Conference Presentation, Fireside Chat, Panel
Smarter Cities for a Smarter World
Milken InstituteJonathan Woetzel, Hugh Andrew, Nayef Khalid Al Khalifa, Robert Rosenstein, Lauren Sorkin
- Current State and Potential: McKinsey Global Institute (MGI) recently released a report indicating that while smart cities offer tangible benefits—longer life expectancy, reduced water usage, increased safety, and shorter commutes—most cities currently operate at a "7 out of 10" on a maturity scale, leaving significant room for improvement.
- Core Challenge: A primary uncertainty involves whether smart city technologies are making cities smarter for the entire community or merely for a privileged minority; early adoption often highlights deep "have vs. have-not" divides, as seen in San Francisco.
- Investment Perspective (Real Estate): BlackRock views technology not as a direct revenue generator in real estate but as a value creator that allows for higher rental rates or earlier occupancy; for example, using Wi-Fi data to track in-store purchases from online comparisons to calculate fees on a turnover basis.
- Urban Planning and Zoning: Bahrain's Urban Planning and Development Authority is shifting from specific zoning prescriptions (e.g., facade colors) to outcome-based regulation to allow innovation, while redefining zoning to accommodate digital-era needs like storage for e-commerce over traditional retail floorspace.
- Digital Infrastructure as a Utility: In Asia, the physical requirement for technology is simply a "dry, roof-covered space" with adequate connectivity (broadband); developers are bundling these services into rental packages to make properties more competitive.
- Public-Private Partnership Models: Effective smart city execution requires governments to define specific "asks" (outcomes) rather than just handing over licenses, enabling private companies like Grab or Didi to tailor solutions to city-specific challenges like congestion or traffic flow.
- Human Capital as the Battleground: The ability to attract and retain talent is identified as the critical factor for smart city success; cities must improve education, foster family-friendly environments, and address social inclusivity (e.g., LGBTQ+ acceptance) to draw the engineers and professionals needed to process urban data.
- Financial Barriers: Private sector investment in smart infrastructure is often limited by the inability to secure debt financing based solely on "experience-based" business models (e.g., entry fees instead of rent) rather than traditional cash-flow models, requiring a balance between innovation and lender requirements.
- Regulatory Strategy: Regulators are moving toward "outcome-based" rules (e.g., ensuring quality of life and views rather than dictating building heights) to avoid overreach that strains infrastructure capacity, such as electricity or sewer systems, while preparing for future transport modes like autonomous vehicles.
- Equity and Accessibility: There is a concern that private platforms may exclude low-income populations through peak pricing or lack of access; however, mobile technology allows "bottom of the pyramid" users to register grievances and access services, potentially bridging gaps if governments set the right rules.
- Leadership and Governance: Successful smart cities require strong civic leadership to define a 20-30 year vision, as technology cycles are short (a year equals 10 years in relevance) compared to infrastructure planning horizons; examples include Seoul's Mayor Park, who utilizes real-time data and social media for transparency and accountability.
- Cultural Integration: Cities are using digital tools to preserve and promote culture as an economic asset, with tourism apps in places like Malacca and Barcelona helping to manage traffic flows in heritage areas and attract talent who value local culture.
- ROI Measurement: A key forward-looking need is for cities to establish better metrics to measure Return on Investment (ROI); currently, many cities lack the data to determine if they are achieving desired outcomes or if investments are leading in the right direction.
- Case Study - Japan: The city of Toyama demonstrated a successful model for an aging population by creating integrated digital care centers where seniors access GPs remotely, reducing germ exposure and fostering community through "senior iPad" social groups.
- Case Study - Singapore: Singapore's Urban Renewal Authority (URA) incentivized sustainability by allowing a 99-year land lease for a public communal space ("the Cube") for a nominal $1 fee, prioritizing social value over immediate revenue to encourage public amenities.
- Future of Retail: The shift to online shopping is forcing physical retail to convert traditional storefronts into "showrooms" and automated delivery kitchens (dark stores), changing zoning requirements to include more storage and motorbike access rather than parking for cars.
- Scaling Challenges: Smaller cities often lack the financial capacity or expertise to implement smart city strategies independently; a proposed solution is the creation of "smart city franchises" or practitioner networks (as seen with India's $30 billion Smart Cities Mission) to provide just-in-time expertise.
- Market Trends: MGI benchmarking of 50 cities identifies North Asian cities (Shenzhen, Beijing, Shanghai) and Seoul as top performers, with New York, Abu Dhabi, and Dubai also ranking highly, while noting variability in European city performance.