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A Lever to Move the World

On-demand services can become real estate's superpower for sustainability

With heatwaves, fires, and storms threatening much of the world, climate change and sustainability have come to the forefront of almost every industry. This is especially true for built world professions of real estate, design, and city planning. Unfortunately, too many people and organizations are missing the background of the last few decades of evolution in understanding what is actually environmentally sustainable. The most evident error is focussing on surface solutions that are green, while ignoring solutions that are maybe less interesting, less evident, and more complex.

Examples are everywhere. Installing solar electricity solutions for the roof of a building is an obvious way to generate sustainable energy but a cheaper solution would be to insulate the building better, find a sustainable energy supplier, and manage energy flows better. 

There’s no magic bullet that will instantly move the built sector towards sustainability and climate protection. Sustainability solutions historically, even those pursued and promoted by governments and experts, attempt to drive change by increasing quantities of effort, resources and attention—by sheer force. A better tactic is to focus on the principle driving the biggest change, at a time when decades have been lost through mistaken priorities and lack of information: leverage.

Give me a lever long enough and a fulcrum on which to place it, and I shall move the world.

Archimedes 287-212 BCE

The Big Lever: Cities and Buildings

Cities, buildings, urban infrastructure, are the most intensive consumers of resources in history. As such they are also the most powerful ways to change consumption and climate impact patterns at scale, at speed. It isn’t just that our built world represents such a large part of our consumption and waste, they can contribute to so much positive change because they operate as systems. Change a system and you change everything.

To reveal this system-level power of the built environment, let’s consider energy. Imagine we are seeking to supply green energy to some new buildings. What do we do? A reflex approach is to seek green certifications for the buildings, which may lead to onsite energy production. This seems excellent—and it is. But the systemic perspective opens new opportunities. Standalone energy production for individual buildings turns out to be inefficient and slow to install, when we compare the sum of these separate efforts with, for example, upgrading the energy system for a whole city all at once.

Another approach to green energy, a great example of a system approach to sustainability, is district heating. With district heating, water is used to drive steam turbines in power plants, after which is piped around the city as hot water, for no additional energy cost. This is cheaper, easier, faster and more effective as a solution at the building level, and more efficient as a total energy solution. The essential insight is: district heating is only possible by using the built environment as a system-level lever. 

This demonstrates what should be a priority for cities and real estate actors when it comes to innovation and sustainability, the best way to change the built environment is with a systemic lever. 

Leveraging Change in Production and Consumption

Spatial optimization via micro-fulfillment, reloading and returns will increase sustainability of logistics greatly.

While half the physical impact of cities comes from the city infrastructure itself, the other half comes from the material choices of consumers, so let’s focus on the capacity of the city to influence production and consumption patterns.

What is the relationship between these and the city, and how can the city act as a sustainability lever here? Production and consumption have an intimate, historical relationship with buildings and cities. “Main Street” (or as we call it in the UK, High Street) formed, historically, not because retailers of goods particularly wanted to cluster together, but rather because the dynamics of space make it easier for consumption. Buyers like options and convenience so they go to places where there are lots of shops—to compare prices, buy multiple goods at once and maybe even make a day of it. Main Street is born!

The way commerce has arranged itself is a reminder of the leverage power of the built environment. Real estate folks have always known intuitively the Main Street is, or was, a super-lever on consumption behaviors, where new trends and counter-trends are born, where brands establish identity and value, and where shopping and more is done.

But in the digital age, consumers don’t need Main Street. They can discover, compare, choose online and have goods delivered right to their house. This reorientation of the spatial dynamics of consumption, let’s call it respatialization, is far more profound than just removing consumers from individual stores. The spatial and commercial power of the High Street ends up somewhere else. Where? In dense multi-user residential and commercial buildings.

The seeds of the spatial and systemic value are all there. It’s where the consumers are, it’s where purchases are made, it’s where the goods are handed over. And so, there’s huge, new opportunities to structure and optimize consumption in the long term.

The Last Meter: A Huge Sustainability Opportunity

The last meter crunch is about the lack of coordination – in data, spatial, value, and trust terms – between the flow of user services and the buildings and urban environments that receive them. People and stuff have to go somewhere: this can be a liability or a huge lever for sustainability.

The growth of e-commerce and the logistics evolution that has facilitated it is often talked about. What is less talked about is the impact of the last meter of delivery and how it can create quite a bit of a bottleneck. The goods we order come to us in to our houses in large delivery vehicles, a method that has a number of drawbacks. It creates congestion in our streets and pollution in our air. It also is not capable of supporting the level of product returns that is becoming a huge part of the modern retail system. 

Our buildings are also not able to handle this change. Allocation of space in buildings for deliveries is usually informal and inefficient causing theft and waste and frustration. Even buildings with package lockers struggle under the sheer number of packages that the modern tenants needs to have delivered. This is worrying but what is more worrying is this: we are already experiencing a last meter crunch when the volume of user service-enabled retail is only at 6% of total purchasing. What will happen when it reaches 30% or more as is predicted?

So it’s time to act now. And how? The respatialization of consumption opens up leverage points for our real estate. Building owners and managers can support night-time and staggered deliveries, bulk and shared deliveries, routing optimization (eg one-way access), and more to facilitate huge efficiencies in logistics dispatch. Urban planners and land-owners can work with logistics firms to enable reloading centres and micro-fulfilment which supports supply chain management, routing and loading optimization are a larger resolution.

The real estate industry can optimize parking for low-impact, green, and safer logistics. This means for example, creating parking opportunities for cycle, e-bike, and EV delivery, by allocation of prime space and priority access, and supplying vehicle charging opportunities. And by contrast, gas vehicles, and trucks, will be deprioritized, supporting both sustainability shifts and greater on-street safety and health.

The inside of buildings can be oriented to services that supply the most value to users, not just require the most volume. Buildings are not, after all, logistics hubs. If low-value deliveries require more space, let the retailers work out how to solve that (likely by renting spaces in the neighborhood). And, by aggregating buildings and acting together, buildings can create better logistical flows. For example, site package handling locations can happen at shared locations like courtyard rather than edge locations, such as doors. Buildings can also create space for packaging waste removal and recycling. 

Ultimately, real estate owners and managers can include services as part of the property’s amenity offering. This is a balance between selecting service partners, and optimizing the building’s design around the service requirements for maximum efficiency and best experience. The opportunity is highest in new build development. For example: properties are evolving that have limited parking but an integrated relationship with car-share and rideshare; and as for deliveries, rather than mixing resident entry with packages, dedicated service areas and logistics loading bays are coming to residential formats. The value result is increased property value, reduced insurance cost, higher levels of user trust and brand identity.

We know sustainability is hard to do. City and real estate professionals are late to the party and struggling to catch up. Resources and time are limited. If we apply a leveraged approach not just to utility systems, but to the emerging patterns of consumption, we will be contributing something massively more impactful and viable in sustainability and climate terms, than, say, asking consumers to recycle more, or shifting to carbon-neutral vehicles, or even using large data sets to route individual deliveries better. Doing this will drastically improve the service revolution, where production and consumption is re-spatializing from Main Street to residences.

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