Drones and Commercial Real Estate June 15, 2017 There’s Something in the Air . . . What Does It Mean for CRE? Drones seem to be everywhere these days. Whether in the news or hovering over your neighbor’s yard, these flying robots—often used as remote-controlled cameras and couriers—have been growing in popularity as technology has advanced and prices have dropped. From aerial footage that helps with insurance claims, environmental protection and even broadcasting of Lady Gaga’s Super Bowl halftime show, drones are letting us access, monitor and gather information like never before. They’re also poised to have a major impact on many industries, including commercial real estate. How might drones specifically impact CRE as their usage becomes more common? Let’s take a quick flight around the subject and find out. Drones Get Versatile As virtual “eyes in the skies,” drones already help real estate marketers create images and videos that elevate listings by providing fantastic views of existing properties and prospective views from properties not yet constructed. For developers, drones have taken mapping and surveying to the next level, reducing cost and complexity and allowing for up-to-the-minute terrain and other critical information. More and more drones are appearing in workplaces themselves. Some employers are using them to monitor inside spaces, parking areas and remote worksites to assess productivity and safeguard against theft. As high-tech, sometimes brawny carrier pigeons, drones can deliver items and transport patients. As remote-controlled robots, they’ve even built walls—a developing technology that offers the further benefits of removing human error and safety issues during construction. Drone Deliveries Prepare to Soar With major retailers like Amazon and Walmart experimenting with drone package deliveries and other businesses like UPS, pharmacies and 7-Eleven following suit, receiving everything from clothes and groceries to inhalers and Slurpees via drone may soon be common. This means drone launch and delivery stations on tops of commercial buildings, generating excitement—but also questions. Yes, deliveries will be faster and cheaper. But, at what price to tenants and the community? Areas with more deliveries would have heavier drone use, translating into more noise, air traffic and privacy issues. Depending on tenant mix, building location and measures taken to minimize the impact, drone deliveries could be a blessing or a nuisance. But for some, the prospect of drone deliveries raises an even bigger question. What Constitutes a Property’s Airspace Rights? While there’s chatter surrounding drones as surveillance and delivery tools, talk grows louder when the topic shifts to property rights. The prospect of thousands of drones buzzing around delivering packages and creating a new form of air traffic has drone operators and property owners asking, “Who owns the airspace above a property?” “Can we commercialize it?” and “Will government use eminent domain to seize at least some airspace control? The short answer is . . . we don’t know yet. Exploding commercial drone usage is expected to spur an “updating” of airspace property laws that have been largely untouched since 1946—when the Supreme Court then sufficiently stated (in United States v. Causby) that a property owner’s airspace rights extend to at least within the “immediate reaches above the land.” With drones about to fill the skies and likely create a market for low altitude air rights, those “reaches” now need to be pinpointed, so that value within them can be assigned and intrusion of them defined. Keeping an Eye Toward the Skies While the future of drone technology and services continues to play out, one thing seems sure: drone use is on the rise and here to stay. As CRE and other industries leverage all drones have to offer, it may seem the sky’s the limit. Change is in the wind and with it, several potential opportunities. As they land, KBS will be at the ready to ensure they do so in ways that maintain the peaceful enjoyment of KBS properties. Marc DeLuca is Regional President overseeing the Eastern U.S. As regional president for KBS, Mr. DeLuca is responsible for all acquisitions, dispositions and asset management activities in the Northeast, Mid-Atlantic, Southeast and Ohio. Mr. DeLuca is also chairman of the KBS Investment Committee that meets regularly to review and approve all new investments for the firm.