This is what buildings of the future will look like: and 5 ways to get there

(Credit: Unsplash)

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

Author: Christian Ulbrich, Global Chief Executive Officer; President, JLL

  • The provision of fair access to quality space to live and do business is essential to the overall health of society.
  • But buildings account for 40% of global greenhouse gas emissions, 50% of the world’s energy consumption and 40% of raw materials.
  • There is a clear mandate for the industry to transition to a future where buildings are liveable, sustainable, resilient and affordable.

For years many of us in the real estate community have recognized the pressing need for change. In early 2020, the World Economic Forum’s Real Estate partners set out to prepare a report on the future of real estate.

At the time, we thought sustainability had to be our core focus; sustainability in the broader sense of its meaning – clearly highlighting the importance of making real estate more environmentally friendly, but also addressing questions such as wellness, community, and the inclusiveness of buildings and urban spaces. For example, inclusiveness doesn’t touch only on city planning, architecture and accessibility, but also on affordability. All these required a concerted response from the real estate sector, from urban entrepreneurs and from policy makers.

And then came COVID-19; a pandemic that has accelerated certain trends and affected many of the underlying demand drivers of the real estate industry. The convergence of multiple crises – public health, social, economic and planetary – has served to drive home the urgency of our efforts to identify a few simple imperatives and create a set of signposts that could help the industry ‘build back better’.

In our report – A Framework for the Future of Real Estate – we have developed a vision for the future of real estate; a future in which buildings provide us with comfort, are equipped for the most unprecedented of events, support our health and the planet, and are affordable and accessible for all of society.

We resolved that real estate should be liveable, creating suitable habitats for a rich, culturally vibrant existence. Typically, in major cities around the world, people spend about 90% of the day indoors, which makes buildings instrumental in ensuring liveability. A combination of factors contributes to a good quality of life, including well-developed buildings and communities, human-centric and inclusive designs (designed for people of all ages and abilities), social, community and recreational facilities that meet the needs of citizens in tandem with real estate development.

We resolved that real estate should be sustainable, optimized for zero carbon output in every aspect from construction to operations. The environmental impact of real estate assets is highlighted by the fact that buildings account for 40% of global greenhouse gas emissions, 50% of the world’s energy consumption and 40% of raw materials. If we are to meet net zero carbon goals, we need to accelerate action; action that will require large-scale energy retrofits of older existing buildings and, crucially, the renovation or repurposing of buildings rather than demolition.

Real estate should also be resilient, capable of adapting to whatever exigencies might arise, by mitigating the effects of unforeseen natural and man-made events, such as climate, financial and health crises, and to preserve the cultural identity of communities. Assets need to withstand a variety of unpredictable shocks and be flexible to adapt to changing patterns of working and living throughout their full lifecycle.

And real estate should be affordable, with housing, transportation and essential services available to all. The provision of fair access to quality space to live and do business is essential to the overall health of society. Affordability must comprise both financial access (affordable rents, low barriers to home ownership) and access to the appropriate standard of assets in terms of space, health, location and access to basic services.

Realizing this vision and delivering buildings that are liveable, sustainable, resilient and affordable will require 5 steps:

A Framework for the Future of Real Estate Image: BCG, based on discussions with World Economic Forum Partners

1. Fast-track digitalization and innovation: Technology will be one of the most important enablers to usher in the new era of real estate. Buildings are now generating enormous amounts of data that can be harvested to inform operating, maintenance and investment decisions. But to create scale and efficiencies, an interconnected system of smart buildings that operate together will need to be rolled out. Data privacy and security must also be a top priority to ensure occupants and owners are protected.

2. Deep pools of talent and knowledge: The future vision of real estate requires extensive and up-to-date knowledge and competences as well as a leading talent pool, which has broad market expertise and knowledge. The industry should establish the right C-suite mix and appoint leaders with capabilities to head the transformation around sustainability, resilience, and technology. Real estate businesses must also create diversity and inclusion in their workplaces and ensure more equal representation.

3. Proven-value business case: New solutions are only scalable when there is a compelling business case and clear return on investment, but a lack of alignment of interests among stakeholders often inhibits deployment. Creating comprehensive metrics that reward all stakeholders throughout the value chain will foster investment. There is also a need for increased transparency, in which stakeholders have ready access to high-quality market data and performance benchmarks; and where there is certainty, consistency and rigorously enforced rules and regulations.

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.

4. Greater stakeholder engagement: The real estate community (policy-makers, lenders, investors, tenants, contractors, etc.) must actively collaborate to develop more effective solutions to city and industry challenges. City governments will need to view real estate developers, investors and occupiers as city-shaping partners who can help to achieve goals which would otherwise be difficult in a post COVID world. Meaningful collaborations with academia and civil society are also fundamental to foster innovation and to create human-centric development that encounter fewer obstacles during the urban planning process.

5. Robust regulatory frameworks: Endorsing flexible zoning and city development plans will support transition along with the standardization of existing and fragmented building codes. Regulation can also be a tool to push change, such as in the case of net zero carbon targets, in which their mandatory nature can be a powerful instrument, or affordability, in which the regulation can incentivize supply and/or demand to help close market gaps.

A Framework for Change: win-win approaches

It is our firm conviction that the vision presented in ‘A Framework for the Future of Real Estate’ is in the best interest of all stakeholders. Our industry has to focus on win-win approaches. For all its scope and detail, it will only be actionable once it has reached all policy-makers, elected officials, and corporate leaders who are best positioned to bring its proposals to life. That is our aim for 2021.

This is a unique opportunity and a clear mandate for the industry to transition to a future where buildings are liveable, sustainable, resilient and affordable.

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