What will our cities of the future look like?

Over the next 20 years, we will experience some of the greatest societal and environmental challenges of our time. What will a city look like in the future if it has successfully responded to them? Emma Hoskyn, director for upstream sustainability services at JLL, finds out JLL put this question to some of the UK’s leading property companies – including Hammerson, Land Securities, Great Portland Estate and LaSalle Investment Management at a workshop earlier this year – and built a picture of what the ideal city might look like. Vision of the future Imagine that you’re strolling down the street in the year 2040. You notice the variety of spaces where neighbourhoods and buildings are mixed use and multifaceted, with a range of activity and flexible space. You arrive at Chameleon Street, home to a shared office space where the breakout area is rented to community groups in the evening. Next to it stand 54 mixed-tenure homes designed for multi-generational living, and next to that an energy centre serving the neighbourhood. A health and wellness clinic sits two doors down and a tech enterprise providing training and information on the latest apps and wearable technology operates by its side.  As you exit Chameleon Street, you walk into one of the city’s many community squares. These spaces are owned by the public and managed by companies elected by residents and local businesses. Looking to the left, you see a long corridor of trees and green space crossing the city. Smaller green streets adjoin the city’s green spine and provide tree-lined walks, wildflower beds and vegetable gardens. You then notice electric vehicles buzzing around the streets thanks to local authority investment in a new smart transport strategy, using shared electrical deliveries and drones. The smell of fresh food from independent market stalls, that make dishes from local produce, leads you to your next stop: AgroUrbanism. They opened their first SkyFarm in 2020, converting a 1950s office block into a maze of hydroponics beds that produce a range of organic vegetables. Since then the company has opened urban farms in disused underground stations and shipping containers, as well as building four new SkyFarms including their flagship, The Beanstalk. Like all new buildings, The Beanstalk generates electricity using solar photovoltaic systems on its roof and cladding system. It stores energy using the latest battery technology and uses the Smart Grid Energy Command Centre to manage energy use in real time, so that the authorities can turn the energy generation and storage off and on to balance peak demand.   A short bus trip then takes you to the forecourt of one of the city’s Centres for Excess Material. Unwanted resources taken from homes and businesses are brought here, sorted and resold for reuse, fixing or recycling. The circular economy strategy, implemented in 2019, means authorities work closely with businesses to encourage product reuse and rental models. Adapting to the future This vision may feel like something from a time travel novel, but doesn’t it sound idyllic? It is true that some of what we envisioned is already happening, but unfortunately not fast enough. So, how can property companies ensure that they change fast enough to adequately respond to industry trends? What business transformation is needed to realise the city of the future? It is important to remember that resilience and long-term profitability underlie the business case for organisations that can adapt quickly. To respond to challenges, businesses need to steer themselves away from routine thinking and behaviours, shed ingrained habits, and challenge their core assumptions and business models to ensure future success. Essentially, they need to ask themselves some tough questions – some of which were considered at our workshop in May. As a result, we identified six aspects of business system transformation that must be addressed in order to deliver the level of change required to not only survive but to thrive in a changing world. 1. Vision and business model Establish an integrated business model supported by a long-term strategy that seeks to progress society by fulfilling the needs of people and the environment. The successful business of the future will need to demonstrate a clear purpose that supports progression by removing barriers to wider prosperity and providing a product that improves people’s lives. Business leaders must ask themselves; what is the purpose of my business and is my current business model going to be successful in 20 years? Companies need to establish a vision that goes well beyond the traditional three- to five-year cycle and instead have a vision for the next 10 or 20 years. The integration of commercial, environmental and social strategies is needed to achieve a competitive advantage. Tesla offers a good example of an integrated vision: “To create the most compelling car company of the 21st century by driving the world’s transition to electric vehicles”. The mission of the company is broader than its own economic success; it has a wider environmental and social purpose.                    2. Funding and finance Adopt a finance model that recognises and attributes value to the interdependency of resources (financial, human and natural) required for long-term success. Companies must develop a method for valuing intangibles found in natural and social capital, and communicate that value to stakeholders so that they understand how they benefit the business. New sources of capital, such as green bonds and social venture capital, will also play an increasing role in financing growing businesses, encouraging innovation and adaptation. Amazon, for example, has convinced investors that financing innovation while turning lower margins helps to secure success in the long term. 3. Organisational structure and governance Restructure to remove silos and facilitate collaboration and innovation by leveraging the interconnectivity of resources. To think in a new way may need a new organisational model. Business leaders must ask: “Does my current organisational structure facilitate collaboration, innovation and employee engagement to affect the change required?” Community, customer and employee representatives who have a seat at the table within an organisation would ensure appropriate due diligence is given to key risks and opportunities. Fostering a culture of innovation and attracting new talent by creating a nimble, flexible workforce is essential, as is a workplace that values employee autonomy, agency and trust. Secondments and skilled volunteering should be built into career development programmes to encourage diversity of thought and ensure the cross-pollination of knowledge, skills and experience. 4. Skills and mindset Transition to a diverse workforce in terms of background, gender, ethnicity and skills that bring a fresh approach to delivering the company’s strategy and vision from the board down. While diversity is quickly moving up the corporate agenda, there is still much to be done before companies’ workforce and leadership teams reflect the communities in which they operate. Transformational real estate companies will need to employ people from a diverse background in order to acquire the skills and innovative minds necessary to adapt to and capitalise on the megatrends affecting the sector. Leaders must ask what capabilities they need throughout their workforce to develop an integrated vision for their business. Undoubtedly this will also mean changes or additions to the skillsets represented at the top table. For example, the commercial carpet tile manufacturer Interface has appointed a chief supply chain officer to work towards eliminating the negative impact that Interface has on the environment. It also appointed a chief innovation officer, who is responsible for identifying and driving new sources of revenue and profit from current, new or expanded markets or new/enhanced products. 5. Creative collaborations and partnerships Partner and collaborate with in-and-out of sector organisations to enhance knowledge base, profit from experience, share risk and achieve an amplified impact. In a more volatile world, partnerships and collaboration need to become far more commonplace. Businesses need to adapt quickly to the evolving landscape, which does not always afford them the time or financial resources to build new teams internally. Fundamentally, partnerships allow organisations to share the risk as well as the reward, which is important when investing in wholesale innovation. Technology is perhaps the obvious place to start for the property sector, as its impact on retail, logistics, healthcare and communications are already disrupting the way that property is used. In early 2017, JLL formed a strategic alliance with a start-up specialist and an investor to launch Concrete, an initiative to help identify and support proptech startups, with the aim of bringing more tech-related benefits to its clients. 6. Innovation and R&D Invest significantly in innovation and research and development (R&D) to build resilience to external shocks and ensure ongoing business success. The real estate sector has traditionally limited its investment in R&D, compared with other sectors, because optimising existing models has proven to be lucrative. However, the sector is now approaching the wall quicker than ever before. Transformational companies must increase investment in R&D, with the backing of their investors, in order to capitalise on the opportunities offered by the disruptive forces. They need to create an environment where innovation can flourish by encouraging freedom of thought and most importantly, disruption from within. By embracing threats to the traditional investment models and deconstructing the way they work, businesses can continuously reinvent themselves. Time to take action The first step in the transformational journey is to be brave and willing to change. There are difficult questions that need to be asked and answered honestly and some of the transformation needed to make those changes may be significant. It’s time to put what we know as an industry into practice to ensure that our businesses thrive – financially, socially and environmentally. Starting now, let’s transform real estate for the better. Emma Hoskyn is a director for upstream sustainability services at JLL See JLL’s sustainability timeline here. Pic credit:WestEnd61/REX/Shutterstock