Throughout the history, technology has played a critical role in the evolution of cities. Urban sanitation can be traced to the Indus Valley Civilisation, the remnants of which were found to incorporate early waste and drainage systems, making streets and waterways more hygienic. The next era of urban innovation will be based on advances in technology. This time, however, progress will be in the digital realm, where emerging technology such as artificial intelligence, cloud computing and the Internet of Things (IoT) is facilitating the emergence of Smart Cities featuring advanced information and communication technology, helping drive sustainable development and improving the quality of life. Real estate has a key role to play in Smart City development and is also set to be one of the major beneficiaries of this new technology.
WHAT IS A SMART CITY?
Definition of Smart Cities vary from broad descriptions such as the Smart City Council’s “a city that has digital technology embedded across all city functions” to more data-driven explanations such as IBM’s “a city that makes optimal use of all the interconnected information available today to better understand and control its operations and optimize the use of limited resources”. In future, Smart City technologies are likely to expand in scope and revolutionize areas such as healthcare, education and policing, while also supporting the growth and development of engaged residents capable of understanding and utilising digital solutions and services (“Smart Citizens”).
WHAT DO SMART CITIES MEAN FOR REAL ESTATE?
The integration of Smart Buildings with various components like energy, technology etc. will bring multitude of benefits for the real estate industry, while redefining several long-standing trends and fundamentals.
The Expected impacts are:
Data-driven real estate development: The increased availability of data will enable stakeholders to better understand a property or site, its surroundings and residents. This can be used to guide site selection, planning process and building design. Examples include an investor using foot traffic data generated by embedded sensors to inform its selection of sites to construct new retail premises, or a tenant doing the same to lease a property. However, given privacy concerns, this could be challenging unless such data is provided by the Government as an open source.
Smart buildings’ competitive advantage: Smart buildings, which use automated processes to control a variety of operations such as tracking and managing energy, environment, security and other key features, are expected to see stronger demand in the coming years. Most landlord respondents (84 per cent) to CBRE Research’s recent technology survey believe the technological innovation will drive stronger demand for smart buildings which are expected to command a premium as they will be more attractive to potential tenants due to their prestige and comparatively lower operating costs.
Asset flexibility: Advances in technology are transforming the traditional processes of companies deciding on a location where they would like to do business; buying or leasing an office; fitting it out to their specifications; and installing it with technology for their staff to perform their jobs. The digital age is reversing this process; individuals are in the driving seat and companies’ decisions are being informed by connectivity and accessibility as well as talent attraction and retention. While location will remain important, this will require buildings and workspaces to be far more flexible and adaptable than before. New developments will therefore have to be constructed with flexibility in mind.
Data centre demand: Data centres are set to play a leading role in Smart Cities as repositories for massive volume of data required to be collected, stored, analysed and archived. Data centres are already becoming as important a part of business operations as office, retail and industrial assets, supported by increasingly digital world, IT development and the importance enterprise IT strategy plays in business delivery. This will drive demand for state-of-the-art data centre development in and around the Smart Cities.
While the real estate industry is making rapid progress in development and innovation of Smart Buildings, it is critical that they gain a thorough understanding of how these developments will fit into and align with the broader Smart City ecosystem. In particular, real estate industry stakeholders will need to understand emerging data sources and how they can capitalize on them to inform the development, construction and management of property assets.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house