Stop Building Garages: How Driverless Cars Will Affect Real Estate

by | BiggerPockets.com

Driver-less cars are going to change a lot, and if you haven’t been actively reading about this, then it’s most likely going to happen much faster than you’re expecting. At first glance, there may not seem to be much overlap between the auto industry and the real estate industry, but the impacts and infrastructure changes from this technology will be felt by everyone. As investors, it’s our responsibility to understand changes as far out in advance as possible so we can adapt to progress and mitigate new risks.

Just about everything in this article takes place across the next 15–30+ years, which may seem useless to some. However, if you’re currently buying 30-year mortgages then you’ve got commitments that fall well within this transition period, and these changes will affect you. Having a better understanding of the future can be massive risk-mitigation tool against getting caught off guard when changes negatively affect you.

Driving Will Change Where People Want to Live Because Cars Will Commute for Us

Imagine you could wake up at 6 a.m. and crawl into your car and tell it to head to work while you got back to sleep. In two hours, you’re there, you’re safe, fully rested, and you arrive at work on time without having to deal with traffic or the monotonous task of driving. This is not science fiction. In fact, based on today’s technology, this isn’t even far fetched. This is science inevitability.

So how does this affect real estate? Well, think of all the people who don’t want to live in Washington D.C., Los Angeles, or New York City. What if they could live an hour or two outside the city and commute to work without losing any real time out of their day? How might this affect home values in a city when people can commute there easily without having to live there — and without making any sacrifice to do so? It doesn’t even have to be this extreme, either. Lots of people would be willing to commute for one hour each way if they didn’t have to drive. This creates a lot of space between a city hub and the places people can live without taking on the financial burden of city costs.

Might home values in a city go down when the necessity to live close by is reduced? Maybe cities will create an even larger price premium for those who can afford to live there while the masses are forced to commute an hour or two each day from poorer suburbs.

Cars Will Be the Next Rental Real Estate—Owning a Car Will Be a Luxury

Car ownership is going to be a thing of the past before you know it. Sound crazy? It’s not even a secret in the auto industry. Did you know that Ford, the oldest car company in America, has announced it’s going to stop selling cars and just sell trucks and SUVs? How can they do this? That’s a lot of cars to give up on selling … unless they don’t expect to lose that many sales. Companies who host ride sharing like Uber, Waymo, and Lyft are developing fully autonomous vehicles and are building fleets to replace personal car as we speak. General Motors is building a mass-market, fully autonomous car right now that will not be sold to the public. It will be only be used as part of a ride-sharing platform and available (supposedly) in 2019. That means two of the biggest auto manufacturers are starting to just flat-out not sell their products to the public. This is a signal of really big change.

Owning a car isn’t really that expensive, but there is zero return on investment. It’s only an expense. However, once cars can finally drive themselves 24-hours a day, all while producing income, the value of ownership will go through the roof. The most likely scenario is that Uber will sell unlimited-use passes by the month, and we will all happily give up car ownership in trade. It’ll be on-demand, easy, fast, and awesome. It may sound far fetched, but people will happily give up car ownership in the not-so-distant future when the cost savings become obvious. The value of any business is based on it’s income production. If you think cars are expensive now, imagine how much more they might cost when it’s a guaranteed profitable purchase.

Related: Your Car is an Expensive, Health-Sucking, Time-Wasting Machine. So, Ditch It!

Those with means to own their personal cars will create a moat between social classes. These days we might see a Ferrari and say, “Oooooh, that person has money! Look at their fancy car!” In the future, someone driving a Camry might get similar treatment: “Ooooooh, that person has money, they can afford to have a personal car!!!”

Lots of people in America buy their own homes, and some own an extra house as a rental. The volume of landlords is relatively small because owning a house requires capital, resources, knowledge, risk mitigation, etc. In the future, cars will be the new rental real estate; people with means will still own their cars, and a few will own an extra car. The second car will drive itself around as part of a ride-sharing platform and produce income, just like a taxi, but passive.

Remember That Extra 900 Square Feet Everyone Had to Add to Our Houses to House a Car? What Were They Called? Oh Right, Garages!

Why would you need a garage if you don’t own a car? What value does a garage provide? Storage, for sure: We get to put our unsightly water heater there, the Christmas decorations, and the treadmill that my wife just had to own. Is that all worth the space and cost that a garage requires? Not likely. So will garages be a premium in the future, or a nuisance? More likely it’ll fade from importance in middle-to-low-end housing and continue in luxury homes.

This problem is already being tackled with large parking garages. It might be a bold claim to say you won’t need your garage in 20 years, but the world really won’t need massive multi-level parking garages. Efforts are already being made to find out how to convert these spaces into light retail, office, storage and other amenities. It’s not going to be feasible to tear down all that concrete, but it will be imperative to find something useful to do with all that space.

Currently we pay a premium for garages because they are a highly sought after convenience. However, when the majority of people don’t own cars, will that garage command a premium? Or will it be a detriment? 

What’s the Land Underneath a Gas Station Worth?

Some of the most valuable land you can find is sitting underneath a gas station, and for good reason. Corner lots with good road access on busy cross streets serve a lot of cars and provide tons of ancillary needs. (Where else are we supposed to buy Slim Jims?). This infrastructure has been built up over decades and billions of drivers, but at its core it really relies on one thing: the internal combustion engine.

Electric cars, however, don’t need gasoline (surprise!). You’ll charge at your home and probably at work. So how often are we going to need a gas station then? Hard to say, but the fact is, people will use a lot less gasoline, and my assumption is they will use gas stations much less.

Now, obviously, some operators will find competitive advantages to survive, but many will not. And in rural areas, we should expect this problem to be much worse. A complete halt on gasoline sales is unlikely, because there are still uses for the product: small engines, generators, non-EV-conformers, etc. That’s a pretty weak position to hold onto though. Lots of industries are long gone, but still have niche support. Walmart will still sell you a CD Walkman (I saw one recently for $30!), but you wouldn’t use that example to highlight the value of compact discs.

Related: 7 Sharing Economy Side Hustles Real Estate Investors Can Use to Earn Extra Cash

When gasoline sales do slow, what will gas station owners do? I personally think most will go away, but not before suffering increasingly diminished profits as they experience the decline. Many will sell their businesses because of this, and what will their assets be worth? No one wants to look at a declining income statement trend and then pay top dollar. What about all the stores attached or adjacent to gas stations that capitalize on the heavy traffic? I’ve heard of no great solutions to these questions, but that won’t stop the impending takeover of autonomous and electric cars.

How Long Will All My Daydreaming Take to Come to Fruition?

If you don’t read often about this topic, then it’s likely that this transition will happen much sooner than you would guess. People hear about autonomous cars and say, “It’ll never happen.” Well, “never” will begin in 2020 when both General Motors, Ford, and others start to produce mass-market autonomous cars. What happens when every cab and Uber driver across the country goes jobless in a few short years? Ride sharing platforms will replace car ownership, as I mentioned earlier, and it will start next year. GM has publicly announced plans to build cars not sold to the public. They will only be part of their ride sharing platform….next year. How will home values be affected when waves of mass unemployment start? Take everything I’ve mentioned so far and apply it to truck drivers as well. In fact, they will be unemployed first, as autonomous 18-wheelers are already being used in the UK.

Unfortunately, I have no good advice for how to adapt to this, but anticipation and being proactive about change should help. For the “It’ll never happen” camp, they will not take any measures to protect themselves and it will cost them dearly.  What I don’t want to convey here is not to buy a house with a garage because you might not need one in 30 years. That’s silly, but maybe get used to the idea of not needing one in the future. Sleeping in our cars is what poor college kids do when they are really stretching, but in 10 years it might be a feasible temporary option instead of stretching to rent an apartment. Twenty years ago smartphones didn’t exist, now I can’t go three minutes without touching mine. It’s important not to get too confident of what is normal, as you may get caught stuck in the past.

You don’t need to have an MBA to know that businesses who refuse to participate in new technology go under. The board members at Blockbuster obviously had a strict head-in-the-sand policy. Don’t be like Blockbuster. Embrace and adapt to changing technology.

What do you think? Am I on to something?

Where do you see the future of garages and personal vehicles? Share below!

About Author

Alexander Felice

Alex is a long distance single-family real estate investor and a full-time underwriter at a commercial bank. After a few years of success in real estate, he felt compelled to teach people real estate is more profitable than they might think and far less risky than they assume. Alex is the author of brokeisachoice.com

27 Comments

  1. Christopher Smith

    Don’t hold your breath waiting for houses without garages in the foreseeable future, there’s nothing on the immediate horizon that will materially change the need for them. I hold an interest in a global venture that’s dedicated solely to the development of alternative transportation sources of the future (driverless, no carbon, etc.) and I see nothing from that perspective that would justify this conclusion for some long time to come. We’re not quite at the Jetsons point yet.

  2. Dan Redmond

    Much work still to do with driverless vehicles. I currently live on Potrero Hill in San Francisco which is the proving grounds for mutliple driverless operations. After several near accidents, multi vehicle including a bus in the middle of an insection, with one operations vehicles, I had to file a complaint. No matter what you read and think, not yet! I have nothing against that particular tech, but this is a situation where a late update is going to work.

  3. Jim K.

    You won’t house your own car or charge your own car at home. The thing will be parked at a remote charging station overnight and you’ll summon it to your home’s front door in the mornings when you wake up.

  4. Alan Majors

    This article is silly. Let’s suppose car ownership dies in 5 years. Do we tell tenants in the meantime they won’t need a car in 5 years? What do you do until then?? Why not consider future proofing any new or renovated garage instead? What would that look like? People always want more space, so configure a new garage to be easily converted into storage or another bedroom some day if cars fade away. Until then, a nice secure parking spot is a great selling point.

    • Proncias MacAnEan

      Doesn’t your answer point out why this article isn’t silly. Planning for the future now seems prudent. It may not make much of a difference in an SFR, but if building a multi unit where one has a large garage, it would make sense to design it so it could be more easily converted into another unit in the future.

      And to backup my case, recently I read on Nextdoor about a tenant who was looking for advice because a landlord was taking back all the garages and in a multi-unit to turn them into residential units.

  5. John Teachout

    I think there is a failure in this article to recognize the difference between the development of technology and the implementation of it.
    There will be a huge infrastructure required for the transition to electric vehicles. The majority of roads in the USA are not in a city and when you’re going across Nebraska, where are you going to plug in your car? It will take government involvement to establish this type of infrastructure and that may not be easy to get through federal and state lawmaking processes due to the exorbitant amount of funds required to accomplish what many will deem as unnecessary. While I think driverless vehicles and electric vehicles will become more commonplace, I’m not planning my future around them.

    • Proncias MacAnEan

      City planning and trans-Nebraska driving planning don’t have to follow the same track. And as most people live in urban/city areas; and since current technology can easily get one across Nebraska; I wouldn’t expect future vehicular developments to be Nebraska based.

      Electric vehicles work for most people most of the time, as most journeys are short. And if one isn’t going to own a vehicle, how much new infrastructure is really needed; especially if that is only to plug in a vehicle.

      And aren’t all those high-rise parking garages and parking lots, a great place to store and charge all those vehicles.

  6. johnny wolff

    @Austin Fruechting and I were talking about this a few days ago. Thought he made a great point – that even if self driving cars are better than driving yourself. Being close / being able to walk will always be more desirable and convenient.

  7. Nick R.

    I have had thoughts very much along these lines for a couple years now after listening to Elon Musk during one of his quarterly conference calls. I agree that a transportation revolution is upon us. I’m not as confident that it will sweep society with the pace of technology. Perhaps the pace of politics, or somewhere in between.

    I’m mindful of it going forward. But trying to game it l, and especially time it, is a big challenge.

    For what it is worth, I do expect fully autonomous vehicles to be driving along side me in the 2020s – and statistically I expect to be the more dangerous driver between the two of us.

    As soon as I can buy an Uber abled one, show me where to sign, and I will watch it drive itself right out of the parking lot to pick up my first passenger. I hope to never see it again, just the revenue it generates.

  8. Nick R.

    I have had thoughts very much along these lines for a couple years now after listening to Elon Musk during one of his quarterly conference calls. I take Musk’s optimistic projections with a grain of salt, but I still agree that a transportation revolution is upon us. I’m not as confident that it will sweep society at the usual pace of technology. Perhaps the pace of politics, or somewhere in between.

    I’m mindful of it going forward. But trying to game it l, and especially time it, is a big challenge.

    For what it is worth, I do expect fully autonomous vehicles to be driving along side me in the 2020s – and statistically I expect to be the more dangerous driver between the two of us.

    As soon as I can buy an Uber abled one, show me where to sign, and I will watch it drive itself right out of the parking lot to pick up my first passenger. I hope to never see it again, just the revenue it generates.

  9. Ken Oz

    Soon drivers wont know how drive let alone how to read map, gps does the thinking for us. Driverless cars will make people afraid to take the wheel. Sheeple, not people… something to ponder before you give up your garage and automobiles

  10. Andrew Jurinka

    I look forward to automated cars and think they’ll make life safer and easier. I disagree that they will do away with the family car or “Fahrfugnugen“ (joy of driving in German). I don’t understand why the commidization of cars wood render them more expensive In a competitive world where cars themselves are increasingly made by machines.

  11. Lane Crownover

    I lived in New Jersey for a few years and people were already sleeping on their two hour commute. They took the train from Pennsylvania to NYC and they had absolutely no home life. That being said, I highly doubt that driverless cars would change where people want to live.

  12. Brian Kertscher

    Why am I sleeping in my car for a 2 hour commute when I can just work from home? Having a SMART home with upgrade internet access would seem better. How does my hair look after a 2 hour sleep/commute? Am I sleeping in my coat and tie/dress? Did I get up to shower only to sleep in the car?
    I see Uber/Birds/Limes/Bikes/Self driving cars reducing the needs to own a car in the city and urban areas where cost to own are higher but not in the suburban areas, still have to get the kids to soccer.

  13. Eric L.

    Nice to see a post about driverless cars here. I’ve been talking about it on BiggerPockets for five years now. This will be the biggest change since the Internet and the technology is ready this year.

    Waymo is years ahead of the competition here. They are already driving without a driver in Phoenix, picking up passengers, and scaling their operations as they receive more cars. They have 82,000 cars on order over the next couple of years. Waymo is predicting each driverless car to do 15x as many trips as the average car today. Over the next 10 years, their CEO was quoted that the odds of being able to be picked up by a driverless Waymo in any major airport is 100%.

    People in the US spend half of their earnings on two things, housing and transportation. With each driverless car replacing nearly 15 cars, it’s easy to see cost removed from transportation.

    It’s not so easy to predict the second order affects of housing. My city used to expand 30 blocks, just past the end of the street car lines. When the automobile came around, suddenly the city was over 200 blocks.

    Not only will people be more nomadic and spread out both with longer commutes, but the #1 complaints not to build dense will go away. They announced a big development two blocks away from me two weeks ago. Sure enough, like clockwork, the news interviewed the neighbors with their complaints a week later, “Where will everyone park?!” and “This used to be a nice quite neighborhood, think of the traffic!!”.

    If driverless cars reduce the land cost of housing the biggest expense in housing will be labor. RV’s and modular homes have a huge benefit of being built in a factory with ever increasing automation and decreasing labor needs. The cost savings over traditional housing will be much more pronounced and the cost savings increase over time with assembly line automation.

    As it depreciates, housing in the US might become something people live in and trade more frequently, like RVs, rather than a wealth building tool. Leading to more depreciation and cost of living savings.

    Astro Teller has more on the end of the ownership society: https://www.theverge.com/a/verge-2021/google-x-astro-teller-interview-drones-innovation

    • Dany Ven

      You are so anxious about all these driverless cars, but have you read the reports about how often they’ve been hacked recently? For hackers it’s like stealing a candy from the kid. I don’t want myself to be killed just because someone are willing to have a house without garage.
      There are so many houses in any real estate agency that have a garage that is not connected with the house directly or just has a parking slot near it, so it doesn’t harm the house footage. https://tranio.com/residential/?options=2
      I embrace all the new technologies but only when they are useful. Inventing new technology for technology’s sake is idiocy.

      • Eric L.

        “You are so anxious about all these driverless cars, but have you read the reports about how often they’ve been hacked recently? ”

        What reports? Current cars are already drive by wire and are already connected to the Internet. Having a tech company like Google in charge of Internet security as opposed to Chrysler with only a handful of engineers, increases security drastically.

        “I embrace all the new technologies but only when they are useful.”
        -Reducing the #1 killer of Americans age 4-34
        -Taking the average 17% spend on transportation closer to just 5%
        -Turning the roughly hour a day on average spent commuting into free time

        Those seems like pretty useful things to me and are huge deals by themselves, let alone combined. Those are before we even start thinking about second and third order effects.

        The tractor freed up 10% of our income, but it took almost 50 years to do it. Driverless cars are going to do that in less than a decade.

        • Dany Ven

          No hacking. Sure. In 2015 there was an accident caused by hacked systems which led to a recall of more than 1m Fiat Chrysler vehicles. For me that was a wake-up call — flagging to the world the dangers hackers pose to the auto industry.

          Adding autonomous systems that make cars partly or fully self-driving means the vehicles also have to connect to other cars and infrastructure on the road.
          But this opens up what was traditionally a closed system to outside, possibly malicious influences. For example, we’ve seen demonstrations of attacks using cars’ Bluetooth, WiFi and radio frequency on passive key entry systems, which all create possible entry points for hackers.

  14. Proncias MacAnEan

    I was chatting to a realtor in San Francisco. He has noted that whereas a decade or so ago, everyone wanted a garage, and it was definitely harder to sell a property without a garage. Now, with Uber, Lyft, Zipcar, Getaround, Tech buses, etc, it isn’t an issue for many buyers.

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