The power of connections
The average Wi-Fi speed across 67 European cities is 24mbps. But where can you get the fastest downloads?
Stuttgart, according to M&G’s European Urban Connectivity Ranking (UCR), where you can enjoy 63mpbs. The German city just beat Paris (59mbps) and Amsterdam (50mbps).
How relevant is this for real estate investors? Increasingly so, if M&G’s report is to be believed. Wi-Fi speed supports urban connectivity and consequently is one of 18 indicators use to generate the ranking. The rise of real-time transport apps such as City Mapper, Moovit and Whim – which are also factored into the ranking – depend on internet connections and play an important role in helping people navigate multiple modes of transport.
In the low-yield environment, the findings of the report are particularly relevant, M&G says. “Demand for real estate space is boosted in cities where efficient transport networks play a major role in enhancing economic growth,” the report says. “In the long run, good connectivity benefits property fundamentals by making occupiers more likely to want to locate there, boosting rental growth potential, which in turn justifies a lower yield.”
Technology is revolutionising urban transport. Uber and car-sharing is already having an impact on the traditional taxi industry, rental bicycle schemes are now commonplace, and the next phenomenon involves rentable electric scooters. However, as we show in the latest magazine, these technologies stand not only to disrupt the incumbent transport industries but also have implications for city infrastructure and real estate markets – and potentially property values.
E-scooters magnify the questions arising from the emergence of electric and autonomous vehicles. Most obvious is the need for charging stations. Investors believe self-driving cars are likely to have the most extensive impact on property assets, but those changes may be as much as a decade away due to the lack of urban infrastructure to support them, such as sensor networks for navigation, new traffic signals and signal control systems, and electrical power stations to charge batteries.
Carlo Ratti, Italian architect, engineer, and director the MIT Senseable City Lab, expects self-driving cars to become widespread over the next decade. “I believe they are among the technologies that have a great potential to change our cities,” he says. “Over the last few years at the MIT Senseable City Lab, we have been investigating how a world of driverless cars might impact urban infrastructure.”
In the 1990s, technology and the internet was predicted to be the “death of cities” as they undermined the need for people to work in close in proximity to each other. US professor Melvin Webber gave this notion currency as early as the 1960s when he wrote: “For the first time in history, it might be possible to locate on a mountain top and to maintain intimate, real-time and realistic contact with business or other associates”.
Conversely, the internet and technology appears to have been a catalyst in recent urbanisation and densification trends. This is reflected in the rise of the ‘tech tenants’ like Google, co-working spaces and a recognition that working in proximity with other people can help spur ideas and opportunities that would not otherwise have emerged.
As we explain here, the co-working and flexible workspaces are becoming more than just a niche sector of the traditional office market. They point to the future and reflect changing world of employment. And that is becoming increasingly about ‘community’.
While conversations about co-working tend to focus on the flexibility it offers in terms of shorter-term leases, the ongoing appeal of the format rests on a more fundamental change in the workplace. “The concept is that not only are you consuming space and a bundle of services, but you’re interested who else is around,” says Jacques Gordon, global head of research and strategy at LaSalle Investment Management.
But the phenomenon is still in its infancy. Many wonder how the co-working model will behave when put under pressure – by an economic downturn or the next global financial crisis. Will demand still be there, when the economy does not support the next start-up?
Mary Finnigan, director of transactions at WeWork, is confident that the best-known co-working provider’s business model is robust. “In a downturn, flexibility becomes so much more important than it is in the boom time,” she says. “Businesses are able to scale up and down much more easily. There is normally a surge in entrepreneurial activity in a recession, and people crave community more.”