“The urban economy of tomorrow” – a study (not only) for Darmstadt, Germany

On behalf of HEAG Holding AG, in which the city of Darmstadt bundles its economic activities and participations, the so called German “Zukunftsinstitut” has prepared a study on the urban economy of tomorrow. It not only analyzes trends and forecasts up to the year 2040 and presents interesting pilot projects: More importantly, it looks specifically at how a major German city – using Darmstadt as an example, of course, but the results are easily transferable – can future-proof its urban economy as it is today. So it’s not a question of planting a futuristic city in the desert like Saudi Arabia or designing optimized urban districts on the drawing board, but rather of managing the existing building stock in as sustainable and future-oriented a way as possible.

After all, the challenges we face in the next two decades are too great and too pressing to relegate their solutions to the realm of science fiction. Urbanization continues to increase, with more and more people moving to the country’s major cities, even though there is already a shortage of housing there. Modern lifestyles and family models no longer fit seamlessly into old forms of living, and real estate must also become “movable,” so to speak, i.e., adaptable, in order to meet the growing demands for flexibility. And hovering over all of this is the sword of Damocles of climate change, which we must counter in two ways: By paying more attention to sustainability and climate protection to prevent worse, and by adapting our lifestyles to the changes that are already unstoppable. These megatrends are obviously having an impact on the real estate industry and on residential real estate in particular.

Climate protection in existing buildings – more than just facades (insulation)

In terms of housing supply and design it’s obvious, but real estate investors and developers are also in demand when it comes to climate and environmental protection. According to the Federal Environment Agency, households account for almost 30% of the energy consumption in Germany, and most of that (about 70%) is heating energy. How much CO2 is emitted to bring living spaces to a comfortable temperature depends on two factors: where the heat comes from and how well a building is insulated. There are ever stricter insulation regulations for new buildings, but energy refurbishment of existing buildings has tended to decline in recent years – not a good sign for the official plan to make Germany climate-neutral by 2045. But the reluctance of property owners is understandable. Energy-efficient renovations are expensive, time-consuming and unpopular with tenants.

After all, the various subsidy measures for energy-efficient buildings have now been merged into one federal subsidy, the BEG. But the focus on facade insulation obscures the view of other measures that are often easier to implement – and for which the BEG also provides subsidies and loans in some cases. A little research is worthwhile here. The study points to a pilot project in which a single-family house from the 1980s could even be converted into a plus-energy house, and at marketable prices. This will not work with every type of building, but individual measures can also be transferred to multi-family houses. There is also the – often forgotten – lever of the energy source: solar thermal energy on the roof or geothermal energy in the basement can heat water and rooms with minimal CO2 emissions. Not only insulating but also greening facades and roofs can even have multiple benefits: Homes are warmer in winter, cooler in summer, improve microclimates, contribute to occupants’ health, and help cities absorb rainwater – an issue that will become increasingly important because of climate change.

Flexible housing – everything but immobile

The issue of housing shortage is preoccupying the real estate industry anyway. In most German cities, the demand will increase: For years now, more and more people have been moving to cities; by 2040, well over 80% of Germans are expected to live in urban areas. At the same time, demands are rising – on the one hand in terms of living space per capita, and on the other in terms of flexibility of use. New buildings are increasingly being designed with this in mind. But that doesn’t mean that portfolio owners are left out in the cold – quite the opposite. Especially those who hold larger real estate portfolios in growing cities can make a difference – if they are flexible themselves.

After all, even old buildings can be adapted to new types of use with little effort, often solving several problems at once: Co-working spaces in residential neighborhoods shorten work commutes, make office equipment and their use more efficient, and, because they eliminate the need for separate workrooms, save on living space and heating costs. The principle can also be extended to other shared spaces, from the guest apartment to the bicycle cellar with shared workshop to the house garden in the courtyard. Many tenants also have their own ideas, which landlords should be more open to. The principle of shared housing, for example, has long since ceased to be of interest only to students – combined with multigenerational living, it becomes an innovative concept that requires nothing more than a few cleverly drafted contracts in many existing buildings.

Those who are willing and able to invest more can counter several of these trends with a single measure. Redensification, especially through space-efficient gap development and by adding roofs, can combine the advantages of new and existing construction. The additional space required is minimal, a new floor can be built from the outset in such a way that it insulates the entire house better from above and possibly also includes a solar system or roof greening, and the new floor plans can be designed flexibly. The Zukunftsinstitut points to a whole series of successful projects, from minimum-impact prototypes to conversion and redesign.

Change as a constant

Our cities are changing – as are the demands placed on them. More people will live longer and healthier in a changing climate by using resources more sparingly, while maintaining their standard of living, while the boundaries between living and working, work and leisure, public and private are becoming increasingly blurred. City administrations are preparing for this, and project developers and architects are developing innovative solutions. By no means do portfolio owners have to remain behind the scenes and watch idly; on the contrary. They will continue to provide most of the living space in the future. If they want to play an active role in shaping the urban economy, they have more leverage to do so than many think. All it takes is a willingness to engage in dialog, thinking without pigeonholes, and the realization that the most constant thing in life is change. The HEAG study provides interesting impulses. What we make of it is up to us – the main thing is that we don’t stand still.