CITIES OF THE FUTURE | THREE | FEBRUARY 2024
The Future Use & Value of Land
Innovative solutions to changes in urban land usage
INTRODUCTION
Environmental, demographic and technological factors are all challenging traditional models of land use in urban settings across the globe. This is driving changes to how cities are being developed and governed. The solutions implemented to alleviate land use challenges will have significant implications for urban stakeholders, such as real estate developers, insurers, business owners and residents. These solutions will include climate change defences, mass electrification, urban agriculture and the re-invention of high streets, to name a few. Changes to how cities use land will also have significant global consequences. Although cities use just 1% of available land area, they account for over half of the world’s population, 70% of total greenhouse gas (GHG) emissions, and 85% of global GDP.
Urban land area will increase greatly in the coming decades. The expansion of cities will be mainly caused by urban population growth, but also by factors that reduce urban density such as rising incomes, which enable residents to pay for more personal space; increased car ownership, which facilitates suburban migration; and declining average household sizes in many countries.
The geographical expansion of urban centres will be particularly significant in South Asia (especially India), East and South East Asia (especially China, Indonesia and Vietnam) and Africa (especially Egypt, Nigeria and Ethiopia). Collectively these three regions will account for 80% of the growth in the global urban population between 2023 and 2035. Urban land use requirements will surge in these countries. Cities in Central and West Africa will use nine times more land by 2030 than in 2000, while India’s new and existing cities alone will witness an increase in urban land by more than the whole of Western Europe. Authorities in Mumbai expect 32 million people to live in the metropolitan area by 2036, an approximate 50% increase from 2023. Rising incomes mean that Mumbai’s urban density will also likely decline as more wealthy residents pay for more space, and so the boundaries of the city will expand. If the increase in population was accompanied by a reduction in urban density towards the level of the city of Seoul, this would increase Mumbai’s geographical size five-fold, exceeding the amount of developable land in the region.
Change in urban land area by country/region, 2000-2030
1 How 3 cities are transforming to adapt to climate change, World Economic Forum, 2023 2 The Weight of Cities, International Resource Panel / UN, 2018 3 Global forecasts of urban expansion to 2030 and direct impacts on biodiversity and carbon pools, Seto, Guneralp and Hutyra, Proceedings of the National Academy of Sciences, 2012
Incorporating vast tracts of greenfield land into cities will have a number of consequences. From a sustainability perspective, urban expansion can destroy ecosystems, degrade air and water quality and increase GHG emissions. Increased building on marginal land, such as flood plains, increases the likelihood of future damage from extreme weather events caused by climate change. Sprawling cities are more expensive to maintain, as public services must serve a wider area. Barcelona and Atlanta have similar populations and income levels, but Atlanta’s low urban density necessitates roads, utilities and public services that cover 26.5 times as great an area as in Barcelona. Sprawling cities constructed around one dominant centre will also become less appropriate in countries across Europe, North America and parts of Asia like Japan as hybrid working and e-commerce become more prevalent. These significant challenges will inspire innovative approaches to how cities are developed and managed. This report highlights examples of innovation in countries with strong population growth, such as Malaysia and Colombia, as well as in ageing societies, such as Japan and the US.
Specific city case studies in this report span both high-income cities, such as urban greening in Melbourne and land reclamation in Singapore, and solutions being implemented in emerging cities, such as the construction of a new ‘garden city’ in Putrajaya (Malaysia) and the promotion of a digital nomad economy in Medellín (Colombia).
SECTION ONE
Land use challenges
Future urbanisation will differ from past decades, shaped by challenges such as climate change, sustainability, demographic shifts, new technology and economic development. Available land will become scarcer as the geographic footprint of cities expands, particularly in rapidly growing megacities in the developing world. Land use patterns in established cities will also be challenged by shifting economic, social and climatic factors.
In this report, the drivers of urban land use change are grouped into three main categories:
Sustainability challenges encompass the need to reduce the degree of climate change by pursuing net zero policies, making cities more resilient to the impact of climate change, and protecting biodiversity.
Demographic challenges are mainly about population growth, which will be the most significant driver of urban land expansion. Urban population growth will be caused by an increase in births in many cities and by greater migration from rural areas. Demographic challenges also include ageing societies in more developed economies. Older communities will require accessible transport and public spaces, use commuting services less and drive demand for residential and medical property rather than commercial property in cities.
Economic challenges include the land and resource demands of expanding economies, such as space for new commercial and residential buildings, infrastructure and water use. Digitalisation will also change the pattern of land use in cities as a result of the growth in e-commerce and hybrid working.
Primary Challenges Driving Land Use Change
In every city, the severity of these challenges depends on the environmental, economic, social and technological context. The table on the next page gauges the challenges in 12 cities, which have been chosen to represent a cross-section of regions and income levels.
Source: Fitch Solutions
Severity of Challenges by City
Source: Note: All scores are out of 5 with 5 meaning very severe and 0 not severe. The greener the colour, the less severe the challenge and the redder the colour, the more severe the challenge. Environmental stewardship - Environmental Performance Index by country (Yale) Climate change exposure – ND-GAIN Index by country (University of Notre Dame) Population growth – City population, % change 2025-2035 (UN) Ageing societies – Country median age, 2035 (UN) Economic Expansion – Country average real GDP growth, %, 2023-2032 (Fitch Solutions) Digitalisation of work and retail – Country 4/5G subscriptions, per 100 population (Fitch Solutions)
Although challenges placed upon land will vary city by city, overarching observations are emerging. Across this series of reports on cities, we have categorised cities into three groups:
- Mature cities - cities in developed markets, which are well-established and have significant budgets to invest in urban development.
- Upwardly mobile cities - cities in lower-income countries, but with fast-growing populations.
- Innovation frontrunners - wealthy cities that will expand on the back of rapid economic growth.
Upwardly mobile cities, such as Delhi and Lagos, will face particularly acute land use challenges due to rapid population growth and economic expansion. In mature cities such as London and Singapore, ageing societies and the digitalisation of work and retail will be the main challenges to urban land use patterns. Innovation frontrunners such as Melbourne, Kuala Lumpur and the new city of NEOM will face all these challenges to differing degrees.
Upwardly mobile cities face particularly acute challenges
Cities in rapidly growing economies will face the most significant challenges to existing land use patterns. These economies will typically experience major growth in demand for residential and commercial real estate over the coming decade due to expanding populations and economic growth. According to UN forecasts, the urban population of just seven economies (China, India, Nigeria, Indonesia, Pakistan, Bangladesh and Mexico) is projected to increase by a cumulative 278 mn by 2030 and account for half of the global increase over that period. Delhi features in our “Severity of Challenges by City” table, and the city’s population is forecast to swell by 6 mn by 2030, while the city’s economy is estimated to grow by more than 7% annually (2023-2030). These growth levels will necessitate more space, resulting in the development of increasingly scarce land.
Sustainability challenges in lower-income cities, a feature of upwardly mobile cities, are also typically acute due to significant reliance on fossil fuels, high levels of pollution and, in some cases, exposure to extreme weather events. The rapid pace of urban expansion in these cities will exacerbate sustainability challenges by increasing pollution, reducing biodiversity, encouraging building on flood plains and increasing road congestion.
The chart below illustrates that economic and political risks in upwardly mobile cities are also typically higher than in more mature cities. This makes responding to their land use challenges even more pressing. For instance, the risk of social instability in Lagos makes it particularly important for the city to use land in a way that improves the quality of life for residents, for instance, by strengthening food security and improving access to basic services.
Severity of urban land use challenges
Note: Size of bubble represents level of risk (larger = more risk) based on Fitch Solutions Economic and Political Risk Scores. PPP = Purchasing power parity. Source: Fitch Solutions, World Bank
Mature cities face demographic, sustainability and digitalisation challenges
Challenges in high-income cities, a key feature of Mature Cities, will mostly require adapting land that has already been developed rather than expanding into new land. Growth in the urban population and land footprint of more mature economies will be relatively slow. The geographic extent of cities in North America and Western Europe is forecast to be 90% higher than 2000 levels by 2030, compared to a 230% increase in the rest of the world. Urban populations in high-income countries are forecast to increase by just 4% by 2030, compared to 14% in the rest of the world. The UN actually forecasts the population of some mature cities, including Tokyo, to decline over this period.
The main challenges to land use patterns in mature cities will relate mainly to ageing societies, the mitigation of climate change and the rapid digitalisation of economic activity.
5 PNAS paper
SECTION TWO
