why landlords want uber-techie renters

4/11/13 Seattle Daily Journal of Commerce

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April 1 1 , 201 3

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 pullsup and a young man hops in the back seat. Without addressing thedriver or even specifying a destination, the car rushes off down thestreet.

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 bothyou and Town Cars nearest you. With a simple, free subscription youcan summon the nearest Town Car. Your credit card information anddestination details are preloaded, so you just hop in without a word tothe driver, and skip that awkward battle when trying to use a creditcard. You step out of the car without ever opening your wallet.

For the impatient reader, I'll get straight to the point. A renter whodoesn't require a car, by using Uber or other snazzy car-centric applications, likely can and willpay more rent.

As a general measure of relative urbanist tendencies, denizens of San Francisco allocate roughly50 percent of personal income to housing; in New York 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 cheapermeans to transport ourselves creates an opportunity to shift resources (e.g., dollars) fromtransportation to housing.

Using average rent as a metric, it is easy to see potential rent growth for Seattle. According toMPF Research from the fourth quarter of 2012, average rent in Seattle is $1,101 whereasaverage rent in Boston, San Francisco and New York City are $1,642, $2,379 and $3,371,respectively. This illustrates rental premiums in those cities of 33 percent, 54 percent and 206percent. Yet, 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 versustransportation.

Shift in thinking

The influence of technology cannot be overstated, yet technology is merely a mechanism tomake behavioral shifts in how we live and interact. What does this mean vis-a-vis theautomobile? The Gen-Y set wishes to use fewer of them and to use the ones we have moreefficiently.



Several cases support this point. Although different in methodology, the results all support thecommon premise of fewer cars being used more efficiently, and that equates to more dollarsavailable each month to pay rent.

Uber is unlikely to substitute for daily car use, yet it plays an important role: efficiency andconvenience. Imagine: No car payment. No insurance. No haunting concern of one too manyat the bar after work. It's easy, elegant and at about 15 percent more than the cost of a cab, itsremains 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 conceptthat now has the likes of Enterprise and Hertz clamoring to [re]gain market share in the hourlycar rental market. With the latest market entrant — Car2Go — we no longer need to find aZipcar lot or make a Zipcar reservation.

Pull out your smartphone, launch the app and voila: You see the location of the Car2Go nearestyou. Hop in and drive, then drop if off whenever you're done, wherever you like. Easy, elegantand 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 driveAudi with a ski rack for $10/hr. Don has a 2006 Toyota Tacoma available for $56/day. Peer-to-peer car sharing provides a platform for sharing cars directly between those who have cars andthose who need cars. Whether on RelayRides, Wheelz, Getaround, JollyWheels or any of theother seemingly ubiquitous peer-to-peer car rental platforms, a clear path to market adoption ofthe car-sharing model is emerging.

If you think the concept of sharing your car with a relative stranger is outlandish, let me quicklypoint you to Airbnb. Founded in 2007 and based on a peer-to-peer network for nightly rentals ofapartments, condos, houses, stretches of beach and tree-forts, the business today is internationaland 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 YOU) picking up strangers who hopefully donate to the cause.Smartphones, Facebook, minimally invasive background checks and a rating system and honorcode form the backbone of this newly emerging phenomenon. Although challenged by manyjurisdictions for lack of licensure and other conventional policing mechanisms required ofcommercial 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 thepoint that when operating in an urban environment, those of us in commercial real estate musteducate ourselves about the behaviors, trends and technology that are important to ourcustomers.

The point I made earlier about shifting transportation dollars to housing cannot occur withoutunderstanding 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 suggestthe potential exists for 18 percent rent growth in King County based on per capita incomeforecasts alone. New properties coming on line in King County are capturing the majority ofrent growth and this product is clustered in several urban micro-markets, so competition forthese higher rents will be fierce.

Delivering what our customers value is paramount. Knowing how to do that will separate thosewho flourish in the urban rental game from those who struggle. Time to catch that Town Car!



Copy right 2013 Seattle Daily Journal of Commerce

Dylan Simon is a technology hobbyist and commercial real estate broker with ColliersInternational, based in Seattle.

why landlords want uber-techie renters

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