Changing work and changing demography = changing cities

How much longer will cities be powered by office workers in a central location?

The history of cities is a long one, but the urban form of a mono-centric city that houses the best knowledge workers and professional minds, serviced by unrivalled inner urban amenity and metro wide transport networks, is relatively young in historic terms. It may also be short lived.

The pre-industrial city existed for several hundred years until around the early 1700s, and was largely a trade and agriculture hub, powered by people and animals. The industrial city of the late 1700s to mid 1900s was powered by mechanisation, factories and manufacturing, with workers living close to the places of industry. Think the London of Charles Dickens. This lasted maybe 250 years. The post-industrial city, powered by growth in service industries, finance, information and research, lasted roughly from the 1960s until recently – a period of maybe just 50 or 60 years. This is what drove demand for office buildings the world over. This is our world now, but it is changing fast.

Sydney of the early 1900s may seem an eternity away but this was only just over 100 years ago. 

Two recent media stories drew attention to forces which are inevitably, irresistibly reshaping cities again. Post-Covid changes to workforce dynamics, the rapid deployment of Ai, and the unrelenting march of demography (the ageing population) place us at the start of a new era of change.

The first story was by Hari Hara Priya Kannan, Data Scientist at The Demographics Group, writing in The Australian. “The story shaping commercial property markets is not the headline increase. It is the age composition beneath it,” she wrote.

“An expanding 70-plus cohort supports sustained demand for healthcare infrastructure – general practice clinics, specialist consulting suites, diagnostic facilities, rehabilitation centres and day surgeries… Suburban medical precincts, particularly in established middle-ring suburbs, are likely to benefit…

Growth in the 55-69 and 40-54 cohorts reinforces demand for professional services, financial planning, insurance, legal practices and wellness providers. As workforce participation among mature workers remains elevated, demand may shift toward flexible and decentralised office formats. At the same time, slower relative growth in the 25-39 bracket moderates expectations of rapid youth-driven expansion in inner-city hospitality and high-density retail precincts.

Office markets face a nuanced adjustment. As the share of older workers rises, demand may tilt toward accessible, flexible and decentralised formats. Commuting intensity may shift as retirement ages extend but full-time CBD attendance moderates.

Mixed-use precincts integrating residential, healthcare and essential retail may align more closely with demographic reality than single-use CBD developments.”

The second story dealt not with demography but technology, and specifically the impact of Ai. “Morgan Stanley axes thousands of jobs as AI up-ends white-collar work” was the headline, also in The Australian.

“The “great cull” is eliminating thousands of white-collar roles at major Australian companies… While jobs are also being axed, businesses are demanding a radically new AI-fluent employee, warning those who fail to adapt will become obsolete…

The mass sackings have sparked a new industrial revolution, with some executives warning of more to come as bots and algorithms consume human roles.”

Ai’s capacity to perform administrative tasks at ease and with speed, will surely take a toll on many thousands of jobs traditionally harboured in CBDs, but elsewhere also. Some estimates suggest over 40% of Australia’s administrative and support service roles could be replaced by Ai by 2030. And the Ai revolution is only beginning, with moves into medical, education, finance, even creative industries being impacted at light speed.

Office workers of the late 1960s. A little over 50 years ago but now nearly all these occupations are gone. 

Yes, Ai will create new, previously unimagined opportunities for some. For others, who relied on administrative skills, it will be a rapid and uncomfortable readjustment. The concentration of wealth and privilege in the hands of an increasingly smaller share of the population has been underway for some time. Ai may accelerate that inequity.

Today's "office worker" doesn't even need the office. They split their time between home and the office. 

The history of the evolution of cities reflects the history of work and occupations. With Ai impacting occupations in such a profound way, it is inevitable that city-wide changes will follow. Combined with our changing demography (“demography is destiny” the saying goes) a fundamental reshaping of our cities around what type of work is done where and by whom is surely underway. Already we can witness the replacement of traditional retail tenancies in suburban shopping districts with the rapid growth of health and allied health services. GPs, dental, physio, pharmacy, blood pathology, medical imaging, personal care – these are the new retail specialties, with growth driven by demography.

And in CBDs, the impact of ‘work from home’ along with rapid technological innovation appears to be equating to fewer overall CBD workers. The best and brightest will continue to drive demand for premium office space in the most amenable parts of the CBD, but the future of older style buildings in less prized locations is uncertain. Will they remain as offices, or be converted to schools, healthcare or possibly residential?

Options for unwanted CBD office space in secondary buildings could include conversion to education, health or possibly residential uses. But will they be reborn as refurbished offices? Who would fill them? What types of occupations that cannot be done by Ai?

What does seem certain is that CBDs are going to be less about the ‘business’ and increasingly more about the amenity. Inner cities are continuing to add enhancements from both public and private capital while many suburban and regional centres watch on with envy.

New apartments targeting the wealthier members of the community are viable only in inner city markets because wealthy purchasers can afford them, and because this is where many of them want to live due to the concentration of amenity in the inner city and proximity to their high end workplaces.

Meanwhile, modest new dwellings in many suburban areas struggle to be viable because development costs exceed the capacity of the local market to pay. 

In a similar vein, public capital devoted to new or improved cultural, recreational, transport, education, dining, entertainment and open space assets seems invariably to gravitate to inner city locations. This is despite the declining numerical weight of CBD/inner city jobs relative to a wider region, and despite the shifting demography which is also drifting away from centres.

The Hunger Games contrasted the excessive, indulgent wealth of monocentric The Capitol with the relative poverty of The Districts. Was this an allegory for the recent evolution of cities where wealth and privelege concentrates in urban cores which were only 100 years ago centres of industry and working class housing? 

Have we now reached a point in the history of the evolution of cities where the forces of change are now far ahead of our thinking? Are we still mentally of the monocentric mindset of the post-industrial city – despite all evidence to the contrary – and doubling down on infrastructure and private capital investment on that basis? Are we reinforcing that obsolete mindset with planning and other regulatory instruments which perpetuate that model and that period in time?

Change and evolution is impossible to resist. The new era of cities – the fourth industrial revolution – is upon us. We had better get used to it: it is time to think and act differently. There is no turning back.

Suburban centres will continue to evolve, and be home to a growing services, health and education based economy. The monocentric city will become polycentric. 

Do we need Elon Musk to help fix our planning systems?

I know the mention of Elon Musk can be triggering for some. Mention of planning laws is equally triggering, but for a great many more people. You will see the connection soon.

My first formal encounter with “planning law reform” was in the mid 1990s, when as a fairly new Executive Director of the then newly named Property Council, the case for planning reform was passionately promoted by the industry. Planning laws were - it was argued - overly complex, time consuming, inconsistent and riddled with costly process. Or so we thought. Oh, to have those bad old days back again.

The Government of the day introduced a reform package in what was known as the “Planning, Environment and Development Assessment Bill” (PEDA). We joked we should call it ‘the PEDA-file.’ The name was swiftly and wisely changed, into what would later become the Integrated Planning Act (1997).

Proponents hailed IPA as something of a revolution. It introduced what was billed as an ‘Integrated Development Assessment System’ (IDAS) which promised a more coordinated approach to assessing and approving development applications. It also introduced a less prescriptive form of land use control, via a system of performance-based planning – the idea being that how a project performs against outcomes of sustainability, economic and community criteria is more important that prescribing what can and cannot be built on a particular piece of land. Environmental sustainability was also heralded as a key objective of the act.

The IPA promise of greater efficiency and transparency proved an abject fail, if the burgeoning number of planning law specialists, town planners and associated experts is anything to go by. Local governments resisted interference in their plan making and adjudication powers, while applicants were faced with a confusing labyrinth of overlapping assessment pathways under different regulations. Ambiguity led to community anger, and the government of the day played up to it by labelling all developers as ‘greedy’ for trying to do what the original act had promised.

It kept us busy at the PCA. The Bligh Government, under pressure to resolve the widespread dissent, worked up a new regulatory framework, initially under Deputy Premier and Planning Minister Paul Lucas, then Stirling Hinchliffe who took over as Planning Minister in early 2009. The new ‘Sustainable Planning Act’ was passed in late 2009. I recall Minister Hinchliffe joking to me that a core KPI of his for the new Act was that the word ‘sustainable’ must appear on every page at least once. I later learned he wasn’t really joking. While the industry continued to be blasted as “greedy developers” the Act was very much positioned for political appeal to the growing environmental movement. Planning was becoming a political plaything.

Once again, any promise of regulatory improvement was a fail. Complexity, confusion, process-led assessments which took extraordinarily long times to consider, and inconsistent outcomes flourished under the SPA. More planning lawyers, town planners, and related experts were now needed to answer the simple question: “what can I do with this piece of land?”

And so once more it was necessary revisit the regulatory framework, with the noble aims of simplicity and transparency front and centre. And with that, some years more of industry advocacy later, the Planning Act (2016) was passed.

Are we any better off now than we were back in 1997? In a paper I was commissioned to produce for the Australian Institute for Progress titled “FASTER, BETTER, MORE - Why it takes so long and costs so much to deliver the housing we need – and what we can do about it” I observed that:

The increase in complexity is illustrated by the length of many state planning regulations: for example, the Local Government (Planning and Environment) Act of 1990 was 120 pages in length. The latest incarnation – the Planning Act 2016 – is 430 pages plus 526 pages of planning regulations, plus 54 pages of Rules under the Act, 86 pages of Minister’s Guidelines and Rules and over 200 pages in State Development Assessment provisions. Further, there has been exponential growth in local government planning schemes and infrastructure agreements which can run to thousands of pages.

Lawyers I spoke with told me they didn’t really know how many pages of rules and regulations were now in force – just that it would be so many as to be impossible to count.

To deal with this level of complexity, the Planning Institute of Australia is now calling for more town planners. True, the complexity is such that what could once be performed by a trained administrative officer now requires a team of university-trained Town Planners. But rather than asking for more town planners, could it make more sense to call for less planning red tape? After all, the idea of a university educated Town Planner with a HECs debt now devoting their mind to what are often mindless administrative processes seems a terrible waste of human intelligence.

According to Jonathan O’Brien - founding editor-in-chief of Inflection Points - this increasing complexity has eroded the productivity of planners over time:

So, where to next? I cannot find a single person in the industry – either within government or private sector – who considers our current framework to be efficient, productive and clearly understood by industry and the community. Not a single one. Most will say it’s inferior to what we had 30 years ago. Little wonder supply of even the simplest thing you can do (build a house) is so choked.

Enter Elon Musk. The guy is frankly quite weird, but you can’t deny his achievements. An outstanding example of that is how he has driven simplification of rocket engines used for his Space X rockets. The original Raptor 1 engine from 2019 resembles a NASA style tangle of pipes and process that produced 185 metric tonnes of thrust. The latest version is lighter, simpler and will produce over 300 tonnes of thrust. This evolution took just 6 years.

NASA to some extent reminds me of an organisation that resembles our planning laws – they changed little over time, resisted innovation and meaningful reform, created a burgeoning bureaucracy with their own inter-generational career paths, and cost increasingly more to operate.  Along comes Elon Musk, who rethinks every process and challenges every article of rocket science faith, and whose Space X is now leading NASA in many respects. The Raptor engines are a visual symbol of how that looks in real life.

 

Which means it (planning law reform) is possible. But it will not happen by applying the ‘business as usual’ thought processes, or by inviting ‘the usual suspects’ to the reform table. The processes and people that created the problems we have today are not the people to reform them.

Musk's 5 Step Algorithm to Cut Internal Bureaucracy (from Corporate Rebels.com)

1. Question every requirement

Before changing anything in your processes, the first step of Musk's algorithm is to create clarity about every requirement that exists today.

That clarity can be made by attaching a person—and a name—to every requirement. That is, each requirement should come with the name of the person who made that requirement.

Musk: "You should never accept that a requirement came from a department, such as from 'the legal department' or 'the safety department.' You need to know the name of the real person who made that requirement."

Once that clarity is achieved—that is, when every requirement has the person's name attached—then you can start questioning whether these requirements make sense. No matter how smart or how 'powerful' that person is.

Musk: "Requirements from smart people are the most dangerous because people are less likely to question them. Always do so, even if the requirement came from me. Then make the requirements less dumb."

2. Delete any part of the process you can

The second step of Musk's algorithm is all about subtraction—a widely undervalued habit in management. In this case, it is all about deleting any part of the process you can.

In fact, it is all about deleting just a bit more than you feel comfortable with.

Musk: "You may have to add [parts or processes] back later. In fact, if you do not end up adding back at least 10% of them, then you didn't delete enough."

3. Simplify and optimize

Only when you have walked through steps one and two can you start by simplifying and optimizing (parts of) your processes.

This particular order of steps protects you from doing unnecessary work—it keeps you from improving (parts of processes) that you do not need in the end.

Musk: "A common mistake is to simplify and optimize a part or a process that should not exist."

4. Accelerate cycle time

The fourth step of Musk's algorithm is all about speed. It is about finding ways to speed up your bureaucratic processes.

"Every process can be speeded up," says Musk. "But only do this after you have followed the first three steps. In the Tesla factory, I mistakenly spent a lot of time accelerating processes that I later realized should have been deleted."

5. Automate

The fifth and last step of Musk's algorithm involves automation. Now that you have clarity about your processes and have deleted any unnecessary parts to speed up your bureaucratic processes, it is time to start looking for what you can potentially automate.

Musk: "[Automate] comes last. The big mistake in [my factories] was that I began by trying to automate every step. We should have waited until all the requirements had been questioned, parts and processes deleted, and the bugs were shaken out."