Economics of vertical cities 三维城市的经济学分析 Lei Yian, School of Physics, Peking University 1st International conference on Vertical city 14th Oct., Tianjing

Table of contents A Vertical city, basic features, (enclosed, smart, huge volume) Construction plan of the city, existing and expecting new technology Construction cost estimation (bottom up, comparison) The cost and the value of a property The cost and the value of a vertical city What’s special in China & Jingjinji? Conclusion

What is a vertical city High Huge volume (space) Enclosed, separate from environment Artificial environment temperature, humidity, pest control, … Fully functional city Dedicated human habitat (vs natural habitat)

Other basic features of a vertical city Smart (智能城市）, foreseeable future technology ready, robots, automatic delivery High energy efficiency No heating, High efficiency air conditioning, coordinated and energy recovery elevator system, … Walking and small electric vehicles based traffic in building, railed commuting between cities. Cars are for fun. Safe No traffic accident Social service fully coverage: police, medical assistance, … No natural disasters, storm, heat, blizzard, … No wild animal attack, no pest, hygene Minimal crime rate High living standard for everyone Air quality, Comfortability Nice community, Safety & Security Less anxiety and conflict Affordable property Equality Minimum human impact on environment less land usage less urban heat island effect less energy, water, and other resource consumption Futuristic?, or realistic even now?

An example A vertical city can be in a form of wildest imagination. In this talk we will discuss the simplest configuration: A stack of enclosed city blocks. Each level is 20 or 40 meters high, separated by a service/infrastructure layer (3-5 meters high). Maybe just 1 or 2 40 meter levels. Each level is functional self-sufficient (air control, information system, utility, …), and vertically isolated (for air flow control). Construction bottom up. Up level construction does not affect the lower levels. Vertical connections (elevator, utilities, …) extended seamlessly.

Construction plan Large footprint base construction, underground structures, piling & concrete works. City weight neutral or insignificant. When construction finished, no extra weight are put to the base. Structure weight no more than excavation. Extendable elevator shafts or system, composite columns & steel beams Standardized infrastructure and building construction, prefabricated parts, automation (in-door construction is much easier to automate). Primary and secondary development. Infrastructure construction vs. community (or level, city block) development. Infrastructure construction proceeds up level by level. Finished levels can be further developed as a city block. A smooth process. Upper level infrastructure development depends on demand. Save time and cut financial overheads.

More considerations: City elevation, above worst case sea-level rise scenario, about 60 m above current sea level Long lifetime, fixable or replaceable major components, light maintenance. Light weight, re-configurable prefabricated in-city construction. Inflammable materials, minimum fire risk, fast reaction fire control Limited to about 20 levels, lowering vertical traffic demand and structural stress, so we can use existing and economical technology, materials, …. Less technological or financial challenging, more acceptable to decision makers, city dwellers, …

Construction cost estimation methods Reference estimation Comparing with existed mega-buildings Commercial building vs residential building Basic construction cost summation Concrete, steel, infrastructure, facilities Anything special in china? Jing Jin Ji?

Cost of world largest buildings by floor area Rank 排名 Name 名称 Location Floor Area million m2 Cost (bn RMB) Cost per m2 (kRMB / kUSD) 1 New Century Global Center 成都新世纪环球中心 Chengdu, China 中国 176 12.0* 6.2 / 0.91 2 Dubai Int. Airport Terminal 3 杜拜国际机场3号航站楼 Dubai, UAE 阿联酋 171 28.3 16.6 / 2.4 3 Abraj Al-Bait Endowment 麦加皇家钟塔饭店 Mecca, Saudi Arabia 沙特阿拉伯 158 93.3 55 / 8.1 6 Beijing Int. Airport Terminal 3 北京首都机场3号航站楼 Beijing, China 98.6 22.0 22 / 3.2 7 The Venetian Macao 澳门威尼斯人酒店 Macao, China 中国澳门 98 15.0 15 / 2.2 8 Sands Cotai Central 金沙城中心 89 25.0 28 / 4.1 * Including an auxiliary building not counted in floor area

Chengdu New Century Global Center The project consists of more than one building Main building size 500x400x100m An outskirt of resident apartments, hotels, offices, conference rooms, a university complex, two commercial centers, a water park, a 5000 m2 artificial beach, … “overheads”

Inside New Century Global Center Main entrance hall Water park (no need for sun scream).

Points to ponder: Cost increases approximately linearly to structure size Landmark buildings are luxury, and expensive. UAE, Saudi Arabia, Macao are not industrial places. Almost all construction works have to be outsourced. All materials have to be imported (expensive). Airport terminals have very high clearance, which means much less floor area. Airport terminals is heavy duty, heavy trafficking, heavily equipped, and luxury. Recreation needs most space (high clearance, large span), hence most expensive, but shared among most people. Residential area are most economical in cost/floor area ratio. NCGC is still very “empty”, thin outskirt, didn’t make full use of its 100 meter height. 500x400x100, with each story 5 meters high, have 800 million m2 floor area, about 5 times current area Typical clearance, residential, 3 m, commercial 4 m.

Vertical city scenario Dimension: 1000x1000x400m 20 levels, each 20 meters high. Total 20 M m2 for city development 1/3 residential, 1/6 commercial & public, half recreational Residential (2.7 m clearance): 20 M / 3 * 7 = 47 M m2 Commercial & public (4 m clearance): 20 M / 6 * 5 = 17 M m2 Recreational (20 m clearance): 20 M / 2 = 10 M m2 Total area: 74 M Floor area / Footprint ratio = 74 / 1 M = 74 >> 1.70/(0.5x0.4) = 8.5 Per m2 cost should be lower than NCGC, assuming 5000 RMB (740 USD) As an estimation, total cost: 74 M * 5000 = 370 Bln RMB

Another approach Current construction prices in China: Concrete high residential building 2000 RMB/m2 Steel structured residential building 3000 RMB/m2 Commercial building 4000-5000 RMB/m2 Large structures (not including interiors): 8000-10000 RMB/m2 Simple vertical city: Infrastructure including parks: 10000 RMB/m2 Residential: 3000 RMB/m2 Commercial: 5000 RMB/m2 Total: 10000 x 20M + 3000 x 47M + 5000 x 17M = 426 Bln RMB

Another reference Source: Construction cost handbook, China & Hong Kong 2016, Langdon & Seah Ltd. Mainland China, apartments, high rises, average standard: 500-750 USD/m2; office: 750- 1200 Hong Kong, apartments, high rise, average standard: 3200- 3700 USD/m2; office, 3100- 3700

Yet another reference Hunan, Changsha, Broad Sustainable Building 838 m high, 1,050,000 m2 floor area Planned to build in 210 days, suspended RMB 9 billion total cost, 8600/m2

Vertical city vs Skyscrapers Larger volume and floor area, lower cost per m2 Lower surface/volume ratio, more energy efficient Much smaller height/width ratio, much less challenging in vertical rigidity design & construction Lower elevator shaft/floor ratio, higher capacity, lower cost per m2 Better inherent stability, less structural consideration for earthquake, wind, etc., lower cost In-city traffic dominance vs out-bound traffic dominance (problematic) Much more choices in travelling paths. Skyscrapers have strict in-building passages (Elevator bound) VC cost is much lower than skyscrapers if calculated by usable space

Land & financial cost In China, land cost consists typically 20-50% of the total cost of a development project. In Tier-1 cities (BJ, SH, SZ), up to 70% is common. Vertical city lower land cost by 20 fold, which is no more significant. Vertical city is location insensitive, as it is self-sufficient. No land-scarcity problem in mega-cities. I.e., a vertical city multiply the most valuable city land. Level-by-Level development strategy lower financial cost drastically. Cash flow-in by a year or two, instead of 10 years, and the amount of loan is cut by 10 fold. 400 Bln RMB and 10 Year vs 40 Bln RMB and 2 year. Thus, the cost of a vertical city is almost purely construction cost, which is about 4000 RMB (600 USD) / m2. We will use 5000 RMB (740 $) / m2

More financial calculations According to regulations, the example VC can accommodate 1 million people. With the construction cost of 400 Bln RMB, 400, 000 RMB (60, 000 USD) is needed per capita. 560 Trillion for 1.4 Bln people. Chinese M2 is 130 Trillion right now, equals to more than 300 million people accommodation in vertical city. In 2015, China GDP is 68 Trillion RMB, 9.6 Trillion investment in real estate. Assuming 3% growth, same real estate investment rate, in 50 years of transition time, the total GDP is 7900 Trillion, and total real estate investment is 1115 Trillion. Assuming 1 Trillion invest on VC in 2020, 10% growth every year, in 50 years, total invest would 1164 Trillion. Even double the cost estimation, we can still move every one into VCs in 50 years.

Urban planning land usage Urban land usage classification and urban planning regulations,《城市用 地分类和规划建设用地标准》，GB50137-2011，per capita: 65 ~ 115 m2 land usage (depending on city size, climate zoning) 23-38 m2 residence >= 5.5 m2 public service >= 12.0 m2 road and traffic facilities >= 10 m2 public parks and city squares Sums up to 51.5-66.5 m2 usable space per capita, not including industrial usage. The example VC can accommodate 1 million people.

Urban planning regulation (China) Purpose of land usage percentage Residential 25 ~ 40 Public services 5 ~ 8 Industrial 15 ~ 30 Road, traffic facilities 10 ~ 25 Green lands & city squares 10 ~ 15

Costs vs value Why do people pay 60, 000 RMB for 1 m2 in BJ, SH, SZ? While building it costs only 3, 000 RMB? Location! Location! Location! For what? Living standards, Job opportunities, Security, availability and quality of services, neighborhood, … Where did that 95% percent money go? ideally, it should be spent by the government on roads, utilities, parks, hospitals, … Apparently, that 95% didn’t do it’s job well, because the natural conflicts of space/land and connections in a two dimensional topology. Let’s assume the property does worth the price. Which means the value of a property exceeds its construction costs (about 8,000-10,000 /m2 in total in BJ) Cost ≠ Value, how to find the value of a property?

How to calculate the value of a property? 𝑉= 𝐴 0.7 ×𝑄×𝑆×𝑁 ×𝐴𝑠 ×𝑂×𝑇 𝐴 is the area (size) of the property 𝑄 is the quality of the environment, air quality, weather & climate (temperature & humidity), comfortability 𝑆 is safety and security factor, natural disaster free, accidents free, low crime rate, surveillance coverage, … 𝑁 is neighborhood & community nice index 𝐴𝑠 is the accessibility to services, gym, school, commercial center, … 𝑂 is opportunity to jobs, friends, marriage, doing business, … 𝑇 is technology, such as city smartness, foreseeable future technology ready (robots, automatic delivery, information connectivity, …)

Accessibility (connectivity) 𝐴𝑠= (𝑑 𝑒 𝑡) −𝜂 𝑑 is the distance to the destination 𝑒 is the energy spent to get there 𝑡 is the time 𝜂 is a coefficient greater than 1 Vertical cities are more compact and well connected, which means smaller 𝑑, 𝑒, and 𝑡, or much larger 𝐴𝑠 For a customer, means easier access to all services, and more choices For a business, means more potential customers, lower cost, more choices in hiring, …

Value of a vertical city By definition above, properties in a vertical city should have higher values. An apartment in a VC offers a better life for a family living in a 60, 000 RMB/m2 apartment in BJ, SH, …. Meaning it has an even higher value, though not necessarily a higher price. Construction cost of vertical city properties is only slightly higher than that of a traditional one. In economy, if an investment creates add value, it’s a profitable investment. If most investments of a society are profitable, it has healthy economy. Construction of a vertical city creates value. Construction of vertical cities will fix the economical problems we are facing right now.

More value Vertical city creates land (space), in a high land value area. It improves all kinds of connectivity (accessibility) of a human society. Human society is better organized and healthier as an entity. We also have an healthier environment because of less land usage and less aggression to the habitat of other species. Human products in VC last longer, because of less attack from sunlight, moist, temperature change, wind, flood, hail, …, more add value to all human products including VC infrastructure (longer building lifetime, less maintenance). People are healthier, happier, nicer, …, because everyone have a very high living standard by default, and lots of traditional city anxiety sources (insecurity, conflict, road rage, …) are gone. Everyone owns the city (everything it provides), not just his/her apartment

Vertical city is … A promised land of prosperity The future And now.

不忘初心， 三维城市就是: Following our deep-in-heart desire, a vertical city is:

Why China? China must. Only way to improve the living standards of the vast number of her people fast. (Smog, urbanization and urban problems, …). After long years of following, we are (almost) at the front, and we must lead. China can. Efficient governance, dominant basic material production (steel, cement, glass, copper, aluminum, …), at least fairly good work force, technicians, architects, engineers, … And you guys 因为我们是社会主义，我们要建设共产主义

Why Jing Jin Ji Jing Jin Ji development project Almost all problems are worst or worse: worst smog situation, worse traffic problem, higher energy consumption, least water resource Almost all merits are better: stronger governance, better financial support, more steel, cement, … production, better working force, technician, engineer, … Ji alone produces more steel than USA+Japan

Jing Jin Ji (京津冀）Riddle Jing, 京, means Beijing, or a metropolitan city (traditional) Jin, 津, means Tianjin, or a ferry crossing Ji, 冀, means Hebei province, or hope Jing Jin Ji A metropolitan city has to drop its “ng” part to find hope “ng”, NG, no good, urban problems How to urbanize a country and avoid urban problems? Do we have an answer?

Conclusions Construction costs 5000 RMB/m2 Relocate a citizen costs 500 kRMB, 1 billion people 500 trillion Acceptable in 50 years Substantial value increase in property due to connectivity improvement in all physical and social aspects. VC offers better life, cut energy, infrastructure, and city maintenance cost. A boost to the economy. Construction in China costs less. China and Jingjinji is a good place to start

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