The expansive development of the interstate system during the Eisenhower administration and the proliferation of the automobile drove many Americans towards the suburbs. However, millennials and empty-nesters are now leading a movement back into urban locales. In response, public transportation has expanded dramatically having a profound effect on commercial real estate values. To be specific, retail, office, and multifamily have all benefited from the expansion and each for different reasons.
Retail has seen an explosion in foot traffic. Without the limitation of parking spaces, more people are able to pour into central urban retail space. To further capture this traffic, many retailers have taken space within the central transportation hubs right along the terminals. For example, the recently completed Oculus in downtown Manhattan is lined with stores and restaurants taking advantage of the thousands of people who travel through daily. Office space has followed a similar strategy by locating near central transportation hubs to capture the demand for access from employees. Finally, as millennials increasingly purchase fewer vehicles, new multifamily development no longer has to include expensive and less profitable parking space.
With this trend toward urbanization and public transportation, many wonder how much further of an impact could self-driving cars, a tremendous mechanism for public transportation, have on commercial real estate values.
Written by Front Street Intern Blake Hakimian.