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Future of Cities | Follow the money

Smart cities

Cities worldwide are growing at a rapid pace. But what is the infrastructure need and what are the opportunities for civil engineers?

The proportion of the world’s population expected to be living in cities in the future just keeps rising. The United Nations (UN) now estimates that 68% of the world’s population will live in urban areas by 2050, up from 55% today. This is according to its most recent dataset released in May last year.

That shift in residence of the human population from rural to urban areas combined with the overall population growth could add another 2.5bn people to urban areas in just over 20 years, with close to 90% expected to be accommodated by Asian and African towns and cities.

The numbers alone present a global logistical and engineering challenge. And that is before the concept of the “smart” city is introduced; a sweeping term that has been around for a decade or more now and broadly implies that cities of the future will be technologically-enhanced through collection and use of data in ways that still seem far-fetched. We are talking delivery robots taking vans off congested streets; traffic lights that respond to pedestrian flows as much as vehicle flows; modular roads and pavements that automatically heat up before a winter storm so snow melts on contact; and many other innovations that will change the way buildings operate and integrate with each other. Numbers abound, but one study by Bank of America Merrill Lynch puts the global market for smart city technology at $1.6 trillion (£1.2bn).

Google urban design spin-off Sidewalk Labs is perhaps closest to really starting this journey, working in Toronto in partnership with the tri-government agency Waterfront Toronto and the local community to design and develop a 325ha district in the Canadian city’s Eastern Waterfront to tackle the challenges of urban growth in a sustainable, “smart” way. This joint effort, called Sidewalk Toronto, aims to make the city the global hub for urban innovation.

It is big vision, but still one very much in its infancy: a spade has yet to strike ground to build even one of the proposed 2,500 homes let alone on the promised light rail scheme to link the district to the city centre.

So realistically, where are the opportunities for engineers going to be? Pragmatically the thing to do is probably to follow actual investment. Property investment management firm Colliers International reckons the amount of real money looking to be invested in property annually could hit £1.9tr by 2020. And Toronto is not high on its list.

“My message to investors is invest in the big [urban] centres,” says Colliers head of Europe, Middle East and Africa research Damian Harrington. “And follow the infrastructure.”

Colliers’ latest research into investment trends shows that the big global cities dominate the deployment of capital in property with New York and London leading the charge, ahead of Los Angeles, Tokyo and Paris. A further four markets – Hong Kong, Washington DC, San Francisco and Chicago join the global gateway club of nine that have amassed more than £75bn of real estate investment since 2008.

Cities 1

These are cities, says Harrington, that are seriously investing in traditional infrastructure.

Harrington cites London and projects like Crossrail and the Northern Line Extension, both of which, while still far from complete, have already driven demand for retail space “new inner suburbs” of Stratford and White City, and Battersea respectively. Comparing demand in those suburbs between 2013 and 2015 and 2016 and 2018 is staggering – up around 490%, 330% and 300% respectively. And to prove it is not just an inner London thing he also cites Croydon – where demand has gone up less than 30%.

Certainly London mayor Sadiq Khan is putting his money (or at least his pleas for money) into heavy infrastructure as the means to growth – with his Transport for London (TfL) earmarking £41.3bn for Crossrail 2 over the next 20 years and setting aside a further £19.6bn to build six line extensions across its Underground, Overground and tram networks by 2038. While Khan has in the last year launched a “roadmap” intended to make London “the world’s smartest city”, the only cash he has committed is £365,000 to the City Data Analytics Programme to support the development, commissioning and implementation of data science projects across different public sector organisations within the Greater London area. Rather, his real focus is on finding cash for his more traditional schemes.

TfL has had to manage the impact of an average reduction of around £700M per year in government grant. Since March 2018, TfL has become one of the only transport authorities in the world not to receive a direct government operational grant for day-to-day running costs. Worse for Khan and TfL, there is currently no certainty of government capital funding beyond 2020-2021.

Ahead of this autumn’s spending review, TfL says it will be making the case to get that grant back to ensure critical infrastructure projects can continue and Khan himself has called on government to recognise that London gets its share of recommended spend on infrastructure of 1.2% of total gross domestic product.

“There is only so much that TfL can do when its government funding is slashed, it’s locked out of funding for road maintenance and faces no certainty over future government capital investment,” said Khan in March. “At the spending review this year, it is vital that the government listens to its own National Infrastructure Commission (NIC) and ensures that London gets the funding it needs to continue to operate a world-class, affordable and sustainable transport network.”

While also talking up the smart city concept, in reality New York City’s leadership is similarly focused on big, traditional, infrastructure. State governor Andrew Cuomo has set out a £120bn five-year infrastructure plan starting in 2020, building on the city’s current £75bn five-year plan. The plan has little to say about smart infrastructure, focusing on rail and metro upgrades, airports, highways, bridges and tunnels.

Harrington also points to Paris and its spectacularly ambitious Grand Paris Express. There, 200km of new metro lines – the equivalent of the existing network – are being built between now and 2030, 85% of them underground, together with 68 new stations, interconnected with existing transport networks. There are questions being asked about the budget, which has soared from €19bn (£14.4bn) at 2008 prices in 2010 to £26.5bn at 2012 prices in project promoter Société du Grand Paris’ last update in July 2017. But nonetheless work is underway with a fourth tunnel boring machine (TBM) poised for launch this month. By 2020 20 TBMs will be at work on the project.

It is a project designed to give the Paris conurbation a transport system commensurate with its growth momentum and ambitions and while still in its infancy as a project, Harrington has already observed a 4% swing in demand for office space away from the central business district and towards the inner suburbs that will be served by the new lines.

Looking more globally, Singapore is held up by many as the prime example of a city that is using infrastructure investment to drive growth, expanding its rail network alone by over a third in the past six to seven years.

So little surprise that managing director of Colliers’ Singapore office Terence Tang agrees with Harrington: “Do not underestimate the value of infrastructure investment. Crossrail has already driven investment in places like Stratford; in France it will be the same the Paris Grand Metro. Infrastructure is huge. Where investor money has gone – it is where the infrastructure has gone.

“So the best place to put your money is where the government is putting money into infrastructure.”

Within Europe, the major German cities of Berlin, Munich and Frankfurt alongside Stockholm form the European contingent of the next big group of global cities by scale of property investment, witnessing between £38bn and £75bn in investment activity since 2008.

What is perhaps surprising is how far further back other UK cities such as Manchester, Birmingham and Bristol are, both in terms of actual investment and perceived desirability.

Colliers’ Cities of Influence score (CoI), which reviews and ranks cities based on their occupier attractiveness, availability of talent, and quality of life factors alongside economic output and productivity, puts the other UK cities a fair way behind London and Paris.

Cities 3

But there are multiple factors influencing investors decisions, and in fact, when you put it altogether Harrington reckons the UK regions could come out as a good bet.

“If you put all these cities together and look at the CoI score, capital values, yields, economic outlook yield outlook, rent outlook, you get a good view of where you could be parking your money,” says Harrington, presenting a slide which has Manchester, Bristol and Birmingham topping a table whose top 10 is further filled out with the European cities of Utrecht, Barcelona, Warsaw, Hamburg, Stuttgart, Munich and Cologne.

And those major UK regional cities are all planning for infrastructure boosts of their own: for Manchester and Birmingham it is the arrival of High Speed 2 (HS2) and expansion of their metro systems; for Bristol it is brand new, ambitious £4bn underground metro.

The NIC is strongly backing their plans; its National Infrastructure Assessment, published last June and still awaiting detailed government response (something it now has only weeks to do if it is to stick to its commitment to respond within a year of publication), called for Crossrail 2 funding London, but also for the Northern Powerhouse Rail linking the major northern cities of Liverpool, Manchester, Leeds, Sheffield, Hull and Newcastle and a boost in funding for major cities totalling £43bn to 2040, with cities given stable five-year budgets, starting in 2021.

There are ways to boost attractiveness further – and this is where smart city thinking comes in?

Bristol aims to become a net zero carbon city by 2030; Manchester by 2038.

But the challenges are huge. Explains Steve Cox, engineering director for north west utility firm Electricity North West: “There is a huge shift away from oil-based transport and gas-based heat and electricity grids in our cities will need to double in size and deliver three times as much energy.

The exact figures are uncertain; the NIC’s analysis suggests that a 100% uptake of electric cars and vans could increase total annual electricity demand by 26% by 2050; recent analysis of by the Centre for Economics and Business Research for smart meter lobbyist Smart Energy GB suggests that by 2035 electricity demand in London is set to stand 29% above 2005 levels, in Manchester 17% higher and in Bristol 13%.

This suggests Cox maybe over-egging things a little. But he explains that within cities there will be hot spots. He cites Manchester, where his firm is currently embarked on a £5M project to improve the airport’s energy infrastructure as part of owner MAG Group’s expansion programme. “If you look at some of the challenges that MAG Group faces, there are going to be something like 50,000 vehicles at Manchester airport, and if you think they are all going to be electric vehicles, the recharging demand for those is several times the airport’s existing electrical demand. And that’s before HS2 drives more surface transport to the area.”

“I see in a lot of developers a strong desire to deliver sustainable affordable development but some confusion around the technology roadmap and the infrastructure needed,” he says. “Our role is as an infrastructure provider is to provide the investment to put that infrastructure in place to create the energy motorways that the city will need for its decarbonisation journey and make Manchester one of the smartest cities in the world.

“But affordability is a key challenge,” he observes.

The NIC says that without action to manage demand through the day, meeting this increased demand nationwide would cost £2bn per year, adding up to £30 per year to consumer bills.

The Commission says that most charging should be “slow and smart”. Done in the right way, using smart charging, the Commission believes electric vehicles can lower electricity system costs: the system will be able to operate closer to full capacity over the course of the day, as electric vehicles can charge primarily at night, increasing network efficiency.

So that then looks like the focus for civil engineers in cities in the near to medium term future: quite traditional transport infrastructure projects supported by increasingly smart energy infrastructure projects.

And what of the future beyond that?

In London, Khan’s roadmap is somewhat limited to “supporting the commission of a new generation of smart technology” such as lamp posts incorporating air quality sensors, publicly-accessible WiFi and electric vehicle charging points.

In Toronto, Sidewalk Labs is being a little bolder. In March hundreds of Torontonians braved snowy weather one Saturday to catch a first peek at two of its public realm prototypes: the building raincoat, an adjustable awning that can attach to a building to create a kind of indoor-outdoor arcade, and modular pavements, which can heat up to melt snow.

These prototypes are just some of the innovations that Sidewalk hopes could encourage people to spend more time outdoors in the future.

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