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With reduced parking needs and increased accessibility making new areas developable, how will project feasibility change?
What is driving change?
Minimum required parking is a major constraint in developing properties. The demand for parking appears to be decreasing in certain areas, such as airports, dense downtowns, and areas with concentrated nightlife, as people increasingly choose to use ridehailing services to go to these areas. The cost of providing parking stalls on site can be as much or more than providing similar-sized leasable space, so reducing or eliminating these parking-related costs as demand for parking changes could make many more projects feasible.
On one hand, AVs may enable people to travel farther, longer, and more frequently. Commuting to work and traveling for leisure may be less costly, both perceived and real cost, since the travel time can be used more productively for work or leisure. Increased comfort in the travel experience may mean that people are less sensitive to travel distance and more selective about their destination. On the other hand, the reduced demand for parking could result in a greater agglomeration and more intense development, including larger buildings where the increased demand makes such development feasible.
The impacts of transportation network companies (TNCs) and eventually autonomous vehicles (AVs) on real estate development depends on the changing nature of travel. If AVs are substitutes for transit, people could work and live farther away from transit stops, leading to new contraction in more remote, less developed areas even within urban cities. Even so, changes to the built environment will likely happen slowly and incrementally as developers figure out ways to modify existing buildings to accommodate a new prioritization of travel modes as well as redevelop surface parking lots and other opportunity sites in the highest demand locations.
What Could Happen?
- Areas previously considered too distant for development could become developable. As AVs travel faster and allow passengers to take on activities other than driving during their trip, travelling longer distances could become more palatable. This could increase project feasibility by opening up less expensive land on urban peripheries to development. However, it could also lead to increased urban sprawl if more projects move further out from city centers.
- More types of projects could become feasible when parking isn’t a factor. Parking lots and above- and below-ground parking garages are expensive to build and maintain, and can limit the financial feasibility of projects. Removing or reducing the need for parking removes this cost burden. At the same time, space previously allocated for parking could now be used to create leasable space or additional units, increasing potential revenue. That, combined with reduced or eliminated parking costs can dramatically increase project feasibility. Additionally, locations that were not previously feasible for development because of limited footprints that could not accommodate parking could become viable options for new development.
- Projects could be built farther from goods and services and could require less shipping space. E-commerce and courier network services (CNSs) can lessen the need to live close to stores and services. This increases the areas where projects could be developed and reduces the reliance on nearby commercial centers. Additionally, the shift toward small localized warehousing and more experiential retail could change the size and design of retail stores. Inventories could be reduced within stores while space that would otherwise be dedicated to storage or shipping bays for receiving large amounts of freight could be reduced or eliminated. This could be particularly impactful if smaller AVs could be used for sending and receiving goods.
EVIDENCE TO DATE
- Transit-oriented suburban development with first/last-mile micromobility connections isn’t new. This approach has been used extensively by Canadian cities for decades, for example. Both Montreal and Toronto have been encouraging suburban and peripheral projects by establishing light rail and commuter train transit hubs in these areas along with pedestrian links and micromobility options to provide access to transit hubs.
- Parking is a financial drag on development and cities that reduce or eliminate it see an increase in development. Parking is expensive to build and maintain and increases the overall cost of both commercial and residential development while decreasing the amount of housing that is built. Reducing parking requirements have been tied to increased housing production and density.
- Many cities are eliminating parking minimums. Cities across the country and around the world have eliminated parking requirements in urban cores. This allows for development on parcels that would otherwise be too small or too cost-ineffective to support a given project.
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