Retail Apocalypse or Retail Evolution?: How Changing Property Zoning Can Give Brick-and-Mortars a Second Chance

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Headlines in the past two years have highlighted a growing concern for the economic hardship caused by the “retail apocalypse”. The term itself covers the story of thousands of big box retail stores shuttering its brick-and-mortar doors to downsize or filing for bankruptcy and liquidating its assets as a mark of extreme losses and business failure.  

According to research firm CoStar, 10,600 retail outlets have closed in 2019 whereas 3,017 opened.  In 2018, 5,400 stores closed and 3,200 opened. Among those closing shop included Charlotte Ruse, Payless Shoes, Forever 21, Sears, Toys R Us, and JC Penny—all which were previously known as common marketplace staples for most shopping centers in the U.S..  

Many blame this phenomenon on the rise of e-commerce driving customers away from physical retail. As physical retailers suffer losses, they are forced to either pivot or close shop. While it is common for the retail market to swing its volatile head in either changing consumer habits or demands, the accelerated rate of change caused by the incumbent online shopping marketplace has left a graveyard of businesses in its wake. 

To gauge a better understanding of ‘what went wrong’ in its failings and to look at ‘what has gone right’ for the surviving businesses, it is best to begin with a stakeholder dependent on the brick-and-mortars themselves: commercial real estate owners and investors. 

Because commercial real estate is tasked with managing the environment and land use of all retail properties, owners and investor’s sole responsibility is to identify and adapt to changes in the market to maximize foot traffic in order to charge the highest rent. Because of this, their troubles actually began a decade ago, when the financial crisis hit its peak and consumer spending was at an all-time low. 

The Great Recession was the first wave to shake retailers as they saw the average storefront struggle while discount big box stores like Walmart and the Dollar General Store grew.  Malls were hit the hardest as foot traffic began to dwindle, affecting all stores within its multiplex walls.  

As the economy began to recover in the following years, online shopping simultaneously became more efficient and widely adopted by the general public. This change in the market’s habits contributed to the continued losses of these established brick-and-mortars, particularly in apparel and general goods. In an era where 70 percent of shopping centers comprised of apparel retailers, traditional malls and plazas were to face serious losses if they did not act promptly. Many were already feeling the effects of this disruption.

 On average, shopping mall property values declined 13 percent, according to Green Street Advisors, a California-based research firm, and is the only sector in the real estate industry to have lost value over the past twelve months.

For long-time owners, such as the private equity firm Walton Street Capital, such a high devaluation leads to large losses. The firm purchased its Poplar-Prairie Stone Crossing shopping center in 2014 for $46.6 million and has recently sold the same property for $32.3 million this year—a 31 percent devaluation.

Part of this diminishing value lies in the fact that the primary foot traffic for these malls have always relied on anchor stores: big box retailers with a high known demand in the market. Many of these anchor stores were some of the staple brands mentioned before: Sears, JC Penny, and Forever 21, to name a few. 

As these stores shutter and the overall number of opportune customers reduce, the remaining tenants in a shopping complex either suffer to the point of leaving themselves or negotiate for lower rental rates, depressing the profitability of the mall and driving down its valuation in the process. 

Losses of big box retailers also mean an absence of otherwise highly profitable lots festering in the dark as other retailers of the same size appear to be in similar troubled waters and therefore pose the same risk of failure. 

In the American Dream Mall in New Jersey, Lord and Taylor was slated to open as a major retailer for the complex. Due to poor finances, the company pulled out from their lease. The replacement for the chain, Barney’s New York, ultimately filed for bankruptcy several months after and had to abandon the same lease as well. With this pattern, vacancy rates remain high and compound over time.

This increasing risk both affects the value of the properties as well as presents an increasing risk for investors, which has led many to hold out on commercial real estate investment in recent years, even for shopping centers that are relatively full.  Due to lack of access to capital coupled with diminished returns, retail delinquency rates are up 6 percent in the past four years, which is twice the average for all other forms of real estate.  

Rate of delinquency on loans for commercial real-estate properties in 2015-2019

Property owners are pushing to get connected to investors as a means of recovery. Many are looking to mortgage-backed securities, called CMBSs. These securities spread the risk for lending to commercial properties, though many investors are not even willing to approach that much. Consequently, only “trophy malls,” high-end shopping centers with strong financials to ensure trust, are able to gain access to investment capital. Those comprising of the middle- or low-tier shopping districts are thus left to fester or are abandoned. 

Those who are able to collect a sizable investment allocate their funds in a variety of ways, each with its degree of success dependent on its location and demographics. The general consensus, however, has been to replace those who are competing with online retail with unique or specialized tenants. 

1. MORE EXPERIENTIAL BUSINESSES 

A majority of shopping malls across the U.S. have approached this first by increasing the ratio of restaurants and entertainment on their property. According to Harvey Ahitow, general manager of the North Riverside Park Mall in Chicago, the current average proportion of apparel stores to the entertainment-restaurant mix in shopping malls is about fifty-fifty, in comparison to the seventy-thirty of a few years prior. 

This emphasis on entertainment and restaurants is part of a growing focus on experiential shopping over shopping for general goods. If the shopping experience can provide an aspect that is unable to be generated through online simulation or information, then it is more viable in this new post-retail-apocalypse context. 

Some of these businesses even outfit the place of anchor stores, including kid’s recreation facilities, gyms, and even grocery stores. Niche interests are also encouraged over general goods as well, including specialty stationary stores or other novelty stores that will bring in customer base on their own.

Inside the American Dream Mall, NJ: Nickelodeon-themed rollercoasters and attractions take up the bulk of the entertainment options in the mall itself.

Some shopping centers are looking to expand the entertainment value of their mall to the extent of an amusement park to attract both locals and tourists to their property. The newly-opened American Dream Mallis the second-largest in the U.S., located in New Jersey. On top of containing an array of staple brands, the mall also boasts a bunny field, an aviary, a doggy day care, and a luxury lounge. The development also included the construction of several hotels beside the mall to add convenience for visitors and tourists. 

Triple Five, the company behind the largest malls in North America, including the American Dream Mall, is looking to establish American Dream as a “community hub”, modeled heavily off of its two other malls, the West Edmonton Mall in Alberta, Canada and the Mall of America in Bloomington, Minnesota.  

2. SMALLER STOREFRONTS

Shopping centers are also looking to diversify their portfolio by quantity. Since previously-established anchor stores no longer carry the same weight in terms of bringing in foot traffic, multiple smaller retailers ultimately can bring in the same amount of their own customer bases. At the same time, more retailers spreads the risk of loss if one fails. Smaller tenants are also easier to replace.

3. MIXED USE DEVELOPMENT

Some shopping centers decide to abandon the mall format altogether and adopt a form of mixed-use development. The architecture of this format includes commercial real estate on the ground floor and residential real estate on the upper floors. This mix is conducive to urban settings and is a prime way to diversify the property’s portfolio in a manner that isn’t reliant solely on the whims of the retail market

At the same time, the convenient accessibility of both components to the property also give each an added value proposition. Apartment complexes can be charged higher rent due to convenient access to shops, which often includes access to a grocery store in the complex. Retailers also are given easy access to a customer base and therefore can be charged higher rent because of the increasing exposure to and producing revenue from that customer base. 

These development projects adapt malls and plazas into strip commercial districts, which have been more capable of recovering from both the recession and the retail apocalypse. According to Costar, strip retail center values are growing 2 percent in the 2018-2019 year, which is a stark contrast to the 13 percent decrease in mall property values. 

4. EDUCATION APPROPRIATION 

Shopping centers themselves are buildings with size specifications that can fit the needs of many different services outside of business operation as well. For Austin Community College, the Highland Mall was a perfect venue for a state-of the art lab space.  The Hickory Hollow Mall received a similar treatment when Nashville State Community College decided to renovate its space into a professional hockey rink and a school-sponsored ethnic market filled with immigrant businesses. 

5. ENVIRONMENTAL RECLAMATION

Development of commercial spaces did not go without its environmental costs either. As suffering low-end malls see their end-of-life, government initiatives buy up land of parking lots and structures to repurpose into recreational parks or nature conservation regions, such as the Northgate Mall salmon stream in Meridien, Connecticut. 

This decision could imply an admittance of failure in the commercial structure itself. This does not mean that the value derived from a park is no less than the value of a commercial property. 

THE OUTCOME

With these pivots in mind, it is more difficult to see the retail market failures as an “apocalypse” intent on destroying our physical retail economy, but rather a change in the guard of the major players in the industry based on which companies were able to adapt to the shift in customer wants and utilize new technologies to compete with new value propositions created by the emergence of the online shopping space. 

What exemplifies this distinction is in the fact that many of the online entrants in the retail space are beginning to open their own brick-and-mortars themselves. Native internet companies such as Warby Parker, Glossier, and even Amazon itself have set up storefronts nationwide.

It should also be noted that new anchor stores have emerged from the rubble of the fallen. High-end apparel such as Nordstrom and Lululemon as well as specialty goods such as Apple and Peloton have since replaced major general goods retailers and drive in a majority foot traffic to shopping districts. 

What distinguishes these new major players from companSears is therefore not in the replacement of physical stores with online shopping and direct-to-consumer shipping, but rather the adoption of technologies that enhance value proposition of basic goods or distribute increasingly valuable specialty goods. Those who are able to survive in the landscape are those who stand out either in price or in specialty.

However, some of these value propositions come at a cost. Amazon, the dominant hand in the e-commerce space, has a prolifically deplorable record for workplace abuses and underpaying its warehouse personnel, which have contributed to its cheap and highly efficient shipping systems. It also has a history of extorting its vendors.  Since these value propositions come at an unfair cost, the possibility for other businesses to challenge the behemoth ultimately diminish into a fraction of the typical market environment exhibited just a decade prior. It is through this that we may see more graveyards appear as retailers existing in the same space of general goods, apparel, or even furniture struggle as underdogs. In this new landscape, it is either “be better” or “fail with the rest” with no room for averages or just getting by.   

Low-Income Households: The Most to Lose, The Least Capable of Change in the Face of Global Warming

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One of the biggest concerns for the current American public is taking action against climate change. In recent years, more people have reported feeling the effects of climate change firsthand than ever before. Around six-in-ten Americans claim that climate change is affecting their local community in either a great deal or at some capacity. This is due in part to increasing global temperatures and rising sea levels effecting both inland and coastal communities.

Those most at risk are often low-income communities. Cheaper housing can be found in high-risk areas such as flood or fire zones as well as in decaying, older housing that can be equally or if not dangerous in a natural disaster. The latter is due to the fact that older housing is often not outfitted with updated building codes that implement fire-proof or flood-mitigating infrastructure. Even the streets themselves may be incapable of handling efficient transport of emergency services. The more likely a firetruck is to get stuck in a congested street, the more likely the building in an old urban district is to face irreparable damage or even get burned down. 

It’s no contest that failing to address climate change early has contributed to an increasingly burdensome cost on mitigation efforts. Firefighters are subject to increasingly longer overtime hours, FEMA applications in flood zones have skyrocketed, and local governments, including California and Texas state governments, are looking to buy out housing in high-risk areas to prevent further housing in those regions. The costs are also looking to increase in the next few years. 

Many Americans are electing preventative measures to combat climate change. This includes choosing eco-friendly brands who are changing manufacturing practices to reduce carbon emissions to conserving resources including energy and other utilities. This conservation of utilities is also a cost-saving benefit to many households. However, there is a glaring issue in terms of the infrastructure of utilities provided for by both public and private companies that negatively affect low-income households‘ ability to participate in eco-friendly activity and economic conservation: infrastructure. 

In a study that analyzed socioeconomic status and energy consumption, New York University urban planning researchers Constantine E. Kontokosta and Bartosz Bonczak and the University of Pennsylvania urban planning professor Vincent J. Reina found that the highest consumption was found in both the lowest and highest income neighborhoods in the study. 

While the consumption levels for the higher-income bracket is attributed to an average increased use through more appliances, electronics and other behavioral choices, the same could not be said for the low-income bracket’s use. 

Public Housing Projects in NYC.

As stated before, much of low-income housing is often found in regions with aging buildings that fail to upgrade its infrastructural components to fit current standards found in new housing. As a result, new technology that provides more efficient systems in conveying utilities is never implemented. No matter how hard these households attempt to conserve resources on a behavioral level, they ultimately end up using and paying more because of their outdated systems. 

The same can be said for subsidized housing units, where often the cheapest option for utility conveyance is placed in rather the most efficient. This leads to small short-term costs at the expense of the developer, but large long-term costs at the expense of the resident, who must outfit the monthly utility bills. 

This places an extra burden on low-income households, who already pay an increasingly larger  portion of their income on utility bills overall—up to 20 percent of their wages as opposed to wealthy families who pay between 1.5 and 3 percent of their income. Thus, this infrastructural issue is both at a significant cost of low-income communities as well as the environment.

Energy Cost Burden in relation to minority populations, an aspect of the 2019 study on energy consumption on metropolitan regions.

Currently, there is little incentive for private housing units to provide upgrades to their aging structures without placing the expense on their tenants. On the other hand, public housing is beginning to see promise in the form of legislation—particularly the Green New Deal. 

The ambitious bill proposes seven different grant programs to completely replace the energy systems of public housing nationwide within 10 years. The replacements would either consist of renewable or sustainably carbon-neutral systems, addressing the issue of aging infrastructure as well as carbon-emission reduction. 

While the initiative shows promise, the bill is still in contention in Congress and has yet to be enacted. If we wish to see both alleviation of the burden and stress of low-income living in the nation as well as protecting the most vulnerable population from climate change, more investment on sustainable infrastructure and utilities needs to be made. 

Brain Drain: the Spiraling Issue

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In our current era, more countries are entering stages of industrialization and development to compete with already developed countries. This process of development has many growing pains, some of which can hinder or discourage continued progress and can cause problems that lower rather than raise the standard of living and life expectancy.

One of the more prominent growing pains is brain drain: a process by which the growing educated elite of a region or country emigrate to typically more-developed countries with better opportunities, thus removing the skilled labor workforce from the country’s population. 

This reduction in the skilled labor population often translates to a vacuum in necessary services required for development, including education, healthcare, and engineering, among others. This can ultimately decelerate or even stagnate growth. If left unaddressed, brain drain can compound and lead to worse problems.

When a portion of the educated elite leave, there is a higher stress on the remaining skilled workforce to fulfill the demands in services those emigrants were meant to fill. This worsens working conditions and increases the disparity between the actual value of the service provided and the compensation service-providers are ultimately given. These problems then push more of the workforce to emigrate elsewhere, accelerating the rate of brain drain. 

This is the case in Nigeria, where improved education has created a swathe of healthcare professionals ready to enter the workforce. In recent years, however, a majority of this workforce has left for developed countries such as Canada, Australia, and the U.S. after completing their education. Of the 72,000 doctors and dentists registered under the Medical and Dental Council of Nigeria, over half of them work outside of the country. This has left the medical industry with one doctor for every 5,000 Nigerians. 

Why are Nigerian’s health professionals leaving? 

Many health professionals cite a lack of resources—including basic utilities such as water and power— poor working conditions, and poor compensation. They criticize the Nigerian government for allocating only 4 percent of their national budget to healthcare despite the desperate need for such services.

PHCs, or Public Healthcare Centers, are the lifeblood of Nigerian healthcare. They face a litany of issues in basic services, which then affect the quality and capacity of the service provided. Infographic c/o: Premium Times Centre for Investigative Journalism.

This is despite the fact that, according to Onwufor Uche, consultant and director of the Gynae Care Research and Cancer Foundation in Abuja, “eight of 10 Nigerians are presently receiving substandard or no medical care at all”.

Doctors themselves are payed N200,000 monthly ($560)—a paltry sum compared to the compensation in Canada.  With more doctors leaving, the disparity of how much value doctors bring to the economy versus how much they are compensated becomes even greater. 

The government of Nigeria has attempted to remedy this situation by providing education subsidies to generate more health professionals. This naturally creates an incentive for more to enter the healthcare industry, but it doesn’t exactly address why people emigrate in the first place. 

It is not as if Nigeria’s economy is struggling to generate the funds necessary for a proper compensation program either. As an OPEC country, Nigeria’s profits from petroleum have boomed since the 1970s. Yet, governmental corruption has failed to allocate and invest those economic resources into infrastructure, basic utilities, and key service industries such as healthcare. Many also cite that, while education may be sufficient in creating a healthcare workforce, getting residency and certification from the government is such a grueling process that lead many to either give up or move abroad.

How do we tackle the core issues that lead to brain drain?

Taking on the process of developing infrastructure and industry is a big task– one that is often not done on the government’s participation alone.

Several decades ago, China was in a similar situation as Nigeria is currently. Despite its burgeoning population and the leading regime’s incentives and directives to increase industry in the form of factories, China saw its educated elite fleeing for other developed countries. This was in part due to the oppressive measures in censorship by the government that discriminated against the educated in China.

This discrimination hindered the education system and the emergence of entrepreneurial exploits, particularly in the STEM field. Frustrated by the blocks and the lack of support, particularly during the technology boom of the 1990s, many left China for the U.S. and Japan to participate in the research and development opportunities there.

As China began to experience the effects of this exodus in the stagnation of its industries, particularly in competing in the technology landscape, the Chinese government decided to use the opportunities abroad as leverage. They began a subsidy program which would help Chinese nationals study abroad. Over the next ten years, they focused on generating capital through their exploits in industry and exports. In the early 2000s, the government created economic opportunities competitive to those in other developed countries to entice Chinese nationals back. They specifically targeted sectors they wanted to stimulate, such as solar power.

The number of returning nationals shot up from 1 million in 2001 to 4.8 million in 2017. Chinese nationals who went through this program were dubbed “sea turtles”, as they would bring innovation and education from other sources to enrich China’s economy.

Now, however, some ‘sea turtles’ are struggling to compete with China’s own locally educated youth. Research innovation and infrastructure were built up in such a way that have since made them also educationally competitive on the global stage. Perhaps it is in these conditions that China is can be considered a “developed” nation. 

What if developing countries have not acquired enough capital to offer such competitive opportunities?

The development process for a country’s economy may take years, and the effects of brain drain slowing that process only further drains resources (including capital) and time.

The mass emigration of the Filipino workforce, particularly in the nursing and hospitality sector, is a case in which the country of origin simply does not have the resources necessary to remain competitive enough to retain their skilled population. In 2013, the Philippines deployed approximately 1.8 million workers– about 10 percent of its population— to other countries. In that sam year, the country itself was ranked number one for exporting nurses and number two for sending doctors overseas.

Poor working conditions include temporary contracts which lead to unstable career path, high nurse-patient ratio, a lack of resources, and understaffed hospitals and clinics. Infographic c/o: Filipino Nurses United.

Such high statistics are a result of poor working conditions juxtaposed with a remarkably strong nursing and healthcare service education system. Essentially, the Philippines is an example of the extreme implementation of Nigeria’s current plan.

Healthcare in the Philippines continues to suffer the same problems as that in Nigeria– where there is a deficit of healthcare workers for Filipino citizens and infrastructure is still poor. The government attempted to counter such issues by “overproducing” skilled professionals through its highly specialized nursing and healthcare programs.

The large population of abroad workers, however, also has made the remittances those workers significant enough to contribute to the economic growth of the country– up to $25 billion annually. This contribution has led the Filipino government to further encourage migration. This is in part due to the fact that remittances is a steady income that is often unaffected by the regional economic fluctuations. Despite how beneficial remittances have proved for the Filipino economy, there are concerns about the dependency these transactions bring to the country as a whole.

As a means to combat that potential risk, the Filipino government is looking to begin return programs much like China’s “sea turtles,” but face little progress due to the fact that their resources and compensation remain noncompetitive and unstable compared to opportunities abroad. Whilhe the Philippines may still suffer through the growing pains of economic development, they have crafted a way to utilize its brain drain to boost economic development and mitigate the process’ larger problems. This ultimately can encourage its continued development and the aspiration towards a better standard of living.

While these strategies may have worked for China and the Philippines, it is unwise to assume that they will be the save-all for Nigeria. By looking at these examples, however, we can begin to gauge how governmental powers may target one aspect of infrastructure or policy to lower the barrier and reduce push factors.

Wage Stagnation May Tell Us Why We Sense an Impending Recession

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How we feel about the value of our money plays a huge role in the growth of the economy and the wellbeing of our monetary future. Entire sections of the government, like the Federal Reserve, are dedicated to managing that public perception through a two-pronged approach of managing interest rates and informing the press of their opinions to placate public anxiety. People turn to experts like the federal reserve along with metrics such as GDP growth rates and stock values to determine the value of their money both now and in the future. These projections then inform how people will decide to spend their money now or attempt to save, which will lead to a contraction or expansion of the economy. 

While these metrics may seem like a holistic picture, their current numbers fail to rationalize the growing anxiety of an impending recession in the United States. While the economy has steadily been growing since the Great Recession, a Deloitte Global Millennial Survey states that 45% of millennials in the workforce believe that they will never achieve the financial status of their parents.

Where could this anxiety come from? 

Well, let’s look at wages.

Up to 80% of Americans live from paycheck to paycheck.  Because of that, wages are one of the more direct indicators of economic growth and wealth for a majority of the U.S. population. Wages themselves tend to grow with inflation and GDP. This stems from the concept that if more money is put into the economy, that money has the capacity to circulate through exchange. That has not been the case recently, however. 

Since the Great Recession in 2008, average wages have dropped significantly due to unemployment and an increasingly competitive job market for most sectors. In 2008, the sentiment was simply that everyone just wanted a job, and so most people were willing to take jobs at lower pay. As the economy began to improve in the subsequent decade, average wages remained virtually the same. If we account for inflation, this means that the average worker was actually being paid less over the course of ten years. This is because the same amount of money must pay for the constantly growing costs of commodities such as housing, food, education, and medicine. This lack of growth is attributed to businesses holding off on increasing wages. Instead, they are apportioning more of its increasing revenues to shareholders.

While it may seem like a bad move on the companies, this actually is a common business practice due to the sticky wage theory: wages may be easy to rise, but are increasingly difficult to drop during a recession. However, this theory is becoming impractical for the era. As companies continue to keep wages low, when a recession ultimately does hit, they have no choice but to layoff workers rather than cut costs . These policies instead increase wealth inequality and leave working Americans vulnerable to financial struggle or even disaster.

The good news is that wages are beginning to rise. Some economists attribute this to a tightening job market as unemployment rates drop . Others say government policies such as increasing the minimum wage have forced companies to address this stagnation. Still, there is a lot work to be done as productivity continues to increase while wages fail to grow at the same rate . Policies such as the most recent tax cuts to companies have also failed to increase the spread of wealth (Forbes). Thus, many Americans are seeing increasing inflation due to a rising GDP yet consistent or underperforming wage growth, leading them to believe that their lives are getting more expensive but that they will ultimately be unable to afford it.

Increased Auto Repair Service Sales Could Indicate Recession

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It is often said that the decisions of one impact the lives of many. Decisions on what to spend money on and when to spend accumulate into a collective force that dictates the growth or decay of the economy. This means that, behaviorally, the confidence the individual has in the continuation of their income will dictate whether or not they decide to spend money at that point in time in the first place. 

Large investments such as cars and property have been used as a means of measuring the confidence of that consumers have on their economic future. Because of the size of the cost, money is often borrowed for such purchases and these goods are often used as equity for other loans. When the economy is doing well, people are more inclined to purchase homes and cars (both old and new) with the assurance that they will be able to pay off the debt of their mortgage or car loan. On the flip side, during a recession, sales tend to slow as consumers become more reluctant to make such risky purchases due to the chances of defaulting and high interest rates. Overall, consumers tend to withhold their spending in most markets when their confidence in the growth of the economy, and their spending money, is low. 

Motor vehicle sales are often used as an indicator of economic health. During the Great Recession, auto sales dropped significantly. Source: Yardeni Research Inc.

While it is often thought that all business tends to slow during a recession, there is one particular enterprise that actually benefits from an economic downturn: auto repair shops. 

The heavy investment in vehicles makes commodities like cars precious. They endure regular wear and tear or collision damage, which inevitably leads to the end of the car’s use. Historically, car owners were more willing to trade their car in for a new model after every two years to avoid dealing with repair bills while enjoying the upgrades in fuel efficiency and better manufacturing. 

During the Great Recession in 2007-2008, people divorced themselves from that habit to save money. As cars aged and began to break down, car owners had to invest in auto servicing, increasing auto repair sales by 10.5% from 2007 to 2011.

Between the Great Recession and the eventual recovery of the economy in 2015, car owners refrained from buying new cars, resulting in an increase in the average age of cars that were not purchased in a “used” condition.

As with all indicators, there are a few factors to consider when analyzing the economy through auto repair sales. For one, it is important to note the rising cost of both cars and car parts due to new automotive technology such as self-driving and improved collision safety engineering, which can factor into the overall increase in consumer expenditure in that market. US-based insurers Travelers reports that the cost of repairing a 2018 sedan is up to three times higher than a 2017 model. These increased costs are projected to be an investment in driving safety, which could ultimately be offset by reduced frequency and intensity of vehicle accidents in the future, which means less-frequent spending on auto repairs.