As I write about cities and their social function, I want to mess around a bit with a business model known as Real Estate Investment Trust, or REIT. You can consult my video on REITs in general, namely the one titled ‘In ‘Urban Economics and City Management #2 Case study of REIT: Urban Edge and Atrium [https://youtu.be/BURimdfpxcY ]’. I study there the cases of two REITs, i.e. Real Estate Investment Trusts, namely Urban Edge (U.S.) and Atrium (Central Europe).
I am pursuing the idea of investment as fundamental social activity. I intuitively guess that cities will be developing along the lines of what we will be collectively investing in. By investment I mean a compound process which loops between two specific activities: the accumulation of resources, and the allocation thereof. Since the dawn of human civilization, we have been putting things in reserve. First, it was food. Then, we discovered that putting some of our current resources into building durable architectural structures paid off: warmer in winter, cooler in summer, plenty of room for storing food, some protection against anyone or anything willing to take that food from us etc. Yes, architectural construction is investment. I put my resources – capital, labour, natural resources – into something that will pay me back in the future, over a prolonged period of time.
Investment is an interesting component of our collective intelligence. Our society changes in directions and at paces very much determined by the things we willingly invest in. We organize those things according to the principle of delayed gratification, as controlled today’s deprivation oriented on having some durable outcomes in the future. I deliberately use the term ‘things’, so general and plain. We invest in railroads, and we invest in feeling safe from natural disasters. We invest in businesses, and we invest in the expectation of having the most luxurious car/house/dress/holiday in the entire neighbourhood. We invest in collections of physical things and we invest in ideas.
We have governments and political systems because we have that pattern in our collective intelligence. Governments are in place because and as long as they have legitimation, i.e. because and as long as at least some part of the population accepts being governed, without being coerced into obedience. People give legitimation to governments because they accept sacrificing some of the presently available resources (taxes) and freedoms (compliance with the law) in order to have delayed gratification in the form of security, territorial stability, enforceable contracts etc.
Thus, we go in the direction we invest into. That direction is set by the exact kind of delayed gratification we expect to have in the future, and by the exact type of resources and freedoms we give away today in order to have that delayed thing. Cities evolve exactly according to that pattern. Cities look what they look today because at some point in the past, citizens (yes, the term ‘citizen’ comes from the status of being officially acknowledged and accepted as permanent resident of a city) collectively invested in a given type of urban structures. It is important to understand the way I use words such as ‘collective’ and ‘collectively’. People do things collectively even when they say they completely disagree about doing those things together. This is called ‘tacit coordination’. Let’s consider an example. We disagree, in a city, about the way of organizing a piece of urban space. Some people want to build residential structures there, essentially made for rent. Some others want to see a green space in exactly the same spot, like a park. What you can see emerging out of that disagreement on the long run is a patchwork of residential buildings and green spaces, all over the neighbourhood.
Disagreement is a pattern of tacit coordination, thus a pattern of collective intelligence. We disagree about things which we judge important. Openly expressed disagreement is, in the first place, tacit agreement as for what we really care for (object of disagreement) and who really cares for it (protagonists of disagreement). In my personal experience, if a collective, e.g. a business organization, follows a strategy with unanimous enthusiasm, without any voices of dissent, I am like ‘Ooooh, f**k! That thing is heading towards the edge of the cliff…’.
Good. We invest, i.e. we are collectively intelligent about what kind of present satisfaction we sacrifice for the sake of future delayed gratification. The most important investments we collectively make are subject to disagreement, which is more or less ritualized with legal norms and/or political institutions. Here comes an interesting case, disquietingly connected to real life. Cineworld, a chain of cinema theatres (https://www.cineworldplc.com/en/investors) has just announced that ‘In response to an increasingly challenging theatrical landscape and sustained key market closures due to the COVID-19 pandemic, Cineworld confirms that it will be temporarily suspending operations at all of its 536 Regal theatres in the US and its 127 Cineworld and Picturehouse theatres in the UK from Thursday, 8 October 2020’ (look up https://otp.tools.investis.com/clients/uk/cineworldplc1/rns/regulatory-story.aspx?cid=655&newsid=1420306). That provokes a question: what will happen to those theatres as physical places? Will the pandemic force a rethinking and reengineering of their functions in the surrounding urban space and of the way they should be managed? Is that closure of cinema theatres a durable, irreversible change or is it just temporary?
You can see the entire map of Cineworld’s cinemas under this link: https://www.cineworldplc.com/en/our-cinemas . A bit of digital zoom, i.e. at https://www.picturehouses.com/cinema?search=London, and you can make yourself an opinion about the Cineworld cinemas located in London under the brand of ‘PictureHouse’. Look at the Clapham PictureHouse (https://www.picturehouses.com/cinema/clapham-picturehouse ). and at its location: 76 Venn St, Clapham Town, London SW4 0AT, United Kingdom. The neighbourhood looks more or less like that:
What can be done there? What will the locals collectively invest in? What will be the key features of that investment which they will be disagreeing about? These are low buildings; the neighbourhood looks like a combination of residential structures and small utility ones. Whatever can that cinema theatre be turned into, that thing will make sense for the immediate neighbourhood, like 5 kilometres around.
I turn that cursory reflection on the closure of Cineworld’s theatres into three pieces of teaching, namely as a case of Urban Development sensu stricte (https://youtu.be/B6fFnStK-eA ), for one, then as a case of Economic Policy ( https://youtu.be/lTDqGG0tVpU), for two, and finally as a case of International Economics (https://youtu.be/5mx47eInQbI), because as cinemas close, folks are bound to spend more time in front of their private screens, and that means growth in the global market of digital entertainment.