Chairman’s comments
Article Type: Chairman's comments From: Journal of Property Investment & Finance, Volume 33, Issue 5.
The 2015 RICS Cutting Edge Conference featured many of the trends likely to affect the property industry in the next 25 years,the length of an old-style institutional lease. It was a fascinating snapshot of expert opinion in London in 2015. Since then,the RICS has published its latest Futures Programme paper, “Our Changing World: Let’s be Ready”.
The scale of urbanisation is massive with UN forecasts of 41 megacities[1] of ten million or more by 2030. The same source projects an increase of 380 cities with populations over 500,000 by that date; altogether, their populations are projected to rise by some 45 per cent. Many of these locations are in Asia. The UN forecasts that by 2050 two-thirds of the global population will be urbanised compared with one-third in 1950.
Never before has change been larger-scale. There is no shortage of land and willingness in Asia and Africa to challenge the established European and American cities for footloose investment from global organisations.
Some cities, like Detroit and some European provincial cities, are shadows of their previous selves because of the changing nature of demand. They may be destined to play a game of catch-up as their base employment levels have fallen away dramatically. They need to develop new industries as well as gain their share of the immense demand from footloose multi-nationals. They often need to transform their infrastructure: access and affordability for occupiers of all kinds are becoming increasingly important issues which need to be resolved.
The governance systems of cities will have to show much more versatility and a capacity to deal with planned and unplanned change than they have in the past to make their cities competitive.
Increasingly, demand is likely to move towards areas with high levels of well-planned infrastructure. The term infrastructure not only covers digital and transport networks that enable excellent communications to their catchment areas and to the rest of the world but also stretches to having the right levels of social and other facilities to enable these cities to operate effectively and affordably. In short, they need to be good places to live in – at least better than the competition, if possible. Workers may indeed choose to live somewhere else on a lower salary if the housing there is affordable and local facilities are acceptable. In addition, cities will need to be able to show that they have a reasonable supply of workers of all kinds at an acceptable price.
Successful global cities, and especially their centres, are attracting ever higher levels of investment relative to other locations with prices ballooning in response. Such cities clearly attract many different types of occupier because these locations offer a great deal of added value. Despite this, most occupiers, with their offices at least, are using technology and behaviour change to reduce their space-take, although it remains to be seen how much this trend can continue. Property owners will need to understand the capacity of their new buildings, when designing them as tenants will certainly want to use as much of this capacity as possible as their workforces become ever more mobile.
New types of leisure and other facilities will be required to make cities attractive to their increasingly middle class populations. Even the property sector’s old favourites – retails, offices and sheds – are changing fast and the buildings of the 1960s,1970s and 1980s are becoming obsolete. Much of the land required for new development will come from redeveloping these now unwanted buildings.
Arguably, data connectivity should mean that rural areas have a substantial future even though only a third of the global population will live there. However, if history is any indication, the countryside may continue to get worse services than their urban cousins in the future. However, certain types of worker should be in a position to operate successfully in this environment.
The buildings of the future will necessarily become ever more complex and stuffed full of automated equipment; building management will need to develop fast as the new wealth of data coming from building information management systems will demand a new style of professional approach. The dramatic growth in the size of the facilities market should be able to absorb such change,if it continues on its current path of growth. We anticipate a lot of re-adjustment between the professions as these and similar changes work their way through.
Many new challenges are emerging for the built environment sector as a whole. The speakers at the conference suggested that we will have to secure better quality data, make decisions quicker, work together better and be more transparent than we have been in the past. The industry will need to have a much bigger central core of knowledge and capability than we have shown to date. The strain on professional standards may increase as new technology and working methods scythe their way through established practices. The way in which relationships between different parts of the built environment industry are built up and sustained is likely to change. We believe that current levels of merger and acquisition amongst suppliers is likely to continue as larger companies are likely to be the only ones who can generate sufficient economies of scale.
Some attention has been diverted away from environmental sustainability issues in the past few years with a greater emphasis on sustaining the workforce. However, it would be foolish to forget that we are going to have to come to grips with the inevitability of further environmental legislation and CSR pressures. These pressures may force a high level of city-scale and building-scale innovation to prevent global warming, water use, waste creation and environmental pollution generally. Because change is hard to effect on existing buildings, focus is going to have to be given to all opportunities to make every new building, extension and major refurbishment greener.
The city centre has re-emerged at the expense of many of the suburban locations some of which are now battling amongst themselves for survival. The centres themselves are becoming denser and noticeably more multi-use with much higher levels of residential space. Planning and zoning regimes are coming under great pressure as a result. In some cases, residential development is threatening to throttle the commercial life out of the city centre with irresistible bids for development sites. Whichever land use wins out, the debate on the right levels of building density is yet another issue which needs to be thought through and engaged.
Christopher Hedley
Note
1. UN Department of Economic and Social Affairs.
