Over the last few years, autonomous vehicles (AVs) have gone from science fiction to near reality. Already, prototype vehicles zip through cities like Pittsburgh and Miami; autonomous trucks travel long-haul routes in multiple Western states and deliver freight in Atlanta.

Industry experts expect that Level 4 AVs (which require driver participation under certain traffic or weather conditions) will be incorporated into mobility fleets within the next few years, and will be available to consumers as private automobiles by the mid-2020s. Level 5 vehicles, requiring no driver involvement at all, may become a reality only a few years later. The Boston Consulting Group predicts that by 2035, one in 10 cars on the road will be a fully autonomous vehicle and an additional 15 percent will be partially autonomous.

AV technology is certain to disrupt and transform the real estate industry – just as the steamboat, steam engine, electric streetcar and automobile have done in the past. In particular, AVs are expected to free up for development vast swaths of land previously dedicated to parking or other automobile-dependent uses. Plus, at least some existing parking garages could become rentable space, storage space or something else able to produce income. And construction costs may dramatically decrease due to reduced or eliminated parking needs and lower distribution costs for materials delivered by AVs.

AVs are also likely to drive demand for certain asset types and make some property more valuable. For example, data centers, both traditional large-scale facilities and smaller “edge” facilities, will be necessary to process the incredible amounts of data generated by AVs – by Intel’s estimate, each AV will generate an amount of data equivalent to that used by 3,000 people. Companies like Amazon and Walmart will rely on fulfillment centers near population centers to make speedy deliveries using AVs. Living and working in outer suburbs may become more desirable, and land values in such areas may increase, if AVs make commutes shorter or more comfortable.

But it’s not all upside. In particular, the uncertain future of the AV industry will make it difficult for the real estate industry to proactively adapt. Currently, AVs are being developed both by traditional automotive companies, which generally anticipate some level of private car ownership, and companies like Uber that envision a future in which vehicles are shared. Most current projections regarding land value, impacts on particular asset types and construction costs assume that AVs will be largely shared. Owners, developers and lenders should, at this point in the development of AV technology, watch the AV industry closely to see if this assumption is correct as well as maintain flexibility wherever possible in how property is developed and managed.

It is also uncertain how and when AVs will change consumer preferences with respect to real estate. Because AVs are expected to make road travel more efficient, more convenient and more comfortable, both the premium placed on convenient locations and the penalty associated with inconvenient locations will likely diminish. But to what extent will that be true, and how long will it take for AVs to influence our decisions about transportation?

Historically, there has been a consistent premium associated with a commute of an hour or less. Will that hold true for AV commutes? And will urban areas continue to be desirable for living, working and entertainment, or will we see a resurgence of interest in suburban locations?

Finally, certain industries may suffer as the AV industry takes off: traditional car companies – at least those unable to keep pace with their tech-company rivals; car-focused retail like strip malls; and hotels and restaurants catering to freeway travelers. The future of automobile insurance companies, automobile dealerships and gas stations is also unclear. The unknown economic impact of these industry shifts and the replacement of professional drivers with AVs create additional uncertainty.

Now is the time for the real estate industry to start considering the impact that AVs will have on the real estate landscape – and start participating in the broader conversation with planners, government officials, technology and automotive company leaders and other stakeholders regarding AV technology.

Katherine Wax is a shareholder with Schwabe, Williamson & Wyatt. She focuses on real estate and construction. Contact her at 503-796-2912 or kwax@schwabe.com.

The post OP-ED: Potential impacts of autonomous vehicles on real estate appeared first on Daily Journal of Commerce.

2017 has been a tumultuous year for brick-and-mortar retail. A wave of bankruptcies and store closures has underscored the fast pace of change in the retail industry – and the cost of failing to keep up. But retail is hardly dead. Far more retail stores will have opened in 2017 than will have closed by the end of the year, and by some metrics, consumers’ in-store shopping has increased steadily since 2014.

Savvy retailers are working to lure customers away from their smartphones – or at least lure customers and their smartphones – back to brick-and-mortar stores by focusing on the customer experience, convenience, and technology integration. At the same time, retailers are rethinking the role of the brick-and-mortar store. As we move into the holiday season and the new year, here are some trends to watch and innovations to follow.

Creating “third places”

Starbucks pioneered the concept of the “third place” as a retail strategy – a place that is not home (the “first place”) and not the workplace (the “second place”), but offers a comfortable and informal space for gathering. Retailers, developers and shopping center owners have recognized that such spaces can anchor and support the brick-and-mortar shopping experience. Over the next year, expect to see a renewed focus on creating spaces within retail stores and shopping centers intended to make visitors comfortable and extend the duration of the typical shopping trip. These spaces may also provide a new way for customers to interact with products or brands through programming or amenities.

An Apple executive’s comments at a product release event last month underscore this trend. Apple has reconceptualized its physical locations as “town squares,” and hopes they will become “gathering places” where customers will come to relax, try new products and take classes. New and redesigned stores implementing the “town square” concept will include more seating, interior landscaping and educational programming in a plaza-like setting.

Personalization

Another significant trend is a focus on personalization and the customer experience, particularly for high-end retail. One recent example is Nordstrom’s launch of a new small-store concept: Nordstrom Local. At 3,000 square feet, Nordstrom Local’s Melrose Place location in Los Angeles is a fraction of the size of a typical Nordstrom location and carries no inventory. Instead, items are selected by salespeople for particular clients, or selected by customers using an app, and brought to Nordstrom Local from a nearby store or warehouse.

Personal shoppers are nothing new, but integrating technology into the shopping experience offers a wealth of new opportunities. Many luxury brands and high-end department stores are experimenting with technology that helps tailor the in-person shopping experience to individual customers and eliminate pain points in the shopping experience. Apps also offer a way of collecting information about customer preferences, allowing individual salespeople to serve consumers more effectively as they learn about them and allowing brands to learn about customers in the aggregate. We can expect to see further innovation in this area in 2018, and beyond.

Smaller stores

Retailers are also focusing on bringing stores closer to their customers and to more convenient locations. Nordstrom Local gives customers the ability to pick up and return online orders, try on clothes and work with a personal stylist in a relaxed, boutique setting – without fighting crowds at the mall or parking in a shopping center garage. Other retailers experimenting with small store concepts include Sephora, Target and Ikea. Smaller stores may allow these brands to open more stores and increase brand awareness in new markets or new environments. They can also serve as a distribution point for picking up and returning online orders.

Unique experiences

In order to lure shoppers away from screens, many retailers are designing stores that provide product-based experiences that cannot be replicated online. For example, Eddie Bauer has installed an “Ice Box” in some of its new stores, allowing customers to test outerwear in temperatures as low as negative 20 degrees Fahrenheit. A Nike store in New York features an indoor basketball court for testing shoes. Best Buy has found success with shop-in-shops, where customers can try out products from high-end retailers like Magnolia Home Theater and Dyson in separately branded environments. These strategies build customer trust and product familiarity, while providing customers a reason to shop in person instead of online.

Data collection

While many retailers and startups are experimenting with technologies that assist in data collection, Amazon is one high-profile pioneer. In Amazon’s physical bookstores, customers can scan electronic product labels with their phones to bring up current pricing and reviews. The data generated by customers provides insight into how they browse and buy, and allows Amazon to refine in-store and online shopping environments. Amazon is expected to introduce similar technology into Whole Foods stores to track the browsing and spending habits of grocery customers as they shop. Other retailers will doubtless follow suit.

Streamlining distribution

Physical stores are also increasingly being used as distribution points for online sales. Target launched a new store concept with two entrances – one for online pickups and grab-and-go purchases, and a second for a more typical Target experience. Similarly, Amazon partnered with Kohl’s to provide a special area in Kohl’s stores for Amazon returns, and has installed Amazon Lockers in Whole Foods stores to allow Amazon customers to pick up online items while shopping in-store. Not only do these concepts make online shopping more convenient for the customer, they lower distribution costs for retailers because products can be shipped to and from a single point.

The 21st century store

The trends discussed indicate major changes in the way customers shop, and the way retail tenants use space. Landlords, tenants, and owners and developers of retail projects should recognize that the stores of the future may look different than the stores of today, and that as the retail landscape changes, the way retail properties are developed, leased and managed may need to change too.

Katherine Wax is a shareholder with Schwabe, Williamson & Wyatt in its real estate and land use and entitlement practice areas. Contact her at 503-796-2912 or kwax@schwabe.com.

The post OP-ED: Reinventing retail: trends to watch in 2018 appeared first on Daily Journal of Commerce.