It’s no secret that the sharing economy is having a major impact on the real estate industry. Co-work spaces like WeWork have created new demand for flexible office layouts, and Airbnb has eaten into the hotel industry’s profits. Now ride-sharing services are leaving their mark on the real estate sector.
Just this past week, the Wall Street Journal featured a story about how real estate developers are partnering with companies like Uber and Lyft. Unlike Airbnb’s adversarial relationship with the hotel industry, real estate developers see the value ride-sharing companies bring to their projects. Dave Bragg, an analyst for the real-estate research firm Green Street Advisors, went as far as calling Uber and Lyft the “single biggest game-changer for real estate” over the coming years.
This is particularly true in urban areas, where land costs continue to climb and building on-site parking becomes that much more cost-prohibitive. What’s more, people are driving less nowadays, so building excess parking seems like just that—an unnecessary excess.
So real estate developers are intentionally partnering up with Uber to offer tenants incentives to use ride-sharing services instead of keeping a personal vehicle on site. The earliest example of this partnership was in San Francisco: Real estate developer Parkmerced, whose portfolio includes more than 3,000 Bay Area rental apartments, started offering all new tenants a $100 transportation credit that could be spent on Uber and/or public transit. As part of the deal, Uber agreed to cap all UberPool rides between Parkmerced and the nearest BART or MUNI station to just $5.
“This is a building block for broader, smarter cities,” said Wayne Ting, Uber's Bay Area general manager earlier this year when the partnership first launched. “Our hope is that this is the first of many deals with real estate developers.”
Developers around the country have followed suit. Here in LA, the owners of the 41-unit Eleanor Apartments also offer tenants a $100 Uber credit each month. They had tried implementing a ZipCar strategy a few years back, but that didn’t work out. So then they began leasing spaces at a nearby medical office complex for tenants to use, but when the lease expired it wasn’t renewed. The owners were searching for an alternative way to mitigate the property’s lack of parking, and the $100 Uber credit seems to be doing the trick.
For renters like Taylor Fisher, a 33-year-old who recently moved into the Eleanor, the $100/month in Uber credit meant that the building’s lack of parking “wasn’t a deal breaker” anymore.
When partnerships like these allow developers to scale back – or eliminate – parking, it makes the units more affordable for renters. A single parking space can add upwards of $25,000 to a unit’s cost; and twice that if the developer has to build structured or underground parking.
The Wall Street Journal also noted that Uber isn’t the only thing real estate developers are paying close attention to. Savvy developers are also starting to think about how driverless vehicles might impact real estate development.
In Somerville, Massachusetts, developers Federal Realty Investment Trust (FRIT) have teamed up with Audi to explore how self-driving cars might be implemented into FRIT’s new 2+ million sq. ft. mixed-use development project known as Assembly Row. With driverless cars expected to be on the road by 2030, and with the understanding that FRIT’s new development will be around for decade to come, the team is working to design a parking garage that will accommodate the rise in driverless vehicles. Because driverless cars will need less room to park (you don’t need to worry about opening doors, for instance), Audi estimates that the developers could cut parking space by 62% and save the developers upwards of $100 million over the project’s lifetime.
And because land is scare in urban areas (especially in communities like Somerville, the 7th most densely populated city in the U.S.), the space that would have previously been used for parking can be freed up for other uses.
“We can transform those floors into residential, hotel, office and retail uses,” says Amy Korte, a principal designer with Boston-based architectural firm Arrowstreet. “There are a number of uses that will make our cities better.”
Alain Kornhauser, a researcher from Princeton University, echoed that sentiment. The biggest impact of autonomous cars, he says, will be on parking. “We aren’t going to need it, definitely not in the places we have now,” he told Curbed earlier this year. “Having parking wedded or close to where people spend time, that’s going to be a thing of the past. If I go to a football game, my car doesn’t need to stay with me. If I’m at the office, it doesn’t need to be there. The current shopping center with the sea of parking around it, that’s dead.”
As technology advances, we can expect the impact on real estate development to grow. It is important for developers to monitor these trends closely. Planning for the future now will be more cost effective than trying to retrofit properties in the future, particularly given the “future” isn’t all that far away.