C&W Perspectives

D uring the process of the industrial revolution, some industries disappeared entirely across the UK as their economic relevance diminished; whereas other new communities were formed in rows of dense working- class housing in the hinterland of the new northern factories. We now stand on the brink of a fourth industrial revolution, again powered by technology, which promises to be equally impactful on society and communities. And again real estate faces both challenges and opportunities arising from this change. The defining feature of the fourth industrial revolution is the shift towards a digital economy, described by the World Economic Forum as the ultimate convergence of the physical, digital and biological worlds. In the same way that first industrial revolution displaced economic activity away from villages and towards cities, this one will shift activity away from the physical world and into the ether. This doesn’t sound like good news for real estate, does it? Displacement is already in evidence in the retail sector, as the share of wallet spent on e-commerce continues to rise. The ability to work remotely and flexibly has also put early pressures on traditional offices, and every day reveals a new headline of how many workers will be made redundant due to digitisation. Meanwhile the logistics market has boomed as activity shifts towards the lowest cost form of physical real estate. There is some way to go as these trends continue to mature, and inevitably there will be further casualties. However, it is not all gloom. In the first industrial revolution the Luddites had similar concerns; many skilled labourers had lost their jobs to the factory looms and spinning jennies. However, technological change brought with it demand for new products and stimulated previously stagnant economic growth. Whilst there was no longer good money to be made being a textile worker, increased efficiency and lower production costs created wealth and new jobs. Those who were longsighted enough to see this became the beneficiaries of change, rising up the value curve to more lucrative professions and higher value-added businesses; (those that were more short-sighted smashed up the machines and were mostly executed!). In very much the same way, real estate now needs to rise up to accommodate higher value uses, and those investors who can spot this will continue to reap the rewards. So what are those higher value uses? The defining feature of the fourth industrial revolution is the shift towards a digital economy By Richard Pickering, International Partner, Head of Futures Strategy CUSHMAN & WAKEFIELD 21 #TRENDING

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