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How will Cities of the Future be Impacted by the Field of Real Estate?

Shenzhen, a city in southeastern China, is emblematic of the rapidly changing urban fabric of many cities in Asia. Only officially becoming a city in 1979, Shenzhen is now one of the fastest growing cities in the world, experiencing this growth while simultaneously transforming its industrial manufacturing roots into an innovation economy. The pace and scale of transformation occurring in Shenzhen and many cities throughout the world is likely to increase, begging the question: how do academics, practitioners, and policymakers from the field of real estate interact with these swiftly changing urban economies and environments? The 24th Asian Real Estate Society International Conference, held in Shenzhen from July 7th to July 10th 2019, examined this question as well as the evolving roles and responsibilities of the field of real estate in cities of the future.

This Asian Real Estate Society (AsRES) Annual Conference was co-organized by the Asian Real Estate Society, MIT’s China Future City Lab, MIT’s Center for Real Estate, and the Hang Lung Center for Real Estate at Tsinghua University under the leadership of Siqi Zheng, DUSP’s Samuel Tak Lee Associate Professor of Real Estate Development and Entrepreneurship and the 2019 President of the Asian Real Estate Society. Over 280 participants from around the globe attended. We were recently able to sit down with Zheng to learn more about the conference.

Q1: What is the relationship between the cities of the future and the future of the field of real estate?

Zheng: It is hard not talking about cities as a whole when discussing the future of real estate, because the fundamental role of real estate is to provide a variety of spaces for the economic activities in cities. The world, especially in Asia, is becoming increasingly urbanized and most economic growth is taking place within cities. Digital and transportation technologies are fueling radical transformations in our economy and society – namely, our relationship and the nature of living, working, and playing. We are also witnessing dynamic disruptions in traditional real estate products and markets: co-working in the office market; digital retail, such as Alibaba and Amazon, impacting the retail space market; high-speed rail enabling secondary cities become the suburb of mega cities - integrating the originally-separated real estate markets; and others. To forecast and be better prepared for the future trends in the real estate field, we need to first understand the future of cities, and how such new trends will influence firms’ and households’ demand for real estate spaces in the long-run. Such an intrinsic linkage between cities and real estate is the base of real estate asset value. That is why I set the theme of this 2019 AsRES conference to be “the future of cities, the future of real estate.” Together with Jing Wu, a professor from Tsinghua University and the program committee chair of this conference, we aimed to gather researchers and practitioners in both urban and real estate fields at this year’s AsRES to not only discuss internal mechanism within one industry, but also generate new insights for future collaborative efforts.

Q2: For those who were unable to attend, what were some of the key takeaways from the discussions at the conference?

Zheng: I would like to highlight three take-away messages from the conference. The first is “AI for social good”. The two keynote speakers on the first day of our conference, Sandy Pentland, a professor from MIT’s Media Lab, and Xiao’ou Tang, a professor from Chinese University of Hong and the founder of SenseTime, both explored how AI and data could be leveraged for social good. In a speech titled in ‘The Social Physics of Cities’, Pentland addressed the use of statistics to understand cultures in a city and how, using data, cities could better support those cultures. Tang, who believes strongly that artificial intelligence can help to improve the quality of life for citizens of a city by leveraging data to facilitate social activity and to enhance our access to services and entertainment, discussed how commercialized AI products – such as facial recognition, smart technologies, and augmented reality – could serve to improve people’s experiences in the city. Both of these examples highlight how urban researchers and practitioners have an opportunity to collaborate across disciplines not traditionally associated with planning and design to ensure citizen are able to live a pleasant and comfortable life in the cities of the future.

Another key take away from the conference was how the increasing connectivity between cities will change economic geography, urban vibrancy dynamics, and real estate values. Many cities are linked by a considerable diversity of networks: subway lines, expressway, high-speed railway (HSR) and airline networks, mobile communication and social networks. The diversity of such networks creates interdependencies between urban spaces, enhances global and regional integration, and promotes urban vibrancy in both production and consumption aspects. Collaborating with the Journal of Habitat International, we organized two special paper sessions to discuss this new trend and its implication for real estate value dynamics. The papers presented in the two sessions all show that physical and virtual networks connecting dense urban areas greatly facilitate the speeds of travel and information transmission. In this sense, the boundaries of agglomeration economies in consumption and production, and the resulted urban vibrancy and real estate value enhancement effects, are endogenous and hinge on the configuration of these networks. I am now guest-editing a special issue of Habitat International, and selected papers in these sessions will be published in it later this year.

Over the past few decades, Asia has experienced some of the fastest urbanization processes in the world. One significant phenomenon across Asian countries is the emergence of “new planned cities”, such as industrial parks, high tech zones, and new smart cities. National and city leaders explicitly conceptualize these new cities as a key engine for local economic growth and urban vibrancy. MIT’s China Future City Lab and Fudan University’s Shanghai-Hongkong Development Institute hosted a panel to discuss the patterns and practices of these new, planned cities in Asia. Panelists from a wide range of countries emphasized that benefits of new planned cities – such as “leaping” into higher-skill sectors, diversifying the existing economy, triggering creative clusters and innovation hubs – depends on central planners’ ability to effectively achieve a good synergy between place-based investment and the fundamental realities of a specific geographic location. Bad synergy might lead to “ghost towns” and the oversupply of real estate. MIT China Future City Lab will continue to research this balance of synergy with plans to publish their findings in a book in 2020.

Q3: How do you envision the next generation of real-estate academics and practitioners engaging with intensifying global urbanization?

Zheng: The Plenary panel of 10 real estate program leaders from universities in Asia and North America discussed the future of real estate education. Topics included: building real estate students’ ability to analyze data for economics and finance to improve real estate decisions; contextualizing curriculums to adapt to the market by collaborating with industry professionals; how to balance the shift from new development to urban renewal and redevelopment; the importance of understanding both the consumption of real estate as well as the production; and, the shifting demographics of real estate stakeholders. Dennis Frenchman, the moderator of this panel, introduced that at MIT, the Center for Real Estate is introducing a new curriculum built on the idea that real estate is less about developing projects, and more about making cities that are livable, affordable, socially responsible, and beneficial to their communities and environments.