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Big Cities Crack Down on Scooter Providers, Raising Cost Concerns for Property Owners


New Rules Could Boost Expenses for Charging Stations, Storage, Added Fees

Motorized scooters and bikes have popped up on downtown sidewalks across the country in the past year, prompting big cities to crack down with new laws to address safety concerns that may boost costs for commercial property owners and developers.

Cities such as San Diego and Santa Monica, California, have begun charging major dockless motorized bike and scooter operators – such as Lime, Bird and Ofo – higher permit fees.


With the proliferation of electric scooters, they’ve also had to crack down speed limits and where they can be used and parked. This may translate into added costs for electric charging stations and storage that developers may build on their own to be competitive, and it could eventually mean added fees or taxes to help pay to enforce new laws regulating scooters.


"Developers could eventually be asked to pay into that infrastructure, but they will also get something in return," said Gary London, senior principal in San Diego-based real estate consulting firm London Moeder Advisors. That could include the chance to build projects with fewer required parking spaces, letting developers instead devote more space in their apartment and office projects to revenue-generating units.


Dockless electric scooters have quickly infiltrated cities from Los Angeles to Austin, Texas, with advocates touting their benefits as a solution to car congestion and gaps in public transportation. Companies like Bird own fleets of micro-vehicles that can reach speeds of 15 miles per hour that companies have typically dropped off on public sidewalks across cities and pick up again in the evening for recharging.


Users can rent them through the day with an app that unlocks them and charges fees for minutes of use, a flexibility that's both an advantage for riders and a potential nuisance with congested sidewalks, driveways and parking lots where they are sometimes abandoned at will.


The issue is acute in cities with little rain and cold weather where scooters are a popular means of travel on most days. San Diego is the most recent city to respond to rampant complaints about near collisions and a rising tide of actual accidents – and even deaths – involving pedestrians and scooter riders, especially along popular oceanfront boardwalks and other tourist-friendly promenades. There is also the more frequent nuisance of tripping on the scooters left in the middle of sidewalks.


A growing movement against the scooters has taken hold in places like Venice, California, where residents have started an Instagram page highlighting ways they've destroyed scooters using fire or the ocean.


The San Diego City Council recently gave unanimous approval to multiple scooter ridership changes, which are expected to be finalized in June and take effect July 1. They include a speed limit of 8 miles per hour in high-pedestrian traffic areas like Balboa Park, Mission Bay Park and the boardwalks of Mission Beach, Pacific Beach and La Jolla.


Two downtown areas – the waterfront Embarcadero and the Martin Luther King Jr. promenade across from the convention center – would be deemed "no-ride zones," and the speed limit in much of central downtown would be reduced to 3 mph. For developers and owners the issue would be whether to include charging stations and additional areas to park.


Emulating cities like Santa Monica, a beachside city where Bird is headquartered and among the nation’s earliest adopters of scooter-related parking changes, San Diego also recently began creating designated streetside "corrals" – spray-painted rectangles, sometimes with pylons – for dockless scooters and bikes to be parked, keeping them off sidewalks.

Under the new San Diego laws, scooter companies would pay to be issued six-month operating permits, the cost has not been finalized but could be more than $5,000, and pay an annual fee of $150 per device to the city.


"The way people get around town has changed quite a bit, and we’re embracing that by putting in place common-sense rules to protect the quality of life in our neighborhoods," said San Diego Mayor Kevin Faulconer, in a statement after the council vote.


Landlords Adapt

Going forward, experts have noted, cities will probably need extra worker hours, meaning higher costs to administer and enforce new scooter-related laws. London, a downtown San Diego resident and dedicated Segway rider since 2003, said commercial property owners and developers could eventually be asked to contribute to the ongoing urban fixes through fees, similar to the way other city services are supported.


Cities as well as developers have an incentive to reduce vehicle traffic, and London noted that developers have already been paying to incorporate bicycle storage and repair facilities, electric-vehicle charging stations and other eco-friendly amenities into their office and apartment projects as consumer demand for those services has risen.

In its own recent national report on mobility shifts in commercial real estate, brokerage firm Cushman & Wakefield noted the rise of micro-mobility modes – such as bikes and scooters – could prompt more landlords to offer scooter-related storage and other amenities in their office and apartment buildings.


More streamlined use of the shared bikes and scooters will probably add to momentum already being seen in favor of public transit-oriented development in many major cities. Cushman researchers said public transit users "typically enhance their commute with scooters and bikes."


San Diego officials are expecting the scooter providers to use GPS and other existing tracking technologies to minimize incidents of speeding and improper parking. The scooter companies have so far said publicly they are willing to work with San Diego and numerous other cities where changes are playing out, including Seattle, Los Angeles and Austin, Texas.


Earlier this year, the Los Angeles Department of Transportation began permitting dockless mobility providers who applied in advance to operate in the city as part of a one-year program. Los Angeles is taking it slow, however, having awarded just three companies a one-year permit – Lime, Spin and Bird – with others under review, according to a statement from the transportation department.


As part of that program, Los Angeles also introduced designated "parking zones" on the outer edge of some sidewalks in places like its downtown area for the dockless scooters. Should scooters catch on, the implications for commercial real estate owners and developers include the potential for less required parking spaces to be built into new construction.


Jeff Palmer, a partner in Los-Angeles based PMI Real Estate Investment who has blogged on the subject, told CoStar News that changes underway in places like Santa Monica and Los Angeles are reminiscent of a much larger wave of transportation-related adjustment that U.S. cities faced in the early days of the 20th century.


"It’s very much a transitional issue – the same kind of thing happened when cars started replacing horses in the cities," Palmer said. "There was traffic control, and issues like where are you going to park those cars, when all of those spaces in front of the buildings are needed for horses. Eventually all of that got resolved."


He added that "plus, bikes have been around forever, and you have regulations for bikes, so it’s a hop, skip and jump to regulate scooters."

© 2020 by Lee & Associates Investment Services Group

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