City Momentum Index 2018

The cities of the 21st century are constantly competing with each other. They permanently aim to strengthen their economies, retain their qualified workforce and attract innovation, thereby stepping ahead in the global value chain. The Jones Lang Lasalle (JLL) consulting firm issues an assessment of the future potential of the world’s greatest cities every year, and their latest such publication is the City Momentum Index 2018.

ABOUT THE INDEX

The increasingly faster and extensive changes of today’s globalised, digitalised economy are transforming how cities function in an unprecedented way. As barriers to entry are lowered and demand for talent and innovation becomes increasingly global thanks to technology-based platforms, cities need to adapt by building environments that promote innovation, skills development, and connectivity in order to maintain their competitiveness and tap the potential of this fast-paced change.
JLL, a US-based firm present in 80 countries and specialised in international financial and real estate consulting, has published its City Index for the fifth time based on a complex range of factors to identify major cities with the most successful short and long-term features. The Index includes 131 established and emerging business hubs across the world, exploring each city’s socio-economic and commercial real estate momentum, as well as its “future-proofing” capacity, that is how likely it is to maintain this momentum over the long term.
The 2018 CMI focuses for the first time on those cities that have the attributes necessary to manage and benefit from fast technological changes in the global economy, and evaluates their future-proofing potential – considering factors such as innovation capability, skills development, and the state of higher education; the number of technology start-ups and their expansion rate; the number of patent applications; and the quality of the environment. While the list includes some of the world’s largest and globally most important cities, such as New York, London, Paris, and Tokyo, smaller cities, such as Silicon Valley, Melbourne, and Stockholm also perform well due to their strong education, liveability, or sustainability.
The 2018 CMI also identifies the cities that have the greatest short-term (three-year) economic and real estate momentum. Their city structures are experiencing major changes as infrastructure to meet the highly increased demand is being built now, and many cities in this group are quickly climbing up the global chain, (typically in the Asia-Pacific region).

REGIONAL DISTRIBUTION OF THE 30 MOST IMPORTANT FUTURE-PROOFING CITIES

Figure 1: Top 30 cities that grow dynamically in the long term. Source: JLL, 2018.

TECHNOLOGY CLUSTERS REINFORCE CONTINUOUS

MOMENTUM IN NORTH AMERICA

Being home to the world’s most dynamic technology sector, North America hosts half of the cities in the Future-Proofing Global Top 30.

• The first two places in this category are taken by San Francisco and Silicon Valley being the world’s number-one technology centres. These two areas have hosted more than a third of the world’s technology “unicorn” companies established over the last 15 years, and the most tech start-ups currently are set up here as well.
• New York, in the 3rd place, employs the most people in the tech sector in the US. In addition to the fact that quite many of the world’s largest enterprises have headquarters in the city, it also hosts the second highest number of tech start-ups in the world (after San Francisco).
• Boston has the 5th place in the region. The city’s distinguished status is due to the fact that it has a very high concentration of leading research institutions and human capital. Its education infrastructure as well as the number of patent applications are outstanding.
• In Southern California, Los Angeles (6th) and San Diego (10th) are also among the top 10 cities. Their leading university programmes strengthen the growth of the number of students with tech qualifications, and these cities have the most employees on the West Coast in the IT sector and industries requiring mathematical knowledge. Consequently, they have a substantial innovation potential: both of them are among the top 5 US cities in terms of the number of patent applications.
• With the 9th place, Toronto is home to a thriving tech sector and a leader in marketing new technologies. Several projects (e.g. the construction of the Quayside neighbourhood and the cooperation with Sidewalk Labs) demonstrate the commitment of the city’s governance to new urban innovations.

In addition to these main technology clusters, smaller technology- and knowledge-intensive cities, such as Austin (18th), Vancouver (19th), and Denver (20th), also appear on the top 30 list. These cities also have strong education institutions, are liveable, have good connectivity and attract highly qualified workforce.

NORTHERN EUROPE’S PERFORMANCE IS OUTSTANDING

Northern Europe’s cities are highly represented on the Future-Proofing Global Top 30 list thanks to the fact that they have high employment rates in the knowledge-intensive sectors and remarkably well-developed physical and digital infrastructure, and they devote much attention to sustainability aspects as well. Three metropolises have made it to the top 10:

• London has reached the 4th place thanks to its diverse technology and creative industry besides strong education and innovation. The highest number of tech start-ups and unicorn companies in Europe have their seats here. It has been the number-one investment target of foreign global software and IT companies over the past ten years, attracting over USD 1 billion of foreign investment in the sector for the 7th successive year in 2017.
• Paris has made it the 7th place; the city is Europe’s research engine, has the largest high-tech labour force and the most patent applications in the region. It is likely to maintain its momentum in the long term thanks to, for example, the ambitious “Grand Paris” infrastructure development project.
• Amsterdam (8th) is Europe’s fastest growing tech hub (having the highest number of tech start-ups per capita in the region), which is further underpinned by its global relationships and multilingual and highly qualified workforce. Successful local companies include Booking.com, TomTom, Gemalto, and more recently newer tech start-ups such as WeTransfer and Adyen. The city is also home to the seats of many global technology enterprises.

Many other European cities perform well on the list thanks to their high-tech labour force, number of innovations, globally successful companies as well as high quality of life, including Northern European capitals such as: Copenhagen (22nd), Stockholm (23rd), and Helsinki (27th), the German cities of Munich (15th) and Berlin (16th), as well as Edinburgh (24th) from the UK.

“ESTABLISHED WORLD CITIES” HAVE MAINTAINED THEIR LEADING POSITION IN THE ASIA-PACIFIC REGION

Many of the globally active Asian cities that produce high value have made significant progress in creating innovative environments and gaining human resources in order to further grow their new digital economies:

• North Asia’s two largest urban economies, Tokyo and Seoul are also among the future-proofing top 30 (in the 13th and 28th place respectively). Thanks to their global enterprises and world leading digital networks, they steadily maintain their leading position in research, primarily in the hardware and robotics industry. Both cities invest in major infrastructure development including the Pangyo Techno Valley in Seoul and the planned introduction of a new autonomous public transit system for the 2020 Tokyo Olympics.
• Australia’s largest cities, Sydney and Melbourne also feature on the top 30 list (in the 14th and 17th place, respectively) thanks to their strong education systems, advanced tech companies, and liveability.
• Singapore, in the 29th place has also maintained its favourable status due to its large R&D investments and traditionally good education system, among other factors. Many of the world’s biggest tech companies operate a regional centre in the city, and Google, HCL, and Infosys have also established R&D centres here. In addition, the city’s potential for tech start-ups is very promising as well. In terms of long-term momentum, the government’s commitment to new technologies also enhances its position.

REGIONAL DISTRIBUTION OF THE 30 MOST IMPORTANT CITIES WITH SHORT-TERM MOMENTUM

Figure 2: Top 30 cities that grow dynamically in the short term. Source: JLL, 2018.

EMERGING CITIES IN THE ASIA-PACIFIC REGION

The short-term momentum index focuses on cities which currently produce the largest growth. Similarly to the previous ones, the latest list reflects the emergence of the cities in the Asia-Pacific. These cities are increasingly becoming the centres of global capital, commerce, and innovation; 25 of the 30 most important cities are to be found here.

• Indian cities have secured remarkable positions on the top list; four of the first five cities are in India. They have registered the largest demographic and economic growth and they are also the most important targets of the government’s policies aiming at developing infrastructure and attracting companies. The country’s two leading technology hubs, Hyderabad and Bangalore feature in the first two places, while the 4th and 5th places went to Pune and Kolkata. Apart from them, three other Indian cities are among the top 30, namely Delhi (8th), Chennai (14th), and Mumbai (20th). Although economic growth largely boosts India’s cities, infrastructural shortcomings, severe social inequality, the lack of accessibility as well as environmental degradation significantly deteriorate their long-term perspectives and potential.
• China does not show any loss of momentum as 11 of the top 30 cities are found in the country. The Chinese “powerhouses”, Nanjing (7th) and Hangzhou (9th), whose economies are deeply integrated in global production chains, lead the Chinese cities on the list. Next on the list are Guangzhou (16th) and Shenzhen (19th), which are aspiring to become global leaders in technology and have an advanced manufacturing industry. China’s “established world cities”, Shanghai (15th) and Beijing (22nd) continue to be one of the world’s most dynamic markets, supported by innovative “next generation” companies, exponentially developing infrastructure, and qualified workforce.
• The Vietnamese Ho Chi Minh city (3rd) and Hanoi (6th) attract considerable amounts of foreign direct investment as important centres of global high-tech manufacturing. Thanks to rapid economic and income growth, these cities have seen the highest increase in retail sales and the number of air passengers in the world.
• Asia’s “megahubs” are trying to maintain their positions in the competition for qualified workforce, visitors, and attracting innovation through their economic momentum. They include Manila (18th), Jakarta (23rd), Kuala Lumpur (24th), and Bangkok (28th). Many companies wishing to extend their markets settle in these cities, especially Chinese firms striving to become international. These cities see the largest growth in real estate as their infrastructure tries to meet this demand.

SHORT-TERM MOMENTUM VERSUS FUTURE-PROOFING POTENTIAL

Based on the two main components of the City Momentum Index, all cities can be grouped by whether they have a short or long-term momentum. Two cities, however, stand out from the index as they have reached remarkably high values in terms of both components (they feature among the 30 most dynamic cities in both lists).

• Last year, Singapore registered the largest growth based on the indicators of the short-term momentum. Global trade growth has largely boosted its economic momentum and corporate demand has also increased. Office rental rates are likely to have increased here the most during 2018 (this data was not yet aggregated at the time of the index’s publication).
• The huge demand for growing tech companies has significantly boosted the economy and real estate prices in Seattle. With the spread of tech companies in the city, office rental prices have increased sharply here as well.

CMI METHODOLOGY

131 cities participated in the index following a pre-screening, during which factors such as their population, urban GDP, corporate presence, air accessibility, real estate investment activity, and commercial real estate stock were taken into account. Then a complex indicator was created based on the above factors, and the 131 most dynamic cities were selected. In the case of each city, the metropolitan region (including the cities and their agglomeration) determined by the UN were considered. Out of the 131 cities, 34 is North American, 8 Latin American, 51 European (including Budapest) and Middle Eastern, and 38 Asia-Pacific.

References

AUSTEN, Ian (2017): City of the Future? Humans, Not Technology, Are the Challenge in Toronto. The New York Times, 29 Dec. 2017. https://www.nytimes.com/2017/12/29/world/canada/google-toronto-city-future.html
CBINSIGHTS (n. d.): The Global Unicorn Club. Current Private Companies Valued At $1B+. https://www.cbinsights.com/research-unicorn-companies
FEENAN, Rosemary, KELLY, Jeremy, MCAULEY, Matthew (2018): City Momentum Index 2018 – Agility, Talent and Technology. JLL Global Research. http://cities-research.jll.com/research/203/jll-city-momentum-index-2018
HUME, Christopher (2017): Christopher Hume’s Project of the Year: Google’s Quayside. 19 Dec. 2017. http://torontostoreys.com/2017/12/christopher-hume-project-google-quayside/
HYUN-JEONG, Lee (2016): Techno valley – Korea’s start-up hub. The Korea Herald, 15 Jul. 2016. http://www.koreaherald.com/view.php?ud=20160715000547
JLL (n. d.): Grand Paris Project. http://www.grand-paris.jll.fr/en/grand-paris-project/
MACCASKILL, Steve (2018): How Autonomous And Electric Vehicles Will Keep The Tokyo 2020 Olympics Moving. Forbes, 25 Jul. 2018. https://www.forbes.com/sites/stevemccaskill/2018/07/25/how-autonomous-and-electric-vehicles-will-keep-the-tokyo-2020-olympics-moving/
NIKOLA (2015): A Visit to Pangyo Techno Valley. Kojects, 3 Aug. 2015. https://kojects.com/2015/08/03/pangyo-techno-valley-visit/
REUTERS (2018): Japan looks to launch driverless car system in Tokyo by 2020. Reuters, 4 Jun. 2018. https://www.reuters.com/article/us-japan-economy-strategy/japan-looks-to-launch-driverless-car-system-in-tokyo-by-2020-idUSKCN1J00VN
SIDEWALK LABS (n. d.): https://www.sidewalklabs.com/
SIDEWALK TORONTO (n. d.): https://sidewalktoronto.ca/#documents
VINCI (2017): Grand Paris Express: the biggest infrastructure project in Europe. 4 Dec. 2017. https://www.vinci.com/vinci.nsf/en/news-update/pages/grand_paris_express_the_biggest_infrastructure_project_in_europe.htm

 

Author: László Gere