FOC Economist

A pension crisis is looming for those currently in work, and as the population continues to age, the rate of wealth recycling will slow down. The power in 2040 will sit with the old and not the young, and we expect the market to shape our cities around this. Over history we observe periods of rapid economic change driven by the introduction of new foundational technologies. The change this time comes from the exponential adoption of the internet in business practices, combined with new artificial intelligence technologies and biotech. Over time these could radically reshape our economy – and fundamentally alter the productivity problem. By 2040 many forecasters predict that c.50% of existing roles will become at high risk of automation. This will impact both the working and professional classes – and for many will increase the risk of perpetual unemployment. In the same way that industry change marked the birth of factories and then offices, it is quite conceivable that this new industrial change will bring with it new forms of real estate better designed to address the changed nature of the activities that they house. Perhaps more fundamentally, the metrics against which we assess the economy are under pressure to change. The use of GDP as a measure of growth is so universally accepted, that it’s hard to believe that it was formulated less than a century ago – as a solution to understanding the US’ recovery from the Great Depression. Yet as a number of economists have pointed out, including Joseph Stiglitz and Simon Kuznets, GDP focuses on the amount of growth rather than the quality of that growth. The World Economic Forum’s Inclusive Development Index offers one route forward for measuring national success – with inclusivity, happiness and sustainability taken into consideration alongside other measures of growth. With increased focus on Environmental and Social value across economic stakeholders, such measures are likely to only become more considered – and with more measurement, comes more capacity for change.

Takeaways » Sluggish growth won’t last forever, but its impact on development will carry a legacy. » In the short-term inflation will come down but deglobalization and decarbonization are long-term inflationary pressures. » A pensions crisis created by sustained low interest rates post-GFC will have an enduring impact. » Wealth will continue to be redistributed towards those with assets, exacerbating existing inequalities. » Foundation technology will continue to reshape our economy. » Role automation will be a feature of the next 20 years and will change workforce composition. » Expect new forms of real estate to respond to new economic activities and other forms to become obsolete. » Societal shifts in focus on environmental and social value will re-shape economic focus. Black Swan Risks » Rapid automation creates joblessness » Rapid new growth driven by new technologies.

CITY SHAPER ECONOMY

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Cushman & Wakefiled | Future of Cities |