The increasingly virtual nature of work, combined with the future of mobility, could reduce the pressure to locate in megacities and give a boost to suburbs and smaller cities.
This could have profound and wide-ranging impacts. Will central business districts decline and what will replace them? How will this affect the arts and cultural amenities that cities typically nurture? Will we see a decline in community cohesion and social capital — with knock-on effects for everything from mental health to employee morale?
Key questions:
- What risks and challenges might a massive move to remote work create for you?
- How should your talent strategy adapt to remote work and the future of mobility?
- Will location still matter in a world of remote work and effortless mobility?
Urbanization will be more balanced
In addition to the changing nature of work and mobility, several other factors point to a more balanced urbanization in which smaller and post-industrial cities flourish relative to the world’s megacities and hotbed regions.
Climate disruptions, resource scarcity, pollution, infrastructure gaps and high costs will increasingly constrain the attractiveness of megacities and hotbeds, and their ability to grow.
At the same time, disruptive forces are enabling new growth in smaller cities:
- Technology: Digital technologies that democratize and decentralize the tools of innovation, collaboration and production — such as additive manufacturing (3D printing), AR/VR, IoT and AI — open new pathways to participating in the global economy from anywhere.
- Globalization: Disruptive innovation can start anywhere and grow with global teams, whether the members of those teams are in established hotbeds or elsewhere. As a result, companies and investors increasingly look outside established hotbeds for new opportunities.
- Demographics: Millennials and the growing cohort of seniors prioritize city livability, affordability and mobility, creating new opportunities for city re-invention.
Post-industrial city assets are becoming newly valued
For post-industrial cities, successful in a previous industrial revolution but since left behind, these changing dynamics are creating new opportunities for revival. Post-industrial cities offer what megacities and hotbeds lack: excess capacity. Their infrastructure was built out to serve larger populations and larger economies. Similarly, cultural, civic, health care and educational institutions frequently outshine what you’d expect in a smaller city.
The urban design, architecture and neighborhoods that seemed outmoded when people fled old city cores for the suburbs have become valued again as preferences shift toward urban living and work.
Second-tier and smaller cities will benefit
Usually anchored by institutions such as universities, hospitals and government, second-tier cities offer some of the dynamism of their larger counterparts at a lower cost. This situation has created an outflow of mainly young people from large metropolitan areas seeking lower barriers to entry, lower costs of living and cheaper access to entrepreneurial resources.
In India, for example, a growing number of start-up entrepreneurs are leaving or avoiding hotbeds, such as Bangalore, in favor of smaller, second-tier cities where resources and talent are more accessible, such as Jaipur, Bhubaneswar, Pune and Ahmedabad.
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2019 Edelman Trust report
63%of Millennials in California are considering leaving due to the high cost of housing in areas such as the San Francisco Bay Area.
To thrive, post-industrial and smaller cities must harness the forces reshaping urbanization by becoming platforms for innovation, not just in technology but also in public space, infrastructure and financing. Emphasizing co-creation and new forms of public-private collaboration, city development becomes less linear and more about enabling constituents to innovate their community.
Espoo, Finland, with a population of 300,000, is one such thriving small city, named the 2018 Intelligent Community of the Year in the world for its sustainability, innovation and human-centered application of technology.
“Espoo engages its university, schools, corporations, startups and residents in open-minded, bottom-up processes that break down the barriers between public and private,” notes Markku Markkula, Chair of the City Board of Espoo, and First Vice-President EU Committee of the Regions. “The goal is a more human city where technology and digitalization are strongly embedded. The outcome has been Espoo as a place-based innovation ecosystem that effectively implements UN SDGs and supports quality of life and well-being.”
Key questions:
- Is the high cost of business in hotbed cities worth it?
- As digital democratizes innovation, in which community should you look for the next great business idea?
- How aligned is your location strategy to the location preferences of your talent?
The goal is a more human city where technology and digitalization are strongly embedded.
Important questions for CEOs and boards:
- How should we incorporate changing city dynamics into our talent, facilities and innovation strategies?
- How will changes to the urban landscape affect cities as markets for our products and services?
- Have we adequately assessed the resilience of the cities in which we have facilities and supply chain partners?
- What are the new financing, revenue and business model opportunities arising from the changing urban landscape?
The “Remapping Urbanization” chapter of What’s after what’s next? The upside of disruption, Megatrends facing 2018 and beyond (pdf) report provides an in-depth exploration of the forces changing the shape of cities. Further insights into the future of post-industrial and small cities can be found in the “Innovating Communities” chapter.
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Summary
Urbanization forecasts often focus on quantity: a future with more cities, more residents and bigger metropolises. But, the trends discussed here emphasize that the future is not a linear extrapolation from the past. The convergence of several forces will fundamentally reshape cities and the global cityscape, with huge implications for corporations, citizens and governments.
