Is it too early to start preparing?
Self-driving cars and the impact to commuting, parking requirements and how building owners and developers will adapt is likely five or more years away. However, considering this change now is important as leases signed today may exist for another twenty years or more.
How will this new technology affect your Leased premises?
Many maintain that driverless technology will impact parking the most, possibly occurring in a two-stage process.
For existing office buildings, the future is in the smart repurposing of existing spaces and structures, and policies and zoning codes that support those types of projects.
Self-driving cars can park very close together, as there’s no need to leave room for a person exiting the vehicle. What’s more, the whole process is automated, meaning laser guided precision will line up cars carefully. The result is that existing buildings will likely be reconfigured with a smaller parking-related footprint and eventually that could cut required parking space by over 50%. Traditional parking of course won’t totally disappear. We will still need parking for older, standard vehicles.
For new buildings or retrofits, redesigning parking lots and entrances to be less about static parking and more about increasing the flow of drop-offs and pickups will be important. These areas will also serve as staging areas for driverless cars not in use and will free up space and ideally protect roadways from potential congestion.
Landlords will experience decreasing parking revenues and will likely look to make up these foregone revenues elsewhere in the building.
What will this mean to tenants of existing office buildings?
Landlords will attempt to pass through the additional costs to redesign and reconfigure the parking areas. In addition, landlords will look to other areas to recoup lost parking revenue. Many cities in the United States, such as Houston, have large above ground parking garages. In the future, some of these above ground parking levels may be repurposed into office space.
Leases will have to be reviewed and appropriate changes should be made to any renewal, lease amending agreement or new lease to minimize any additional costs to the tenant for the repurposing and/or reconfiguring of the parking garages, parking areas and other commons areas of the building and lands. Certain definitions within the lease will need to be fluid and adapt as the building changes.
For new office buildings that are just on the drawing board and will be built in the next five to ten years, the effect of driverless cars will likely be factored into the reduced costs of design and layout. Will landlords pass off the savings to new tenants in the form of lower rents?
Landlords may use the promise of driverless cars to realize net savings by creating more space that can be converted for use as commercial or residential areas.
Will tenants be able to negotiate for fewer parking spaces, perhaps even setting up their own agreements with transportation-network companies such as Uber or Lyft to provide employees with transportation access? Or will landlord’s offer this service and then charge the tenants back for this service?
What will all this mean to tenants of office buildings to be built in the next five to ten years?
Tenants need the right advisors on their side to provide insight and advice on all matters affecting their leased premises in order to minimize the future financial impacts of technological change. Start the process today by reaching out to CRE Advisory Services Inc., your trusted Lease Audit and Advisory Consultant.