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Smart Cities – What makes them special. And what they mean for the future.

Copyright: Patrizia SE / shutterstock

One megatrend that has shaped the development of tangible assets in recent decades is urbanization. With regard to Europe, it can be said that this process was very dynamic in the period after the Second World War, especially after 1950. Although the pace slowed in the 1990s, urbanization remains an important driver of economic development. As a result, European cities have become important centres for education and innovation. In an increasingly knowledge-based world, they are the ones who drive economic growth.

Although Europe is already predominantly urban, urbanization will continue in the coming decades. The United Nations estimates that the proportion of the population living in urban areas will rise to over 80 percent by 2050. This means that the urban population will continue to grow over the next 20 to 25 years, even in those countries that are expected to have a shrinking overall population.

Policymakers, researchers and city dwellers have therefore long been concerned with the future of cities. This is due to a greater recognition of the role of urban areas in securing a sustainable future and in solving important global problems, such as climate change, poverty reduction or providing the population with adequate and affordable housing.

To be competitive, cities need to convince investors and residents that they provide a safe environment in which people live and investors want to invest their money. Urbanization will be a transformative but disparate process that requires differentiated responses. Cities create wealth, promote development, fulfill desires, harness human progress, and increasingly use new technologies to address multiple challenges.

Urbanization in the 21st century is and remains not a singular path, but encompasses different growth paths and many possible future scenarios. Despite the variety of possibilities, it is important to identify desirable outcomes that make cities more equitable, inclusive, productive, greener, compact, pedestrian-friendly and healthier. Future urban populations will live with the infrastructure and planning decisions we make today.

Ambitious action is needed to unleash the power of cities for sustainable economic development. At its core, it depends on a compact, networked and coordinated use of urban areas. Promoting density is crucial to prevent excessive, inefficient and climate-sensitive growth developments. The quality of the density is crucial. “Good or smart density” means functionally and socially mixed neighbourhoods with access to green spaces, adequate, affordable and climate-friendly housing for all and high-quality public transport networks. Cities must therefore become smart.

What is a smart city? There is currently no universally valid definition. The term smart city emerged at the end of the 1990s. At that time, it was shaped by the development strategies of cities in the Asia-Pacific region, which were determined by the increased use of information and communication technologies (ICT). This first appearance of the term “smart city” is associated with a technological smart city approach that can still be observed today, according to which urban processes and services can be designed more efficiently and effectively in a networked city. However, as more and more smart city projects have been launched in recent decades, the challenges, needs and conflicts of interest of cities and citizens that arise from a purely technology-focused implementation are becoming increasingly apparent. This has led to a holistic approach to the smart city concept, balancing social, economic, environmental, human, cultural and technological aspects. The idea of the smart city is therefore now closely linked to a networked, efficient and innovative “green city” in which citizens are at the centre.

If we look at smart cities from this holistic perspective, it becomes clear that the development of smart cities is a necessity to address urban challenges and not an end in itself. To be “smart”, cities must therefore respond to the concerns and concerns of their residents.

The idea of the smart city goes hand in hand with the use of digital technologies. At the same time, it is a response to the economic, social and political challenges facing post-industrial societies. It is often said that smart cities will change our lives in the urban future. They are cities that use data from sensors and video cameras, and where everything from trash cans to streetlights is connected. However, the holistic approach outlined goes beyond this: Smart cities are driven by a development approach that is derived from the expectations and wishes of governments as well as those of companies and residents.

It’s about linking the digital and analogue worlds. Digitization must be seen as an instrument, not as a goal. This instrument enables municipalities to improve the living conditions of their citizens. In order for cities and municipalities to get their smart future, politics and administration must be able to take local people with them – and also involve less digitally savvy groups. Analogue and digital services must be offered and available jointly to all interest groups, civil society and regional companies.

To make the transition to a smart city, many cities will have to rely on the private sector to finance the necessary measures. Institutional investors looking for long-term predictable returns have long been considered ideal sources of financing for such projects. However, to understand the complexity of a single project, a one-dimensional approach from a real estate or infrastructure perspective is no longer enough. We need to connect the knowledge pools in the real estate and infrastructure sectors and bring them together in a combined approach in order to be able to understand, analyse and evaluate every project or investment in a city in the future. Regardless of whether it is real estate or infrastructure.

Technology and data are the lifeblood of smart city solutions, but we must remember that a city is not a computer.

Dr. Marcus Cieleback
Chief Urban Economist, PATRIZIA SE

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