Real Estate

the growing role of digital space in
cities

Written by lketr

This article presents an introduction to cities and buildings
in the digital era. Smart technologies underpinned by ubiquitous computing will have a drastic impact on the way
space users interact with the built environment, ultimately
giving rise to ambient intelligence embodied by ‘‘senseable cities’’ and conscious buildings.
Commercial real estate will be massively affected by
these changes even though the urban form should not be
drastically altered. Hence, one should not expect a construction boom due to the technological disruption real
estate is currently facing.
More importantly, the growing role of digital space in
cities will challenge buildings’ traditional role as interfaces
to human activities. The new positioning of smart buildings
as platforms to digital means that access has become more
valuable than location. This focus on buildings’ digital
positionality has the potential to radically redefine city
maps in real estate analysis.
The fourth industrial revolution will also alter the way
real estate assets are being modeled, and ultimately valued.
While the quest for functional versatility comes to
dominate buildings’ physical structure, one can expect
technology to become the dominating factor of heterogeneity and the main value driver for commercial real estate
in smart cities. Technology’s impact will be felt at two
levels: firstly, at the urban level where each city’s idiosyncratic infrastructure (smart grid and digital skin) will affect
digital space, and secondly at the building level where
buildings’ smartness has to be normalized and assessed.
Mitchell’s ‘‘cities of bits and atoms’’ will represent a
new urban environment for corporations. With it will come
opportunities as well as challenges. The real estate sector
needs to adopt innovative business models, whereby commercial real estate players become service providers rather
than physical structure managers. New entrants in the sector (e.g. co-working space operators) are already showing
the way ahead.
For the other economic sectors, the role of real estate
in corporate strategies is expected to grow inasmuch as
commercial property moves from being a silent partner
to becoming an active component of corporate value
chains with the abilities to generate significant competitive advantages. For instance, tomorrow’s retailers will
choose to be located in ad hoc ‘‘augmented places’’
within smart cities. By doing so, they will maximize
synergies between physical and digital spaces while generating maximum returns from their real estate-related
costs. In their locational choices, companies will focus
on optimal access to the digital skin. A similar reasoning
applies to smart grids.
In many respects, smart technologies question the social
contract between corporations, public authorities, and citizens. There will be a myriad of ethical questions stemming
from the implementation of smart technologies in smart
cities, for example, privacy and security of data collected
in smart buildings, role of corporations in smart cities,
importance of technology-driven market forces in shaping
urban landscapes. Real estate companies can expect to be at
the forefront of these issues.
Beyond the search for efficiency in which artificial
intelligence will play an ever-increasing role, smart cities and smart buildings will force managers to ask themselves what role their companies should play in defining
human lives in smart urban environments while the
fourth industrial revolution keeps delivering on its promises for innovation.

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lketr

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