The Great Real Estate Recalculation

We will need to rethink where bookstores should go: not always in the higher-rent suburban locations, where Borders outlets were placed, but rather in out of the way fringes.  Book lovers will have to drive for longer periods of time to do their browsing, or use Amazon.

Buildings should become taller, more densely packed in, and there is a chance of vertical farming

Best Buy stores are too large.  The NoVa landscape is already starting to be littered with empty big boxes.  What will be put in them?  How many current "stores" should evolve into "petting zoos" designed to complement the company's web sales operations?

Some parts of the suburbs should become quite empty, while some roads should become much wider and better maintained, accompanied by congestion pricing of course.

I've already stopped using Tysons Corner Shopping Mall, mostly because the combined activities of parking and walking take too long and involve too many hassles.  The mall no longer offers convenient access to its nodes.

The dinky homes in Pimmit Hills, Falls Church will be replaced with much larger and newer boxes.

In so many sectors of the economy, Manhattan has become obsolete as a shopping center, replaced by the web.

Self-driving cars have the potential to fit many more cars on the road.  Traffic will become less costly, as cars evolve into portable offices.

It is not hard to imagine how The Great Real Estate Recalculation should proceed.  But it will take decades to occur, and there is a chance that we get only the "hollowing out" side of the story.  In the meantime, land economics will rise in importance as a field of economics, whether or not the profession realizes it.

Comments

With so much commerce going online (and sizable fraction becoming dematerialized--as with music, movies, books and newspapers) we may simply need much less retail space. Some of the empty box stores may sit abandoned until they are demolished. When the 3D fad plays out, look for a lot of empty movie theaters as well as big box stores.

Telecommuting is not yet as advanced, but it has the same potential impact on office buildings. In fact, the great real-estate recalculation may eventually include a recalibration of the advantages and disadvantages of people clustering together into congested, expensive urban areas.

We need to recognize that major changes may be first enabled by technology but only realized by much slower changes in customs (often having to wait for enough unchangeable fogies to retire). My mother will never read a newspaper online or send a text message. My kids will probably never subscribe to a print newspaper or have a land-line phone. Imagine the changes to real-estate in a world where companies and universities are things you join where you are and don't require you to kiss all your friends and relatives goodbye and pack all your stuff in a moving van.

Self driving cars will change everything. Mostly, they'll be taxis.

Vertical farming is pie in the sky, violating simple logic, even if they did fool Scientific American.

Don't forget office space. Most people at my company now work from home.

Also, we have to accept that large cities, such as Detroit, will just shrink. It's a common occurrence in the older parts of the world, where wars and changing trade routes greatly affected cities, but foreign to American experience in many ways. Enough of this talk about rebuilding some of these cities. Move on.

Try this simple recalculation - 'the U.S. has 20.2 square feet of retail space per person -- compared to 3.3 square feet for the next-highest entry, Sweden. The UK -- which practically invented Industrial Age retail commerce -- has 2.5 sf, only 1/10 as much as the U.S.' http://boards.straightdope.com/sdmb/showthread.ph...

Much like with its defense spending, the U.S. is such an outlier in some ways that Americans just don't understand how atypical the U.S. is in those areas. And the rest of the world isn't likely to double its retail space any time soon, is it? On the other hand, if the U.S. reduced its retail space so as to have twice as much as the next country, it would face a reduction of 2/3 of its retail space to get to that still exalted position at the top of the list.

@slocum;

Check out google's experiment from last year where they have a fleet of these cars going around SF. They are self driving in fairly congested freeways and CA neighborhoods. It got me convinced that they might indeed work fairly soon.

Do your US supermarkets do home delivery? That business has expanded hugely in the UK over the last few years. And very convenient it is.

Why do people assume vertical farming would require electricity? At some point we really will want to capture as much sunlight as we can. If you start with the assumption that anything 'hot' is probably bullshit, you don't have to waste a lot of time debunking it.

Nonsense. As transportation continues to get better, cities will become more spread out.

"We will need to rethink where bookstores should go"

Why? Borders issue isn't so much location - it is that their boxes are far too big and too expensive to lease. Don't forget - until very recently Borders was not a book store, it was a "media store" that always had extensive CD and DVD collections. When the electronic media market collapsed, Borders had nothing else to put in that space, with the result that their stores now are full of crappy stationery and gift items. Sure, e-books may eventually kill book stores, but Borders' crisis today was not caused by e-books, it was caused by e-music and streaming video. B&N faces the same issue of course.

Slocum,

I have 20/50 vision and can barely read signs on the road until I'm a few feet away. I also had cataracts in the past, which leads me to have greater light sensitivity. I'm not alone with this issues. I, and everyone like me, would be far far better off with an automatic automobile.

BTW, I don't know if Tyler intended it, but self driving cars(i.e. the mobile office) are probably the next technology breakthrough that will lead to a significant increase in our standards of living. Even with a 30 minute commute, my mobile office would cut an hour out off the time I needed to spend in the office.

Note that one argument about big box stores being too big isn't about the amount of floor space for shoppers, but about having too much space in the back to store inventory. Advancements in supply chains and logistics argue against having having lots of space in high $/sq ft areas for storing inventory; better to store everything in a warehouse in a cheap location and ship just-in-time to replenish stock.

'In America, retail is a social experience -- one of our public spaces.'
Which shows a deep level of confusion - retail space is anything but public. Which is why, in the U.S., the idea of a privately owned and controlled space being considered 'public' is a commonplace - a public space that only exists on the sufferance of the owner, who tends to be only interested in private profits - and very uninterested in 'subsidizing' competition through taxes. For a simple, but very typical example, count the number of playgrounds found within McDonald's franchises, and the number of truly public playgrounds in a geographical area like a county. McDonald's is not a public space, but it certainly does a fine job providing what is no longer laughably referred to as 'playgrounds' for small children.

The U.S. is a true outlier, and continues to believe that it is simply representative.

Probably the two largest hindrances to growth of home delivery are product choice and cost.

This is why I can't understand the assertion that much of Manhattan retail is obsolete. There's much more product choice in NYC (at least for clothing, home goods, etc) because of all the small boutiques and high end stores here. I don't even have 'vehicle wear and tear' for my shopping trips either because I can just walk a few blocks (free! ...fine, except for opportunity cost) or take the subway (max $4.50+ round trip, and in reality much less because I have a monthly pass). If the prices online and in store are comparable, it's a no brainer to just pick something up myself and have it available for immediate use.

The problem with Barnes & Noble in NYC is that the in-store prices are so much higher than even their own online prices. If I don't mind spending a little time, I can order the physical book online or get it from the library or look for it at the Strand. If I don't want to wait, I can buy the ebook. The one advantage that B&N has over shopping online is the ability to browse new books, but if I'm looking for atmosphere and 'browseability', I'd rather go to my local bookstores (plus they usually have cats!)

Reply to Tim at Mar 7, 2011 12:41:57 PM

"Actually you're just describing a housing boom. Those HOA-managed parks and playgrounds will more than likely be public parks and playgrounds in a decade or four as the HOA disintegrates over time and decides to "give" them to the city."

-- any evidence for that? The cost of HOA dues for a playground is much lower than what the city would charge. You also get control over it.

I've been fascinated since a young child by the transformation of real estate uses (one reason why I started out my life in law in land use). I'm interested to see what becomes of a lot of the space used by Blockbuster, for instance, made obsolete by Netflix; in many cities Blockbuster stores previously took over from closed bank branches in strip mall locations when ATMs made them redundant (along with the S&L crisis that forced closure). All over the Southwest, evangelical churches are taking big box space from failed grocery stores. Unfortunately, land use laws and the petty tyranny of zoning boards will assuredly be a dominant element preventing the market from adjusting and accommodating the changes that you describe. Less experimentation will go on and the conversion of space will move slowly.

What about tele-immersion? The experience of interacting via 3D glasses is getting better quickly. The day will come when a significant number of people will no longer need to live in a particular place for their job. On the other hand, space won't be used in city centers for people to work. Of course there are many other reasons to choose to live in a city, but lots of people won't and those cities will look much different than they do today.

Was this post written by a libertarian?! I would never have guessed based on the content. After all, I thought the market was supposed to sort all this out.

If these are just hypotheses/predictions, why not use "will" or "may" instead of the more prescriptive "should"?

This may be the first MR post where I don't disagree a bit with anything you've written. And that has me concerned for you, Tyler. (Though perhaps this is all a joke or performance art or some such....)

"rethink where bookstores should go: ... in out of the way fringes. Book lovers will have to drive for longer periods of time" + "I've already stopped using [the mall] because the combined activities of parking and walking take too long" ~= bookstores should be eliminated because you have to drive too far and its a hassle?

Late comment, but regarding this: "Book lovers will have to drive for longer periods of time to do their browsing..."

It's not exactly a secret since it gets featured in national press pretty regularly, but Archer City, TX is home to a cluster of stores that fit this description:

http://www.bookedupac.com/

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