The impact on real estate in a Johnny Cab world

What will a future with autonomous vehicles on the road really look like?

Columnist John Clark says when it comes to challenging socio-economic issues, old ways of thinking just aren't good enough.

Columnist John Clark is Vice President with The Regional Group of Companies Inc.

I think they nailed it quite well way back in 1990 in one of Schwarzenegger’s sci-fi flicks, Total Recall. Most urban dwellers take some form of mass transit. The next option is a robo-taxi service called Johnny Cab.

Actual individual automobiles with intelligent driver assist and autonomous capability are a prestige item for the well-to-do, as well as law enforcement and first response.

If this holds true, most of us will not be owning our own self-driving car.

The Economist published a great piece last week that suggests this is how the near future can be expected to unfold. Limitations of road conditions and seasonal weather, as well other practical considerations, may mean most autonomous vehicles will be in the form of some kind of robotaxi service within well-defined urban areas, just like Johnny Cab.

Even if the technology is there in terms of safe and reliable performance for individuals to own their own self-driving cars, The Economist suggests the cost of this added intelligence per vehicle might still be prohibitively high for most of us until the 2030s. Not too far in the future!

Prime land for redevelopment

That leaves me thinking that, while we may reduce the number of vehicles in total, the roads will be just as busy, if not more so. Today, if you own a car, you know it spends most of its time sitting in a driveway or parking lot, waiting to be used. But in a Johnny Cab world, those robotaxis will be constantly on the move.

I continue to believe this transition will have a profound impact on urban real estate. It will substantially reduce the need for architects and developers in the urban core to incur the labour and cost of designing and building multi-level underground parking. In fact, we already see many condo and mixed-use developments across Canada being built today with far fewer parking spaces than there are residential units.

The impact will be even more profound in suburban areas, where a building footprint typically doesn’t exceed 25 per cent of the site area. What could be done with much of that 75 per cent currently allocated to asphalt if people can rely on robotaxis for their commute? 

If you look at a high tech area like Ottawa’s Kanata suburb, it is conceivable two to three times the amount of R&D space could occupy the same land area if driverless cars get adopted in a big way.

In fact, there might be such a surplus of land, it deflates the market and drives prices down.

Now, what about public transit?

The big question is what will be the marginal cost of pay-per-use without ownership versus the cost of taking public transit. The answer to this crucial question could either mean boon or bust for municipalities.

Car ownership is costly. I’ve spoken before about how my son uses one of those car-sharing services that have been around for years. He jumps behind the wheel whenever he wants, to go wherever he wants. His total annual cost is only about a fifth of my total costs to own and maintain my car.

According to the CAA, it costs about $8,600 to $13,000 a year to own a vehicle, depending on its size and including depreciation. If you average 20,000 kilometres a year in mileage, that works out to 43 to 65 cents a kilometre.

Now take Ottawa (because it’s where I live). A bus fare currently costs $3.45. At 43 cents/km, the break point is eight kilometres on a one-way trip.  If you buy a monthly pass and need to take more trips, the cost obviously shifts in favour of public transit.

A regular adult monthly pass breaks down to a daily cost of $3.88 in a 30-day month. A person taking four one-way trips a day cuts their cost to 97 cents per trip with the break point reduced to about a 2.3-km trip.

Cost will depend on who’s running the show

What will it cost to take that Johnny Cab? Besides the cost of technology, it depends on who is running the fleet – a municipality focused on cost recovery, or a private enterprise focused on profit. If the cost to you as the user is still around or above that 43 cents/km mark in today’s prices, short hops around the city quickly become more costly in a robotaxi than on public transit.

Just like a conventional car today, can a robotaxi offer enough convenience and flexibility to offset this price premium versus public transit?

It remains to be seem what happens in rural areas. But considering that Canada has already become largely urban, with well over half our population in fewer than 20 urban areas, the impact of autonomous vehicles on real estate and how our cities function could be substantial.

To discuss this or any valuation topic in the context of your property, please contact me at jclark@regionalgroup.com. I am also interested in your feedback and suggestions for future articles.


John Clark is Vice President with The Regional Group of Companies Inc. He has more than 33 years of experience in the real estate appraisal field, is a fully accredited…

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John Clark is Vice President with The Regional Group of Companies Inc. He has more than 33 years of experience in the real estate appraisal field, is a fully accredited…

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