Is aerotropolis Songdo really the city of the future?

Songdo from above. Image: Fleetham/Wikipedia.

The ‘aerotropolis’ has been described by U.S. business consultant John Kasarda, the pioneer of the concept, as the “city of the future”. The notion of building a city around an airport, not the other way round, has been deemed to be crucial for economic development. Just as urban areas sprawled around railroads in the 1800s, and highways in the 1900s, the thinking is that business and commerce will jump at the opportunity to be based near a world-class, international hub.

Amsterdam Schiphol and Seoul Incheon have been widely seen as the two poster children for the concept of the aerotropolis. But are airport cities really that glamorous in reality?

Fast forward eleven hours from Heathrow, and one lands in the stylish Terminal 1 of Seoul Incheon (IATA code: ICN), a routine prize-winner in the "World’s Best Airport’ awards. Every time I have landed there, there is some new addition to the hi-tech gizmos on show in the arrivals lounge, whether high-tech sanitation in the restrooms, a high-speed railway linking Incheon with the rest of Seoul, or, on my recent arrival, automated robots making sure the floors of Arrivals were polished to perfection.

Yet much of the attention has focused not on ICN, but its aerotropolis of Songdo, officially the Songdo International Business District. A ‘smart city’ built from scratch on reclaimed land, Songdo was destined to be the prototype cosmopolitan aerotropolis, the city of the future: home to international university campuses, globe-trotting businessmen, multinational financial firms, as well as a place for high-end tourism. The 2012 Presidents Cup golf tournament was played at the Jack Nicklaus-designed golf course in Songdo. What better way to attract an international clientele?

Yet have a look around Songdo, and it feels like a ghost town. The students are there, businessmen come and go, restaurants and department stores open their doors, yet something is missing.

The lack of footfall and sporadic numbers of ‘cosmopolitan clientele’ were crystal clear as I walked down the deserted streets. Songdo is no exception to South Korea’s obsession with high-rise life, but more apartments are being built than tenants moving in. In what looks like a half-hearted attempt to emulate the epitome of global urban cosmopolitanism, New York, the high-rise apartments encircle a designated park named Central Park.

Central Park. Image: Dongjun Kim/Wikipedia.

Songdo also promised environmental and technological progress. Amongst the city’s many accolades, it has claimed the title of the world’s first ‘smart’ city: sensors have been placed throughout the area to gather information on traffic flows, and apartments are fitted with the latest technological accouterments. The frequent-flying businessman can make video calls from the televisions in the apartments, and the global student can attend university classes remotely. Trash is collected and separated automatically, sucked out of apartments by a vacuum chute, and, within the blink of an eye, arrives at the sorting facility.

These are hallmarks of an efficient city – but only if there are car users for whom tracking pollution levels and traffic flows may be useful, if there are businessmen who actually make use of the LED television screens to conference call, and if there is enough trash to be recycled and sorted, come to that.


Speaking to those who live in Songdo and its vicinity, the hype all seems a bit much. With South Korea increasing in its technological innovation day-by-day, the ability to host a conference call from one’s LED television screen is no big deal. Similar waste collection has been tried tested in Singapore, amongst other cities: again, nothing to get excited about.

And most of all, when I asked where the cosmopolitan citizens are, the reply was simple: “They are all in Seoul, and will stay in Seoul.” Something has clearly gone wrong for Songdo, not least the fact that the city’s construction on reclaimed land has attracted its fair share of criticism from environmental groups – but a big problem is that it has failed to attract the globetrotting, frequent-flying, citizen-of-the-world.

There are plenty of airports around which commerce, retail, and residence are becoming ever more numerous, which raises the question of whether the aerotropolis is actually something new. Just as it is nothing out of the ordinary that businesses sprawled along the railroads in the 19th century, maybe the airport is just the railroad of today: it is only natural for urban life to blossom around it.

Maybe we should pay less attention to the new ‘cities’ springing up around airports, and more on the airports themselves. They may seem like mere waiting rooms to some – but they can be rich sources of architecture, technology, big data, and fascinating places in their own right. Incheon’s Terminal 2 opened in January of this year. It promises to be just as glamorous, efficient, and technologically-embedded, if not more, than Terminal 1.

So next time you see someone checking-in to a flight with an ‘ICN’ tag on their luggage, you may know one thing. They may be flying to Incheon, but chances are they will not set foot in Songdo.

 
 
 
 

High streets and shopping malls face a ‘domino effect’ from major store closures

Another one bites the dust: House of Fraser plans to close the majority of its stores. Image: Getty.

Traditional retail is in the centre of a storm – and British department store chain House of Fraser is the latest to succumb to the tempest. The company plans to close 31 of its 59 shops – including its flagship store in Oxford Street, London – by the beginning of 2019. The closures come as part of a company voluntary arrangement, which is an insolvency deal designed to keep the chain running while it renegotiates terms with landlords. The deal will be voted on by creditors within the month.

Meanwhile in the US, the world’s largest retail market, Sears has just announced that it will be closing more than 70 of its stores in the near future.

This trend of major retailers closing multiple outlets exists in several Western countries – and its magnitude seems to be unrelated to the fundamentals of the economy. The US, for example, has recently experienced a clear decoupling of store closures from overall economic growth. While the US economy grew a healthy 2.3 per cent in 2017, the year ended with a record number of store closings, nearly 9,000 while 50 major chains filed for bankruptcy.

Most analysts and industry experts agree that this is largely due to the growth of e-commerce – and this is not expected to diminish anytime soon. A further 12,000 stores are expected to close in the US before the end of 2018. Similar trends are being seen in markets such as the UK and Canada.

Pushing down profits

Perhaps the most obvious impact of store closures is on the revenues and profitability of established brick-and-mortar retailers, with bankruptcies in the US up by nearly a third in 2017. The cost to investors in the retail sector has been severe – stocks of firms such as Sears have lost upwards of 90 per cent of their market value in the last ten years. By contrast, Amazon’s stock price is up over 2,000 per cent in the same period – more than 49,000 per cent when considering the last 20 years. This is a trend that the market does not expect to change, as the ratio of price to earnings for Amazon stands at ten times that of the best brick-and-mortar retailers.

Although unemployment levels reached a 17-year low in 2017, the retail sector in the US shed a net 66,500 jobs. Landlords are losing longstanding tenants. The expectation is that roughly 25 per cent of shopping malls in the US are at high risk of closing one of their anchor tenants such as a Macy’s, which could set off a series of store closures and challenge the very viability of the mall. One out of every five malls is expected to close by 2022 – a prospect which has put downward pressure on retail real estate prices and on the finances of the firms that own and manage these venues.

In the UK, high streets are struggling through similar issues. And given that high streets have historically been the heart of any UK town or city, there appears to be a fundamental need for businesses and local councils to adapt to the radical changes affecting the retail sector to preserve their high streets’ vitality and financial viability.


The costs to society

While attention is focused on the direct impacts on company finances, employment and landlord rents, store closures can set off a “domino effect” on local governments and businesses, which come at a significant cost to society. For instance, closures can have a knock-on effect for nearby businesses – when large stores close, the foot traffic to neighbouring establishments is also reduced, which endangers the viability of other local businesses. For instance, Starbucks has recently announced plans to close all its 379 Teavana stores. Primarily located inside shopping malls, they have harshly suffered from declining mall traffic in recent years.

Store closures can also spell trouble for local authorities. When retailers and neighbouring businesses close, they reduce the taxable revenue base that many municipalities depend on in order to fund local services. Add to this the reduction in property taxes stemming from bankrupt landlords and the effect on municipal funding can be substantial. Unfortunately, until e-commerce tax laws are adapted, municipalities will continue to face financial challenges as more and more stores close.

It’s not just local councils, but local development which suffers when stores close. For decades, many cities in the US and the UK, for exmaple Detroit and Liverpool, have heavily invested in efforts to rejuvenate their urban cores after years of decay in the 1970s and 1980s. Bringing shops, bars and other businesses back to once derelict areas has been key to this redevelopment. But today, with businesses closing, cities could once again face the prospect of seeing their efforts unravel as their key urban areas become less attractive and populations move elsewhere.

Commercial ecosystems featuring everything from large chain stores to small independent businesses are fragile and sensitive to change. When a store closes it doesn’t just affect employees or shareholders – it can have widespread and lasting impacts on the local community, and beyond. Controlling this “domino effect” is going to be a major challenge for local governments and businesses for years to come.

Omar Toulan, Professor in Strategy and International Management, IMD Business School and Niccolò Pisani, Assistant Professor of International Management, University of Amsterdam.

This article was originally published on The Conversation. Read the original article.