How self-driving cars will profoundly change real estate

Menlo Ventures managing director Venky Ganesan says that urban spaces will change dramatically once self-driving cars become widespread.

"The average house is roughly 3,000 sq ft and it's been going up. The size of your garage is roughly 500 sq ft. That means roughly 15 to 20% of your living space constructed in the average home is devoted to the garage," said Ganesan.

His prediction is that driverless cars could become a reality in five years, and will profoundly affect real estate within eight or nine years. "When the first driverless car is on the road, I think people will start thinking about zoning changes," said Ganesan.

Here are some of the changes he and other experts in the field predict:

Urban planning. Each urban area will have a hub, but it won't be in the expensive part of town -- it will be in the cheaper part of town, right off the freeway, Ganesan believes.

Fewer parking lots. In 2016, in the D.C. area, commercial underground parking garages added 10-12% to the cost of office construction according to CBRE, the world's largest commercial real estate service firm. In residences, each additional parking space increased the cost of development per unit by 25% according to CBRE data.

Driverless cars could make these parking lots a relic of the past and save on costs.

Some architectural companies are already preparing for the obsolescence of the parking garage. Andy Cohen, Co-CEO of Gensler, one of the world's leading architectural firms, says parking structures that are traditionally built with slanted floors. His firm is already dealing with adapting parking requirements for a future of self-driving cars. Today, they are starting to build garages with horizontal floors and an exterior, rather than interior ramp, so the structures can be more easily converted from a parking deck to a traditional office space.

The projects Cohen's firm works on take four or five years to be designed, approved and built.

"The next set of buildings that we're designing have to adapt to make these spaces work, otherwise we're building all of these unused spaces," said Cohen.

Fewer gas stations. CBRE predicts gas station real estate will be reclaimed as well. CBRE researcher Revathi Greenwood points to a shift to autonomous vehicles in a 2016 whitepaper, predicting a "pay-per-mile" model rather than a full car ownership model.

"Think of all these gas stations. There are 125,000 gas stations in the United States in prime real estate, you won't need those anymore," said Andy Cohen.

Preparing for the change means starting now. Cohen names a recent project his firm worked on, Orange County Great Park in partnership with Five Points, a residential community already prepared for an easy shift to driverless cars. The brand new community will have its own self-contained and operated driverless car system.