Homes and gardens

Technology shapes the city

People-centric urban economy is emerging as a major driver for growth of realty. Educated and talented people are becoming the major asset of cities. Consequently, realty businesses are shifting focus on enlivening the work atmosphere in order to retain talent. This is the conclusion drawn by the ‘Global Cities 2017’ report following a Knight Frank survey of 34 important business cities across the world. The list includes Bengaluru, Delhi and Mumbai from India.

Bouncing back

Every technology revolution brings in its wake ‘creative disruption’. Cities that were dismissed as busted flushes in 2009 due to their high exposure to financial services, are now thriving as innovation centres. Trends in realty show that major cities have bounced back in favour, thanks to rise of new technology, and developers and landlords adapting strategies to address the new geography.

New York, the worst victim of recession in the United States, is an example. In 2015, TAMI (technology, advertising, media and informational technology) tenants comprised 29% of the total square footage leased in the Manhattan office market, nearly double the 15% market share that TAMI accounted for in 2009.

By focusing on innovation and creativity, Dubai and Miami have regained their vibrancy. Dubai repositioned itself as a tourist destination (as Cairo lost its appeal due to the Arab Spring) and turned into an aviation hub and centre for retail offerings. Miami (in Florida-U.S.) came to host Microsoft’s Innovation Centre in Miami-Dade County and reinvented itself for hi-tech jobs. Realty in Washington DC took the hospitality route to resurgence. Nearly 2,000 rooms are under construction in the U.S. capital as of now (mid-2016).

According to Nicholas Holt, Asia-Pacific Head of Knight Frank, Bengaluru and Shanghai have sustained growth due to their ‘Techquibility’. The report estimates that nearly $9 billion was invested in start-ups in India in 2015, with majority of them taking birth in Bengaluru. The city which had attracted Airbus Bizlabe earlier, was chosen to be headquarter by Flipkart, InMobi and Mu Sigma last year. U.S.-based home improvement and appliances retailer Lowe’s has made its entry into the city and Visa intends to house 1,000 software developers in the months ahead.

Disruptive landscape

Business is faced with a new disruptive landscape. It notes that the last decade witnessed Dotcom bust but new technologies like driverless cars, robots, drones and artificial intelligence are now replacing them. It is where disruption is also seen as a creative force and real estate and developers are called upon to respond to the changes demanded by the occupiers.

Implications for realty

Lee Elliott, Head-Commercial Research, also sees disruption caused by technology as yet another opportunity for growth. He says technology is fundamentally challenging businesses and urging new approach to space with mobility, flexi-hours and co-working. “Working places must act as magnets for talents.

Maximising utilisation, densification and beautification of space are natural corollaries of the trend which need to be addressed,” he avers. The study notes that normally 55% of the cost of business operations goes for people who work, 15% is the cost of real estate while other heads claim 30%.

In the new environment, businesses go where the talent is. General Electric recently relocated from Fairfield in Connecticut (its home for 30 years) to Boston as it recognised that its success was dependent upon software innovation and that this placed priority on attracting city-dwelling tech talent. Amazon shifted its U.K. headquarters from Slough to high quality premises on the edge of the Shoreditch tech cluster in London. It concludes that the notion that office occupiers are spatially fixed is being challenged on a daily basis.

Brexit and Trump

The report does take note of anti-globalisation forces such as rise of Trump for the candidacy of White House and Brexit (vote for exit of Britain from European Union). These, they concede, do signal protectionist trends, but do not see them potent enough to reverse the globalisation process.

One major reason is the fragmentation of business processes which has led to ‘shoring’, whereby functions have been relocated to locations that have clear labour or cost advantages. Bengaluru, Shanghai, Warsaw, Bucharest and Manila have all been beneficiaries of this trend. “But they must be wary of the emergence of Peru, Trinidad and Tobago, and Kenya.”

The report endorses the view that ‘millennials’ (a person reaching young adulthood around the year 2000) are now central to the economy due to the ease with which they interact with new technologies like self-driving vehicles, drones, robots and artificial intelligence.

The author can be reached at maqsiraj@gmail.com

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Printable version | Aug 7, 2020 5:03:53 PM | https://www.thehindu.com/life-and-style/homes-and-gardens/Technology-shapes-the-city/article14928452.ece

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