Real Estate Assets Digitized Now Will Do Better Down the Road, Despite Trends in Transportation

Advances in technology, shifts in demographic and economic patterns, and evolving public policies are combining to disrupt the way people and freight move from place to place and in the way they use space. Real Estate is an industry being significantly affected by this disruption, which is expected to intensify in the years ahead.

Changes in the way travel occurs impact Real Estate assets of all types. This is because they are dependent upon roads and vehicles to bring to them people, products, and services. Cars and trucks traveling along those roads create traffic. For a Real Estate asset to be successful, traffic must move efficiently. However, congestion makes it difficult for humans and freight to speedily and safely go to and from the asset. 

Congestion is likely to worsen in the months and years ahead due to rapid growth in and around urban zones as masses of people leave rural areas and flock to cities where opportunities for greater prosperity abound.

Some Solutions will Lower Asset Values

There are three primary ways metropolitan areas address traffic problems. The first is traffic avoidance. In this approach, changes are made to streets (such as widening them or simply banning parking in front of buildings) in order to accommodate more vehicles and prevent traffic slow-downs. The second way of addressing flow problems is traffic relocation. Here, the goal is to reduce the number of vehicles by discouraging their use within the city. This can be achieved by closing streets to cars and trucks, and by building or expanding public transportation systems. 

Both of these approaches—traffic avoidance and traffic relocation—tend to lower the worth of Real Estate assets unless changes are made in the way space is utilized and accessed (examples: construction of more multi-story warehouses and bike paths or bike highways). Value reduction occurs mainly because traffic prevented from parking in front of a property or altogether kept away from it disrupts access.  For example, a once always-full parking structure on a busy corner will likely attract fewer cars if the street on which one of its entrances is located is blocked off and converted to a pedestrian mall.

Consequently, many metropolitan regions are choosing instead to focus on the third way of addressing traffic problems. Rather than avoid or relocate traffic, they strive to modernize existing infrastructure and add more of it. Notably, this approach places emphasis on technological innovations—everything from encouraging the use of ride-sharing programs and electric scooters to installing computer-controlled traffic-management systems and helping bring about the new age of self-driving Connected and Autonomous Vehicles (CAV).  This approach favors such things as the construction of smart roads, both public and private. Infrastructure modernization also looks approvingly at innovations just over the horizon, such as hyperloop systems (a transportation concept in which magnetically levitated passenger and cargo capsules travel at jet-aircraft speeds along a track or through a low-pressure tube constructed either above or below ground).

Digitization is Improving Transportation Efficiency

Importantly, transportation-sector disruption is creating opportunities for Real Estate assets utilized in freight logistics. There exists a pressing need to make warehouses, distribution complexes, and intermodal transportation hubs more efficient. Shippers need greater efficiency in order to cope with the pressures placed on the supply chain by traffic congestion and the responses to it, but also by the rise of e-commerce, increased competition within the transportation industry itself, and other factors.

Accordingly, the freight logistics field is turning to digitization to achieve superior efficiencies. For example, facilities are being outfitted with embedded sensors. Robots and drones are playing increasingly larger roles. Automated vessels and trucks are being developed.  Even blockchain technology is coming into use.

Digitization is invaluable for a variety of reasons, but the most relevant in terms of Real Estate assets are data collection and data analysis. Digitization makes it possible to identify the precise best locations for a warehouse, a distribution center, or an intermodal transportation hub. Decisions about where to site a facility, how to design it, what features to include or exclude, and how to get it built on-time and within budget can be made far more confidently. If the facility already exists, digitization permits faster and better due-diligence ahead of acquisition. Indeed, decision-making supported by digitization is generally much less risky. It is also much more likely to result in a superior ROI—something that can be further enlarged by outfitting the asset with high-tech automated controls to transform it into a “smart building” that intelligently operates and maintains itself with little or no human decision-making required. 

Improved decision-making is just as possible for Real Estate assets having nothing to do with transportation logistics but instead impacted by traffic congestion and the various ways it is addressed. Arcadis believes that Real Estate assets affected by disruptions related to transportation can benefit from digitization. This benefit can be obtained at every stage of an asset’s lifecycle. However, doing so requires knowing how to leverage digitization to the maximum extent possible.

Read the Arcadis „Trend Report: Connectivity“ for more recommendations.