Curbs, clothing and crises

Main Streets Across The World  Of all the asset types, retail is the one that is likely to command the highest unit rent in any given country. Why is this? Retail stretches from high streets, to shopping malls, to retail warehouses and there is a big gulf between best and worst. The best retail typically has scarce characteristics; it is pretty much always on the ground floor and either in the centre of our best cities or in a renowned destination based on a unique or significant agglomeration. These factors create natural monopolies. On the demand side, retail rent is traditionally considered to be an economic residual. That is to say that it is the amount of money left over once the other costs of doing business have been subtracted from the sales of that store. Hence, the operators that can afford to take space on the best high streets are the ones with the highest residual to bid as rent. This last point has become more nuanced, as store sales give way to wider value elements, including brand and the growth in online shopping – the latter making it more difficult to quantify the value of the store. In particular, the best retail locations around the world tend to be home to premium brands that may make a trading loss from the store but take value from the kudos of association with the destination. This in turn can amplify the corresponding rents, which are often seen as a marketing/advertising cost as opposed to a pure property cost. My research colleagues have recently published an analysis of global retail rents and trends which highlights a sharp disparity between the top and bottom at a global, country and city level. Top of the pile is Hong Kong; a wealthy and very densely populated city with tight supply, occupying a unique location and regulatory environment on the edge of mainland China. Dropping down by country to the 10th highest location (Vienna, Austria) requires an 80% reduction in rent. Within the US, there is a 60% drop between Upper 5th Avenue and Rodeo Drive. Meanwhile back in London, the drop between New Bond Street and Lower Clapton Road (…not referenced) is 98%. You can download your copy of the report here.  #highstreet #retail #economics

Digital cities  Sidewalk Labs’ Waterfront Toronto scheme is being held out by many as a blueprint in waiting for the future of smart cities. It has been curious therefore that until now the design statements released by Google’s sibling have focussed on construction materials, affordable housing and flexible space, rather than tech. This is rectified in the form of a Digital Innovation Appendix published this week. An important part of this work is breaking ground around data ownership and governance, in a partnership between the public sector and a BigTech backed business. The approach is one of ‘digital restraint’ including no facial recognition, no sharing of data with other companies, only collecting data to support the project purpose, a patent pledge vesting right in software developers using the infrastructure and a profit share where the public partner will receive ‘a share of Sidewalk Labs’ global profits on ‘Testbed Enabled Technologies’ for a period of 10 years’. The cool stuff comes in the form of 18 core systems and 52 subsystems, including: (1) adaptive traffic lights (improving traffic flow), (2) heated pavements (safer for cyclists), (3) dynamic curbs (that measure parked cars and collect payments), (4) a mobility as a service system (aimed at reducing car ownership, by providing multi-modal link ups), (5) a real time public realm system (inc horticultural maintenance, environmental metrics and space booking features), (6) adaptive weather mitigation (providing shade and cooling when needed), (7) self-driving trash bins (return to the depot on an evening), (8) a flexible retail platform (footfall tracking, and co-location opportunity identification), (9) building monitoring (inc air quality, vibration, load and noise measurement), (10) building operations management (running the core building operations and maintenance), (11) energy monitoring (helping to reduce aggregate energy costs), (12) urban consolidation centres and robotic delivery (minimising vehicle movements), and (13) a central storage solution (decreasing the need for storage space in housing). If you can stomach the 483 pages, it’s worth a read (link provided on our website).  #sidewalklabs #toronto #smartcity


New Urban Crisis  That fact that Millennials, creatives and tech talent want to live in major urbans centres has become almost an unchallengeable axiom of modern urban thinking. Much of this thinking was captured in the early work of Richard Florida, where he set out a vision for the rise of the creative class and posited that an area’s regeneration had a high dependency on such people, judged against measures such as the ‘Bohemian Index’. There remains little doubt that creatives and innovators can catalyse urban change (both good and bad). However, are cracks starting to appear in the assumption that this should be in our major urban centres? Writing in Citylab this week, Florida points to new evidence which supports his more recent theory of a New Urban Crisis, and a reversal of the urban revival. Emsi’s Talent Attraction Scorecard for 2019 points to a shift in those areas best placed to attract talent in the US. The winners are not the usual suspects, but rather the locations where housing affordability is good and where there are strong environmental factors such as areas of natural beauty. Whereas the talent pool remains deepest in the superstar cities, the delta is away from them, as the sheen starts to come off the tech hubs. In Florida’s words, ‘the amenity gap between superstar cities and other places has closed, while the housing-price gap has widened’. This is not just an American issue; the seemingly insatiable appeal of London’s tech ecosystem will start to dampen if it cannot find resolutions for what are huge and persistent challenges around affordability and quality of life. Competing centres, both in the UK and abroad, will be watching closely and hoping to capitalise.  #cities #urbanism #talent


HOT:SECOND  The story of e-commerce supplanting shops by selling physical products online is not a new one. However, how about the physical world displacing the virtual one by selling virtual products in physical stores? That is exactly the premise behind recently launched London pop-up ‘HOT:SECOND’, where one can purchase digital garments in exchange for unloved clothes. Described as ‘the world’s first circular economy concept store, trading physical products for digital experiences’, the pop-up in a non-commercialised concept, designed to explore customer demand for digital garments. If you’re not familiar with digital fashion (38% of respondents weren’t), it is virtual clothing that you can superimpose either on static images (for sharing on social media), or dynamic ones that can be ‘worn’ in virtual worlds such as multi-player online video games. 27% of those surveyed also believed that this could be a way to trial purchases before buying the physical version. The analysis shows that consumers still believe this to be a novelty purchase; however, those in their teens were more willing to consider digital clothing seriously, responding to heightened engagement among this group around both the virtual world and sustainable fashion. The promotor of the project cites a lack of cross-platform standards as a barrier to adoption. However, it feels eminently feasible that as virtual and particularly augmented, reality takes off, the layers through which we view the real world will be where the value is, and clothes that we actually wear will become less important. One commentator described digital clothes as the new lipstick. Pucker up!  #fashion #retail #shopping