Sustainable is smart

Perspectives

Sustainable is smart

ME PoV Fall 2019 issue

Delivering sustainable solutions for cities of the future

Given the rate of population growth in urban centers, the primary purpose of cities is, or ought to be, sustainability: meeting the present economic, environmental and cultural needs while remaining agile enough to meet the needs of the future.  Municipalities, planners and developers must employ all the tools available to them to execute sustainable community level and city-scale projects. This article explores some of these tools and their impact on real estate development models. 

The United Nations predicts that by 2030 there will be 8.5 billion people on the planet, of whom 60 percent will be living in cities. And while urban centers contribute to 60 percent of global GDP, they also generate 70 percent of global carbon emissions and account for over 60 percent resource use.1 The fastest growing cities in developing nations are already showing signs of crumbling infrastructure and housing shortage, and are marked by their inability to follow the fast changing rules of what constitutes a livable city.

The value of data

Technological advances over the last decade have responded to evolving urban dynamics by redefining the future city as a smart one. The phrase “Smart City” conjures up visions of a technologyled ecosystem driven by the Internet of Things (IoT). At the heart of this connected and integrated universe are three core elements: people, data and real estate. Some of the technological capabilities—such as GIS enabled traffic mapping, remote building environment controls, automated parking, and driverless public transport—already exist in future-focused cities around the world.  However, these are often controlled by, and scattered among, different public and private entities, making it difficult to coordinate and analyze the reams of data being generated in silos. The framework of a Smart City, encompassing datadriven digital and physical infrastructure, enables the optimization of this data for the wider economic benefit while improving the quality of life of residents in meaningful ways. 

An emerging real estate asset class within this framework is the data center, a facility that stores and manages technology and operations for companies. This segment requires significant capital investment but is typically linked to greater job creation, thus improving the overall economic benefit to the cities in which it operates.  The recent US$500 million investment by the UAE-based Mubadala Investment Company into U.S. data center company Cologix indicates global capital chasing opportunities in alternative assets that link technology and real estate.2

Contextualizing technology

The development mix within a smart city may include typical elements of residential, office, supporting retail, transport, education and healthcare facilities. The key differentiator of an integrated smart city is the use of innovative techniques within the built environment, achieved by incorporating these technology elements as part of residents’ interaction with the built environment. This is already being witnessed around the world through how retail is moving from bricks and mortar stores to multi-channel offerings that are truly people-centric and experience led.

For city planners, this integrated approach can allow delivery of flexible and/or shared spaces, unlocking the value for spare capacity in real estate. The co-living and holiday home models are examples of this concept in action, as is provisioning for shared utility infrastructure among neighboring residential and office clusters that have disparate peak time requirements. Controlling the internal environment of buildings has also helped improve energy efficiency of assets around the world.

The Edge, Deloitte’s Amsterdam office, was awarded a 98.36 percent BREEAM sustainability score upon completion in 2014, the highest ever for an office building at the time.3 The building achieves energy efficiency through solar panels that produce more energy than the office consumes (some of which are placed on neighboring buildings); below-ground thermal energy storage; ethernet-powered LED lighting system, estimated to be 80 percent more efficient than conventional illumination; and rainwater harvesting in the roof and balconies to flush the building’s toilets and water its gardens.

Unlocking value from real estate

Retrofitting smart city infrastructure onto an existing community or city can be challenging. While certain pockets can be identified for flexible usage through reassessing zoning policies, this is linked to the ability to unlock land that can quickly be repurposed and supports these multiple uses: for instance, converting urban plots for community agriculture projects or promoting temporary land use and leasing structures that allow sectors such as business and academia to share facilities.4

As adopters of the UN Sustainable Development Goals 2030, governments in the Middle East have begun supporting the delivery of futuristic cities/clusters.  The primary challenge is finding viable investment models that are best suited to the specific needs of this region. This can be achieved by understanding the value of municipal assets and identifying their potential role to deliver functional aspects based on today’s needs, such as transport infrastructure, and being flexible enough to build mixed-use assets for future use.6 Absorption levels for all the planned real estate will eventually drive investment returns, even allowing for the forward-packaging of income-producing assets as potential investments for REITs (Real Estate Investment Trusts).7

Data transparency and time to delivery also affect development costs and return on investment. In the built environment, sustainable models of construction that focus on modularity can help improve returns by reducing costs and timelines.  However, in the Middle East, examples of pre-fabrication have been limited primarily to labor/staff accommodation or warehousing. A wider application of these technologies to deliver mixed-use assets within a smart city framework, without comprising on quality, presents a gap that could also help achieve sustainability goals.

Regional potential for smart city delivery

The Middle East region presents unique opportunities for delivering Smart City solutions, through both Greenfield and revitalization projects at the district, community and city level. The demographic profile of GCC countries, with an estimated 53 million people by 2020 (of whom a majority is under 25 years old) reflects positively on the potential for integrated mixed-use offerings to serve the large working population.8 These opportunities require early intervention ahead of the master planning stage and involves development parameters focused around mobility, public spaces, affordable housing sustainable buildings and supporting social infrastructure.

The ground up strategy in the US$500 billion NEOM project in Saudi Arabia is an example of regional governments leveraging emerging technologies to deliver a smarter future. For Greenfield smart city projects such as NEOM, the key to sustainability is job creation and related real estate development that responds to needs-based assessment rather than being a speculative build.

The smart city model can also be dataand infrastructure-driven and cities can benefit from developing online platforms that allow citizens a speedier and more transparent access to zoning regulations and related applications processing. One example is the Smart Dubai initiative, which, among other things, aims to make Dubai a paperless city, ensuring that all government transactions are 100 percent digitized by 2021.9  

City administrators need to prepare for the evolving needs of residents and at the heart of any Smart City delivery lies the well-being of individuals. Agile development models interlaced with technology and data can cater to community needs of the present while also meeting the goals of sustainability, climate change control and urban agendas for the future.10  

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