RealEstateNews 10.21.24

Weekly News Roundup

• Rise of Smart Cities
• Hurricanes Whip Up Insurance Costs
• Quantum Real Estate

Rise of Smart Cities

As smart cities evolve from concept to reality, they are redefining how we think about urban development, particularly within the real estate and construction sectors. These urban areas envision a future where emerging technologies such as the Internet of Things (IoT), artificial intelligence (AI), and big data are seamlessly integrated with urban living to improve residents’ quality of life, boost sustainability and connectivity, and drive economic growth. Properties with smart technologies like energy management systems, real-time data, and high-speed connectivity are increasingly in demand. Green buildings with sustainable designs and eco-friendly features not only reduce operational costs but also align with the growing emphasis on environmental responsibility.

Countries like China and Saudi Arabia are emerging as global leaders in smart city development, often outpacing the European Union in several key areas. This dynamic is driven by several factors including governance structures, economic strategies, and technological investment. Major projects such as The Line in Saudi Arabia, Toyota’s Woven City in Japan, and Net City in China, are part of a movement set to redefine how buildings are designed, managed, and valued. The rise of smart cities is also transforming the construction industry, prompting a shift from traditional building methods to more collaborative, data-driven approaches. 

Construction firms are increasingly tasked with integrating technologies like Building Information Modelling (BIM), IoT-enabled devices, and wireless infrastructure such as 5G and Wi-Fi 6 to support the interconnected nature of smart cities. Developers are now expected to think beyond physical structures, incorporating technologies that enhance residents’ quality of life. The Build-to-Rent (BTR) market is particularly well-positioned to benefit, with asset owners seeking smart solutions that address societal changes like hybrid working and electric vehicle adoption. For real estate, this evolution presents a prime opportunity to create urban spaces that prioritize sustainability and modern lifestyle needs. Source: Forbes

Hurricanes Whip Up Insurance Costs

The insurance brokerage Marsh McLennan estimated that premiums on commercial properties rose an average of 11 percent across the country last year but as much as 50 percent in storm-vulnerable places like the Gulf Coast and California. This year, premiums may have doubled in some of those places, the brokerage said. For apartment buildings, insurance costs now account for 8 percent of operating expenses, twice what they did about five years ago, said Paul Fiorilla, the director of research at Yardi Matrix, a data provider. 

Compared with expenses like taxes and maintenance, insurance is still a small sliver of the pie, Mr. Fiorilla said, but it is adding to the strain caused by stagnating rents and higher borrowing costs. Landlords’ operating expenses grew faster last year than their income, he said. The rate increases have been fastest in coastal cities and towns vulnerable to damage from big storms or coastal floods, but insurers and banks are coming to terms with the notion that no area is truly safe from increasingly extreme and unpredictable weather events.

“This current interest-rate environment has exposed the people that know what they’re doing and those that don’t,” said Mario Kilifarski, the head of asset management at Fundamental Advisors, a New York-based investor with $3.5 billion in assets. Analysts say the insurance problem is more of a headache than a potential catastrophe, and data on loan delinquencies shows stress but no cause for major alarm. By being extremely cautious about their lending and shedding as many older commercial real estate loans from their books as they can, banks may have staved off a crisis. Source: New York Times

Quantum Real Estate

Across the country, parcels of underused real estate are setting the stage for a new wave of development sprouting up on the heels of artificial intelligence. The projects are taking root in the service of quantum computing, a field using subatomic particles existing in more than one state to calculate at speeds far faster than traditional technology — and with a lower margin for error. Quantum processing is expected to lead to breakthroughs in how major tech firms from Google to IBM use artificial intelligence, as well as in such fields as cryptography, drug development and climate science.

Quantum computing has drawn the attention of economic development professionals as cities across the United States move to get ahead of what consulting firm McKinsey & Co. estimates could become a $2 trillion industry, and create hubs for research into the technology.  Quantum computing has “off-the-charts potential” to create demand for labs and support facilities around key technology hubs, said Rob Kolar, president of JLL Technologies, the Chicago-based global brokerage’s division that plans and manages facilities for some of the world’s largest tech giants.

PsiQuantum, a Silicon Valley company, recently chose the Chicago site to open a facility at an about 420-acre campus funded by Illinois and the U.S. Department of Defense. In Colorado, a state that beat out Illinois and others to land $40.5 million in federal funding from the almost $53 billion CHIPS and Science Act, a consortium called Elevate Colorado broke ground on a quantum computing research facility at an old industrial property in Arvada, northwest of Denver. Other regions such as Boston, New York, Maryland and the Washington, D.C., area are also vying with Seattle and the San Francisco Bay Area to become Silicon Valley-style clusters to develop quantum computers. Source: CoStar