The economics of skyscrapers

Why do firms pay more for space in skyscrapers? I’ve posted some answers on LSE’s Spatial Economics Research Centre blog. Drawing on new research by the SERC community, I look at the balance between agglomeration effects (people working in tall buildings are more productive) and reputation effects (managers like prestigious addresses).

The research findings suggest both effects are in play – particularly for very tall buildings like The Shard. That has important implications for planning the skyscape of London and other UK cities.

Now read on …

Facetime limited

What’s on sale here? Will Davies and I both have been puzzling over this ad on the Tube. Will’s worried about the politics of ‘facetime’, but I think there’s a more basic problem.

I can see the point of putting this ad up in (say) Barrow-in-Furness, or in the middle of the countryside. But if ‘facetime’ is the commodity, why offer Londoners access to 400 million people, when they can reach several times that number in the capital itself?

I would have thought that Birmingham’s comparative advantage in ‘facetime’ (or dynamic agglomeration-derived proximity benefits, to be precise) has to be usability, not quantity.

Core cities like Birmingham offer a good balance between size, speed and access. For the businesses targeted here, Brum has pretty good infrastructure, amenities and markets – but is also easy to navigate. Isn’t that the selling point?

London might be a megacity, but it also has to be one of the least usable and most frustrating places in the UK to travel around – as anyone stuck on underground reading this ad would realise …

Fortresses of Insanity

Der Spiegel, one of Germany’s biggest papers, has published some of my sea forts pictures, and run a fascinating backstory (in German) about life on board. Enough said. See it here.

You can also find out more about the forts, including how to visit, at the Project Redsand website.

So, farewell then …

… eco-towns, by the look of it. This is a good thing. Eco-towns are largely unloved, often in the middle of nowhere, and would have little impact on overall CO2 emissions.

Dermot (and Adam Marshall) have rightly criticised eco-towns for distracting from the much bigger task of greening Britain’s cities. As I’ve explored elsewhere, that’s a job which should have both a significant impact on the UK’s carbon footprint, but also much greater economic development potential.

Eco-towns have also failed dismally at being the kind of demonstration project the Government originally envisaged. There are much better examples abroad, both self-standing cities like Masdar in Abu Dhabi, and (more realistically) urban extensions like those in Vauban, Freiburg, or Hammarby Sjostan, Stockholm.

The latter also have the benefit of localist in design and delivery. In the coming months, let’s hope the Coalition can give British cities the financial flexibilities to try something similar.

City in a box, unboxed

Excitement online and in the twittersphere about the Cisco ‘city in a box’ being built in Songdo, South Korea. There seems to be a bit of a utopian city meme at the moment – instant cities,  floating cities and Paul Romer’s Charter Cities (which I discussed a while back). Last week’s Economist even showcased a whole series of prototype ‘cities for 2030′.

As the Economist piece points out, there’s something slightly odd about these kind of exercises. Cities tend to emerge and evolve organically, even chaotically, rather than being built from scratch: and their residents and users tend to be resistant to masterplanning.

A closer look at Cisco’s instant city actually confirms all this quite neatly. First, it’s not a city, it’s a business district – albeit one that could house up to 1m people. Second, it’s neither new or self-contained. Instead, it’s a bolt-on to an existing city, Incheon, the 3rd biggest in S Korea.

This kind of CBD megaproject has been done before – in Canary Wharf, for example, which works pretty well as a financial service cluster, if not as a functioning community. (With a working population of around 90,000 people, it’s over ten times smaller than Songdo.)

I can see the potential for this kind of plug-in planning in China in particular, given the pace of urbanisation there. The developer at Songdo reckons there’s a market for at least 20 more in China and across South East Asia. That’s plausible if the demographics and national economies hold up. But ‘build it and they will come’ is an inherently risky strategy – just look at Dubai.

I’d also love to see Cisco try this in a small, highly urbanised Global North country like the UK. Our biggest urban planning challenges in years to come is going to be greening the cities and buildings we’ve got. The eco-towns initiative doesn’t tackle this, and the programme is basically marginal.

But in growing places, there’s potentially an important role for high-tech, resource-efficient urban extensions – around Greater London, Manchester, York, Cambridge or Brighton, say. The problem will be the total lack of public funds to help actual building. Perhaps Cisco can step up to the Big Society plate and donate one?

ps. I’m now finally on Twitter – find me here.

pps. We’re now on holiday for a bit. Blogging returns in July.

Geography and social justice

This is the first of two posts on ‘shrinking cities’, or as civil servants might put it, ‘places with a long history of economic underperformance’. In the UK, this means cities like Hull or Stoke-on-Trent with low average incomes and higher-than-average deprivation rates; abroad, places like Leipzig, Cleveland or Detroit.

The politics of improving life for people in under-performing places is extremely sensitive, as Policy Exchange discovered when they appeared to suggest moving people out of ‘failing’ Northern cities. Recently there’s been more interest, via LSE’s ‘Phoenix Cities’ book, Julien Temple’s ‘Requiem for Detroit?’ and from the Centre for Cities (see Dermot’s helpful summary, and my thoughts from last summer).

Why now? First, during the 2000s a lot of economic development funding went into cities. But this has not always improved residents’ overall welfare. As the business cycle turns, city leaders are looking for new ways forward. Second, there’s now less regeneration money around. Between 2011 and 2015, central government departments like CLG may face 20-25% spending cuts. So Whitehall policymakers are looking hard at if, where and how to spend.

At the recent AAG Conference in Washington DC, Michael Storper offered some helpful thoughts on all of this.

Spatial disparities exist, Storper argues, because there are benefits of clustering economic activity, and these persist over time. Agglomeration economies help explain why cities exist, and why they still matter. Theory and real world experience also suggest that long term convergence is unlikely.

So agglomeration leads to disparities between places. At the same time, increasing returns to skills lead to disparities between people. And because higher-skilled people tend to sort into more successful cities, we often get poorer people concentrated in poorer places.

The question for policymakers is what, if anything, we should do about this? Storper outlines three responses.

We could aim for ‘spatial equity’, compensating people and places who lose out. This feels appealing – but what does it really mean? Is holding successful places back fair to their residents? And how do we actually equalise outcomes? Even the UK’s very centralised public services haven’t got rid of postcode lotteries.

Another view is that we invest in poorer places. This is the traditional regeneration perspective. Structural economic change has long term impacts that markets won’t deal with – physical decay, poverty, crime. And there are efficiency costs to this – not least higher spending on benefits. Area-based policies tackle these externalities, get markets working again and places back on their feet.

This has been pretty much the UK approach for the past two decades. It’s given many cities a public makeover – and has made them nicer places to live. But most evidence suggests that improving places doesn’t easily translate into improving outcomes for people. Trickle-down regeneration works about as well as trickle-down economics.

People can move, and it’s hard to assess area-based initiatives if some recipients leave the area. ‘Regeneration thinking’ also doesn’t say how to balance limited resources between helping poor places recover, and helping growing places do better. CLG’s Regeneration Framework has a go, but isn’t completely convincing.

A third view comes from urban economics, especially Ed Glaeser (and now, Richard Florida). In its simplest form, this says we should focus on people, not places. People are mobile; investing in their mobility and human capital improves their economic prospects. Investing in immobile places does not, especially as convergence is unlikely.

To me, this feels like the right starting point for policy. This view is also increasingly fashionable in UK policy circles, and partly explains the bad press traditional regeneration has been getting. But as Storper points out, it’s more complicated than it looks to implement. There are three big policy points.  

First, it’s not clear everyone is truly ‘mobile’. People are free to move; but less skilled people have less information or resources to migrate between cities. Policy interventions might improve mobility, although we don’t have strong evidence here – increasing choice in the social housing system could help, also expanding housing supply in more successful places. Research and experiments should look to fill this gap.

Second, it implies we maximise economic welfare. But we know people think beyond money. Some local responses to Policy Exchange’s report reveal people happy to live in ‘failing’ Newcastle and Liverpool – because they like being there. At an LSE screening, critics of Julien Temple’s film similarly pointed out that nearly a million people still live in ‘failed’ Detroit.

Urban economists explain this in terms of spatial equilibrium. People sort by economic prospects, and prefer different kinds of communities. Low wages get traded off against low cost of living and/or better amenities. In spatial equilibrium local labour, housing and ‘quality of life’ markets all clear, so that real wages equalise across all places. Ongoing SERC research finds some UK evidence for this.

The spatial equilibrium approach implies we don’t need to worry so much about disparities in nominal income. But in some poorer places, especially given mobility barriers, we may want to adopt measures (better quality housing, tackling crime) which will improve residents’ wider wellbeing – and thus raise real incomes.

Finally, national politics and local delivery are both critical. The UK is generally less tolerant of inequality than the US. Our politics is steeped in notions of fair play and universal standards: we’re a long way from accepting apparently large income disparities on the basis of hard-to-explain equilibrium concepts.

British over-centralisation also makes it politically difficult to do anything about managing decline: London policy apparatchiks seem to be telling other cities what to do (which they are). This is one reason why the Housing Market Renewal programme has often been so painful, why Policy Exchange got in trouble, and why the Coalition’s emphasis on localism is important. In future, devolution and actually doing managed decline need to go hand in hand. I’ll explore these ideas further in the next post, and take a look at some international experiences along the way.

The magic roundabout

Ah, the perils of place branding. Wired have re-upped their ‘Silicon Roundabout’ story, highlighting the cluster of tech and new media firms around the Old Street / City Road junction in East London (thanks to Eric and Mat for pointing me to it).

The magazine reckons there are now about 85 firms in the neighbourhood, including Dopplr, last.fm and moo.com (who make my lovely business cards). That’s exponential growth since Matt Bidduplh’s original 2008 map. Along the way it’s picked up a Wikipedia entry, props in the FT and a (slightly self-conscious) support group.

 There’s only one problem here. Almost none of the firms are *actually on the roundabout*, or even near it. Look at Wired’s picture again. These companies are almost all down the road in, er, Shoreditch – or in one case, way out in Bethnal Green.

Obviously ‘Silicon Roundabout’ is a good meme (here I am writing about it, after all). And it means people don’t have to say they work in Barley-esque Shoreditch. But it fails completely as a descriptor for a real cluster, or even a spot on the map. It’s also nothing like Silicon Valley, which is a continuous sprawl stretching halfway across the Bay Area, including several cities along the way. Silicon Roundabout is  Trumpton to the South Bay’s Sim City. But that’s another story.

New stuff

A couple of new things from me. First, UCL Urban Lab and Figaropravda have just published ‘The Architecture of Financial Crisis’, papers from a recent workshop on cities, urban economics, design and the crash. Chapters from me, Peter Hall, Matthew Gandy Davida Hamilton et al.  It’s all masterminded by Louis Moreno. PDFs should be here.

Second, a new paper on cultural diversity and innovation by me and Neil Lee. We do some number-crunching on firms in London, and find a small but significant ‘diversity advantage’: firms with a richer mix of owners / staff seem to innovate more.

This paper will be coming out in January in the inaugural issue of the International Journal of Knowledge-Based Development, but you can download it here for a while.

The research is part a bigger piece of work I’ve been doing here at Berkeley. I’ll be presenting the new findings in April at the AAG 2010 conference in Washington DC, if any of you are around for that.

Sleep Walk, Sleep Talk

My friend Suki has made a new film / installation about life in the city, using footage from around London and interviews with various urbanites (including me – fame at last!). Sleep Walk, Sleep Talk is part of Free To Air, a four-year programme of commissions and events loosely organised around the idea of urban freedom.

The installation is showing at 198 Contemporary Arts in SW9 from 14 September to 19 October. There’s a private view on Monday night – email me if you’d like an invite.

The gallery says:

A London of fast-blinking lights and speeding commuters, where cars and trains leave luminous comet-trails marking their passage through the night, and where individuals reflect on freedom in the urban metropolis, or seek escape from the repetitive habits and conditions it enforces.

Inspired by ideas of freedom of expression in contemporary society, Suki Chan’s new video installation is an impressionistic study of London’s diverse population … Chan’s work weaves together a series of evocative video portraits highlighting people’s different responses to the hubbub of London life. Groups of skaters, unimpeded by traffic, move freely through the twilight city, tracing an intuitive map of the metropolis. Nigerian security guards gatekeeping a deserted high-rise office block compare the ‘freedom’ of London with their rhythms and aspirations of their former life. While city commuters embody the regularity of everyday urban existence.

I’d recommend going even if I wasn’t in it – Suki’s film work is always very beautiful to look at. In the meantime, or if you’re not in town, you can watch some excerpts here.

Ground control

I’ve finally got around to reading Anna Minton’s excellent new book on space, fear and happiness in British cities.

For a self-proclaimed polemic on the urban renaissance that puts the boot into just about everybody, it’s generated an amazing amount of agreement. At the ICA recently Anna, Liz Peace (Head of the British Property Federation), Nigel Coates (RCA) and Daniel Moylan (Deputy Leader of Kensington and Chelsea Council) barely exchanged a cross word.

This is testament to the book itself. Minton takes aim at the privatisation of the urban public realm. She attacke the ‘pseudo-public space’ of big shopping centres like Liverpool One and the ‘pseudo-private space’ of Business Improvement Districts. Landlords increasingly run the public realm for profit, she claims. Instead of functioning spaces we have sterile deserts: Minton quotes one city centre manager who actually talks about ‘importing vitality’. Worse, pervasive CCTV and an obsession with safety actually make us feel less safe and more unhappy. Privatising public space ends up damaging everyday life.

What is to be done? Councils should open up ‘shared space’ at street level (as Kensington and Chelsea have done successfully), should allow flexible uses of abandoned buildings and urban places, and need to play a stronger ledership role. Meanwhile Whitehall should re-engineer our risk and litigation systems (in Sweden, if you cross the road and a car hits you it’s the driver’s fault) and review compulsory purchase rules.

Most of this is dead on target. The clue’s in the name, I think – public space can be managed like a commodity, but ultimately it belongs to us. We should have rights to it as citizens, not selective access as consumers. Private sector management of public spaces has to reflect this. Equally, shopping centres that look like streets will inevitably get treated as public property. Trying to police this out is clearly counterproductive.

I’m less convinced by some of the detail, though. Anna mainly relies on a few high-profile examples, and admits she can’t quantify the privatisation of public space. She then claims ‘a huge shift in land ownership has taken place’. But then we don’t know if this is true. And are design and space management really driving fear – rather than, say, media coverage of crime?

Does the recession allow us to rethink urban space, as Anna suggests? Perhaps. The HCA’s emerging regeneration strategy puts the public sector in the driving seat, masterplanning and – crucially – controlling land sales. But there’s almost no money: over 80 councils are competing for just 12 Accelerated Development Zone pilots and HCA budgets are tight. Fundamentally, authorities in deprived areas may have little leverage over developers – who can always walk away.

And the book is weak on the dynamics of urban change. Anna wants fluid cities which evolve and surprise. But sometimes she also wants to block change she doesn’t like. It’s hard to have it both ways.

When Liverpool One was built, the independent Quiggins Centre was demolished – sure, the building should have been saved, but the new L1 is clearly an improvement on what was there before. And is the creative core of Shoreditch really ‘under threat’ from rich incomers? Parts of the neighbourhood are changing. But the artists are simply moving up the road to Dalston and Hackney Wick. As a whole, London’s creative community is as active as ever. We do know that cheap workspace and social infrastructure – like restaurants, bars and clubs – can help support creative activity. But we can’t – and shouldn’t – be using these tools to freeze neighbourhoods in time. Cities are too rich and complex to be pinned down in this way.