Cities of the future

Our research on megatrends shows that, in many countries, ageing populations are transforming societal needs. By 2050, that means cities will have more assisted living accommodation, for instance. They will develop spaces for social activities, safer transport, and more mobility solutions to help older residents access local amenities.

Meanwhile, the growth of middle-class cohorts is transforming economies. It could boost commercial areas and prime spaces for services, from entertainment and culture to green spaces. And as urbanisation grows, so are single-person households and preferences towards sustainability and eco-friendliness.² This will impact the residential set-up of cities, towards smaller, single-person units in zero-emissions, energy-efficient buildings.

The rise in low-carbon regulation around the world, although different across countries, should mean many more new-build developments (residential, office, commercial and industrial) are also zero-emissions and energy efficient. They could be built using advanced manufacturing and automation – from 3D printing to nanomaterials – as these transform production capabilities.³

Cities will be resilient

In research from 2021, Adaptation without Borders also noted that population density in often high-risk areas like floodplains and islands put cities at greater risk from extreme weather events than less densely populated regions. Flooding could endanger residents, damage infrastructure and contaminate drinking water sources. The urban heat island effect could also put both people and infrastructure at risk from extreme temperatures.⁴

Major cities around the world need to adapt and build resilience against these hazards. By 2050, many more urban zones will include seawalls, additional trees and green spaces to lower temperatures, and infrastructure to absorb storm and flood waters (like Manchester’s “sponge park”).⁵ Areas closest to water may no longer be considered suitable for development and could be transformed into other structures or green and blue public spaces (blue spaces are outdoor environments that prominently feature water).⁶

Some cities like Phoenix, Arizona, have begun to invest in making themselves ready for hotter temperatures, from providing more shade and trees to overhauling building codes. This could attract businesses and investment in the long term, as companies look for resilient places to operate.⁷

They will be changed by climate action

As a global coalition of 97 cities, C40 Cities champions cutting emissions by halving fossil fuels by 2030, building resilience, and advancing city climate action.⁸ Its members are working across all areas affecting urban environments, from renewable energy adoption to waste management. As they progress in implementing their agenda, it will not only transform participating cities but also show the way for others.⁹

Beyond buildings, the C40’s Green and Healthy Streets Accelerator will reshape opportunities for infrastructure investors, as its cities adapt street layouts and public transport, enhance cycling and walking routes, increase the share of zero-emission buses, and set up low-emission zones.¹⁰

The coalition also aims to increase access to nature in urban areas. One pathway they describe is to make 30 to 40 per cent of city surface green and/or permeable. This includes street trees, parks, building-integrated vegetation, infiltration trenches, detention basins, and regenerative urban agriculture. The other pathway is to give 70 per cent of the city’s residents access to a green or blue space within a 15-minute walk or bike ride.¹¹

Cities will be healthier

For 35 years, the World Health Organisation’s (WHO) European Healthy Cities Network has been putting emphasis on public health at the municipal level.

“The network defines healthy cities as those that build trust and resilience within communities, invest in people and promote inclusion. They ensure communities participate in decisions that affect where and how people live, their common goods and services, including on health and well-being,” explains Kira Fortune, responsible for Healthy Cities, Health Promotion and Well-being in the Regional WHO Office of Europe.

“Policymakers and mayors in the WHO European Healthy Cities Network pledge clear, practical commitments to make health a cross-cutting priority: they provide visible political leadership, pledge to mayoral commitments and designate political champions to ensure “Health in All Policies” is embedded across planning, transport, housing, environment and social services,” she adds.

“Right from the day of applying, members are required to share City Health Development Plans, Strategies, Policies or equivalent documents confirming that health is an integral aspect of their city’s development,” she says.

Cities’ social, physical and cultural environment should be accessible to all and promote wellbeing, and urban design should incorporate health and sustainability.¹² As populations age in Europe, the Healthy Cities Network also recommends that cities develop safe infrastructure centred on accessibility and connectivity, including public transport and digital inclusion.¹³

Cities will revolve around accessible amenities

These trends all point towards the availability of social activities, safer transport and mobility solutions, but also sustainable buildings and green and blue spaces, as well as health and inclusivity. Carlos Moreno’s 15-minute city framework proposes a potential solution for urban design that meets many of these requirements.

The idea is to offer all densely populated residential areas a full array of essential urban services within a 15-minute walking or cycling distance. The other key tenet of the framework is that such neighbourhoods must be common enough to be widely available and affordable.¹⁴ That means more investment in affordable yet high-density residential, which is a challenge in today’s market.

However, achieving this would reduce the need for travel, cutting air and noise pollution, and even reducing road infrastructure, while freeing up space for walking, cycling and green and blue spaces. It could also make streets safer from traffic deaths and injuries.¹⁵

“By 2050, a healthy European city will put health and equity at the heart of every policy,” hopes Fortune. “People will live in 15-minute neighbourhoods, where everyday needs are within easy reach and streets are safe for walking, cycling, and clean transport. Homes will be affordable, energy-efficient, and accessible, and primary and community care will focus as much on prevention and well-being as on treatment.”

To build those healthy, resilient, sustainable and inclusive cities, the foremost consideration is housing.

“In several countries, there is a lot of media coverage about the ‘housing crisis’,” says Jonathan Bayfield, a research director who leads on real estate at Aviva Investors. “It can refer to a number of issues: poor quality of housing, affordability, distribution, and supply.”

He says this is where institutional investors can play a key role by developing high-quality, professionally managed housing for long-term rentals. This is particularly relevant in areas where land is constrained and demand is high.¹⁶

“Long term, we think there is a need for institutional capital to support affordability issues in our cities globally,” he says.

He adds that a key factor to monitor in certain countries is ageing populations, which could significantly reshape the landscape of cities. For example, healthcare and elderly care may become a key category of jobs, as we have seen in much of the non-coastal USA. This is likely to be coupled with growth in senior living facilities, a lot of which will require significant investment and construction.

Meanwhile, although the demographics for student accommodation are positive for the next decade, for many Western economies like the UK and the EU, Bayfield expects challenges to emerge by 2050.

And places like prime shopping centres will need to adapt their environment to new users, compete with new types of media entertainment, and probably start incorporating residential uses. 

As a result, Gregor Bamert, head of real-estate debt at Aviva Investors, says that in his asset class, the key considerations are the location and current use of assets, but also their potential for adaptation.

“Taking our lending secured to Shaftesbury Capital in and around Carnaby Street, London, as an example, the usage of buildings in our charge in that location include retail, leisure, office and residential and are constantly changing and adapting. The climate and biodiversity initiatives the sponsor implements give us confidence in having loans that will mature in ten years or more,” he says.

Green spaces

Net-zero buildings are a key area of focus, whether for housing, offices or other uses. In the short term, Bayfield says Aviva Investors’ real-estate teams are focusing on net-zero operations developments – buildings running entirely on renewable energy, like 101 Moorgate, a central-London office development.¹⁷

“On some of our UK single-family home investments, we have partnered with Octopus Energy, which is able to guarantee 100 per cent renewable energy, being an energy producer as well as a provider,” says Bayfield. “Octopus installs solar and battery storage. Tenants use the green energy for their homes, while Octopus sells the excess back to the grid at peak times and uses that to deliver zero-cost energy.”¹⁸

In the longer run, Bayfield says the goal in the industry will be to lower emissions on construction itself, with a net-zero aim by 2050. For many, research is in its early days, but developers are focusing on low-carbon materials, from green steel to timber and 3D printing from sustainable materials.

The provision of green spaces, from green roofs to permeable surfaces, will be a focus as well. It ties into net-zero, as a carbon sink, but also more broadly in urban planning and resilience-building. Green spaces can be key to mitigate flood risks and relieve urban heat-island effects, creating value for investors, as they can help make buildings and neighbourhoods more attractive.

These considerations also open possibilities for infrastructure investments.

“There’s a lot of appetite to look at cities in their own right,” says Darryl Murphy, managing director for infrastructure at Aviva Investors. “Particularly in developing countries, urbanisation is a driver of economic growth and the rise of the middle class. It is therefore a priority for many governments. And if more people settle in cities, infrastructure investment is non-negotiable to make those cities function.”

In a similar trend, cities in developed markets are competing for people and economic growth. “The UK is a good example,” says Murphy. “Manchester, Leeds, Glasgow and Bristol will be competing to attract people, industry and investors to generate economic value.”

To achieve this, Murphy says cities need to develop local infrastructure plans, replicating and adapting national plans at a local level. These can give investors visibility and clarify how different requirements connect.

Trams, trains and automobiles

“The first key point is the interaction between transport and housing,” says Murphy. “Do you want vibrant city centres where people live, or a world where people generally live outside the city? If you decide to build most housing outside cities, you will need to design transport systems to get people into the centre.

“The alternative is to invest in housing in the city itself, alongside mass transit to allow people to get around. In this scenario, efficient public transport is key,” he adds.

To encourage more walking and cycling, and for municipalities wanting to develop 15-minute cities, it is just as essential to integrate housing, urban design (of streets, pavements and cycling lanes, for example) and public transport strategies. They need to think about where people live, work, and access amenities, to tie everything into a 15-minute cyclable ecosystem.

“Our asset-level framework when investing in a single-family suburban rental focuses on proximity to key amenities - such as good local schools, healthcare, the high street, local employment opportunities, economic strength, and transport links to other workplaces,” says Bayfield.

And to create the cities of the future, decarbonised transport is another important consideration, not only in terms of mass transit like electric buses and trams, but also when deciding on low-emission areas, congestion charging and, crucially, the number and location of EV charging points.

Bayfield adds that autonomous vehicles (AVs) might change city landscapes. Firstly, there could be a bull case for the development of autonomous taxis replacing personal cars, though this remains to be seen. Secondly, with AVs, warehouses can set up anywhere – and not necessarily in high proximity to dense urban areas.

“Currently, delivery companies favour certain locations across Europe because they provide access to large parts of the population within the duration of a driver’s shift,” says Bayfield. “But with autonomous trucks, that won’t be needed, as drivers’ fatigue is removed from the equation.”

Warehouses and AVs could be decentralised and brought closer to cities. That would reshape the landscape by putting pressure on land while driving investments in EV charging infrastructure, power, as well as cloud and digital developments to run the AVs.

Decentralised and distributed

This would add to the longstanding trend in creating a more digital and connected society. From an investment standpoint, it continues to support allocations to the underlying infrastructure of fibre connectivity.

And digital and artificial intelligence (AI) providers will want to build data centres in or near large cities, to minimise latency. As with AVs, this will likely put pressure on land while supporting investments in fibre networks – and power.

Indeed, digital societies linked by electric and autonomous transport will require ever more energy, intelligently managed and, where possible, protected from geopolitical and weather-related risks. Murphy explains that, while energy strategy remains a point of national policy, cities can and should think about the best ways to manage their local supply and demand.

“Cities own properties with solar panels, smart metres, and EV charging points, effectively creating micro-grids,” he says. “But while distributed energy has been touted for a long time, it is yet to materialise. The most important element to managing supply and demand is the development of smart grids, in my view.”

As discussed in a series of industry roundtables Aviva Investors held through 2024 and 2025, there are significant investment barriers across the sectors affecting cities, from planning delays to policy requirements.^19,20,21

Supportive policy is particularly relevant, as confirmed by the WHO’s Fortune: “The biggest risks to achieving the 2050 vision are short-term political priorities or lack of political commitment, weak coordination across sectors, climate shocks that undo progress, and development patterns that deepen inequalities or displace vulnerable groups,” she says.

Murphy adds that, for cities especially, finding revenue streams to make investments attractive can also be tricky. According to a 2023 OECD paper on financing cities, targeted public investment can act as a catalyst for private investment, but municipalities should use a variety of policies and instruments to appeal to different investors, from individual landlords to institutional investors. This would enable them to meet the varying scales of investment needs, from a small park to a large mass-transit system.²²

The paper identifies four types of instruments that can bring in private investment: development levies, fees and charges; strategic land and building rights management; subsidies and tax incentives; and partnership models between cities and the private sector. But the money to pay for these must come from somewhere.

Murphy explains that much of the payback on city infrastructure occurs over very long timelines and is not always monetary. Part of it will come in the shape of broader economic and social benefits. Cities can use local taxation and levies on businesses to deliver investment returns, but other sources, like asking consumers to pay for a service, might be decided at a regional or national level rather than a municipal one.

Land-value capture is another possibility raised in the OECD report, since quality urban infrastructure investment can increase this value. However, Murphy says mechanisms to capture it are difficult to monetise.

“It is something we have collectively struggled with for a number of years,” he says. “From an investor’s point of view, there is appetite to do it, but we need to start recognising the local issues around this type of funding.”

As the many initiatives and city coalitions progress their agendas, partnering with investors can address challenges and create models that deliver strong returns. Private market investors can help shape thriving cities for 2050 by working with municipalities and driving the solutions of the future.