Donald Bouchard, CREAccording to UN statistics, the world now has seven billion people. Of this total, 50% living in cities across the globe. By 2050, a short 35 years into the future, the planet is expected to have a total population of nine billion. Remarkably, projections indicate that at that time, 70% of the world’s inhabitant’s will be living in urban areas. This means that in three and one half decades, 2.8 billion people will be moving into cities. (who says there is no future in the real estate business?)
Currently, Tokyo is the world’s largest city and the U.S. has only one city in the top 20, New York. By 2050, the U.S. won’t make the list at all. The top projected city? Lagos, Nigeria, currently with sixteen million residents is expected to top the list and is anticipated to grow to 70 million people! Why is any of this relevant to real estate? The answer should be obvious. Increasing migration to and growth of urban living is a 21st Century trend that is unstoppable and will create substantial opportunities for domestic and foreign investment.
As cities evolve from the old paradigm, isolation in the form of isolated communities (suburbs), isolated campuses and isolated corporate headquarters and neighborhoods will be relics of the past to a great degree. Suburban growth, supported by expensive highway infrastructure, and the mortgage interest deduction assisted in dispersing the population after World War II.
Cities of the future will be larger and there will be a need for the necessary infrastructure, and quality schools to accommodate their growth and enhance livability. Public transportation options are key, as is the need for more density. Contrary to popular belief, larger cities are “greener” than suburban areas because residents consume less energy per capita than their counterparts. Cities are also massive generators of GDP because collaboration and the concentration of knowledge far outpace the economic impact of the suburbs. Productivity and wages are simply higher.
This transition will entail the adoption of new ideas and perspectives about use and density. Zoning regulations as they have evolved over the last seven decades have tended to be rigid restrictive land use models where there is a place for everything and everything must be in its place. Increasingly, existing zoning standards are exhibiting their inconsistency with the evolution of cities where mixed use projects can provide solutions for shopping, housing and job growth, all within the same area. Most of the planning efforts in the last century were oriented to “dividing and conquering” with respect to land uses. Zoning rules and regulations in many communities are simply overly prescriptive and no longer make sense.
I read recently that in the last few years, over 65,000 households were created in the metro Boston area while we have built 17,000 new units of housing. It is any wonder that with such restrictive land use policies that virtually guarantee low density, that land prices are prohibitively high? Certainly, places like the city of Boston “get it,” providing a sensible canvas for much new high density residential development. Most suburban cities and town remain tied to the past and should completely rethink how zoning and density should work. It should become performance based and flexible, employing performance standards for sufficient air, light, traffic mitigation and environmental issues, all of which can be accommodated via higher density mixed-use projects. We have to produce new rational zoning and land use regulations that are sensible and do not artificially restrict smart growth potential. Cities, originally designed along a hub and spoke pattern and often economically driven by one overriding industry (finance, insurance, government, or a specific manufacturing sector) are becoming much more diverse with no one industry required to shoulder the entire economic load. New York, for example, is awash with increasing job growth from technologically oriented industries. We in Boston are fortunate to be blessed with technology, medicine, higher education, bio-tech, and pharmaceutical sectors providing for a diverse employment base.
For long-term viability, suburbs will have to evolve and take advantage of higher densities and improved infrastructure. They will have to alter the established and increasingly obsolete “bedroom” community dynamic. This realistically should be a regional discussion, but with greater Boston’s multitude of small, self-governing cities and towns, many will be reluctant to join in the discourse until the long term benefits become apparent, or until the prospects for their continued economic vitality face serious challenges.
Cities across the world are the engines of economic growth. They are growing, and they will increase productivity, provide “greener” living environments and a high quality of life. The change will come to a significant degree, however, with the abandonment of the one and two-acre zoning concepts from the past century, into sensible, more dense, and vibrant communities that density and supportive infrastructure will be able to provide.
Donald Bouchard, CRE is a senior vice president at Lincoln Property Co., and is the 2016 chair of the N.E. Chapter of the Counselors of Real Estate.