The coming years could see the next great land rush across the US and many other countries worldwide, but it might not even involve land. Instead, the next trend for savvy investors could be fleets of autonomous vehicles.
A previous article posited the idea that the retail industry may be about to experience its greatest disruption since the rise of online shopping. In a market that’s struggling to balance the pros and cons of selling sight-unseen products versus the high costs of maintaining a brick and mortar store, the answer could lie in mobile malls that bring stores direct to the consumer at the push of a button.
The continued progress in autonomous vehicles made by a host of companies including Tesla, Google and Ford makes the possibility of mobile retail stores even more feasible, allowing for tailored designs to better accommodate the shopping experience than previous attempts. And while the ramifications of such a prospect are vast for the retail industry, the effects could be felt elsewhere too.
Problems for the Real Estate Industry
The problems currently facing the commercial real estate industry are piling up. Startups are increasingly engaging with the sharing and collaborative economy, meaning that they’re opting for coworking spaces and shorter term leases to accommodate their ever-changing business models. Likewise, the increasing reliance on remote freelance workers has seen companies requiring smaller office spaces. And as for the retail real estate space, they’ve taken a battering from the rise of online shopping — an industry that has been climbing steadily, with profits predicted to rise to $370 billion in 2017 from $231 billion in 2012. The last thing this industry needs is another headache.
However, if it does make a shift towards mobile stores, the demand on not just commercial real estate businesses but a wider reach of companies that sell and lease out physical space could drop significantly. Instead of choosing to purchase or lease shop fronts, startup businesses and already established companies could be attracted to the less expensive, more risk averse option of choosing a store on wheels.
A New Possibility in Leasing
Of course, none of this is to say that if the mobile retail economy takes off there will be fewer retail stores and small service businesses in operation; in fact, if it proves to be a success more businesses will feel confident in starting up their own stores, less preoccupied by the concerns that normally come with setting up a brick and mortar space. However, the drop in demand for commercial real estate will be replaced by an exponentially increased need for autonomous vehicles capable of providing a space for stores. This would come in the form of companies selling and renting fleets of autonomous vehicles to companies of all different shapes and sizes.
With most companies estimating that autonomous cars will be on the market by around 2020, the idea of renting out fleets of autonomous vehicles to retail and service businesses may still seem like a long way off; however, by looking at the effect that major, innovations disruptors have had on other industries, it’s easy to see how quickly things can change.
For instance, since Uber’s inception in 2010 there has been a fall in income of around 10% among salaried taxi drivers, and a decline of 65% in the average number of rides per taxi in San Francisco between 2012 and 2014. Likewise, since Airbnb came on the scene and disrupted the accommodation industry, it’s estimated that hotels have lost out on approximately $450 million a year.
When rental companies start offering leases of tailored, autonomous vehicles to retail companies and small service businesses, the shift towards terrestrial real estate could be rapid and punishing for those who don’t adjust quickly.
Commercial Real Estate Should Get Ready
The rise of a mobile real estate economy geared towards retail and small service businesses would undoubtedly be a major disruptor that would change the landscape of the industry; however, that’s not to say that it would necessarily have a negative impact. Real estate companies willing to adapt would be able to leverage their knowledge and experience of the industry because, while it would still be largely unchartered, greenfields territory, any experience in the area would prove to be beneficial.
The question is, to what extent will existing real estate companies be willing to adapt, and will they act quick enough to claim a share of what could become a multi-billion dollar market? Those who do see the opportunity could enter the profitable realms of fellow disruptive companies Uber and Airbnb, and those who don’t may unfortunately find themselves left behind in an industry moving quicker than they can manage.