Why has Google’s parent company walked away from the innovative scheme? And what does it mean for real estate?
It was meant to be the world’s first digital district. A project that would inspire a fresh approach to smart, sustainable development across the globe. Ambitious, controversial and fearless, Sidewalk Labs’ Waterfront Toronto scheme championed the concept of “ubiquitous connectivity” on a scale that no developer had, or indeed has since, attempted. But now the trailblazer is bowing out.
Last week, nearly three years after the urban innovation arm of Google’s parent company, Alphabet, first mooted its plans for the 12-acre city to be built “from the internet up”, it announced that it was abandoning the scheme.
Sidewalk Labs’ chief executive, Dan Doctoroff, released a statement outlining the reasons behind the decision, stating: “As unprecedented economic uncertainty has set in around the world and in the Toronto real estate market, it has become too difficult to make the 12-acre project financially viable without sacrificing core parts of the plan we had developed together with Waterfront Toronto to build a truly inclusive, sustainable community.”
Quite the step down from a man who, as New York’s former deputy mayor for economic development, is no stranger to the complexities of ambitious, long-term strategy.
But step down he has, and questions have been raised. Why would one of the biggest tech companies in the world walk away from a project due to set a new precedent for connected, smart development at a time when the world is scrambling for as much building data as possible? And what could the abandonment of the scheme mean for real estate and urban innovation more widely?
Privacy fears
Sidewalk Toronto came up against its fair share of controversy. Its plans to use sensors to build “the most measurable community in the world” fuelled a string of privacy fears and robust criticism from the local government and community.
Doctoroff himself – who took the idea of developing a digital district to Google back in 2015 – admitted that the project was one of the toughest he had taken on. Speaking to EG in 2019, he said: “I don’t think I fully appreciated what I was getting myself into. This is by far the most complicated thing I have ever done.”
But Doctoroff and the wider Google team have plenty of experience in complex development. So why walk away just as the project reached a critical stage, citing “economic uncertainty”?
“It is very unusual for a developer to withdraw from a scheme because of a short-term economic downturn,” says one industry expert. “If you are developing a large area of land, you know you have to be in for the long haul. If this was a smaller developer without any pockets then you might understand it. But this is Alphabet. Surely they can’t be short of funding?”
William Murray and David Twohig, co-founders of consultancy Wordsearch Place, agree that the decision to abandon a scheme of this scope based on a short-term economic event is unusual. They point instead to some of the well-documented issues Sidewalk Labs came up against around public consultation.
“People can be sceptical about developers, and they can be sceptical about tech,” says Murray. “We know that there is a huge public trust issue around technology, and privacy in particular, and Sidewalk Labs had to overcome both with this project. So much of what they were proposing with this scheme was great, but there are lessons to be learnt from this around proper communication and engaging the public.”
Twohig adds: “I don’t think innovation will slow down just because this project doesn’t go ahead. But it will make people think much more about how how they approach communities and cities.”
It has become too difficult to make the 12-acre project financially viable without sacrificing core parts of the plan we had developed… to build a truly inclusive, sustainable community
Dan Doctoroff, Sidewalk Labs
Sad precedent
Other industry leaders fear that Sidewalk’s step-down could set a disheartening precedent for the future of digital, connected development. “If an organisation the size of Sidewalk Labs is struggling to develop a scheme like this in a city like Toronto, which is known for being very forward thinking, its a big red flag for the future,” says Dan Hughes, founder of the Real Estate Data Foundation.
This is something of an about-turn in terms of the wider real estate sector’s perception of Google’s plans in the first instance. When Sidewalk Labs first released plans for its digital district back in 2017, there were some initial concerns that it could pose a threat to traditional developers. Fears were raised that this could be part of a trend whereby big tech companies took on more of a development role themselves, potentially cutting the real estate sector out entirely.
Over the past three years, however, this has proven unlikely to be the case. Last year, Doctoroff told EG that fears of developers and real estate companies being replaced by companies like his were unfounded.
He added that, rather than taking over the roles of traditional developers, masterplanners and architects, Sidewalk Labs would look to lay the groundwork for the sector to deliver the cities of the future. “We aren’t going to be the absolute, physical developer of the vast majority of the Toronto site – or any others there might be in the future,” he said. “We want to be the catalyst to the private market to show that innovation actually makes financial business sense.”
Innovation gateway
The real estate sector took these comments at face value, and there are plenty of companies and individuals that got firmly behind Sidewalk Labs’ vision and saw it as a gateway to wider innovation within the industry.
James Pellatt, director of workplace and innovation at Great Portland Estates, adds: “The abandonment of this project is a blow for sustainability as much as it is for innovation.
“Sidewalk Labs’ attempts to mass-produce timber-framed buildings will be a huge missed opportunity. There was a real chance there to accelerate the sustainability agenda, and an opportunity to demonstrate exactly how space is used via sensors. It’s such a shame.”
And some were on board right from the word go. “Ultimately, I think Alphabet’s plan is heartening,” Earle Arney, director at architects Arney Fender Katsalidis, told EG back in 2017. “The way we have been building is so out of date, and technological advances will drag the property and construction industries into this century. So I am not worried at all about the impact this will all have on the sector. It has been lagging behind.”
David Lewis, partner at architect NBBJ, added at the time: “This could mean we almost build for free. If we reach a point in time where ‘internet-up’ cities mean we can generate income through the data, in the grand scheme of the cost of a building over its entire lifetime, that income could eventually offset the construction costs. It would need to be a very smart city indeed to support a system like that. But it’s possible.”
As for Sidewalk Labs, while the future of the Toronto project looks bleak, many are waiting to see what the company will do – and where it might go – next.
“I don’t think there is any doubt that Sidewalk will go off and do this somewhere else now,” says Wordsearch Places’s Murray. “They have already learnt a lot of things and will be able to apply all of that to a project like this elsewhere. There will be places around the world desperate to boast this sort of project.”
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