Smart cities need to embrace new technologies like artificial intelligence to cope with the loss of workers who are staying home.

In an upcoming podcast, I will host a panel discussion on some of the looming disasters facing cities across the country, their commercial office space, and their investors.

This is all part of the new reality of the post-pandemic economy. Many decision-makers in municipal government as well as commercial property management have failed to recognize that we have gone through a paradigm shift. They are still clinging to the idea that cities will go back to business as usual, and workers will all go back to commuting into cities.

The first warning of a tsunami of increased vacancies hitting commercial office space came in 2020. Commercial buildings were experiencing big vacancy rates as more people worked from home and did not return to cities.

The second tsunami is the one looming on the horizon now with many investors and banks looking very cautiously as empty, or nearly-empty buildings start to lose their value.

Many city governments do not want to believe this second tsunami is actually happening and have done nothing to cut spending. They still think their cities will go back to business as usual when it comes to people going back to the office.

In a recent financial news article in Seeking Alpha, Steven Cress observed: “With tenants in the central business district submarkets of NYC and San Francisco, fire sales and the woes of a potential ‘doom cycle’ are accelerating as city centers turned ghost towns put a financial strain on [real estate investment trusts].”

The second tsunami is starting to wash up into commercial real estate investments and financial markets. Those who understand how powerful tsunamis are are taking action now. Those who wait and see will see their investment values washed away.

The loss of demand for commercial office space has created a phenomenon of the reverse of musical chairs when it comes to buildings being leased up. With more building space becoming available and less demand coming from corporate tenants, property owners need to invest in their buildings to have modern intelligent amenities available for corporate tenants.

Just as money does not grow on trees, tax revenues cannot be gotten from sales no longer generated by commuters who are not coming back downtown. Some cities have already experienced this last year with New York City pointing out that it lost over $12 billion in sales tax revenues.

The big question becomes: “Where are they going to make up this budget shortfall?” This question doesn’t just apply to New York City. Almost all major metropolitan areas from Chicago and Dallas to San Francisco and Denver need to start focusing on this budget shortfall.

Talking to an executive in the smart buildings sector, he said many real estate and property management companies are being overwhelmed by artificial intelligence proposals touting this as “the next big thing for your building” and selling it as if it was some “universal solution” to all their problems.

What they should be looking at is the definition of artificial intelligence representing “amenities insufficient.” If there is no redundancy in the intelligent amenities areas of power and broadband connectivity, their building is at a competitive disadvantage. All other systems used to control lighting and HVAC controls are meaningless if they are not on a reliable and redundant platform.

Now is the time for property owners to think about investing in their properties if they want to capture whatever is left in the market for corporate tenants who need space. Corporate tenants are going to look for the best buildings that can support their mission-critical applications.

Too many in commercial real estate have waited too long to upgrade their buildings. In the past, they were able to lease up buildings that were technologically obsolete and still make a profit. Today, if they want to just keep their heads above water, they need to make some serious investments in upgrading facilities or face the fact that whatever demand is left, will pass them by for a building that offers real redundancy and resiliency for corporate networks and mission-critical enterprise applications.

There are too many digital hucksters proposing solutions to problems that either don’t exist or are so far down in the list of priorities to get buildings profitable again. The same applies to smart city applications where the need to focus on building strong regional economic development applications is key.

These digital hucksters appear as a vendor trying to sell a solution or some out-of-touch academics and consultants trying to come off as experts in smart cities concepts. Instead of coming up with viable solutions to address infrastructure shortcomings in resiliency, they suggest whimsical applications having little impact on the building, the regional economy, and the viability of the area.

Great examples of whimsical applications which have no huge impact on a city’s economy and regional viability would be something like having solar-powered battery chargers at bus stops for electric wheelchairs. A nice convenience for a few, but what is the cost/benefit analysis on that? How many wheelchairs are you going to impact versus the amount of money and resources needed to equip each bus stop? That money, which is usually some federal grant money, could be better spent on a higher-priority problem.

Banks and other institutional investors better wake up to these issues as well. Building appraisers do not have the skill sets to assess the technologies or intelligent amenities lacking within a building. They are still focused on marble foyers, traditional amenities, and occupancy rates. Fancy “talking” elevators impress them. They need to get a technological assessment of the building to see if its intelligent infrastructure, consisting of power and broadband connectivity, can support corporate tenants requiring redundant 21st-century intelligent amenities who are not satisfied with 20th-century solutions.