Community Impact Meets Personal Impact Industry Trends

Disruptive Change Not Seen in the Past 100 Years – Where is Your Community Vulnerable?

Written by: Jeffrey Kerr, PLA, AICP/Principal

We are seeing the beginnings of startling disruptive changes coming in our society. While this will ultimately bring substantial social, economic, and environmental benefits, the chaos to get there may be just as disruptive. EDG is continuing to look into the future and help our clients navigate this path today. In this new economy, those who plan for this transition will prosper, and those who neglect it until it’s here could see difficulties making the change to remain competitive. But disruption does not happen linearly – it explodes exponentially. In its path, disruptions can create new markets and significantly radically transform, or even destroy existing products, markets, and industries.

The Definition of Disruption

So what if we could look into the future? What if we could act on the future today? How could that change our decisions, our direction, our impact? We’re about to experience an immense shift in the way we live, function and connect. This drastic transition will rebuild the structure of our society not seen in the last 100 years. With the coming convergence of technology, science and costs, we will see the advent of significant revolutionary changes in the coming decades that will transform areas of our climate, energy, transportation, food, cities, communication, and health forever. When change occurs too fast, keeping pace will be difficult for communities. Some entrenched industries, businesses and jobs will vanish while new companies and opportunities will emerge. This is what some call the 4th Industrial Revolution. It is defined by a convergence of technologies that blurs the boundaries between the physical, digital and biological spheres.

Here are the seven disruptions that will make an impact on our built environment:

  1. Big Bang in Health & Wellness
  2. Evolution of Mobility
  3. Retail Apocalypse
  4. Food-as-Software
  5. Impending Infrastructure Crisis
  6. Energy Reformation
  7. Climigration

Medical Technology

Big Bang in Health & Wellness

We’re going to live happier and healthier lives. Medicine, as a business, will shift from disease management to cures. Our current “sick care” model tends to be intermittent, reactive and siloed. Future healthcare will function with continual diagnostics that will alert patients and healthcare providers of changes immediately. We will also be able to change our genes – those that are autosomal (inherited) defects or ones that have muted through environmental factors. New technologies such as CRISPR gene editing are allowing us to edit genomes to cure diseases such as diabetes, hypertension, Alzheimer’s, Parkinson’s, cystic fibrosis, sickle cell anemia, as well as cure cancer, and autosomal (inherited) defect cures such as muscular dystrophy and childhood blindness.

The price of sequencing an average human genome has plummeted from about US$2.7 billion in 2003 to less than $1,000 today. What does this mean? We will live longer and healthier – curing chronic disease, cleaner air, dynamic medical assessments will allow humans to live longer, more meaningfully lives. With this comes challenges to the impacts to aging-in-place to outliving retirement savings, accelerating burdens to public pension plans, social security solvency issues.

autonomous vehicle

Revolution of Mobility

We are seeing the convergence of electric vehicles, battery costs, and AI that will transform our transportation networks. We may have already seen peak internal combustion engine cars as the cost of electric vehicles has started to be more cost-competitive than the ICE vehicles. TESLA has already recorded over 2 billion miles and projected to have 4 billion by the end of 2021 [1] of real-world conditions that are being processed through their deep neural network that will drive toward autonomous driving [2]. This will be the beginning of a shift toward transit-as-a-service, where it will be cheaper for individuals to use an Uber-style autonomous network than to own a vehicle.

Our roadway demands will shift as residents will demand more walkable or bikeable networks. Cost of Transportation as a Service will run <$0.10-0.20/mile by 2030 – allowing elderly, disabled, youth, and low income to readily access jobs, shopping, grocery stores, restaurants, and community places. Current public transit systems will need to reinvent themselves. It may be so cheap that stores will pay for your ride to visit them. Land allocated to cars like roads and parking lots will be drastically altered and most likely reduced.

Hyundai and Uber announced [3] a flying drone taxi service that will, by mid-2020s, provide cost-effective and fast service that will compete with other transportation networks allowing people to commute from longer distances. Autonomous trucks will disrupt logistics as platooned multiple trailer trucks will be able to operate 24 hours/365 days [4]. This will change the cost structure of shipping to be more competitive than rail service. A recent Wall Street Journal article noted that we are already seeing an increase in city congestion in the last decade as e-commerce deliveries per household have increased 2-3 fold. With the demand for same-day delivery, local logistic and delivery services will make the curb the most valuable real estate in our cities. Such drop-off zones need to be better managed in urban areas and may be monetized.

solar energy

Energy Reformation

Battery + solar technology will disrupt our fossil-fuel energy system. We are already seeing battery technology replacing peaker plants in Australia, which saved the local utility $40 million during its first year [11]. The cost of batteries has improved over 16% a year, while solar has improved 11% per year. Current Lithium battery efficiency has dropped from over $1,000/kWh in 2005 to around $150/kWh today with projections to sub $100/kWh as soon as 2023 [12]. As the costs of both continue to drop, traditional utility infrastructure will become more and more obsolete.

We already see the coal industry collapse [13] as 90% of coal is used for coal-fired power generation. Companies like Cambrian Coal and Cloud Peak Energy have filed for bankruptcy. Eventually, the cost of self-production of energy (solar on your roof and batteries in your house) could be cheaper than the distribution of free electricity. Tesla Energy just released its third-generation solar shingle to be tied with its Powerwall system that will allow individual homeowners to power most of the daily activities. Even today you can install a 2,000 ft² roof with 10kW solar is less than $35,000 [14].

With this energy transition along with the adoption of electric vehicles, peak oil may be within a few years. Tony Seba sees U.S. oil demand peaking at 100 million barrels a day in 2020, but drop by 30 percent over the next decade, taking the per-barrel cost down to $25 [15]. This will strand many oil and gas assets including oil extraction including shale gas and tight oil, pipelines, and refineries. Energy and utility companies will need to reinvent themselves to keep solvent burdened by debt from stranded assets. There will be benefits beyond cheaper power – cleaner air, healthy populations, and higher crop yields. Decommissioning coal plants have already saved an estimated 26,610 lives. The research suggests areas around decommissioned plants saw additional yields of some 570 million bushels of corn, soybeans and wheat.

Destination experience

Retail Apocalypse

Retail is probably not dead, but it will look, act, and be different. It may also not be competitive where current retail is located. Retailers such as Radio Shack, Sears, Toys-r-us and Pier One have already shut down, dramatically consolidated or tried to reinvent themselves. Many are burdened from over-aggressive expansion, highly leveraged debt, and shifting buying habits from consumers. Over-supply of malls, strip centers, and retail establishments – old format retail – could leave old-style vehicular-based retail corridors ghost towns driven by changing consumer habits such as experience economy, direct-to-consumer, and Amazon.

We already see shifts in malls to logistic hubs. With coming autonomous transit-as-a-service models, food delivery service, and on-line retailers such as Amazon, many businesses affected by this change include department stores, fast-food restaurants, as well as many major automobile-related businesses such as gas stations, new and used car dealers, gas and oil industries, auto repair stores. These large, old parking lots may be used for drone taxi and transit centers. Fast food businesses could morph into delivery only services not needing the main street address. Dark kitchens – delivery-only establishments have no physical restaurant premises in the conventional sense – can be housed in cheap industrial areas where locations are more efficient for delivery and rents are a fraction of main retail corridors. Ultimately, these antiquated retail areas will need to reinvent themselves to stay desirable for consumers as well as the tax-base that communities need. Consumers will be looking for destination retail environments and authentic unique shopping experiences like Ikea, Bass Pro Shop or Starbucks, or old main street shopping environments.

Food as Software

Tony Seba, a market disruption author, has forecasted [5] the fastest, deepest, most consequential disruption of food and agriculture in history, driven by technology and new business models, is underway. He predicts by 2030, modern food products will be higher quality and cost less than half the price of the animal-derived foods they replace, the dairy and cattle industries will have collapsed, and the rest of the livestock industry will follow.

Companies such as Beyond Meat and Impossible Foods are using a technology called precision fermentation today. The cost of modern food production will be between 50-80% lower than animal products they replace. This will save the average U.S. family more than $1,200 a year in food costs. The effect from closer local facilities to the table will allow faster, healthier, and cheaper than traditional logistics and production today. Higher quality, more nutritious food will become cheaper and more accessible for everyone.

In the developing world, in particular, access to cheap protein will have a hugely positive impact on hunger, nutrition, and general health. However, this will disrupt our rural agrarian landscape. Half of the 1.2 million jobs in U.S. beef and dairy production and their associated industries will be lost by 2030, climbing towards 90% by 2035. Farmland values could collapse by 40%-80%. The outcome for individual regions and farms depends on the land’s alternative uses, amenity value, and policy choices that are made. Seba projects that by 2035, 60% of the land currently used for livestock and feed production will be freed for other uses. This 485 million-acre equates to 13 times the size of Iowa, an area almost the size of the Louisiana Purchase. Some benefits such as water consumption in cattle production and associated feed cropland irrigation will fall by 50% by 2030, on course to 75% by 2035 [6].

aging infrastructure

 

Impending Infrastructure Crisis

There are an estimated 240,000 water main breaks each year in the United States, according to the Environmental Protection Agency’s Aging Water Infrastructure Research Program, and some water experts fear that the problem is getting worse [7]. America’s infrastructure is desperately in need of investment, according to the American Society of Civil Engineers. The ASCE estimates the U.S. needs to spend some $4.5 trillion by 2025 to fix the country’s roads, bridges, dams, and other infrastructure [8].

Our aging infrastructure may be stranded, obsolete, or unable to meet tomorrow’s demands (too little or big) at the same time our cost models for delivery of utilities – energy, communication, water, sewer, and transportation may not be able to keep up with repair and replacement needs. San Diego has paid out at least $10 million to settle claims and pay contractors for repairs to private property that was damaged by water main breaks during the past eight years [9].

Many of our rust-belt cities have water and sewer lines that are over 100 years old, causing frequent service disruption and added costs to the system and eventual rate-payers. The American Water Works Association has even termed this “the dawn of the replacement era.” Many localities find themselves having to replace miles and miles of infrastructure for the first time — a financial weight that is especially acute in poorer, older industrial areas with shrinking populations, where such work would require higher-than-average tax burdens or utility rate increases on the residents who remain [10].

climate change

Climigration Trends

Climigration refers to the forced and permanent migration of current land use practices because of climate change effects on essential infrastructure as well as understanding the cost and impact of moving populations and uses out of these vulnerable places. While the Midwest may not be exposed to rising sea levels it is exposed to heightened flood risk due to changing rainfall patterns.

Recent advancements in attribution science show extreme rainfall to be the main driver of recent floods rather than 20th-century agricultural practices, as was largely believed to be the case until recently. Adverse weather resulted in an increase of 75% in the number of collisions, as compared to normal conditions [17]. Rating agencies are increasingly considering climate change and previous extreme weather events as part of their evaluation of U.S. cities and counties.

These evaluations could be better informed by incorporating forward-looking, comparable data on the climate risks that impact these municipalities. Moody’s and S&P both released reports in 2017 explaining their methodologies for incorporating climate change into their municipal credit ratings. Moody’s methodology for local governments, public utilities, and states does not explicitly integrate climate change exposure as credit risk, but rather, incorporates historical occurrences of extreme weather events that affect “economic strength and diversity, capital asset management, fiscal strength, and governance, among other credit factors.”

innovation

Five Innovation Platforms:

Disruption is coming. We believe that we will have a once-in-a-lifetime opportunity to rethink how we invest, operate and even redesign our cities. EDG aims to be at the forefront of how our clients will navigate, advance, and thrive under this new paradigm. To do this, we have reoriented around five Innovation Platforms, which redefine how we can help guide our clients to make a positive impact on their communities.

What are the five platforms?

Water Resiliency

Water Resiliency – We believe in helping to create a clean water-resilient environment by incorporating better land-use practices, sound science, and modern technology. While changes in intensity and duration of rain events that impact many of our communities, we aim to help our clients protect their assets, invest wisely in their infrastructure, and benefit from clean, safe water resources. We will look to help mitigate the negative effects of flooding and water quality through advocating for stronger land-use practices, implementation of green infrastructure, and protecting and restoring resilient riparian networks to reduce these impacts.

Living Streets

Living Streets – We believe in reimagining our transportation networks as more than asphalt and concrete. We will also potentially drive different land-use strategies, requirements, and economics. Living streets require one to look at a dynamic and multimodal system that supports our variety of land uses, create safer environments for all users, and leverages sustainable infrastructure to promote economic development.

Thriving Cities

Thriving Cities – We believe in helping communities drive economic reinvestment to establish a thriving community for tomorrow. Communities will need to be more inclusive, walkable and provide a wider range of housing choices. Demographic changes and shifts in land use demands, and desire for different choices in housing, shopping, and work environments will create new challenges and opportunities as we spend less time traveling and more time desiring authentic places to live, work and play. We seek to balance the needs of investing in public infrastructure and private investment to attract and retain residents, businesses, and visitors.

Happy Healthy Places

Happy Healthy Places – We believe in building cultural infrastructure through placemaking. People are shifting buying habits from ‘things’ to unique experiences and leisure habits to healthy lifestyles. We see people living longer and healthier. Shifts in geodemographic and generational trends will also affect how communities attract and retain residents, visitors, customers, and businesses. We seek opportunities to build this experience economy.

One Planet

One Planet – We believe in embracing our interconnected natural resources through environmental stewardship. Science is proving that our natural system provides critical benefits to health, society, and our communities. This new scientific understanding of our natural systems is leading to new regulations and standards to protect our planet and people better. We aim to use science, technology, and passion to support deeper preservation, protection, and restoration of our one planet.

 

So you will start to hear us talk differently about the future.

We hope you can join us along this path. If you are ready to hear of the possibilities, understand where you are vulnerable, plan for the challenges and build the new economy, we look forward to walking alongside you.

[1] https://lexfridman.com/tesla-autopilot-miles-and-vehicles/
[2] https://towardsdatascience.com/teslas-deep-learning-at-scale-7eed85b235d3
[3] https://www.theverge.com/2020/1/6/21048373/hyundai-flying-car-uber-air-taxi-ces-2020
[4] https://www.mckinsey.com/industries/travel-transport-and-logistics/our-insights/distraction-or-disruption-autonomous-trucks-gain-ground-in-us-logistics
[5] https://www.rethinkx.com/food-and-agriculture
[6] https://www.rethinkx.com/food-and-agriculture
[7] https://www.nytimes.com/2009/04/18/us/18water.html?mtrref=www.google.com&assetType=REGIWALL
[8] https://www.businessinsider.com/asce-gives-us-infrastructure-a-d-2017-3
[9] https://inewsource.org/2012/02/27/cost-of-main-breaks-water-loss-add-up-for-city/
[10] https://www.nytimes.com/2009/04/18/us/18water.html?mtrref=www.google.com&assetType=REGIWALL
[11] https://electrek.co/2018/12/06/tesla-battery-report/
[12] https://riskandwellbeing.com/2018/08/06/testing-tony-sebas-ev-predictions-19-how-low-could-battery-prices-go/
[13] https://www.brookings.edu/blog/planetpolicy/2019/01/16/why-theres-no-bringing-coal-back/
[14] https://www.tesla.com/solarglass/design?redirect=no
[15] https://www.reuters.com/article/us-markets-saft/the-age-of-stranded-assets-isnt-just-about-climate-change-james-saft-idUSKBN19Y2SV
[16] https://www.mnn.com/earth-matters/energy/stories/coal-fired-plants-study-local-pollution
[17] Andrey, B. Mills, M. Leahy, J. Suggett Weather as a chronic hazard for road transportation in Canadian cities