AI has shifted the tech discussion so fast that it’s easy to lose track of other changes that are sweeping the world. Our focus has shifted away over the past two years from the relationship between physical and digital – phygital, as David Mattin called it on stage in 2023 – and back to the digital. But to allow one discussion to overwhelm the other would be a blunder.

Make no mistake, AI is a transformative technology. But that doesn’t change the fact that we’re still working through the implications of the previous waves of changes. And while we can change the apps on our phones in a few minutes, to change the way we use our cities takes years, if not decades.

We’re in a new space race, but it’s not into orbit, and beyond, but to be the cities that work out what 21st-century urban living will look like.

Space: the multiple frontiers

The key factors impacting space right now are:

• The shift in working and commuting patterns, thanks to remote and hybrid working
• The shift in retail patterns, thanks to online commerce
• Emergent forms of micromobility – like electric scooters – that change movement patterns
• The spread of smart city technology, enabled and enhanced by machine learning and, now, generative AI
• The acceleration of smart glasses technology, making AR ever more accessible, allowing a digital layer on top of physical space
• The need to adapt the way we live to the climate crisis

Lurking in the background are the transition to electric cars and the slow rise of self-driving vehicles. This is… a lot.

We’re seeing pressure on the way we use our urban spaces in a way that parallels the rise of the train in the 19th century, and the car in the 20th century. But this time, it’s multiple factors all impacting the way we use our urban fabric.

The human factor

Yet, there’s another factor we need to account for here: humans are fundamentally social creatures. Michael Platt, a psychology professor at the University of Pennsylvania, gave a talk about the need for human connection at an event about post-pandemic social interactions:

“Our brains are wired to connect,” says Platt—and he means this literally. Structures in the brain, collectively described as the “social brain network,” work to manage our moment-to-moment interactions with other people.

In fact, he goes on to suggest, studies from monkeys suggest that this region of the brain grows with the number of our friends. We are, biologically speaking, social animals at a very fundamental level.

To some degree, this is what the dominant technology of the early 2010s exploited. The combination of social networks and mobile phones was targeted straight at this region of our brain. But those long months during the pandemic, when we were trapped at home, with only online contact with our friends, made it clear that online networking met only some of our needs.

Space for humanity

The pandemic gave scientists the perfect environment to explore this, and the findings seem clear:

In sum, our work suggests that certain virtual interactions may improve positive affect and social connection. Nevertheless, no popularly available option can yet parallel the time-tested route of face-to-face interaction in facilitating these outcomes.

So, in an age when everyone obsesses over virtual interactions, there remains a market opportunity for facilitating physical encounters if our physical spaces have to fulfil different roles because the digital world has taken away the fundamental services they used to provide.

Let’s take an obvious example, and an appropriate one given our home in the heart of the Reeperbahn Festival: clubbing.

In many parts of the world, nightclub culture is in precipitous decline:

In 2013, the UK had 1,700 nightclubs. By June 2024 there were fewer than half as many, just 787, according to figures from the analysts CGA by NIQ and AlixPartners, before a slight resurgence in recent months.

And it’s not just the UK:

Once regarded as the nightlife capital of Europe, Berlin now finds itself grappling to preserve its cultural legacy. Among the latest casualties of this shift is Watergate, a legendary nightclub that has announced its permanent closure.

This closure is not just a Berlin story. It reflects a broader transformation in nightlife across major cities like Barcelona, Melbourne, New York and even Istanbul. While the global popularity of dance music continues to grow, the era of all-night clubbing is giving way to earlier closing times and a rising preference for daytime parties.

There are several reasons behind this: a fatal cocktail of the cost of living crisis, sexual relationships being formed on dating apps, not in nightlife venues, and Gen Z’s move away from alcohol.

The post-club hospitality industry

Once upon a time, if you’d talked about “post-club hospitality”, you were talking about places to get breakfast in the wee small hours of the morning, as you staggered out into the dawn after a night partying. Now, we’re talking about how the industry survives – and thrives – as the nightclub itself fades away.

In the UK, some ways of rebuilding the business are emerging. From that same Guardian article:

Russell Quelch, the chief executive of Neos, is focusing on shifting the business model away from larger clubbing venues towards “party bars”, investing in brands such as Bonnie Rogue’s Pub and the apres-ski themed Barbara’s Bier Haus.

“We’re investing in the bar sector because that’s where the growth is,” he said. “What people want out of a night out has changed, and the world’s moving at a pace that you constantly need to have your finger on the pulse.”

In other words, they’re shifting the model away from drinking, dancing and, um, mating to something more centred around groups of friends gathering and celebrating. And, while people are less likely to go out and dance to pre-recorded music, the live music industry is booming.

Rewilding our urban spaces

This might remind regular readers of one of the themes from the Accenture Song Trends report last year: social rewilding. As we said then:

The first five years of this decade taught which experience could be digitised. Now, we’re deciding which ones should be digitised. We won’t give up our phones — but equally, we’ll use them to find real-world, social experiences to enjoy. Our brains struggle with blended physical/digital — phygital — experiences. But we can switch effortlessly between digital experiences and real-world social ones, with practice.

Our cities – our spaces — are fundamentally containers for human activities. As the activities change – from working to playing, from mating to meeting – we need to change the spaces to match. We’ve already explored the ideas of Adrian Hon and Lars Hinrichs and how they may impact our culture going forward – and will be diving deeper into their ideas at NEXT25.

Our urban infrastructure is a long-term bet. In fact, it may be the ultimate long-term bet. Get it right, and we build a cultural platform where our lives and businesses can thrive. Get it wrong, and cultural collapse just accelerates.

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Picture by Ishaan Kansal | Unsplash.