We all know that in today's society, one of the most important indicators to measure the value of real estate is the "distance from the station. However, this common sense is now being overturned from the bottom up. Automated driving technology is bringing about a "once-in-a-century revolution in mobility" that is bringing about structural changes in our lives and in the real estate market.
How will this change the value of properties that have tended to be avoided simply because they are "far from train stations? Or will new value be found? This article provides an easy-to-understand explanation based on expert knowledge and the latest data on how the development of automated driving technology will affect the real estate market, particularly land prices and the state of commercial facilities. Let's learn together the "new normal" of real estate investment in preparation for the coming future.
Fundamental Changes Impacted by the Spread of Automated Driving Technology on the Real Estate Market
The evolution of automated driving technology is not limited to mere improvement in convenience of transportation. It is fundamentally changing the way people value "time" and "distance," and as a result, it is having such an impact that it is redefining the rules of the real estate market itself.
The arrival of an era that will change the concept of transportation
Automated driving technology, which companies around the world are currently competing to develop, is categorized into Level 0 to Level 5 according to its technological level. In particular, the commercialization of Level4, which will realize fully automated driving under certain conditions, and Level 5, which will eliminate the need for a driver under all circumstances, will free us from the labor of "driving" and change the nature of our travel time to "activity time" for enjoying work, learning, entertainment, and other activities.
| Automated driving level | Role of the driver | Role of the system |
|---|---|---|
| Level 3 | Immediate response to system intervention requests | Substitutes all driving tasks in limited areas |
| Level 4 | Not required (within a limited area) | Performs all driving tasks and peripheral monitoring within a limited area |
| Level 5 | Always unnecessary | All driving tasks and peripheral monitoring are performed unconditionally |
According to a study by the Ministry of Land, Infrastructure, Transport and Tourism, the widespread use of such advanced automated driving is expected to significantly reduce the psychological and physical burden associated with long-distance and long-hour travel. This will mean freedom from the constraint of "commuting time" in choosing a residence, a factor that will cause a major tectonic shift in the real estate market.
The demise of the "near station" myth and new location evaluation
In the conventional real estate market, the "0-minute walk from the station" index was the absolute standard for determining property values. However, the spread of automated vehicles may cause a relative decline in the value of this "near station" myth. This is because people will not necessarily need to live near train stations once "door-to-door" transportation, which allows people to comfortably travel from the door of their home to the door of their destination without changing trains, becomes commonplace.
As a result, the axis of real estate evaluation will shift from a situation where transportation convenience was the sole focus to one that reflects a more diverse range of values. For example, factors directly related to "quality of life (QOL)," such as the richness of the natural environment, a quiet and safe living environment, or ample living space, will become more important than ever. This suggests the need to fundamentally rethink real estate investment strategies.
How will the land price map change? Future Predictions Based on Data
The spread of automated driving has the potential to reshape the relationship between urban centers and suburbs and significantly rewrite the map of land prices in Japan. Here we forecast the specific changes based on published data.
Scenario of Narrowing Land Price Gap between Urban and Suburban Areas
In this scenario, the easing of commuting restrictions will increase residential needs in previously undervalued suburban areas, and the increase in demand will push up land prices.
On the other hand, this does not mean that real estate values in central Tokyo will plummet. However, it is natural to assume that the extreme disparity in land prices between the urban and suburban areas will gradually narrow as the value of suburban areas rises.
| Conventional (station-centered) valuation | Valuation after the spread of automatic operation | |
|---|---|---|
| Urban area | Convenient transportation and concentrated property values | Value will be maintained, but relative superiority will decline |
| Suburbs | Transportation convenience is low, and land prices are undervalued. | Land prices are rising due to reevaluation of the quality of the living environment |
| Properties far from train stations | Tend to be evaluated as having low property value | Restrictions on transportation will be eliminated, and values will be reevaluated |
Areas to Watch and Investment Strategies
In this era of change, real estate investors should focus on more than just "suburbs. Areas where infrastructure for an automated society is being systematically developed, such as areas where smart city development is underway, or large-scale new towns where dedicated boarding/exiting and charging facilities for automated vehicles are being built, may have high value in the future.
As an investment strategy, it will be important from a risk hedging perspective to diversify the portfolio from the traditional concentrated investment in "near station" properties to suburban real estate with future potential. In particular, properties with smart home features, such as those that are designed to work with automated vehicles, have the potential to be valued as new added value.
Roadside retail strikes back: new possibilities for commercial real estate
The automated revolution will bring about major changes not only in residential real estate, but also in the commercial real estate sector. This could be a particularly significant business opportunity for roadside retailers, which have struggled in the past due to the rise of e-commerce sites.
Reasons why suburban commercial facilities are being reevaluated
As automated vehicles become more widespread, people will be able to more easily access large suburban commercial facilities. This will bring back the appeal of suburban shopping centers with their large selection of goods and ample parking space. In addition, logistics efficiency through automated operations will contribute to cost reductions in store operations.
Furthermore, demand for parking space itself is expected to decline in the future. If cars shift from individual ownership to sharing, and if the mainstream is to call up cars when needed, vast parking lots will no longer be needed. This excess space can be converted into green space, event space, or new commercial facilities to further enhance the overall appeal of commercial facilities.
The New Normal for Roadside Retail Investment
In the age of automation, the criteria for selecting a location for roadside retail investment will also change. In addition to ease of access to main roads, new evaluation points will include designing traffic lines that allow automated vehicles to smoothly enter and exit, EV (electric vehicle) recharging facilities, and delivery service base functions.
| Investment Decision Points | Examples of specific measures |
|---|---|
| Automatic operation support | Installation of dedicated boarding bays and waiting spaces |
| EV infrastructure | Installation of quick charging stations, energy management |
| Logistics hub | Installation of drone port, automated warehouse system |
| Complex value provision | Attract co-working spaces, clinics, entertainment facilities |
Sharp decline in demand for parking lots and measures for real estate owners
The spread of automated technology will have a significant impact on the parking business. The shift from individual car ownership to sharing is expected to significantly reduce demand for parking.
Impacts of the Sharing Economy
As self-driving cars become more prevalent and car sharing and ride sharing become more common, the need for individuals to own cars will greatly diminish. Once a system is established whereby automated vehicles are summoned when needed and automatically transferred to the next user after use, the demand for parking spaces in urban areas will decrease dramatically.
This change poses a significant risk to property owners who manage parking facilities. The traditional parking revenue model will collapse, and a shift to a new business model will be required.
Strategies Real Estate Owners Should Take
Parking facility owners need to view this change as an opportunity, not a threat, and take action as soon as possible. Specifically, mixed use or conversion of parking spaces is an effective option.
For example, converting part of a parking lot into a revenue-generating facility, such as a laundromat, convenience store, or trunk room, can diversify revenue sources. In addition, installing quick-charging stations for electric vehicles can also bring in new demand.
| Measures to be taken | Expected Effects |
|---|---|
| Conversion to a complex facility | Diversify revenue sources by combining facilities with coin-operated laundromats, convenience stores, trunk rooms, etc. |
| EV charging facilities | Capture demand for electric vehicle recharging and secure a new revenue source |
| Land conversion | Increase asset value by converting land into housing, commercial facilities, parks, etc. |
| Automatic operation support | Utilize as waiting/passing space for automated vehicles |
What Real Estate Investors Should Do Now: Practical Advice
What actions should real estate investors take now in anticipation of the coming age of automated driving? Here we offer practical advice.
Key Points for Reviewing Your Portfolio
The first important step is to review your current real estate portfolio. If your portfolio is overly concentrated in properties near train stations, you should consider diversifying your investments into suburban properties to diversify your future risk exposure.
However, not all properties near train stations will lose value. The brand power of the city center and accessibility to commercial facilities and offices are still important value factors. The key is to build a balanced portfolio.
Asset Building Strategies with a Long-Term Perspective
A long-term perspective is essential for real estate investment. Full adoption of automated technology is still more than a decade away. However, the change is certainly underway.
Developing a forward-looking investment strategy now and adjusting your portfolio in stages is the key to maximizing returns while minimizing risk. In particular, investments in areas where smart city development is planned or automated infrastructure is being developed can be expected to generate high returns over the long term.
INA&Associates Inc. provides optimal consulting on such future-oriented real estate investment strategies for each of our clients. With our expertise in asset building for the ultra-high-net-worth class, we can propose the optimal investment portfolio for the age of automation.
Conclusion: To Succeed in Real Estate Investment in the Age of Automated Driving
As explained in this article, the spread of automated driving technology will drastically transform the value standards of real estate that have been ingrained in our society. The very concept of mobility itself will change, ushering in an era in which the true value of real estate will be reevaluated under the new value standard of "quality of living environment," which until now has been difficult to evaluate.
In order to be successful in real estate investment at this historical turning point, it is essential to accurately predict future changes and flexibly change strategies without being bound by past success stories or stereotypes. By anticipating changes in the land price map and looking at new possibilities, such as roadside retail, you can aim for steady asset growth while minimizing risk.
INA&Associates Inc. provides real estate investment consulting services with this future in mind. We offer optimal portfolio strategies tailored to each client's individual asset situation and goals. If you are interested in learning more about real estate investment in the age of automation, please feel free to contact us.
Frequently Asked Questions
Q1. When will automated driving be put to practical use?
A1. Level 4 automated driving services in limited areas have already begun to be put to practical use in some areas in Japan and abroad. Its widespread use, including on ordinary roads, will depend on legal developments and social acceptance, but it is expected to make significant progress by the 2030s.
Q2. Will properties near train stations really decrease in value?
A2. Rather than a "decline" in value, it is more appropriate to view it as a "relative diminishment" of the absolute superiority that has existed to date. Please consider that the convenience and brand value of urban areas will not be lost, but that the value of suburban properties will increase, thereby diversifying your options.
Q3. Should I start investing in suburban properties now?
A3. From a long-term perspective, investing in suburban properties with potential is an effective option. However, not all suburban areas will increase in value uniformly. It is important to conduct a professional analysis to determine trends in smart city planning and infrastructure development on an individual basis.
Q4. How should existing parking lot management respond?
A4. In anticipation of a decline in demand for parking, we recommend that you consider converting your parking facility into a complex or converting the land to other uses at an early stage. There are a variety of options, such as co-locating a coin-operated laundry or convenience store, installing EV charging stations, or using the parking lot as a waiting space for automated vehicles. Consulting with an expert can help you develop the best strategy.
Q5. What is the payback period for investment in automated driving-ready facilities?
A5. It varies greatly depending on the investment and the location of the property, but in general, a payback period of 5 to 10 years is expected for EV charging facilities. However, this period may be shortened due to the speed at which automated driving technology is spreading and government support measures. It is important to make investment decisions from a long-term perspective.
