Atlanta Commercial Real Estate

Who’s got a better multiple than Waze? Your Own City.

  • Technology, implementation of that technology and viable financial business models are beginning to align for governments to capitalize on new opportunities.
  • The influx of residents to city centers provides challenges to infrastructure, but also opportunities to mine and monetize data.
  • Traffic continues to be the greatest pain point for residents but also opportunity for relief by utilizing aggregated data.
  • Open Data has unlimited potential to improve cities, offering significant economic value to the community and private investors.
  • The current Achilles heel of Smart Cities is clarity around creation of a viable financial business model that balances the privacy of the citizenry, with an economic return to all parties.
  • Public-Private partnerships appear to be the clearest path forward.

Executive Summary

People are drawn back to urban living now, more than ever, and the rapidly increasing population density poses major sustainability challenges for cities. Today’s Smart Cities bring a greater attention to innovative solutions to America’s massive infrastructure needs. Transportation, in particular, represents the greatest public need and opportunity for application of viable technology. It presents a unique opportunity to partner, increase efficiency and deliver significant return on investment. Smart Cities will survive this brisk expansion and even succeed in turning aggregated data into an asset. Many say the utopian ideal of Smart Cities is still far off in the future. But this movement is real. It’s happening now, and exciting innovations are unfolding before our eyes across many U.S. cities.

Innovations to the Rescue

Imagine driverless cars, smartphones embedded with air pollution sensors, self-watering indoor gardens, and danger-sensing traffic lights that automatically turn red as reckless drivers approach. These may sound like futuristic inventions from a sci fi movie, but the truth is – these technologies already exist and are shaping what many are calling “Smart Cities”.

Innovation gets all the press, but it’s the implementation that is so critical to changing lives. In 1920, the upper class capitalized on the independence provided by the automobile and fled to the suburbs leading to a population decline in urban areas. However, that trend has begun to reverse itself and today, more than 80% of the U.S. population lives in large metropolitan areas, generating more than 90% of the country’s GDP.[1]

SmartCities-Exhibit1

The re-emergence of city living is fueled primarily by two groups: young professionals and Baby Boomers, who are retiring and moving back to the cities they left when they started families. While the growth creates opportunities for exciting new development and services, it comes with a price. City streets are clogged with congestion, residents are consuming electricity faster than utilities can produce, and crime has become increasingly difficult to control. According to MIT, our cities consume 70% of the world’s energy, are responsible for 80% of the world’s carbon emissions and represent the prime source of other air and water pollutants.[2]

Atlanta is no different. Ranked among the Top 10 cities for worst traffic, metro Atlantans spend 59 hours per commuter, per year in traffic congestion.[3] With an infrastructure backlog of more than $900 million, Atlanta will finally begin seeing relief with a $250 million infrastructure bond to begin improving the city’s roads, bridges, sidewalks and public facilities.[4] But the truth is, cities this size cannot build enough roads, tunnels or overpasses to solve the traffic challenges for the long run. Our personal position on this is that traffic, while requiring active management, is the natural fruit of a living city. There are places where traffic isn’t an issue,[1] but not one of them would choose their traffic over Atlanta’s success.

Technology is always evolving. So too must our cities and the transportation infrastructure that weaves a city together. We now have a greater purpose that demands innovation: the need to make our cities and communities more sustainable, vibrant and adapt quickly to the severe economic, environmental and demographic pressures that we face.[5] There’s more than enough evidence that points to the need to create intelligent solutions, that build upon what a city already has, and truly change the way cities interact with their own people – the need for Smart Cities.

NOT-SO-FUN FACT:  All 10 of America’s worst cities for traffic (Atlanta being #9) spent more time in traffic than all of Europe’s highest ranking cities. [6]

Using Data to Fuel a Smart City

A Smart City is not defined exclusively by technology; rather, it’s defined by the way a city eases the lives of its citizens and provides essential services in the most efficient manner possible. From both a city’s and its people’s perspective, transportation is among the most essential services.[7]

When addressing these challenges, cities should be looking at solutions and tools that can utilize real-time data, make valid predictions of what will happen, and deliver actionable insights that benefit not only the city but the citizens who live there. Big Data and Open Data can. Together they become Smart Data, the fuel of a Smart City.[8]

Big data is often unstructured, powerful and rich. It is aggregated from weather channels, street security cameras, Facebook, Twitter, sensor networks, in-car devices, location-based smartphone apps, smart meters, etc. But open data (somewhat more structured) can be found in almost every department of city government, research centers, public transportation organizations and every possible stakeholder in a city.  About 2 billion connected devices – ranging from PCs and smartphones to sensor devices such as RFID readers and traffic cams – generate this complex mass of structured and unstructured data that can be collected and put to use.[9]

Urban areas are literally swarming with this kind of data that, when provided openly for public benefit, can be transformed by industrious people, into tools that offer predictive analytics and actionable insights. This data and the innovations they inspire fuel objective, data-driven decisions, rather than intuition-driven attempts. This is smart technology.

The open data movement has been driven by its citizenry’s pursuit of transparency. But now a growing number of experts and policymakers are finding that Open Data has unlimited potential to improve cities, offering significant economic value to the community and private investors. While government agencies traditionally shied away from making data transparent in the past, the trend is changing. Many jurisdictions have established open data portals over the past few years, and more agencies have formalized their commitment with an official open data policy. In 2015 surveys from the Center of Digital Government, public sector city leaders ranked “Open government/Transparency/Open Data” as the 2nd highest initiatives with increased focus in 2016.

SmartCities-Chart

Source: Digital Cities Survey 2015

Open Data’s Hidden Value

Emerging technologies are helping advance and improve local government, and the movement toward open government data in the U.S. has had positive effects on the relationship between citizens and government. But it’s not just the citizens who are benefitting from open data. Open Data has hidden value, and states and localities are beginning to profit from it.

Open data’s economic potential is estimated at more than $3 trillion in the global economy, according to a recent report by consulting firm McKinsey & Co.[10] Their report concludes that Government will play a key role in generating that economic activity and public agencies stand to gain financially through:

  1. increases in tax revenue generated from the expanded economic activity,
  2. higher revenue from the sale of high-value data to companies,
  3. reductions in transactional costs,
  4. increases in service efficiency, and
  5. the always politically popular job creation.[11]

The intelligent transportation systems (ITS) market is a $2.6 billion business with projections to grow to $12 billion in revenue in the next five years.[12] MetroTech, an Atlanta-based startup has developed technologies that turn video feeds from traffic and security cameras into open data that can be used to better synchronize traffic, as well as identify wrong-way drivers before they cause fatalities.  According to Christian Kostcher, CEO of MetroTech, “People and businesses are willing to pay for this kind of data. Open data is now becoming a service.”

The environmental impacts are also astronomical. Several cities are making use of open data collected from intersections for the purpose of optimizing traffic flow. While citizens undoubtedly benefit from synchronized traffic signals through reduced delays at major intersections, improvements to a city’s air quality are being directly impacted. For example, optimizing traffic signal timing reduces both idling and the acceleration for vehicles, leading to less fuel being burned and less carbon dioxide emissions. Portland, OR utilized a software program created from this type of open data at 135 intersections saving motorists 1.7 million gallons of gas annually. This is equivalent to over 15,000 tons of CO2 per year.[13]

Making data open can also save the government money. For example, San Francisco made a simple decision to open up access to real-time transit data in 2012, resulting in 22% fewer 311 calls, saving the city $1 million.[14]

A City’s Biggest Challenges

Clearly, open data can make enormous contributions to the development of Smart Cities. But concerns over protection of privacy, security, coordination of efforts to connect multiple jurisdictions throughout a city, and availability of funds are challenges that encourage incrementalism.

Data collection – especially as it relates to traffic sensors and surveillance cameras can be a concern. As cities add more sensors, analyze more data and use advanced computer programming to run traffic lights and even vehicles, they’re increasingly confronting new ethical, legal and policy questions. But the safety and privacy conundrum can be avoided with the right technology; personal information can easily be anonymized by separating the data collected from an individual’s identity.[15] Still, that requires a trustful relationship with the public that is difficult to establish, much less maintain.

When it comes to the public sector, jurisdictional protectionism, incompatible systems, and unaligned funding models all complicate the coordination of efforts and aggregation of data. The reality is that it takes investment infrastructure to develop a true Smart City, and most cities do not have the funds needed to invest. Finding a sustainable financing model for Smart City projects is the primary impediment to implementation. Part of the problem is that many local authorities lack the necessary awareness about what technology can actually do for them and how enormous the return on their investments will turn out to be. There are so many possibilities with the open data available and tech-savvy entrepreneurs waiting to get their hands on such data, but connecting them with the right investors, not to mention, determining a true ROI, can be challenging.

The Push for Public-Private Partnerships

The clearest solution for creation of a sustainable financing model is public-private partnerships (P3). Cities will need help or will be slow to realize the benefits of the innovations available with open data.[16] Government, business and communities must be partners in this effort, and more are finding hope in P3.[17] Global heavyweights like IBM, Microsoft, Cisco, General Electric, Siemens, AT&T, Oracle and Google all have large dedicated Smart City divisions, while the Smart Cities market is being pursued by a slew of upstarts. And no wonder – the potential is enormous.[18]

For the private sector, the economic benefits of open data could be significant: new business opportunities, reduced costs by not having to invest in the conversion of raw government data; better decision-making based on more accurate information and a more skilled workforce.[19] According to Pike Research, in the present decade, cities around the world will invest $108 billion in Smart City infrastructure.

Summary

Many municipal authorities are still in the early stages of coming to realize the vast potential of technology-enabled Smart City innovations. These developments create opportunities to make cities more efficient, more connected, more sustainable and more responsive to citizens’ needs.

A Smart City upgrades incrementally. Funding sources, citizen/stakeholder buy-in and serious thought to privacy and security aspects all need to be part of the conversation to make the progress sustainable.

Smart cities are not driven by ‘the People’ of course, but rather by forward-thinking city authorities who champion embracing the data they already collect and making it accessible for collaborative inventions. They are the ones that can enhance the efficiency of city management and operation by means of intelligent technology. [20]

We’re still a long way from achieving any sort of open data nirvana, where the public and private sectors are working hand in hand to make urban transportation as efficient as possible, but the groundwork is being laid. The future of Smart Cities is closer than you may think. And it’s going to be a wild ride.

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[1] https://www.mainstreet.com/article/the-best-big-us-cities-for-drivers-who-cant-stand-traffic

[1] Reed, M. “Urban Development Districts: Innovation Labs for Smart City Projects.” Blog.placemeter.com. (2016, May 12). Available here.

[2] Across Technology, on behalf of EMC Greenplum. “Open Data Power Smart Cities.” Datascienceseries.com. (2012, Dec. 7). Available for download here.

[3] Johnson, K. D. (2016, March 16). “How Much Time Do Metro Atlantans Waste in Traffic?” AJC.com. Available here.

[4] N.a. “Renew Atlanta 2015 Infrastructure Bond.” Atlantaga.gov. (2015, Nov 18). Available here.

[5] Robinson, R. “The Amazing Heart of a Smarter City: The Innovation Boundary”. TheUrbanTechnologist.com. (2012, Aug. 13). Available here.

[6] Johnson, K.D. (2016, March 16).

[7] U.S. Department of Transportation. “Beyond Traffic: The Vision for the Kansas City Smart City Challenge.” Transportation.gov. (2016, Feb. 4). Available for download here.

[8] Across Technology, on behalf of EMC Greenplum.

[9] Ibid.

[10] Manyika, J, Chui, M. Farrell, D., Van Kuiken, S. Groves, P. and Doshi, E.A.”Open Data: Unlocking Innovation and Performance with Liquid Information”. McKinsey&Company report. (2013, Oct.). Available here.

[11] Newcombe, T. “Open Data’s Hidden Value.” Governing.com. (2014, Dec.) Available here.

[12] Karkaria, U. “Atlanta Startup MetroTech Works to Get You Out of a Jam.” Atlanta Business Chronicle. (2013, Nov. 8). Available here.

[13] Portland OR Case Study printed article stats.

[14] Newcombe, T. “How Government Can Unlock Economic Benefits from Open Data.” Govtech.com. (2014, Dec. 16). Available here.

[15] Across Technology, on behalf of EMC Greenplum.

[16] Reed, M. (2016, May 12).

[17] Across Technology, on behalf of EMC Greenplum.

[18] N.a. “Gartner Says Smart Cities Will Use 1.1 Billion Connected Things in 2015.” Gartner.com. (2015, March 18). Available here.

[19] Newcombe, T. (2014, Dec. 16).

[20] Across Technology, on behalf of EMC Greenplum.