Automation and Real Estate Development

Automation is having a dramatic impact on real estate development that creates challenges and opportunities in urban, suburban and rural markets.  The growth of E-Commerce closed a record number of retail establishments in the US and will continue to do so but also creates opportunities for the development of fulfillment centers.  The advent of Autonomous Vehicles will dramatically change how we plan cities, manage traffic and transform parking structures into 24 hour transportation centers. Finally, the growth of Artificial Intelligence in the White Collar financial and professional service industries will transform the current office market environment.

The growth of e-commerce fulfillment centers has been staggering.  From 2010-14, e-commerce was growing but still ranked 3th in the “big-box” real estate market constituting 16.1% of the market trailing traditional retail and consumer non-durables.  However, as the chart below illustrates, the development of e-commerce centers is dominating this market place.

Source: Jones Lang LaSalle

The growth of e-commerce centers has also moved from the traditional mega-markets to the second level markets of Indianapolis, Columbus, and St. Louis with these markets now making the Top 10 for deal flow.[i]

The face of traditional retail is dramatically changing as well. .[ii]  By shopping center “gross leasable area,” Cowen and Company estimates the U.S. has 40% more space per capita than Canada but five times more than the U.K., and American Malls grew more than twice as fast as the population between 1970 and 2015.[iii]  Finally, Cushman Wakefield estimates that Mall traffic declined 50% between 2010 and 2013 due to the Great Recession.[iv]  Traditional retail has been struggling for a while but E-commerce is dramatically growing the list of Greyfield Malls.  Credit Suisse suggests that 25% of the current Malls in American will be closed by 2022 and the American retail industry this year set a record for announcing store closings with well over 6000 closed.[v]  Current retail centers will need to be redeveloped to keep even growing communities from suffering substantial economic losses.

The emergence of Autonomous Vehicles will transform the land use landscape of American cities.  263 M non-autonomous cars are on America’s road, and roughly 2 B parking spaces exist in the United States.[vi]  If projections come close to panning out for the growth in Autonomous Vehicle ride sharing, the average American city could see dramatic reductions in the number of cars on the street.  The lack of cars will not only impact commute times for the positive but will also reduce the demand for parking which can constitute 1/3 of the land in a traditional Central Business District.[vii]  Large patches of parking lots and parking garages will be primed for redevelopment.  In addition, many parking garages will be transformed into Autonomous Vehicle hubs powered by electric vehicle. In Los Angeles, AvalonBay Communities Inc. has begun work on an apartment development in the city’s arts district with parking garages specifically designed to be convertible to Autonomous Vehicles when in the near future when extra spaces won’t be needed.[viii]  The city of Somerville, Massachusetts is collaborating with Audi’s Urban Future Initiative and the Federal Realty Investment Trust on a garage design that could cut needed parking space by 62 % with estimates of $100 M in savings.[ix]  Traditional retail centers would see their need for parking dramatically reduced and the front lots devoted in large part to parking could be transformed into new developments or green space.

Finally, Artificial Intelligence will have a dramatic impact on how American office environments are structured.  Artificial Intelligence will impact which occupations grow and are eliminated.  Technology oriented positions demand new and different office environments.  New technology will enter the workplace creating new demands for the office environment of current office buildings and new designs for the office of the future.  Current trends of bringing workers back into a common office space will continue with the growth of automation in the workforce. That sense of teamwork and human connection will continue to matter to companies large and small.  The global office environment company Steelcase reports companies from IBM, Bank of American and Aetna have all asked their mobile workers to return to the office.  These corporate decisions grow out of reports that 1/3 of the workers in the largest economies are suffering from a lack of employee engagement.[x] With the advent of machines taking over repetitive work, successful companies in the future will need to rely more on creativity. According to recent surveys, 77 % say creativity is a critical job skill, but 69% say they aren’t living up to their creative potential. Office spaces will need to become embedded with technology with a balance of private space for individual work but also have spaces that promote creativity and team work to keep workers engaged.



[iii] Ibid.

[iv] Ibid.





[ix] Ibid.