Getting in on the ground floor: how street-level lots could reinvigorate the post-COVID city

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Carlo Ratti, Director, MIT – Department of Urban Studies and Planning & Manfredi Catella, CEO, COIMA

• Changing patterns in home and office use following the pandemic are interlinked.

• Ground-floor spaces are crucial in maintaining the vibrancy of urban life.

• Street-level lots could benefit from more civic spaces that add to their diversity.

Months into a pandemic that has radically changed our ways of working and living in the city, the effects of the crisis have started to manifest themselves in real estate: an industry that moves inevitably slower than others. How will the property sector evolve in the post-COVID-19 world? We believe that in addition to changes in offices and residential asset classes, key transformations will appear in an oft-overlooked area: the ground floors of our cities.

Let us start from the great experiment of smart working in which we all took part, willingly or not, beginning in spring 2020. What will its legacy be in the long run? Many observers have outlined some extreme scenarios, even predicting the death of the office. Nevertheless, there are good reasons to believe this will not happen – nor that it should.

At the Massachusetts Institute of Technology, researchers have analyzed communication networks among students and faculty members, both before and during the March lockdown. Preliminary data seem to show that these networks are weakening while people work from home, as individuals tend to interact remotely with a smaller selection of peers and colleagues in their immediate circles. This is different from what happens in the physical office, where people naturally entertain many “weak ties” and exchange ideas with broader groups of co-workers.

If the results above are confirmed, it means that shared workspaces are crucial for companies, allowing new ideas to emerge and consolidating a shared corporate culture. That said, it is reasonable to expect that a flexible in-person-and-online working regime will remain in the long term, resulting in a decline in demand in overall workspaces.

If offices could become on the whole smaller, what could happen to our homes? One hypothesis is that demand for larger homes will grow, at least in part, to accommodate the needs of those who are trying to balance their professional and family lives; as the parents of young children have come to find out, this is far from simple.

In short, the futures of residential and office buildings are intertwined. On the one hand, we will see a certain compensatory effect as the rising demand for the former helps offset the partial recession of the latter. On the other hand, perhaps more importantly, the line separating work and home environments is blurring even more. Instead of assigning a specific role to every room, it would make more sense to use the same physical space for multiple purposes. One consequence of this new approach will be calling into question the traditional logic of asset classes, which until now have been a pillar of the real estate sector.

In addition to homes and offices, another level of our urban landscape will be equally important in determining the post-pandemic future. We are talking about the spaces on the ground floor, open to streets and squares. These areas have been traditionally reserved for local retail networks, but in recent years have stood at the center of tumultuous transformations. First, shopping-mall retailing and now e-commerce have undermined the long-established brick-and-mortar model in cities. For a while after the 2008 financial crisis, a surge in the number of food and beverage businesses contributed to a revival of the ground floor. However, these ventures are now among the most troubled by the recent pandemic-induced retraction.

The “ground floors” problem is widely felt in urban centres across the world. “Let’s think of the richness of Parisian urban life,” Jean-Louis Missika, deputy mayor of the French capital, recently told us: “It would never be possible without the myriad of commercial activities that fill the streets.” Can we really afford to move away from such a historical heritage, precious to cities from Boston to Tokyo? Its loss would impoverish not only our economies, but our social and cultural foundations.

In other words, street-level lots will pose critical challenges to the city of tomorrow. How can we reverse the crisis and turn it into an opportunity? One way to do this is to emphasize the historic role of the lower floors as an environment for meeting and civic dialogue. While it is essential to use the space to support existing commercial activities, it can also be used differently: for instance, to host new kinds of neighbourhood initiatives. We are thinking about accessible co-working spaces, ‘fab-lab‘, non-profit associations, youth entrepreneurship hubs, and urban agriculture and volunteering centres. In other words, the ground floor can become an intermediary between each neighbourhood’s community and the whole city.

How can we achieve these objectives? In the Old Continent, funding from the European Union’s post-pandemic recovery plan can help municipalities implement these programmes. Local authorities can play an equally vital role in updating the regulatory framework by allowing higher flexibility on issues like the classification of the aforementioned asset classes. Such measures would grant public-private partnerships extra agility, paving the way for more society-benefitting collaborations to be born.

In the last few years, on a different scale, we have supported and worked on several projects along these lines. Their results have been met with widespread approval among both businesses and ordinary citizens. Milan is following the path of ground-floor renovations as it redevelops its Porta Nuova and MIND neighbourhoods [projects in which the authors are involved in different capacities]. It will prospectively go even further, from the historic Porta Romana to the various sites featured in C40 “Reinventing Cities” competition. As a forerunner for the city of tomorrow, Milan inspires positive changes in not only Italy but internationally.

What is the World Economic Forum doing to support the Future of Real Estate?

While investable real estate has grown by more than 55% since 2012 (PwC), the COVID-19 crisis has underscored weaknesses in relation to human and planetary health along with drastic inequalities, leaving a stark reminder of the influence the built environment has on societies and the vulnerabilities that exist in times of crisis regarding how spaces perform.

As the real estate industry looks towards recovery, the need for transformation is clear. Portfolios must be rebalanced, and distressed assets repurposed. Technology must be fully embraced, and sustainability and wellness must be at the core of design and operation. The affordable housing crisis that already existed pre COVID-19 must be systemically approached to ensure access to adequate and affordable housing. If the Real Estate industry is to deliver transformation, it is more important than ever to ensure that policy, financing and business solutions are aligned in delivering better buildings and cities.

The World Economic Forum has brought together CEOs from the Real Estate industry to develop a Framework for the Future of Real Estate to help drive the industry’s transition to a healthier, more affordable, resilient and sustainable world.

Now, we can finally answer the question that we first asked. It is not only from the towering office skyscrapers that we can see the future of real estate and urban life. The ground floor, which animates our life on the streets, will be among the first places to understand and rebuild.