0

Future citiesBY GREG MCKENNA

1

July 19

As technology advances and populations boom, global cities grow and change – here’s what the future holds

Source: GettyImages

Over thousands of years, cities have been the central point of interaction for commerce, science, art and

culture – and finding a way to sustain our cities in the coming decades is integral to the success of our

future.

The global population is urbanising, the number of megacities is growing, and in Australia our cities are

going to get bigger still as more people try to crowd into an already limited space. So, as technology

advances and the population booms, there is a desperate need to ensure our cities are set up to support

rapid growth and a realisation that our governments and industries need to keep up with the pace.

The future of our cities – and how they will handle the challenges that are on the horizon – was the topic

of discussion with leaders across industry at a recent roundtable hosted by Commonwealth Bank of

Australia.

2

July 19

Recognising the increased collaboration across industries and the blurring of lines between different

sectors of the economy, the Commonwealth Bank recently realigned its Institutional Banking and Markets

division into ecosystems. This ecosystem model has allowed the Bank to look at the interdependencies

between different corporations and industries and provide a more holistic service offering.

This is particularly important for Commonwealth Bank’s future cities ecosystem where the

interdependencies between corporations and the surrounding corporations are so critical to the operating

efficiency, liveability, and amenity of our growing metropolises. By bringing together industries such as

real estate, social and economic infrastructure along with sustainable finance, Commonwealth Bank seeks

to provide a proactive platform for cooperation and collaboration for the major players and

interconnected corporations, which are critical to the development of our cities.

Michael Thorpe, Commonwealth Bank’s managing director, future cities ecosystem said, “As a society we

are thinking more carefully about city design and how we live, work and access amenity. The ecosystem

approach means the Bank can better support co-dependent industries across property, infrastructure and

technology. We think the combination of these industries is really powerful and brings together a wide

range of capabilities and allows us to take advantage of those interdependencies for our clients.”

Thorpe said one of the Bank’s main purposes, which is realised through its future cities ecosystem, is to

support the liveability, equality and amenity of Australian cities.

“We're very keen to be associated with financing the development of commercial real estate, residential

real estate, economic infrastructure, and social infrastructure, but also looking at projects through the

lens of social and affordable housing and other elements that bring the whole of city life together,” Thorpe

said.

It is against this backdrop, the industry leaders joined the Commonwealth Bank roundtable to discuss

what the city of the future might look like, what it might try to avoid, and in particular how the four major

cities of Australia – Brisbane, Melbourne, Perth, and Sydney – will accommodate 75% of the extra 11.8

million people who are going to crowd into our nation by 2046, according to Infrastructure Australia’s1

Future Cities report.

“By 2033, our population will have grown by 6 million,” Michael Hanna, head of infrastructure for

Australia at IFM Investors, told the roundtable. “How can we accommodate that? The challenge is huge.

We're playing catch up with infrastructure.”

Not only is the population growth substantial, a huge amount of this population will reside in our cities.

And by all accounts, we are currently not prepared for the pressure this will add to the existing

infrastructure, environment and people’s lives.

1 SUMMARY REPORT REFORM SERIES Future Cities Planning for our growing population February 2018. https://www.infrastructureaustralia.gov.au/policy-publications/publications/files/future-cities/Future-Cities-Summary-Report-2018.pdf

July 19

3

On a global scale, nearly 70% of us will be living in cities by 2050, according to a 2018 UN economic

report. At the moment, there are 31 mega-cities in the world and by 2050, there are going to be 41 cities in

the world with a population of 10 million or more. At least 90% of this growth will be seen in Asia and

Africa, according to the report.

But don’t think Australia will be spared – it is one of the most urbanised nations in the world and we need

to act now.

McKinsey and Company’s2 report, “Thriving amid turbulence: Imagining the cities of the future”,

highlighted Melbourne and Sydney are among the dozen cities globally where more than a quarter of

residents are currently foreign born. As these two cities continue to expand, there is a need for systems

and developments that can support the growth of the population into the future.

Source: McKinsey & Company

This new population brings an added vibrancy and diversity across the cities and to Australia. But as the

population grows and people move from other cities and countries it is essential to create cities that can

support Australia’s growth.

2 Thriving amid turbulence: Imagining the cities of the future, October 2018. https://www.mckinsey.com/industries/public-sector/our-insights/thriving-amid-turbulence-imagining-the-cities-of-the-future

July 19

4

With this in mind, the panel discussed the need for cities to be based on hubs and nodes, that can only be

efficient by providing employment, living spaces and a 24-hour city – not just for affluent, educated and

connected citizens but for everyone.

Future cities in Australia One of the main questions for Australia, and Australians, is whether the development of our cities should

go out or up: the sparser, low density model with which Sydney, Melbourne and the other capitals have

developed compared to a denser model, which is more European, Japanese or Manhattanian in nature.

As it stands, Australia’s big cities – especially Melbourne – are often among the list of the best cities in the

world,3 so this means Australia is doing something right.

That said, with the surge in population growth over the next 25 years or so Infrastructure Australia is

actively thinking about the issues facing our urban metropoles and has canvassed various models for the

growth of our cities.

In particular, it has looked at the impacts of three main scenarios: centralised high-density growth,

rebalanced medium-density growth, and expanded low-density growth for Melbourne and Sydney.

They have researched this with three questions in mind:

• Should our cities expand outwards, at a low density, or consolidate inwards at a higher density?

• Should we seek to locate jobs in a small number of large centres or distribute them more evenly

across the metropolitan area?

• What mix of modes and network structure is best suited to meet the needs of a larger city?

“The scenario analysis shows that well-planned cities, where the location of jobs, homes and their

supporting infrastructure networks are coordinated to maximise accessibility and liveability, will deliver

the best outcomes for Australian communities,” Infrastructure Australia said.

That was precisely the focus of the discussion between participants at the roundtable.

3 RANKED: The 19 best cities in the world in 2019, Business Insider march 13 2019. https://www.businessinsider.com.au/best-cities-in-the-world-ranked-time-out-index-2019-3?r=US&IR=T

5

July 19

Hubs, nodes and transport – how the cities of the future need to develop An important part of transformation of Australia’s cities is the development of different nodes throughout

the cities, where people can work and live. In its National Outlook 2019, the CSIRO highlighted that the

future of our cities will rely on hubs and nodes.

In other words, its vision of the future included an Australia which has “well-connected, affordable capital

and satellite cities that offer equal access to quality jobs, lifestyle amenities, education and health

services”.

The panel discussed the recent development of Parramatta in Sydney, which has a new stadium right next

to the CBD, rail to get people to and from work, and the state government committing to large residential

and commercial buildings.

Canberra Airport’s managing director Stephen Byron told the panel the critical mass of people living,

working and visiting places like Parramatta, or other nodes attached to our big cities, mean they

eventually become self-sustaining.

“Once you get to a certain point of growth and reach critical mass, that node becomes an attractive place

to live and work and there are good jobs there, that then gets self-sustaining and continues to grow,” he

said.

Byron said there needs to be serious consideration taken in regard to where jobs are placed. “Do all the

jobs need to be in the one spot in the middle of the city or do 90% of them need to be? What are the

opportunities to build other hubs in the cities?” he asked.

“There are different places where you can build job hubs, such as regional cities,” Byron said. “Whether

it's Canberra or smaller cities, they can also be job hubs. I think that allows us to think about where

people live and get that proximity and liveability.”

IFM’s Hanna agreed, pointing out there was a need for development in the regional centres such as

Bendigo, Ballarat and Wollongong. But to develop these areas, there is a crucial component needed:

efficient transport.

“Crucial to the decision to support it is the infrastructure, and rail is central to that decision,” Hanna said.

“You've seen a proliferation of announcements by both the federal government and state government in

Melbourne and Sydney around metro-heavy rail and regional rail investment, which is absolutely

essential to convince people that they're not losing a lifestyle by moving out to a regional centre.”

CEO of Mission Australia James Toomey said commute times need to be factored into the development of

cities. “Is it reasonable for anybody to have to travel more than an hour to get to work?” he asked.

If people can easily commute on rail to a hub in 30-40 minutes instead of an hour and a half, it is a much

more enticing factor for people to travel to work and be an active part of the new city.

July 19

6

“You need to think about where people could live in relation to jobs,” Toomey said. “There are two ways of

resolving that, you can either improve transport networks and make them much quicker, so people can

travel much greater distances in [a shorter] period of time, or you can build higher and get them closer to

work from that point of view, but you have to ensure there is a mixed economy in the city.”

We need to ask: who are the cities for?

Source: GettyImages

Cities are for the people Large employers can play a crucial role by building community-centred developments rather than

constructing a standard office building. Canberra Airport’s Byron said there is an opportunity for large

companies and developers to think about enhancing the amenity of buildings and working environments.

“It's the investment in the quality and the character of the infrastructure that ties individual buildings

together. I think that's just so critical in the development of all of our cities,” Byron said.

“Big employers can drive major developments that are beyond just an office building that has floors and

air conditioning, it’s about moving beyond the actual building to thinking about what you want to create

there.”

“You can create something that is tremendous for the community, the local community, and for visitors

and tourists and other functions and it's quite an interesting opportunity – potentially responsibility – for

a large employer's to think about.”

July 19

7

Sophie Fallman, managing partner of real estate at Brookfield Asset Management, said in Perth, Calgary

and New York, Brookfield is seeing an increased number of developments where a couple of buildings

occupy an entire precinct, which are blocks that can have retail, commercial and residential spaces.

“This enables as close to 24/7 as the location allows, not just for the people who actually occupy the

building to use, but also the broader community,” she said.

Byron said the precinct approach is important because it “creates a place where people can come and

spend time” and then use associated infrastructure in the area in and around the precinct. That, he said,

“provides amenity over and above just a single office tower on a single block of CBD, it's reliant on

everything it's creating in the community”.

Precincts can also take on a campus style approach, Byron said, noting campuses can be a place where a

number of different, but related, companies could come together to form an ecosystem at a certain locale.

Arguably, Newcastle in New South Wales is a good example of all these points in action. One of the things

driving the renewal of Newcastle is the development of precincts.

Over the past decade, the heavy rail corridor that used to run through the edge of the city to the end of the

CBD has been pulled up, opening up the connection between the city and the shoreline of Newcastle

harbour.

This enabled a revitalisation of the city as the connection was re-established, which brought developers

and residents into the CBD. After the trams replacing the heavy rail, a renewed legal district sprung up

along Hunter Street, the University of Newcastle upsized its city campus and the city centre was renewed.

But it hasn’t stopped there, Newcastle4 has just won its second smart city award, which Lord Mayor

Nuatali Nelmes said recognised “our commitment to planning for the future and engaging widely with the

Hunter’s tech minds”.

Nelmes highlighted some of the initiatives Newcastle has undertaken recently including investing in

energy-efficient solar projects, rolling out electric vehicle charging stations, bike sharing initiatives, as

well as the roll out of free WiFi. All these initiatives seek “to improve ease of access, efficiency and

liveability for residents, corporations and tourists”.

But Nelmes said it’s more than just the tech. The city, she said, made a point to engage the community in

the planning of the future city.

4 Greg McKenna is an external member of the City of Newcastle Audit and Risk Committee.

8

July 19

The city-dwellers of the future The population surge into Australia’s big cities has driven questions of affordability and there is a risk that

our future cities cater to a highly connected, articulate, educated, wealthy people that reside in cities. To

build a city that instead caters and engages a wide-range of users, the panel discussed considerations such

as housing for lower-income workers and creating a sense of community for a diverse population.

“When it comes to thinking about city infrastructure, I think about how we live in cities and how people

live in cities and who cities are for, and the importance of making sure that cities are actually available to

everybody,” Mission Australia’s Toomey said.

“Social and affordable housing is essential infrastructure which should be incorporated in city planning.

This is particularly because in order for cities to function effectively they need to provide a broad range of

employment opportunities including low paid, key workers and other essential staff. If these people can’t

live close to work, then the city won’t work as efficiently as it could.”

Brookfield’s Fallman said diversity makes for longevity of cities and this needs to be considered by

governments as cities begin to evolve.

“What makes a fundamentally good city is that you have a huge diversity of user, so demographics of all

different types, age, background, different jobs and skill sets,” Fallman said. “If a city’s urban fabric

becomes diluted, [it is] much less sustainable in the long run.”

She added: “Governments are essential in having long-term leadership of the way in which cities are going

to evolve and grow in the long run in Australia.”

Fallman also noted that governments and industry leaders need to engage with the residents, customers

and constituents for whom one is providing the amenity, to ensure it is meeting their needs and

expectations.

“There's an enormous opportunity for government to become increasingly visionary in the way in which

our cities at large are developed in the long run, so they can fulfil the requirements of all of the people,”

Fallman said.

Affordable housing is one such issue. Canberra Airport’s Byron said a development called Denman

Prospect is a positive case study in how to create a diverse user base in a city.

“We've got a responsibility to deliver the community in the suburb 4000 houses or dwellings, 2000 single

houses and 2000 multi-unit apartments,” Byron said. “It's 10 minutes from the CBD, 10 minutes from

Parliament House, five minutes to the lake, an amazing amenity.”

But, he noted, there is a key element that is required during the development: 20% of the 4000 homes

have to meet affordability criteria.

“So there's an affordability criteria for one bedroom, two bedroom and three bedroom accommodation

that actually means that everyone can be accommodated,” he said. “...Price point protected.”

July 19

9

Fallman said there is also a need for developers to align with younger generations and how they want to

live and work.

“Diversity of use and user is a big driver of where our clients – primarily office tenants – want to locate,”

Fallman said. “[Tenants want] to go where the young talent wants to go and that is in an increasingly

urban environment that isn’t just nine to five.”

This, of course, begs the question of how we construct these urban landscapes so they have broader use

and don’t become urban wastelands on the weekends or when everyone goes home at the end of the day.

Source: GettyImages

A 24/7, 365-day city Fallman told the roundtable there is a need for a 24-hour city, where spaces are activated after dark.

“Cities have always been places where people come to be together either to do business, or to have

connection, and cultural interaction,” Fallman said. “Developers or landlords or major stakeholders

within the city can make sure that the city continues to be activated, and it's not just that everyone goes

home and the city is empty. It’s important for the long term duration of the city.”

A city is at its full potential when it is open 24/7, 365 days a year. To achieve this, Mission Australia’s

Toomey suggested there is an opportunity for existing infrastructure to be used by more than one

July 19

10

operator or for more than one purpose. He highlighted there are two cities: the weekday city for workers

and the after-hours, weekend city for tourists and late-night revellers.

This throws up an opportunity to reuse the infrastructure when the workers leave town. This would mean

the coffee shops, meeting rooms and other existing buildings could be reopened and repurposed. His

vision is that this would be done under agreements with owners so infrastructure doesn’t have to be

doubled up. In doing so, he said, the vibrancy of the city can be maintained around the clock.

Fallman agreed, “densification of the existing nodes is a really interesting opportunity, because there's so

much potential”. But, she noted, it also means you have to have more people living in and around those

city centres or nodes to provide the market for these repurposed shops and venues to service.

IFM’s Hanna suggested this change – a fundamental one – may happen quicker than anticipated. He said

that IFM is “seeing a lot more involvement and engagement with communities and customers than we've

ever seen”.

This kind of community involvement then drives engagement, which can lead to urban cityscape renewal.

And the development of hubs of activity don’t just have to be in the major capitals.

Canberra Airport’s Byron said this is happening across the country, where opportunities to move the jobs

and build critical industries around hubs of activity are being embraced.

“Certainly, you see it at the airports, which are big employers. You see it in Melbourne and Brisbane and

elsewhere. There are different places where you can build job hubs, just as other regional cities, -- whether

it's Canberra or smaller cities -- can also be job hubs,” Byron said.

Once you have jobs and critical industries near or within a hub, this is when the area starts to develop

organically.

Source: GettyImages

July 19

11

Usable, sustainable cities As our cities continue to grow, they come with efficiency and sustainability challenges. Indeed,

Infrastructure Australia said, “we need to use existing infrastructure in our largest cities more efficiently”,

while IFM’s Hanna said the next five years will see his fund invest a very significant $12 billion into its

existing assets to manage growth and respond to new technological developments.

But the cities of the future won’t just use existing infrastructure better, they’ll recycle existing

infrastructure, according to Brookfield’s Fallman.

“When you think about sustainability, the idea of retro-fitting makes enormous sense,” Fallman said.

“Having assets that are long-term and enduring and that can be retro-fitted – that don't need to be

knocked down and rebuilt again and again – will be really powerful. Not only will this enhance the long-

term character and fabric of the city, but as resources become more and more scarce, this will be

increasingly important.”

Commonwealth Bank’s Thorpe said the Bank was partnering with corporations who are looking to add a

sustainability element to their operations and forecasts. Whether it’s decarbonisation, a lower carbon

footprint, or other sustainability measures, Thorpe said the Bank was building the achievement of those

goals into loan agreements.

That’s an approach that is likely to take on resonance in time, Fallman said. The asset classes Brookfield is

involved with “are long-term, and often times, the principles of sustainable investing, no matter whether

by an environmental, or social metric often go hand in hand with long term ownership”.

And it’s a growing chorus at a local level too.

Byron highlighted that in the Denman prospect his firm is developing is “the first suburb in Australia,

arguably the world, but certainly in Australia where every single house will have solar”. This then reduces

the suburb’s impact on the overall infrastructure for the provision of services like energy, especially when

people choose to install batteries.

Engagement with people In the end, the future cities people across the globe are going to live in are going to be shaped by people

themselves.

IFM’s Hanna said the engagement his fund has with communities around new projects is “much more

significant than it ever was in the past” and we will continue to see this engagement increase as developers

begin to realise the potential that arises from collaborating with the community.

In working with local stakeholders and engaging with the relevant level of government, infrastructure

providers can deliver an amenity that people want, which they know will benefit them and their

community, and can work successfully with corporations.

July 19

12

Hanna said people will shape the future of Australian cities. The choices they make will drive the

liveability and the success of our metropoles, as Australia accommodates the almost 12 million growth in

population expected by 2046. In other words: it’s up to us.

One thing is clear from the Commonwealth Bank’s roundtable, in thinking about the sum of the parts of

our future cities as an ecosystem not discreet components those who are financing and building

Australia’s metropolises of the future are highly engaged in making them the most liveable, engaging and

sustainable cities they can be.

Disclaimer

This report is published solely for information purposes. The information in this report and any opinions or

conclusions are reasonably held or made, based on the information available at the time of its publication. No

representation or warranty, either expressed or implied, is made or provided as to the accuracy, reliability or

completeness of any statement made in this report. Commonwealth Bank of Australia ABN 48 123 123 124 AFSL

and Australian credit license 234945.