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Seattle Daily Journal of Commerce
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Lay of the Land: Why landlords want uber-techie renters A renter who doesn't require a car, by using Uber or other snazzy car-sharing apps, likely can and will pay more rent. By DYLAN SIMON Special to the Journal
Its 11:35 p.m. on a Wednesday night. A black Lincoln Town Car pulls up and a young man hops in the back seat. Without addressing the driver or even specifying a destination, the car rushes off down the street. A newly minted tech baron you ask? Trust-funder with a private driver? Nope. Neither. Just a guy with a smartphone and an app called Uber; and you want him as your renter. Uber is a smartphone app-based service that uses GPS to locate both you and Town Cars nearest you. With a simple, free subscription you can summon the nearest Town Car. Y our credit card information and destination details are preloaded, so you just hop in without a word to the driver, and skip that awkward battle when trying to use a credit card. Y ou step out of the car without ever opening your wallet. For the impatient reader, I'll get straight to the point. A renter who doesn't require a car, by using Uber or other snazzy car-centric applications, likely can and will pay more rent. As a general measure of relative urbanist tendencies, denizens of San Francisco allocate roughly 50 percent of personal income to housing; in New Y ork City this number crests at 70 percent. Seattle? We clock-in at a very suburban rate of 34 percent. These figures illustrate that despite upward pressure on rent, using more efficient and cheaper means to transport ourselves creates an opportunity to shift resources (e.g., dollars) from transportation to housing. Using average rent as a metric, it is easy to see potential rent growth for Seattle. According to MPF Research from the fourth quarter of 2012, average rent in Seattle is $1,101 whereas average rent in Boston, San Francisco and New Y ork City are $1,642, $2,379 and $3,371, respectively. This illustrates rental premiums in those cities of 33 percent, 54 percent and 206 percent. Y et, per capital income between these cities deviates no more than 15 percent, illustrating a pronounced gap in rental rates relative to income. A major differentiator in these markets is allocation of dollars earmarked for rent versus transportation. Shift in thinking The influence of technology cannot be overstated, yet technology is merely a mechanism to make behavioral shifts in how we live and interact. What does this mean vis-a-vis the automobile? The Gen-Y set wishes to use fewer of them and to use the ones we have more efficiently. www.djc.com/news/re/12051830.html?action=get&id=12051830&printmode=true
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Several cases support this point. Although different in methodology, the results all support the common premise of fewer cars being used more efficiently, and that equates to more dollars available each month to pay rent. Uber is unlikely to substitute for daily car use, yet it plays an important role: efficiency and convenience. Imagine: No car payment. No insurance. No haunting concern of one too many at the bar after work. It's easy, elegant and at about 15 percent more than the cost of a cab, its remains relatively inexpensive. It fills a niche use, and when coupled with the following options, it creates a compelling argument to go car-less. Car2Go Its 2013 and we have all heard of Zipcar. It's the ‘why didn't I think of that' car rental concept that now has the likes of Enterprise and Hertz clamoring to [re]gain market share in the hourly car rental market. With the latest market entrant — Car2Go — we no longer need to find a Zipcar lot or make a Zipcar reservation. Pull out your smartphone, launch the app and voila: Y ou see the location of the Car2Go nearest you. Hop in and drive, then drop if off whenever you're done, wherever you like. Easy, elegant and possible thanks to technology nearly all of us carry in our pocket. One more niche filled. Peer-to-peer Michael rents his 2005 Toyota Prius for $7/hr. Dave is willing to rent his 2007 all-wheel drive Audi with a ski rack for $10/hr. Don has a 2006 Toyota Tacoma available for $56/day. Peer-topeer car sharing provides a platform for sharing cars directly between those who have cars and those who need cars. Whether on RelayRides, Wheelz, Getaround, JollyWheels or any of the other seemingly ubiquitous peer-to-peer car rental platforms, a clear path to market adoption of the car-sharing model is emerging. If you think the concept of sharing your car with a relative stranger is outlandish, let me quickly point you to Airbnb. Founded in 2007 and based on a peer-to-peer network for nightly rentals of apartments, condos, houses, stretches of beach and tree-forts, the business today is international and boasts a valuation estimated at over $1.3 billion. Change is occurring rapidly. Hitchhiking? As children we were all warned of the perils of hitchhiking. To SideCar, it's a business model. Non-professional drivers (aka Y OU) picking up strangers who hopefully donate to the cause. Smartphones, Facebook, minimally invasive background checks and a rating system and honor code form the backbone of this newly emerging phenomenon. Although challenged by many jurisdictions for lack of licensure and other conventional policing mechanisms required of commercial carriers, I'm betting technology and Gen Y creativity will make this model survive. I have taken you down this long road not to make technophiles of you all, but to illustrate the point that when operating in an urban environment, those of us in commercial real estate must educate ourselves about the behaviors, trends and technology that are important to our customers. The point I made earlier about shifting transportation dollars to housing cannot occur without understanding our customer demographic. The people who do — whether through site selection, amenities, branding or management practices — will yield the dividends. According to a recent report by Dupre + Scott, market projections for 2012 through 2017 suggest the potential exists for 18 percent rent growth in King County based on per capita income forecasts alone. New properties coming on line in King County are capturing the majority of rent growth and this product is clustered in several urban micro-markets, so competition for these higher rents will be fierce. Delivering what our customers value is paramount. Knowing how to do that will separate those who flourish in the urban rental game from those who struggle. Time to catch that Town Car! www.djc.com/news/re/12051830.html?action=get&id=12051830&printmode=true
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Seattle Daily Journal of Commerce
Dylan Simon is a technology hobbyist and commercial real estate broker with Colliers International, based in Seattle.
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