METLIFE INVESTMENT MANAGEMENT: ADVANCES IN TRANSPORTATION TECHNOLOGY TO SHAPE WHERE WE LIVE, WORK – AND INVEST
Research finds new investment opportunities in off-transit properties, parking lots and urban retail centers
Whippany, NJ, May 1, 2018
Ridesharing services, autonomous cars and electric vehicle technology could create a host of new opportunities for commercial real estate investors over the next decade, according to a new report from MetLife Investment Management, MetLife, Inc.’s (NYSE: MET) institutional asset management platform.
The report, “On the Road Again: How Advances in Transportation Are Shaping the Future of Real Estate”, explores the evolution of transportation technology and how it affects where we choose to live, work and play. The paper identifies near-term investment opportunities including off-transit apartments and the redevelopment of existing parking lots, in addition to discussing how long-term trends may drive a resurgence in urban retail and a revitalization of the suburbs.
Implications for commercial real estate
Off-transit properties The research suggests that the design and location of future commercial real estate projects will be heavily impacted. The authors noted one of the first major impacts will likely be the increased value of development sites with good access to uncongested roadways, but limited public transportation.
Parking lots As the need for vehicle ownership declines, particularly in urban centers that benefit from a proliferation of ridesharing services, so too should the need for some parking lots. This will create an opportunity to repurpose these lots and breathe new life into otherwise tired and potentially redundant developments.
Urban retail centers The report notes that part of the cost of urban shopping and dining is the cost of parking. With ridesharing reducing costs to consumers in terms of both time and money, a visit to physical stores on the high street may be a far more appealing prospect than before.
Adam Ruggiero, head of real estate research for MetLife Investment Management, said: “When we look at what makes real estate assets most attractive to tenants, access to transit has traditionally been near the top of the list, and investors have been willing to pay handsomely for it. As transportation technologies evolve though, we may see that same sort of direct access become less important, and real estate pricing will adjust as a result. Having an understanding of how these advances will affect real estate demand is essential to any investor hoping to outperform the market.”
According to the report, advances in transportation technology are already having an impact on the market. The research found that the introduction of ridesharing and carpooling services in San Francisco coincided with a decline in rental premiums for on-transit apartments (defined as those properties within a 5-minute walk of a transit stop) from a historical average of 20 percent to only 15 percent today.
The report analyzes a range of publicly available data sources and surveys, in addition to proprietary data compiled by the firm’s real estate research team. It notes that car manufacturers will likely develop autonomous vehicles that they can scale up to a fleet level, allowing them to substantially decrease the cost of a single-trip ride. Customers will have the ability to take longer and more frequent trips at a cheaper price.
Vehicle electrification will be another key factor. While existing battery technology is a significant cost for the current generation of electric vehicles, the future development of smaller, cheaper and more efficient solid-state batteries could increase driving range by as much as 200 percent and significantly reduce manufacturing costs.
These developments, taken together, point to a future of highly accessible, highly efficient and comparatively inexpensive transportation.
For the full report, authored by Ruggiero and Will Pattison, associate director, real estate research, please click here.
About MetLife Investment Management
MetLife Investment Management, MetLife, Inc.’s institutional asset management platform, provides institutional investors including corporate and government pension plans, insurance companies and other financial institutions with long-term public and private investment and financing solutions. With operations in the Americas, Asia and the Europe, Middle East & Africa (EMEA) regions, MetLife Investment Management manages assets for third-party institutional investors, separate accounts and MetLife, Inc.’s general account. MetLife Investment Management leverages a disciplined credit research and underwriting process to provide institutional investors with asset origination and acquisition opportunities and proprietary risk management analytics across traditional fixed income strategies, commercial real estate debt and equity investing, agricultural financing, and private placements, among others. For more information, visit www.metlife.com/investments.
MetLife, Inc. (NYSE: MET), through its subsidiaries and affiliates (“MetLife”), is one of the world’s leading financial services companies, providing insurance, annuities, employee benefits and asset management to help its individual and institutional customers navigate their changing world. Founded in 1868, MetLife has operations in more than 40 countries and holds leading market positions in the United States, Japan, Latin America, Asia, Europe and the Middle East. For more information, visit www.metlife.com.