The Vertical City: The Evolution of Land Uses in Constrained Territories

For decades, real estate development was built around a relatively clear specialization of assets. Residential buildings were designed to accommodate housing, office buildings to host economic activity, and public facilities to serve specific collective needs.

This model remains relevant in markets where significant land reserves are still available.

In highly constrained territories, however, the underlying logic is gradually evolving. As land availability declines and the marginal cost of creating new square metres increases, the challenge is no longer simply to build more, but to maximize the value generated by every available site.

This shift is driving a growing integration of uses within single developments.


From Specialization to Integration

Major projects in land-constrained markets increasingly combine multiple functions within a single development: residential units, offices, retail space, technical infrastructure, public facilities and services.

The objective is not merely architectural.

Rather, it is to optimize the use of a scarce resource by enabling a single site to address multiple needs simultaneously.

This approach can be observed across numerous metropolitan areas facing structural land constraints. In Singapore, Hong Kong, Tokyo and New York, many large-scale developments are increasingly conceived as integrated systems rather than as a collection of independent assets.

As a result, the unit of analysis itself is evolving.

Buildings are no longer viewed solely as standalone assets, but as components of a broader urban ecosystem. 


Optimizing Land Value

This evolution reflects a deeper shift in the way land is approached.

For decades, value creation was largely based on allocating a site to the use considered most appropriate.

In highly constrained territories, value creation increasingly stems from the ability to accommodate multiple uses within a single development.

Projects are therefore assessed not only on their direct real estate performance, but also on their contribution to a broader framework encompassing economic, residential, technical and, in some cases, public objectives.

The challenge is no longer simply to maximize the value of a given asset, but to optimize the total value generated by a limited land footprint.


An Evolution That May Also Affect Retail

This logic raises a broader question regarding the role of retail and commercial uses in markets where residential value has become predominant.

Commercial leases are traditionally analysed as standalone assets whose performance is measured by their ability to generate rental income and independent asset value.

Such an approach is entirely coherent at the level of an individual unit.

It may be less so when viewed at the scale of a building, a district or an entire territory.

In certain highly constrained markets, the value created by a commercial activity may extend well beyond the rent it pays. Its impact on the attractiveness of an address, the quality of local services, the vitality of an area or the desirability of a neighbourhood can directly influence the value of surrounding residential assets.

This observation highlights two distinct economic approaches.

The first seeks to maximize the rental value of the commercial premises themselves.

The second seeks to maximize the aggregate value generated by all uses coexisting within the same development or urban environment.

The two objectives do not necessarily converge.

As residential values continue to rise in the most constrained markets, the performance of a commercial tenant may eventually be assessed not only on the basis of rent paid, but also on its contribution to the value of surrounding assets.

From this perspective, a commercial lease ceases to be solely a yield-generating instrument. It also becomes a tool for land allocation and territorial value creation.


A New Framework for Urban Development

Single-purpose assets are unlikely to disappear.

However, the most significant developments appear to be moving towards increasingly integrated models.

Residential real estate, retail, public facilities and infrastructure are no longer necessarily independent categories. They are increasingly becoming components of the same economic and urban system.

In this context, the value of a development no longer lies solely in the performance of each individual component.

It lies in the ability of the whole to generate greater value from the same land footprint.

In the most constrained territories, the challenge is therefore no longer simply to build more but to create more value with less space.