Technology-led social change continually reshapes the cities of the world. Take the development and mass production of motor vehicles that occurred in the 1950’s, for example.
The growth of car ownership supported the growth of cities as we know them today with sprawling suburbs. People started buying cars because they were affordable, and that led to people choosing to live in the suburbs. The suburbs offered an attractive lifestyle on large lots that were connected to the CBD by motorways. The need then was to have places where you could drive to go and shop- leading to standalone suburban shopping centres with car parking, supermarkets, specialty shops, and department stores.
This has been the reality of the last 40 to 50 years, but as our cities have become larger and more congested we are seeing this shift around, with people wanting to live in the heart of cities again, closer to work and amenities, and with reduced commuting times and access to an urban lifestyle.
Additionally, with ride and car sharing apps enabled by technology, and increasing infrastructure for bicycle use, there is an increasing shift in sentiment away from car ownership for the rising population of city dwellers. In many parts of inner Sydney, there are old apartment and office buildings with basement car parks that have less and less cars in them. There are dozens of car-sharing vehicles with reserved parking spaces in innercity neighbourhoods which you can just book on your phone just five minutes before you need it. It begs the question, why stick a car in a garage and pay for the privilege, when you can also change vehicles depending on your need? A small car one day; a four-wheel-drive the next.
Transport trends are just one of a range of forces changing Australia’s cities. Other forces include globalisation, demographic changes, and the digitisation of the economy. These factors are transforming where — and how — we live, work and play, and altering the infrastructure and types of real estate we need.
One major change is increased density in Australian cities, driven by both social and demographic change. While the most talked-about demographic trend in society is the ageing population, we are also seeing more young people who have a desire to live in different ways, closer to services, and in more central locations. Households are getting smaller and more people are choosing to live in apartments.
Immigration is another key factor, and not just because of the population increase. Many of the migrants coming to major centres, especially Sydney or Melbourne, are coming from places that are already denser than Australia, bringing with them diverse cultural lifestyles. This evolving cultural dynamic is reshaping cities today, as it always has.
We’re also seeing a changing business and industry mix as the Australian economy shifts to a services, education and technology focus. For centuries, a large part of what cities have served to do is provide factory space for manufacturing. We used to locally manufacture much of what we consume, but that’s no longer the case.
Industrial precincts that were once on the fringes of cities – are now in the inner to middle ring and are being converted into residential or mixed-use zones. New logistics hubs that form vital links in the global supply chain are being developed adjacent to new road, port and rail infrastructure. Technology companies are relocating to CBD and inner city locations – driven by worker demand for amenity, collaboration and lifestyle.
Then there’s digitisation.
Connectivity has an obvious, sweeping impact on people’s ability to conduct business in different ways and in different locations. But the associated rise in big data and analytics is transforming our understanding of space and its use. The ability to collect data on shoppers, businesses and residents and use this to provide better insights into the sorts of services needed and the best locations for those facilities will be transformative.
Looking at the retail landscape, online sales have had a very big impact already and they are likely to have a bigger impact in the years ahead.
It may seem counterintuitive, but there is likely to be a resurgence in High Street retail and for large shopping centres with an entertainment and leisure focus. As a result, if people can buy their groceries online and get back two or three hours of time buying essential goods, they are more likely to have time to linger in coffee shops, enjoy a service offering such as a haircut, or spend a couple of hours window-shopping or looking for a special gift.
Understanding how people’s behaviour might change can be anticipated through the processing of real-time data, ensuring that the market has a better window into the future and can respond in a more efficient and timely manner.
Digitisation is also having a big impact on the demand for office buildings. Smarter buildings and working environments allow people to work in different ways with enhanced mobility. Office workers can migrate between locations and the technology they need to be productive migrates with them. There is a rise in co-working activity and technology is enhancing flexibility around how people collaborate and optimise their work experience.
Finally, security is becoming a more important consideration. Tight security – both physical and digital – is necessary to allow the paperless office and the seamless integration expected today.
The speed of the change in land use and city form is such that policy certainty – and an attendant degree of flexibility and agility in the planning framework – are more important than ever, and a key factor in the confidence of investors to facilitate investment into the buildings and cities of the future.
The shift is subtle, but it’s a fundamental one: historically, building owners needed to understand their leaseholders’ needs. Now, they need to understand the people who use the building, and how they use it: how workers want to work, and how shoppers want to shop.
As is being witnessed in other industries where disruption is at play, putting the consumer at the heart of strategy is the right approach. As landlords learn more about their consumers, have more contact with them, and understand their behaviour more, they are more likely to be successful in this new world.
Graeme Ross is the Managing Director and Global Head of Real Estate – Institutional Banking & Markets for the Commonwealth Bank.
This article has been prepared by Business Insider solely for informational purposes and is not to be construed as a solicitation, an offer or a recommendation by the Commonwealth Bank of Australia. This information does not have regard to your financial situation or needs and must not be relied upon as financial product advice or Investment Research. You should seek professional advice, including tax advice, before making any decision based on this information. We believe that the information in this article is correct and any opinions, conclusions or recommendations are reasonably held based on the information available at the time of its compilation but no representation or warranty, either expressed or implied, is made or provided as to accuracy, reliability or completeness of any statement made in this article. Commonwealth Bank of Australia ABN 48 123 123 124.
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