Land Value

If AVs reduce parking demand, prime land for redevelopment, and increase mobility, how might this affect land value?

Yellow "for sale" sign in front of two story residences

Photo by DGLimages via Shutterstock. Used with permission.

COVID-19 IMPACTS

What is driving change?

Change in Parking Demand

Minimum required parking is a major constraint in developing properties. The demand for parking appears to be decreasing in certain areas, such as airports, dense downtowns, and areas with concentrated nightlife, as people increasingly choose to use ridehailing services to go to these areas. The cost of providing parking stalls on site can be as much or more than providing similar-sized leasable space, so reducing or eliminating these parking-related costs as demand for parking changes could make many more projects feasible.

Change in Ease of Travel

‍On one hand, AVs may enable people to travel farther, longer, and more frequently. Commuting to work and traveling for leisure may be less costly, both perceived and real cost, since the travel time can be used more productively for work or leisure. Increased comfort in the travel experience may mean that people are less sensitive to travel distance and more selective about their destination. On the other hand, the reduced demand for parking could result in a greater agglomeration and more intense development, including larger buildings where the increased demand makes such development feasible.

Reduction of Brick-and-Mortar Stores

Ease of access to places and goods is changing the demand for certain types of stores and may cause retail to congregate around anchor stores where the foot traffic is higher. As the need for storage and shelf space decreases with the continued increase of e-commerce, there will likely be a continued reduction in the footprint of stores selling goods that can be easily bought online and delivered.

Future Changes

A woman stands next to a shuttered Kmart storefront in an empty parking lot

Phillip Pessar via Flickr / (CC BY 2.0)

What Could Happen?

Increased mobility could lead to both increases and decreases in land value. In cases where urban development tends toward densification, urban core land values as well as the land values of neighborhoods and suburbs with strong senses of place and identity could increase as new mobility modes reduce the demand for cars and as AVs provide easier access. In cases where urban development tends toward sprawl, land values in urban areas could decrease while land values in neighboring suburban and rural locations could increase as AVs provide easier access to them.
Repurposed parking lots can also drive both increases and decreases in land value. Land previously used for parking suddenly becoming available for redevelopment in large enough quantities to saturate the market could depress land values in some cases. In locations with high demand, the reduced need for parking can result in upzoning and densification, increasing land values.
Redeveloping failing or shuttered retail centers can reverse declining land values. An excess of land available for redevelopment caused by the shuttering of large retail outlets can drive down land values through market saturation. Repurposing these lots into new and desirable commercial and residential areas could increase land values, particularly in dense urban areas.

Train in Japan with mountains in the backgroud

Hans Johnson via Flickr / (CC BY-ND 2.0)

EVIDENCE TO DATE

Demand for parking lots is already shifting and decreasing. The declining need for parking has already started with TNCs and other existing mobility technologies decreasing the demand for parking at airports, in dense downtowns, and in areas with concentrations of nightlife. Others, such as Summit, New Jersey—a suburban transit hub for New York City—are reducing parking availability in favor of partnerships with TNCs, allowing land that would otherwise be used for parking to be developed for other purposes.
Land value is linked to transportation access. While the effects of new mobility and AVs on land values must necessarily remain hypothetical until widespread deployment, the impact is likely to be mixed. Change in parking demand could allow for more intensive land uses, allowing for more housing units or commercial space in the same footprint. Land values have been strongly influenced by access to main roads and transit. AVs could change those demand drivers. For example, locations that were once in demand, such as retail stores visible from highways and major thoroughfares, may transition to other uses.
Warehousing land values are increasing. The growth of e-commerce is the genesis of this trend. According to data from the Bureau of Labor Statistics, more than 3,000 new establishments classified as warehouse or storage were added between 2009 and 2018. The average size of new warehousing in suburban and exurban areas in the U.S. has more than doubled in size from 500,000 sq. ft. to over 1 million sq. ft. Average industrial land values for parcels between 50-100 acres doubled over the space of a year, while infill sites increased from below $200,000 to over $250,000.

Quick facts

Si aliae qui ommolenet que prati aut eossitae optatus daepell uptatur andante comni idebit quid moluptio te am quat facculparum recaecte.

Across eight cities, development costs for shopping centers with underground and above-ground parking structures increased by 53% and 37%, respectively.
Bundled parking increases the annual cost of rental housing by $1,700 in the United States on average, according to industry research.