Can big data really help build better cities?
Why making sense of the data deluge is key for cities and commercial real estate
Real-time data on everything from energy costs to happiness have become widely available. For investors looking to put their money to work, and companies hunting for space, this can be a double-edged sword.
On one hand, it’s easier to dive deep into what makes a city tick. But on the other, the wealth of data can often conjure more questions than answers, according to Jeremy Kelly, global research director at JLL.
We sat down with Jeremy to hear about how investors and occupiers are making sense of the data deluge and using it to their advantage.
Jeremy, we’re living in an age of information. How has this broadly changed the way decisions are made around commercial real estate?
A few years ago when investors wanted to compare cities and their potential, they’d look at a few key metrics including GDP growth, demographic measures and employment figures. But there is now recognition, among institutional investors especially, that cities need to offer long-term value and that the standard economic forecasts don’t provide sufficient insight.
For example, they don’t show whether Austin, Texas, Santiago in Chile, or Lyon in France have all the necessary ingredients to sustain positive momentum and succeed over the long term. That’s why you’re seeing investors and occupiers delving into other metrics.
What kind of metrics?
Researchers looking into cities are measuring things that are more difficult to quantify. Indices that measure competitiveness, or cities that are best at attracting and retaining talent, innovation, quality of life, and good governance, are becoming more prevalent. Real-time data and crowd-sourced data have biases, but they have also become more important.
In addition, measures that track and support sustainability or ethics are appealing to investors and occupiers who are changing their relationship with the cities they occupy. They want to make a difference and contribute to these cities. Therefore sustainability metrics are becoming increasingly more important.
You said that ever-growing mountains of data can be a source of confusion. Presumably cities face challenges here?
Cities are struggling with large amounts of data as much as companies are. We’re at an early stage of developing ways to use big data more effectively. A lot of cities are creating initiatives to monitor and track data without really having appropriate infrastructure or talent to utilize it to effectively improve quality of life or ease of doing business. The lack of data analytics talent, in particular, is a big hindrance for city governments. Those skills tend to go into private sector.
Then there’s the issue of transparency. There’s an expectation that more data improves transparency – especially in emerging markets – but there are signs that masses of data are creating more confusion and opacity. That’s something we’re looking at with our bi-annual global transparency index coming out later this year. There’s also a big question mark over data quality, especially when it comes to crowd-sourced data.
Lastly, I’d say that the best analyses typically offer objective views on things like public transport efficiency or cleanliness. But they can be clinical. They don’t capture the edginess of New York or the vibrancy of Shanghai, for example. This is a big gap in assessing cities. We need to measure the energy, the buzz of a city in a way that isn’t too sanitized.
Which cities are putting data to good use?
It’s hard to pick. I would say Barcelona, with an entrepreneurial attitude and a focus on improving quality of life, is ahead of the curve.
Another is Helsinki, which is quite adept at using the private sector to maximize its use of data. Its Digital Twin program enables the city to predict and manage problems such as congestion.
Healthy buildings and workplaces that improve productivity, attract talent and create happy workers are big at the moment. But can you really track happiness?
I’m part of WEF Future Cities Council. There was discussion recently where two people were at opposite ends of the spectrum on this. One was extraordinarily cynical about measuring happiness. The other, who leads a smart city initiative, strongly believed it was possible. But this is something that city leaders are definitely taking seriously now. Happiness is on the agenda.
I’d also say that the quality of light and air – which we know contribute to happier, healthier workplaces – are things you can track. So you can now get indices that work pretty well.
It’s fun to think about, but how is it going to be put to work in real estate?
Ultimately, investors and occupiers want to know that talent in their chosen city is healthy and happy because it offers good long-term prospects. Being able to accurately measure that is the Holy Grail. Done right, it can change the way our industry sees markets, leading hopefully to better decisions.
Thanks for the time, Jeremy!