Property ownership: Tech disruption in tomorrow's city
Technology is changing how we as a society works, interacts and co-exists within urban economies and environments
Report from – Helen Garthwaite & Suzanne Gill
Tomorrow’s city will be a smart city. It is well recognised that urban hubs of the future will be ever more connected into the ‘internet of things’, with a range of sensors tracking and managing the built environment’s use and effectiveness, and smart infrastructure and transport networks facilitating safer, sustainable and efficient work/life environments. New technologies are, therefore, at the centre of tomorrow’s city and the buildings and places that we will use and rely on.
However, technology is not only changing how we approach places and spaces as physical locations, it is changing how we as society work, interact and co-exist within urban economies and environments. Importantly, these developments are fundamentally challenging the traditional concept of commercial and residential property ownership and investment. The general trend of increased transience, from the gig economy to generation rent, powered by the ever increasing rate of technological advancement, will require new property ownership and investment structures.
The future of work
To a large extent, this can be seen most clearly in the commercial property market place. As the notion of the office as a rigid place of work for eight hours-a-day declines, and the impact of changing worker demands and technology accelerates, workspaces are becoming more flexible and, indeed, less tied to a single physical space. For white-collar industries, many employees already work remotely via the cloud for a significant proportion of the time – answering emails via mobile devices, or working on projects at home over the weekend – while start-ups are using new online or virtual platforms to tap into the gig and sharing economies. This is having a significant impact on commercial property requirements.
Today, only around 45% of the UK’s commercial property space is occupier-owned, with the British Property Federation suggesting that many businesses are increasingly reluctant to commit capital and management time to owning the property they use. This is seeing rented space becoming increasingly the norm and, even more tellingly, while traditional rented office space saw enquiries increase by 15% in 2015, there is growing preference towards short-termism with 2016 seeing a 21% increase in enquiries for flexible office space.
This trend will have a profound impact on the strategies of investors, who own more than half of the UK’s £871bn worth of commercial property assets, and lenders, who are catering to a fundamentally different category of commercial occupier; businesses who value flexibility, cutting edge technological infrastructure and significant attention to placemaking. Both owners and occupiers are therefore looking to future-proof their property portfolios, building-in capacity for a transition to flexible working and creative, intensified, more economical use of space.
Living and buying
Alongside these rapidly evolving changes to the workplace, residential property, too, faces its own challenges.
The travails facing the UK housing market are many and various, with ownership figures declining and renting becoming an ever more important pillar of the market. Only around half of British families now own their own home and an estimated 7.2 million households are expected to be renting in 2025. In London, in particular, 49,000 new homes are needed per year to meet 2050 demand - only 21k new homes were built in 2016.
The cost of purchasing is undoubtedly a factor affecting the future of ownership but it should also be recognised that the impact of technology on people’s work patterns and styles is directly affecting the types of property, even the types of ownership, that individuals can pursue. For example, the rootedness in a single community that owning one’s own home provides may become incompatible with the realities of economic life in tomorrow’s city - which may call for mobility between key global cities and productivity hubs.
Technology has also disrupted the residential property market more specifically with sites such as eMoov taking transactions online and crowdfunding enabling individuals to pool their assets and take a first step on the ownership ladder. The government has recognised the importance of this move with its new shared ownership scheme and ‘build-to-rent’ fund and in future cities, such models of ownership may become a key part of a greater housing mix.
A sustainable future
Technological development is increasingly changing today’s work habits, lifestyles and wider attitudes towards ownership – particularly amongst the growing millennial workforce and generation rent. Disruptive PropTech could reinvigorate the notion of traditional property ownership by offering an alternative to many households who are looking to put down roots, and enable owners to explore new uses for underused or unneeded commercial space. Alongside this, technological and IT infrastructure – including connected transport links, robust and efficient data centres, and fast, efficient cloud and broader internet capability – will be critical in enabling future cities to run smoothly.
The legal implications here are significant. Firstly, technology is an enabler; it provides information on the environment and safety, opportunities to engage with new audiences and creates new choices as to how and where to work and live. However, use of this technology produces risks, not least to privacy and data protection. Meanwhile, for owners and investors grappling with the demand for shorter, more flexible occupancy agreements, new asset classes and lending structures will be needed and new regulatory structures explored and implemented.
The answer may lie in a more nuanced approach to sustainability; encouraging a long term approach to management and reuse rather than sole owner-occupancy, and buildings designed and created using technologies and techniques that enable adaptability for a variety of occupiers – from residential to storage to white-collar office.
What is clear, though, is that while technology may not have killed-off ownership just yet, future cities, and the digital disruption driving their development, will significantly challenge our definition of ownership, and the types of ownership structures which we rely on.
About the authors
Helen Garthwaite and Suzanne Gill are partners at law firm Wedlake Bell, who’s Tomorrow’s Cities, Today’s Challenge initiative explores how clients, consultants and lawyers can respond to the challenges of rapid urbanisation.