The burgeoning trends are affecting the ways developers are structuring current parking lots — given the belief that in the future some of that space might be converted to nonparking — as well as zoning and design decisions on the part of retail, since some retailers are now “manufacturing” via 3-D printing in their stores, O’Brien says.
“Real estate investors are looking at this and recognizing that fortunes were made in major advances in technology,” O’Brien said, mentioning trains crossing the U.S., the invention of the automobile, the U.S. highway system and air travel.
“I think people are looking at driverless cars as having a similar type of impact,” he added.
To that point, investors and developers are planning for a time when driverless cars render large parking garages obsolete, since in theory driverless cars will obviate the need for employees to drive their own vehicle to work.
One way developers are anticipating the trend, O’Brien says, is by building current parking garages with a view to the future, when they might later repurpose the space for another use.
Mezzanine lenders in particular are seizing on the opportunity, O’Brien says, since they typically have more appetite for risk than do more traditional large bank lenders.
“When you’re building an office building with parking, what you’re finding is they are now building the parking with relatively flat floors … such that they’ll be able to use that space for something else” when driverless cars come along.
And that point may be on the horizon. In September, the Obama administration issued its first-ever policy aimed at speeding up development of driverless cars, outlining a safety as well as regulatory framework. And in September, Uber Technologies Inc. debuted a fleet of driverless cars in Pittsburgh.
But as far as real estate development is concerned, it's not just multistory parking garages that are affected.
With developers seeing less of a need for ordinary parking lots, they are finding they have more space to develop office and retail properties where they might have otherwise put parking lots.
“It does create an opportunity for additional street-level retail and office. There are redevelopment opportunities out there. … Retail will need less parking,” O’Brien said.
“If you take a look at shopping malls particularly, there may be an opportunity to redevelop some of the expansive parking lots that [developers] have as driverless cars take root,” he added. “You’re even seeing a little bit of it now with car sharing.”
Indeed, that’s part of a larger trend afoot a shopping malls across the country, as shoppers are increasingly taking Uber or other ride-hailing services to the mall.
Jason E. Grinnell of Dykema Gossett PLLC told Law360 earlier this year that while malls are finding they are able to develop some of that parking space, the question is will they be able to find more retailers to come to their brick-and-mortar facilities.
While driverless cars and ride-hailing services are causing changes to commercial real estate, so too are 3-D printers, O’Brien says.
On the one hand, retailers are increasingly seeing the upside in setting up small 3-D printing operations at their brick-and-mortar stores as they seek to customize consumer purchases onsite.
“We’re beginning to see some stores [eyeing] 3-D printing customization opportunities within their stores,” O’Brien said. “Owners of retail real estate will need to consider: Are they appropriately providing the type of space around 3-D printing [and what is] the impact on leases that 3-D printing creates?”
Retailers have various uses for 3-D printers. Such printers, for example, could be used to customize blue jeans or athletic shoes.
O’Brien says retailers can use 3-D printers to customize shoes to a certain color and can even analyze a buyer’s gait and customize the shoe support accordingly.
Nike Inc. and New Balance Inc. have been eyeing the technology, and earlier this summer retailer DSW Inc. teamed up with digital shoemaker Feetz Inc.
But companies face various issues when putting 3-D printers into their stores. For one, there may be local zoning issues, since 3-D printers technically do manufacturing.
And there are also store design issues, since retailers may want to have the 3-D printer separate from the retail portion of the store.
There are also potentially environmental issues with doing 3-D printing at brick-and-mortar stores.
“It ultimately depends on the nature, and how significant the 3-D printing is,” O'Brien said, of zoning considerations. “It is manufacturing. There’s a different set of environmental concerns for your property.”
While those 3-D printing issues are currently playing out, the commercial real estate industry does also have its eye on how 3-D printers might be used to manufacture building materials.
Countries like China and the United Arab Emirates are currently using 3-D printing for large-scale building, which isn’t yet happening in the U.S., but could come for applications like roofing or deck materials.
Large-scale building with 3-D printers runs up against significantly more regulatory issues, building inspection issues, zoning requirements and public safety regulations, than does small-scale retail printing, O’Brien says.
“In the U.S., you’ll see it more around 3-D printing used to build out individual components … before you’ll see it in terms of large-scale building,” he said.
But while the use of 3-D printing is some time away for U.S. commercial real estate building materials, developers and investors are actively making design and investment decisions based on small-scale 3-D printing, as well as driverless cars.
“You see equity investors looking at the potential intermediate- to long-term opportunities," O'Brien said."