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Smart cities have yet to become a reality
REAL estate is an often-overlooked component in the smart cities equation.
Ah, smart cities. Not a week goes by without a city or two announcing their own projects or solutions. This concept has gone from being a buzzword to a concrete goal. It is estimated that there are more than 1,000 smart city initiatives globally, with half of them in China alone. India's Smart Cities Mission aims to transform 100 cities. Within this region, the Asean Smart Cities Network (ASCN) formed last year consists of 26 cities, including Singapore, Phuket, Kota Kinabalu and Ho Chi Minh City.
Similarly, there are business-led smart cities. The most high-profile is Sidewalk Labs, an urban development company affiliated with Google, which has a smart city project in Toronto, Canada. It promises to roll out many innovative features, from waste-collecting robots to environmentally-friendly buildings, underpinned by the vast amounts of data collected by sensors deployed around the neighbourhood.
No doubt the global push behind smarter, better solutions for our cities is increasing in urgency - half of the world's population live in cities currently. That figure is expected to swell. According to the Association of Southeast Asian Nations, more than 90 million people will move to urban areas by 2030, and the region will see a host of "middleweight" cities of between 200,000 and two million residents.
Governments and businesses recognise the need to tackle the myriad of challenges due to rapid urbanisation - whether it's overcrowding or climate change mitigation, connectivity or job creation.
What exactly makes a city smart? In JLL's latest report, Smart City Success: Connecting People, Proptech and Real Estate, we have narrowed the definition down to policies and strategies that use technology and data to meet three main objectives:
- Improve inclusiveness, services and quality of life for the people who live there
- Drive efficiency, sustainability and improved decision making for government
- Create a transparent, efficient and competitive environment for businesses
Work in progress
Some cities such as Amsterdam, Barcelona, Seoul and Singapore have consistently done well in terms of delivering the above. They top smart cities rankings with initiatives such as Amsterdam's "Start-Up In Residence", a government-backed incubator for start-ups to solve social challenges using city data.
But these are the outliers.
Research done by Roland Berger reveals that only 15 out of the 1,000 or so smart cities projects have comprehensive strategies and only eight really offer concrete plans ready for implementation.
Smart cities projects struggle to take off due to long-standing and often structural issues. The chief of them are scalability and bureaucracy. Cities are, by nature, large and complex ecosystems with different agencies and stakeholders all trying to satisfy a multitude of needs from transport to community engagement. In our report, we learnt from the experts and smart cities providers on the ground that even within one city, different authorities often have significantly different requirements and preferences, even for common projects.
Secondly, initiatives are overly focused on technology. While the technologies already exist, people are not using them. Vendors and governments should be looking for ways to better serve the ultimate stakeholder, the citizens. There is a need to take into account the diversity of each city in terms of its geography, sociology, culture and political environment to thoroughly understand the specific needs of local communities and effectively deliver solutions
Moreover, technology adoption does not happen overnight. It takes time and resources for governments and businesses to adopt and adapt. Both industries and cities can be risk averse and resistant to new ideas, even when presented with innovative new ways to improve an existing service.
The missing link
Lastly, physical spaces are overlooked.
Buildings and how we use spaces are at the heart of every city. This includes the homes we live in, the offices we work in, and the locations where we spend our free time.
Many of the best smart city solutions operate within this domain. The impact of such technologies in the real estate industry - otherwise known as proptech - begins as early as the construction phase. Take the use of cloud-based software for collaboration. It is a system that could improve communication between employees on site and those in the office; project managers and contractors can share files easily and more efficiently, resulting in greater efficiency.
On a larger scale, construction and redevelopment are probably the best ways to understand the true value of smart cities. The real estate industry plays a leading role in urban transformation, regeneration and placemaking, which could boost economic growth, seed new businesses and improve lives.
One of the best examples of this would be Japan's highly regarded Area Management Organisation system, in which the private sector of building owners, businesses and even residents work with one another as well as government agencies to improve the neighbourhood they live and operate in. The very first such Area Management Organisation started in 1988 in the Otemachi-Marunouchi-Yurakucho (OMY) business district in Tokyo, where it led efforts for more pedestrian-friendly streets, created public squares and organised social and community events.
In Singapore, the newly minted Paya Lebar Quarter - made up of three office buildings, a residential tower and a retail mall -- is positioned as a key catalyst for the Urban Redevelopment Authority masterplan to turn the suburb into a "new city precinct and a dynamic sub-regional business hub".
Let's not forget too that real estate is at the forefront of a city's future proofing drive in order to ensure sustainability. The built environment contributes a large share of the overall carbon emissions. According to the International Energy Agency, buildings account for 40 per cent of total direct and indirect carbon dioxide emissions globally.
Through thoughtful design and optimal facilities management, building technology could help cities reduce energy consumption and achieve their sustainability targets.
Cities manage large real estate portfolios, including government buildings and offices, industrial parks, public housing and public spaces. This scale presents a massive opportunity to cut costs through potential energy savings; more efficient use of resources to support building and site operations; and the increased lifespan of better maintained assets.
With growing recognition that technology is able to make cities more sustainable, equitable and competitive, governments are continuing to step up smart cities efforts.
It is just as vital to recognise how real estate features prominently in this smart cities movement.
The true value of real estate lies in infrastructure and environment for productive activity that facilitates creativity, innovation and entrepreneurship, while at the same time fostering a sense of community and well-being for its citizens in a sustainable urban model.
The industry's proptech leap will help get us there, to create better cities for the people who live, work and play in them.
- The writer is the lead director for JLL Global Cities Research