The densification of cities is set to force a fundamental re-think of how real estate investors define living and working assets in urban areas.
Speaking at Institutional Real Estate, Inc.’s 2019 Visions, Insights & Perspectives (VIP) Europe conference on Feb. 20 in Amsterdam, Jeremy Kelly, director of global research at JLL, predicted the make-up of tomorrow’s cities will lead to flexible and mixed use properties that will require a reclassification of real estate sectors.
“We speak all the time about the blurring between retail and warehousing, but that’s happening in hotels and residential, and in offices and leisure as well,” said Kelly.
“We will see some fundamental changes in property sectors in terms of the hybridization of sectors.”
Anne Charon, head of transformational change at BVA Nudge Unit, who joined Kelly on a panel at the conference that discussed the “City of the Future”, explained that as well as densification, two other mega-trends — climate change and advancing technology and expanding data — were pushing cities to adopt flexible and interchangeable assets. The former has heightened people’s awareness of the need to change their habits and carbon footprints, while the latter is having a major impact on the way that buildings are connected and monitored. These mega-trends are forcing people to adopt shared economies, transportation and spaces, said Charon.
Examples of extra flexibility and modularity within cities raised by the panel included apartment buildings where residents share and rent guestrooms, and buildings where parking space levels can be converted for office use within short periods of time.
“There are also now buildings being created that are created to be offices but can also be very quickly turned into residential spaces,” said Charon.
When discussing cities that were leading the way in solving the challenges faced by urban areas, another panellist, Simon Durkin, head of research at BlackRock Real Assets, offered Mexico City as an example of a place that utilizes well-thought-out public policy to introduce much-needed affordable housing in key areas of the city.
Kelly picked Copenhagen as a city that is a success for both its residents and investors.
“It’s got the environmental credentials — 40 percent of workers commute by bicycle — and is looking to go carbon neutral by 2025,” he said. “But what’s more interesting is its governance model and how it has created that combination of liveability and cutting-edge design.
“It’s ticking the boxes for the community itself but also attracting interest in the broadest sense from across the globe.”
