Advancements in technology are causing the world to change more rapidly than we as humans are preparing ourselves for. There are a couple of transformative changes upon us that it seems we are choosing to ignore rather than accept, plan for, and adapt to. I’m afraid that many of us are choosing to overlook many of these changes thinking we will be okay no matter what happens. My guess is we won’t be okay, unless we start preparing now.
I have written extensively on the significant upcoming effects of the automotive industry trifecta: the mass adoption of autonomous vehicles, electric vehicles, and car sharing. That by itself will shake up a massive part of every economy in the world and specially of the U.S., given we are more dependent on cars than most other countries.
Major changes are taking place and we cannot deny it, but the fact is that many of us are choosing to deny it. We are not preparing properly for the economic changes these innovations come with, and we (particularly our government) are focused too much on low to no impact ideas, such as the the false idea of bringing manufacturing jobs associated with building cars back to the U.S. We are completely missing the real dangers and opportunities in front of us.
A) Soon 80% fewer cars will be needed.
B) The cars that are needed will be fundamentally different kinds of cars not built by the traditional car makers.
C) The manufacturing for the most part is and will be automated.
This means: sorry, no new jobs but fewer jobs, millions fewer.
Note that I’m not even taking into account the impact this will have on the financial and the insurance industry as there will be 80% fewer cars to finance and insure. Millions more will lose their jobs because of the trifecta effect including truck drivers, cab drivers, Uber/Lyft drivers, as will car salesmen, garage attendants, mechanics, etc.
But, this post is not about the effect on jobs. It’s about the effect on commercial real estate.
With the automotive industry fundamentally shifting and shrinking we will no longer need the following or certainly we will need significantly less of:
- Car dealerships and their massive buildings and car lots
- Oil change businesses
- Muffler and brake shops
- Parts stores
- Tire shops
- Parking lots and garages
- Body shops
and on and on…
Sure we’ll still need to have a distribution center for car makers, as Tesla has established, but this is a far cry from auto rows as main features of many towns.
Above is in addition to many large and small retail stores and chains that are on their way out or soon will be, or get smaller as they will move more of their sales online or lose to ecommerce behemoths.
Remember RadioShack? Circuit City? Blockbuster video? Borders? Sports Authority?
Think about stores that have closed down a multitude of their locations already: Barnes & Noble, Sears, Macy’s, Nordstrom, Target, Walmart, the list goes on.
As the above real estate is vacated we will not have enough new comers interested in real estate to take their place. Cities all over America and the world will be left with Detroit-like abandoned buildings. Prices of commercial real estate, other than multifamily and to some extent office space, will dramatically decrease. Companies and REITs (Real Estate Investment Trust) owning them will go belly up. Banks will lose billions if not trillions. And, cities will be left with city planning challenges to address the problem.
Our company is seeing a prime example of the lack of movement with the times when it comes to proper planning for the upcoming changes upon us. We are about to move to a new office in Walnut Creek, California. As we are remodeling many aspects of the new building to suit our needs, the City wants to ensure we are following their codes, and rightfully so. However, one of their codes has to do with parking to square footage ratio. From the standpoint of where things are moving, this is a prime example of how a major city in the Bay Area is not moving fast enough with the times and is simply not considering where the technology and the society are headed. Today’s workforce is not as interested in driving their gas guzzlers to work as they are interested in public transportation, car sharing and other alternative ways to commute. We are now seeing a trend we had not seen in the past: employees at our companies who no longer own a car – simply unimaginable 5 years ago. The longer these types of codes are enforced, the bigger the city planning challenges will be in the coming years.
While I’m confident that many painful changes are ahead of us I don’t believe the outcome will be that bad at all. Imagine a world where there are no gas-burning cars on the streets, much fewer vehicles, no traffic congestion, no ugly parking garages, or auto shops, but rather more green space in our cities and a sky much more blue. I think we could all get used to that. But, in order to reach this stage with as little transitional carnage as possible, we need to begin planning now, so we as humans can fully enjoy the outcome of these advances and maybe enjoy the journey too.