Head of Investments at the Unreasonable Group, focused on backing high-growth ventures at the nexus of advanced technology, profit & impact
With over 68% of humankind expected to live in cities by 2050, many of us are observing the reshaping of the urban city firsthand. Smart cities make use of intelligent solutions, such as the Internet of Things (IoT) and information and communications technology (ICT), to strike a healthy balance between human quality of life and the preservation of the natural environment.
Market Value And Investment Leaders
As with any civil upgrades, the rise of new smart technologies and infrastructure requires adequate financing and investment. The market size of the global smart city industry is set to double, from $410.8 billion in 2020 to $820.7 billion by 2025. This exponential growth is guided by global developments in IoT technologies, extended 5G access and eased government regulations on a global level.
In 2019, the top 100 cities that invested in smart innovation made up just under 30% of the global spend in the industry, according to International Data Corporation (IDC). However, while growth might currently be focused within developed cities, investment opportunities are quickly expanding across the developing world. Notably, 70% of smart city growth potential lies in cities that invest less than $1 million per year. This shows massive potential for experienced smart providers to integrate their knowledge and invest in projects across the world.
Globally, Singapore is the current top smart city investor, followed by Tokyo, New York and London. Regionally, the U.S., Western Europe and China account for over 70% of the world’s total spend on smart cities, with Latin America and Japan experiencing the fastest growth in spend.
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New Technologies Are Paving The Way For The Smart City Era
As of today, the majority of opportunity is concentrated around renewable and resistant energy and infrastructure, with smart grids taking up considerable space in the industry. While smart grids attract significant investment, their share of the market is expected to decrease as large-scale renewable energy power becomes mainstream.
Together, smart grids, along with fixed visual surveillance, advanced public transport, intelligent traffic management and connected back-office innovations, represent over 50% of the industry’s investment opportunity, according to IDC. The company predicts that vehicle-to-everything (V2X) communication, officer wearables and digital twin technology will experience the most investment growth over the coming five years.
Over the next few years, expenditure and investment in smart technologies, ICT and IoT is expected to soar as we begin to slow with prototype testing and move toward deploying and integrating new technologies, such as augmented reality, drones and artificial intelligence (AI) robotics, into our everyday lives.
Just as smart cities and IoT technologies need financing, IoT presents financial markets with access to data that can be collected, analyzed and processed more efficiently than ever before. In this mutually beneficial relationship, investing in the smart revolution is becoming easier, quicker and more secure. Traditional financing models are becoming redundant in this new era, as the public and private sectors begin to use AI and IoT to make evidence-based investment decisions.
The Impact Of Covid-19 On Technology Investment
The Covid-19 pandemic has caused uncertainty across most investment sectors. In the flurry of moving from office to remote working, hardware, software and digital spending has shifted from predictable lines and is continuing to change as remote working becomes standardized.
The pandemic has been a catalyst for change for investors across the globe. A survey of over 1,000 IT leaders found that 38% said budget increases will be affected by the virus, with IT spend decreasing continuing into 2021. New trends show that businesses plan to increase cloud service spend in 2021, while plans to introduce emerging digitalization will drop further as companies try to cut costs. On the other hand, companies have realized that remote working is only possible with modern ICT and digital technologies, and investment in these sectors is expected to stabilize and gain traction into 2021.
With a rapid Covid-19-related decline followed by steady growth, we can expect to see increased investment into the smart city industry.
While there is evidence that smart city innovation positively impacts economic growth, investors are cautious, emerging from a worldwide pandemic and economic slump. With IoT and digitalization becoming a part of our everyday lives, businesses, governments and private entities can benefit from access to a vast amount of data, enabling us to better understand and predict barriers and opportunities for investment.
As our physical and digital worlds become intertwined, we are presented with opportunities to invest in a future of continuous and lasting change, and digitalization is enabling smart cities to realize opportunities and overcome challenges.
Source: Forbes – Money