grade parking and up to 18-20k$ per spot for structured parking, can be a significant proportion of construction costs, and typically requires additional land acquisition.
  • Sprawl – several studies have shown that AVs could increase suburban sprawl as people can drive further, faster and might be willing to accept a longer commute as they can now use their time in the car for things other than driving. If that is the case, there will be an increased pressure on sprawl and the metropolitan footprint would expand dramatically.  Again, this constitutes an overall increase in available/feasible land supply which – given the rules of economics – lead to a drop in land value.  Arguably, this would not be the same everywhere as land that will have all of a sudden become available for development would see large price increases while places that are already close enough or within to cities would see land prices drop due to increased competition.
  • Housing Prices – Given the points above, housing prices should decrease. As land prices and construction costs drop, housing rents and prices will also drop.  This could be a boon for affordable housing concerns across the country (for example, each parking spot included in rent equates to about 225$), but could also cause substantial disruptions to existing markets and developments/projects.
  • End of TODs? – One unknown effect of AVs will be how it changes transit. On the one hand, this new technology could be a boon for transit as it helps solve transit’s perennial first/last mile hurdle. Lyft can get people to the train, light rail, or bus station, increasing catchment areas and boosting ridership.  On the other, riders may simply decide to stay in that Lyft all the way to their destination – especially as the price of the trip drops dramatically as technology replaces the highest cost of the trip – the drivers.  Preliminary reports from New York and San Francisco point to this trend, with transit ridership diminishing as Transportation Network Company (TNC) use skyrockets. Some studies have shown a decrease of up to 43% of transit ridership – potentially the death knell of transit as we know it.  In addition to this concern, is simply the potential atomizing of transit.  What happens when multiple rider/route services such as Via and Chariot (or Lyft-line and Uber Pool –  the carpool versions of Lyft and Uber) grows and we now have 8-12 passenger vans zipping through cities, delivering people directly to where they want to go and not to a bus stop a few blocks or a few miles away. If this happens, the activity/energy clustering and focusing role of transit would diminish as would the price premiums that are associated with transit proximity and transit oriented development.
  • Location, Location, Location? – A looming question with not only AVs but the entire shift to mobility as a service is that mobility will become easier and more affordable. As that happens, the friction of transportation – which is one of the factors that creates the value of location – will diminish.  This does not necessarily mean that current activity centers and draws will reduce in value, but any value based solely on the broader proximity aspects of location may diminish.  This will increase the role of the quality of places and the buzz of related activities in determining location value.

A significant issue to consider in all of this is not only the end state change of AV impacts, but also the transition period.  In terms of real estate, a glaring concern would be projects caught during this time.  Projects that have built parking in consideration of today’s reality may find themselves with decreased parking revenues (that is already happening with Lyft and Uber) and unable to repay long-term mortgages or bonds.  In addition, these projects will be competing with future projects that did not need to build parking and/or benefited from reduced land costs.  The last projects built with today’s constraints – and not future-proofing the coming disruptions – will be the ones most punished by this rapid change.

All of this points to a dramatically shifting landscape for real estate.  A large question is both what direction these changes will take and – as importantly – how quickly will they come about.  Of concern is not only the shifting market conditions, but also the regulations that currently help shape that market and the speed at which those typically change.  What happens if parking utilization needs drop dramatically over a short period of time.  How quickly will parking requirements shift with that? And what kinds of political battles will meet these changes as developers and property owners with existing properties fight these changes to protect their competitiveness.

AVs and Streets – A Guide to Potential Impacts

We have been asked numerous times about how the introduction of AVs (and E-commerce) might affect streets.  As cities make plans for future expansions, changes to their street network, the inclusion of various modes/complete streets, and overall street design – what should they be considering when they include thinking about AVs?

Here is a short list:

Curbside space allocation for pick-up and drop-off – This will become a large issue as demand for this space will increase substantially – especially at peak travel times.  It could also cause significant disruption to transit and bike networks as AVs compete for curbside access and cut across bike and transit lanes.

E-Commerce Delivery – Similar to above, as e-commerce expands, there will demand for curb space and places to temporarily park vehicles as deliveries are made.  In addition, we will probably be seeing a large increase in delivery vehicles (an expansion of a specific kind of freight) which will affect streets and corridors?

Separation of Modes – As AVs have algorithms that don’t allow them to hit people (a fantastic development), a corollary will be that anyone walking or biking in the street can cause mass disruptions to the transportation network.  A “critical mass ride” of one.  This had led to calls for stronger separation between modes – a disastrous proposal – imagine our streets starting to look like China’s where there are fences between modes.

Drones on Streets – Not the flying kind (those are probably further off in the future) but the terrestrial ones.  Picture an Amazon truck parking in a neighborhood and sending off twenty delivery AV rovers.  Will those drive in the street? On the sidewalk?  How will they affect other modes? What should we suggest or try to regulate?

Micro Transit Corridors – Lyft and Uber are pushing shared rides (Lyft-Line and Uber Pool) and are already incentivizing people to make their pick-up and drop-offs happen along arterials or more heavily travelled routes to reduce the vehicles efficiency (see this earlier post).  This will define micro-transit routes throughout the city.  Where will these be? Should cities help define the routes? How will it affect all modes moving through these areas?

Reduction/Elimination of Parking – We are already seeing a reduction of parking use in some venues as Lyft and Uber takeoff (see this earlier post, and this one).  As this happens more and more – research says we will need 10-15% of current parking spaces – what happens to the onstreet parking?  Is it transferred to other modes or additional lanes?  What happens to the buffering role it currently plays in many streets?

Changes to Available ROW – Building on this last point, if AVs need narrower lanes (they are better drivers than we are) and potentially can increase throughput through some streets (see point on this below) and therefore allow a reduction in necessary lanes – how will we use the available ROW.  This is especially critical as available ROW seems to be one of the larger limitations to increasing dedicated infrastructure for transit, bikes, and pedestrians.

Increase in VMT – Most modeling of AVs we have seen show an increase in VMT, but this is more dramatic in scenarios where we all have our own vehicles vs shared fleets.  This is especially so if we don’t tax empty cars (zombie cars) driving around as they wait for their owner or go do errands on their own.  How will this increased VMT affect other modes, congestion, etc? How can we make sure we limit it?

Efficiency of Streets (for cars) – AVs in theory will be more efficient, require less space and be able to move faster.  Many models have been created that show connected vehicles zooming towards each other at intersections and just barely missing as they efficiently move people and goods.  What this fails to recognize is that one of the larger impediments to this type of free-flow movement is the fact that multiple users exist in the right-of-way.  Pedestrians and bikes would not work well in these scenarios.  This leads to thinking that there may be two worlds of cars on streets – those where they dominate (definitely freeways, but will that also start including arterials and collectors…) with free flow of vehicles and other areas where other modes are considered as well.  Will the mixing of modes be frowned upon because it is such a limitation to this efficiency?  Will some areas ban bikes/peds?

Street as a Utility – This is more of a meta-concept, but the idea is that we need to stop thinking of the street as a public space that we can all use whenever and however we want, but instead should think of it as a utility that has limited capacity.  Related to how we pay for the amount and time of our electricity use (in places), we can think of streets similarly.  This might lead to something like a geometry tax (you are charged for how much space you take up on the roadway divided by the number of people in the vehicle – a great deterrent to zombie cars).  — Stay tuned for an upcoming post focused on this topic!

Finance – We have done a quick pass at how these technologies will be affecting municipal revenues and – in short – it will not be pretty or easy (see our report here and see analysis of parking/car related revenue impacts here).  A lot of disruption (for example the drastic reduction of parking fees and traffic tickets while we are needing to pay for retraining large groups of the population who used to work in retail or driving jobs). Limited budgets will affect everything else government tries to do and services it provides – streets included.

 

Parking garages are already becoming dinosaurs

I’m seeing a giant meteor coming that will, metaphorically speaking, put a huge hole in municipal budgets. This meteor will be AVs. The meteor that pushed dinosaurs to extinction may have done so with one big hit, the AV evolution might be a bit slower. A recent article in Governing Magazine provides us with evidence that the impact of AVs is being foreshadowed by the likes of Uber and Lyft (often collectively referred to as TNC or transportation network companies).

Airport managers nationwide are expressing concern in how the TNC are disrupting the budget models that airports have long had in place. Carter Morris (VP with the American Association of Airport Executives) has stated that “airports need to adapt and do it quickly.” Many airports have seen dramatic drops in fees collected from taxi companies and car rental companies because so many people are just using the TNCs instead. So now more than 200 airports nationwide are charging pick-up and/or drop off fees for the TNCs, just as they might have with taxis—though the exact revenue models are quite varied. As fee revenues decline, airports may look to airlines to pay more, which could drive them away from the small/medium size airports.

And if you are wondering how much of an impact TNCs are having on the ground transportation game, look no further than “San Francisco International Airport, where TNCs accounted for more than two-thirds of commercial ground transportation in May.” Lyft and Uber are preparing for an AV future, airports should too!

To learn more about the impact of AVs on municipal budgets in the Urbanism Next report coming out in late July. You’ll find a link to the report here on the blog.

US Federal Government taking more steps toward more robust AV policy

Writing software to navigate the driving characteristics, challenges, and rules of cities around the world is clearly a challenge. Some in the automobile industry are nudging the US Department of Transportation to develop more specific policies for AVs. Transportation Secretary Elaine Chao has indicated that a new set of voluntary guidelines will be issued by the end of 2018—though they will remain voluntary.

Ford Motor VP Ken Washington is asking the US federal government to do more:
We must have concrete federal guidelines and additional data to inform how we will bring this technology to market in a way that will cause more good than harm.”
Much of current the current talk of AV policy has surrounded the technical aspects of AVs—with very little attention paid to the secondary effects of AVs. Faculty, staff, and students with Urbanism Next are taking this gap in attention seriously. We will be releasing one of the first looks at secondary effects on local government budgets (expenditures and revenues) later this month.

Engineering scholars recognize the complexity of the urban environments as one of their key challenges moving forward as well. For example, they recognize, as compared to highways, AVs in cities require “progress in both transport technology and infrastructure to effectively deal with the increase in operating velocity of autonomous systems as well as the complexity of urban environments…. Different cities have different driving characteristics and traffic rules, and therefore what works in one environment, may need a lot of refinements if it’s applied to a different environment.”

AVs are going to be a global phenomenon, thus adaptation to AVs will take on many forms and we are now at the moment in time where we have the potential to have the most impact on how cities adapt or shape their future with AVs.

AVs are coming and cities need to start preparing

In the wake of this week’s Portland charrette/workshop on the potential of AVs to transform urban spaces, a new CityLab article is right up our alley here at Urbanism Next.

A take away from the charrette and the article is that cities need to be proactive partners and be sure they are assertive as we transform to AV transportation. “…if cities aren’t learning anything from these partnerships, local officials and citizens are going to push back and say: Why do tech companies get everything and we get nothing?”

Regulatory capture is a real threat as traditional automakers try to block new comers from entering the auto market, but some sort of regulatory action will be necessary—it just needs to be designed in such a way to keep us safe without stifling completion. CityLab notes that “With federal policy, too, the goals of automakers may not always line up with what’s good for cities. Ford, General Motors, Toyota, Volvo, Uber, Lyft, and others continue to lobby congressional policymakers for a “national framework” regulating safety performance standards, so as to avoid 50 versions of AV requirements.”

What is good for auto companies’ bottom lines, may not be good for cities. The authors of the CityLab article note that “While the industry pushes for national AV standards, cities may want to retain local control over things like speed limits, designating special AV zones, and setting trip fees in order to meet the safety needs of their specific neighborhoods.” Balancing the needs of all levels of government will be a key challenge in the next 3-5 years, being proactive and thinking about these challenges is what Urbanism Next is all about. Benjamin Clark and Nico Larco will be releasing a white paper on some of the financial challenges and opportunities for cities in about a month. Be sure to check back here on the blog for more info on that white paper.

 

Think Out Loud – Urbanism Next on the Radio!

Urbanism Next was recently featured on public radios ‘Think Out Loud’ program.  Although mostly targeted on autonomous vehicles, in keeping with this blog, the interview focused on the secondary impacts on cities. You can listen here or take a look at an article about the interview here.

The Blight of Failing Malls – A Rising Burden of E-Commerce

A new article from Business Insider looks at the continuing decline of indoor malls around the country.  Of the 1,300 malls in the US, a staggering 310 are ‘in high risk of closing’.  The largest culprit is the loss of anchor tenants like Macy’s, JC Penny, and Sears – all of which have been seeing large numbers of store closings in part due to the rise of e-commerce (see earlier post about this).

The article discusses the range of consequences of these closings including a rise in crime, increasing blight in the surrounding area, and the loss of municipal revenue coupled with a rise in costs for needed fire and police services.  Dead malls – and the e-commerce that is contributing to their demise – have large repercussions for cities.

As e-commerce expands and potentially reduces the number of strip malls as well (in addition to enclosed malls), these repercussions will amplify.  A recent conversation with the planning director of a suburb city focused around the devastating effects the reduction of strip malls and commercial activity in his city would have on municipal revenues.  This was especially difficult as he saw limited abilities, compared to more urban locations, for suburban cities to redefine themselves and create vitality, draws, and their associated revenues.

Drone Delivery Model from UPS

Drone delivery is on the horizon and could take a bit off the edge of the congestion cliff that will come with increased AV use and increased E-commerce.  UPS just tested a delivery model where a drone, attached to the top of a truck, can deploy to deliver a package while the driver continues on to do their own delivery at another site.

Some large caveats exist with the ability to use this in urban areas (as opposed to the rural example they describe).  That said, this is one step closer to the package delivery model where trucks become mini-distribution hubs and a fleet of drones go to and from a parked vehicle.  Obvious implications for trip generation, for potential design changes to buildings (say hello to your new rooftop mailbox!), and for distribution of warehouses in cities.

Graphic of how this would all work is below.

Losing Parking Revenue May Mean More Money for Cities

For anyone who has tried to re-purpose municipal parking into something else, it is likely they have faced resistance due to lost revenue.  And with projections of autonomous vehicle adoption significantly reducing the need for parking, what will a city do? According to a recent report by Morgan Stanley, the answer is: make more money.  They estimate that the introduction of autonomous vehicles will generate a half trillion dollars for municipal budgets, offset by only $1.3 billion from lost revenue such as parking fees and fuel taxes.  This and other recent reports on some interesting ways to think of how municipal resources could be re-allocated for better and higher uses, such as reducing from 42% the amount of time police officers spend on issuing traffic citations, can be seen in this article in Governing.

Warehouses Will Be Everywhere

As we continue to trend towards e-commerce and a range of delivery methods for products, warehouses – one of the key infrastructure elements of delivery – are going to both shift and proliferate.  A report from Colliers looks at these shifts broadly, but pertinent to this blog, there are sections on First Mile and Last Mile of delivery that outline the changes we will be seeing in the built environment.  Some takeaways:

  • Large consolidation of distribution facilities is happening as this facilitates logistics and the implementation of automation
  • Due to this consolidation, the size of facilities is greatly increasing – ‘First Mile’ facilities (these are distributions centers that are first accepting parcels from suppliers)  greater than 1 million square feet are becoming more commonplace. — Picture a single facility as large as 4-5 New York City blocks or 16-20 Portland blocks.
  • ‘Last Mile’ facilities (distribution centers that ship directly to customers) – on the other hand are locating in order to shorten and speed up final deliveries.  This is leading to smaller distribution centers (50-75,000 square feet) scattered around urban areas.

A great graphic that shows the complexity of new shopping and delivery methods is below.  Many forms of delivery and each has its own land use and transportation implications.

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E-Commerce: Brick-and-Mortar Slide Continues – 12% Drop in Store Trips This Past Holiday

A recent article in the Wall Street Journal documents the continued rise of e-commerce coupled with the inevitable slide of brick-and-mortar stores.  A few key numbers:

  • Overall, online holiday sales increased by 11% over the previous year while brick-and-mortar sales increased only 2.7%
  • JC Penny brick-and-mortar sales dropped by nearly 1% while its online sales grew by double digits.
  • Amazon was the clear leader in online sales with 38% of all online revenue

Probably the most striking number for the subject of this blog, brick-and-mortar shopping traffic (as in the number of times people went into stores) declined by 12%.  That number – if it continues – will inevitably lead to a drop in the amount of brick-and-mortar stores and major shifts in land use and transportation demand.  This will potentially also decrease the vitality and activity around commercial areas.

Uber Replacing Parking (in Suburbs)

Many have talked about the long term implications of ride-sharing companies like Uber – Summit, New Jersey is the first example in the US where a municipality is subsidizing rideshare trips as a way to reduce parking demand in Park-and-Ride facilities.  See the article from Buzzfeed here.

A good example of how Uber may actually be a boon to transit and not a replacement for it.