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World after corona crisis urbanisation

A slow return to normality  
Some of the world’s cities have been hit very hard by the coronavirus and every business has faced unexpected challenges. We do not believe however, that cities will now become extinct. If you just take New York as an example, it has survived the Spanish Flu, numerous financial crises and the terrorist attacks of 2001. In all instances, it rose like a phoenix from the ashes.

Doubtless we will see more people working from home but not all jobs lend themselves to this model and even if they do, the need for social interaction means that it is unlikely to be something people opt to do 100% of the time. The number of desks needed may shrink, but office demand should not fall off a cliff.  

Whilst the urbanisation trend might have slowed because of the pandemic, it still remains and must now more than ever be addressed with ‘liveability’ in mind.

Carsten Menke, Head of Next Generation Research

In terms of their private lives, people emerging from lockdowns are eager to go out again to eat and drink in bars, cafes and restaurants; visit their favourite shops, museums and galleries; and listen to live music. They want to do this with friends in order to make the experience richer.   

We see strong evidence that cities will remain the growth engines of the global economy. Whilst the urbanisation trend might have slowed because of the pandemic, it still remains and must now more than ever be addressed with ‘liveability’ in mind.

Liveability and sustainability

‘Liveable’ communities need to make residents feel safe, and should be environmentally sustainable, providing decent public transport, affordable housing and fair access to healthcare, schooling and outside spaces. Sustainability must be at their heart.    

The Covid-19 pandemic has increased the desire to support organisations that actively contribute to reducing imbalances in society. The weakness of just-in-time manufacturing has been exposed, emphasising the importance of stable, resilient and sustainable structures.      

Companies with a high ESG (Environmental, Social and Governance) rating have proven to be more resilient during the current downturn, as they are more agile and limit their risk through responsible business practices.

We believe that it is inappropriate to dismiss the city model as a result of the Covid-19 pandemic. Cities have shaped our world in the past and they will continue to shape it in the future.

Carsten Menke, Head of Next Generation Research

Digital infrastructure     
Technology is a tool which can make our cities smarter and more sustainable. In a ‘smart’ city, everything will be connected: traffic lights, street lights, buildings, roads and the self-driving cars using them. Smart cities will be heavily reliant on data which will be collected by an armada of sensors and cameras spread around the city, gathering information about traffic, temperature, air quality and humidity, both inside and outside. Smart cities should make our lives easier by utilising new generations of telecommunications technology and employing artificial intelligence and cloud computing. 

The fifth generation of cellular networks (5G) is still being rolled out around the globe. This expansion of digital infrastructure is key to making our cities fit for the future. 5G should pave the way for the Internet of Things to come into its own.       

With all these devices connected, smarter energy, water and waste management can be put in place, contributing to a more efficient use of resources in cities, with the ultimate goal of making them more sustainable.        

To make our cities more fit for the future, we see the expansion of digital infrastructure as an absolute necessity, independent of the corona crisis. Nevertheless, the pandemic has provided a catalyst for infrastructure investments overall, as stimulus packages have been rolled out around the world.

Building technology 
Apart from investments in new buildings, it is vital to modernise existing structures in order to remain up-to-date in terms of the ever-evolving building regulations and to be able to retain or even attract tenants.

Providers of systems such as lifts, escalators, heating and ventilation should all benefit from these investments. And the pandemic may well prompt the uptake of technologies that had never been considered previously.

Manufacturers of such specialised equipment as air-conditioning systems that can be enhanced with disinfectant and room sensors that can detect general humidity levels, should now benefit from a much higher requirement for companies to look out for the health of employees.

The ability to be able to convince staff that their health is not at risk in the office will be a big catalyst to get those workers back to the workplace. Smart buildings will go a long way towards achieving this.

Market Outlook

Which topics will be relevant in the upcoming three months? Julius Baer experts share their views on the economy and financial markets.

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