Disruptive trends
in the Real Estate,
Hospitality &
Construction (RHC)
sector:
urbanization
Current rate of urbanization
What is urbanization?
Urbanization refers to both
the increase in the proportion
of people living in urban areas
as well as the corresponding
displacement of the rural
culture with a largely urbanbased culture. Urbanization
has occurred in a variety of
geographies and cultures
throughout much of the history
of mankind, primarily driven
by changes in employment
opportunities through
advancements in agriculture,
manufacturing and technology.
Recently, however, it has
become a global phenomenon,
as developing nations begin to
see significant shifts toward
urbanization.
We are presently in the midst of one of the
most rapid global urbanization events in
history with cities growing in both number
and size as rapid urbanization in emerging
markets and continued urbanization
in mature markets reshape the global
landscape. In 1800, only 2% of the world’s
population lived in cities; in 1950, that
number had increased to one-third of
the population. In 2008, a milestone
was reached where the majority of the
world’s population lived in urban settings.
The most recent estimates by the United
Nations (UN) predict that by 2050, the
proportion of urban residents will increase
to 66% through a combination of migration
and childbirth.1
Impact of global urbanization
The increase in global urbanization will
be one of the most significant trends in
reshaping both society and business over
the decades to come. The UN has projected
that nearly all global population growth
from 2016 to 2030 will be absorbed by
cities — about 1.1 billion new urbanites
over the next 14 years.2 The developing
countries in Asia and Africa as well as
Middle Eastern and Central American
countries will be central players in the
global urbanization trend. In Asia, the
influx of population to industrial centers is
anticipated to drive rapid growth in both
production and consumption. Africa will
also benefit in a shift from agriculture to
manufacturing, and their tremendous
population growth will see increases in
service related employment as well.
What it means for real estate developers,
investors and managers
Global urbanization, whether at a rapid
pace as seen in many developing countries,
or the more modest pace experienced
by most developed nations, presents a
multitude of opportunities and challenges
for real estate developers, investors and
managers.
1
UN Department of Economic and Social Affairs, Population Division notes. un.org/en/development/desa/news/
population/world-urbanization-prospects.html
2
Barney Cohen (2015). “Urbanization, City Growth, and the New United Nations Development Agenda.”
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Developers and city planners are perhaps faced with the most daunting
challenge. They must consider resource availability, infrastructure
needs (which would include decisions about types of transportation
infrastructure, schools, hospitals, and utilities, among other things),
livability, long-term utility and environmental impact. Technology
advancements, changing demographics and consumer behavior will
significantly transform real estate demand, use and design. For example:
how will the increased adoption of the Industrial Internet of Things (IIoT)
impact real estate as it redefines business models and processes across
sectors? How will the increased urbanization of older populations in
many western countries redefine “livability” in those locations? Will
increased emphasis on sustainability transform design of buildings and
developments?
Real estate investors are seeing increased opportunities due to global
urbanization, albeit with corresponding increases in risk. The availability in
real estate capital will continue to play a critical role in the speed and scale
of global urbanization. The required capital for the construction of new
and replacement of obsolete infrastructure is staggering, with sovereign
wealth and pension funds being major providers. Infrastructure debt funds
are still in their infancy but are attracting increasing levels of interest.
Competition for prime assets in key markets will remain fierce and likely
increase due to new wealth from emerging economies, driving investors to
higher risk/reward opportunities in fast-growing cities. This will place even
greater emphasis on developing an understanding of the local market, key
drivers and players.
Property managers will be challenged with accessing and responding to
changing tenant demand, market and industry needs and geopolitical,
regulatory and social risks in rapidly growing and extremely dynamic
cities. The involvement and use of local resources will be essential for the
acquisition of knowledge of the local economic and social landscape.
Rapid global urbanization is well established and unlikely to change
course over the next several decades. This trend will undoubtedly have an
significant impact on society and business including where and how people
live, work, shop and play. Real estate developers, investors and managers
will all be presented with opportunities for those who’ve planned and are
prepared to embrace the shifting needs, wants and behaviors.
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About EY’s Global Real Estate Sector
Today’s real estate sector must adopt new approaches to
address regulatory requirements and financial risks while
meeting the challenges of expanding globally and achieving
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together a worldwide team of professionals to help you
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For more information on this topic, please contact:
Howard Roth
EY Global Real Estate, Hospitality and Construction Leader
+1 212 773 4910
[email protected]
Scott Welch
EY Global Real Estate, Hospitality and Construction Knowledge Leader
+1 216 583 1664
[email protected]