In his autobiography Sam Walton described why he preferred a small propeller plane to a jet. He could fly closer to the ground and see how America’s towns and cities were growing. Having scouted out the traffic flows and selected the ideal location, he would often land and strike an immediate deal with the local farmer.
Ian MacLaurin saw from the late 80s how the car-owning family was likely to prefer shopping out of town. At the time Tesco was heavily criticised by analysts for ramping up debt to acquire new superstore sites, but it built the platform for two decades of market leadership. Taking the long view on property has always been central to successful retail strategy.
So much of the development of urban landscape is determined by the motor car. Since the 1950s it has driven sprawling suburbanisation and out-of-town development. But within the timescale of property decision making – say up to 25 years – cities and suburbs are likely to change out of recognition again. For this will be the timescale over which autonomous vehicles uproot everything we think we know about locations.
Tesla is a remarkable company but leads us to assume that autonomous vehicles (AVs) will just be like current ones but with the freedom to kick back and watch Netflix. This is the equivalent of the horseless carriage, with the coachmen still sitting high up front. “Driverless cars” of the future will be as similar to today’s cars as the “wireless phone” in your pocket is similar to the phone you used in the 1980s.
Many journeys will be taken by Uber-like ride-hailing or Zipcar-like sharing models. Vehicles will be suited to the ride, with options from mobile workstations to sleeping pods or motor homes. But the cost of AVs – and of course insurance – will fall so much that OC&C (in a study released this month) predicts personal vehicle ownership will still be favoured by many. Either way journeys will be low cost and on demand.
So where will people choose to live when transport is cheap, journeys faster, and time spent in transit can be productive? Our view is that there will be polarisation of both residential and retail locations.
Easier transport suggests a population move out to fragmented, less expensive exurbs. Here private vehicle ownership will remain popular. Miles travelled will increase, but journeys will be more pleasant. Fewer, better malls and retail parks will be needed, as they will be within easier reach of more people. Parking lots will become redundant – vehicles will just drop off and then wait elsewhere or pick up a shared ride. So much more space will be available for retail, entertainment and leisure.
Meanwhile city centres could thrive too, with dense knowledge clusters, creative industries and educational campuses. Eliminating parked cars could free up 20% of total space for attractive new uses.
“Future real estate hot spots may be in resurgent exurbs, or in service units at urban peripheries, or in micro-convenience in city centres”
City-dwellers may choose to give up private vehicle ownership, and call on shared mobility solutions when needed. Automated mobile pods will bring most of their needs into the city on demand. Retail goods will be shuttled in from dark stores, fresh food from vertical farms, or meals to order from shared kitchens, all located around the city periphery. In fact there may be many more AVs moving stuff than moving humans. Very little traditional physical retail will be needed within the city, or find it economical to operate there.
If this view is right then future real estate hot spots may be in resurgent exurbs, or in service units at urban peripheries, or in micro-convenience in city centres.
It was relatively easy to predict mass car ownership, but it took Sam Walton or Ian MacLaurin to see where value would be created in retail real estate, and decades to prove them right. The next technology shift in mobility could be just as profound. Maybe there will be more new billionaires in retail and real estate than in production of the new vehicles.
This article appeared in Retail Week 1st November 2019