Demand and disruption in global cities: JLL

Demand and disruption in global cities: JLL

11 October 2019

2019 is a year where geopolitics looms large for the leading global cities which, combined with the current late-cycle/long-cycle phenomenon and rising concerns over climate change, is focusing minds on ‘city resilience,’ notes a recent JLL and The Business of Cities 2019 report.

At the same time, technology disruption is revealing more starkly those cities that are most prepared for the transformation of the innovation economy.

JLL global map of cities

Key trends

  • Global cities are having to meet a wider set of competitive criteria. These include the ability to optimise locations, improve placemaking, build long-run resilience, continue to meet rising citizen and business expectations, and pivot into the innovation economy. Investors and corporate occupiers have more data to play with and more factors to consider.
  • The innovation economy, the experience economy, the sharing economy and the circular economy are changing the competitive landscape for cities. Cities that adapt will enjoy new sources of real estate demand from new living and working patterns, growth in high-experience locations, transport-oriented densification and sustainable development.
  • A stable top division of ‘Established World Cities’ that testifies to London’s competitive resilience, Paris’s positive cycle of policies, Seoul’s continued momentum and ongoing imperatives for Hong Kong around innovation and smart technologies.
  • The emergence of new ‘Global Contenders’ – Berlin, Boston, Munich and Stockholm are cities gaining more global specialisation while future-proofing their economies and city systems. They are competing more effectively on the global stage by building on their quality-of-life advantages, innovation capabilities and institutional strength.
  • The maturing model of ‘New World Cities’ that have been successfully competing on their quality-of-life advantages, innovation capabilities, brand appeal and institutional strength, and effectively managing the challenges that come with the surge in demand. They continue to outperform ‘Established World Cities’ on many core metrics, reinforcing the cycle of investor demand. Manchester, Philadelphia, Stuttgart, Lisbon and Montreal have joined the ‘New World Cities’ category for the first time in 2019.
  • ‘Emerging World Cities’ are showing it is possible to break through if they ally their investment in infrastructure ‘hardware’ with more of the ecosystem ingredients that will foster innovation, the ‘art’ of placemaking, and spatial development; boost their cultural offer; and improve amenities, the business-operating environment and market transparency. Guangzhou, Shenzhen, Taipei, Istanbul and Moscow are ‘Emerging World Cities’ to watch.
  • The role of city governance and leadership is often overlooked when assessing a city’s future prospects, but the ever more complex nature of city transformation relating to the innovation economy, climate mitigation and geopolitical agility, all point to a city’s governance system being increasingly elemental to city and real estate success.

More cities are challenging and contending to join the top division of global cities.

In 2013 JLL first observed the leading group of global cities – the ‘Big Six’ of London, New York, Paris, Singapore, Tokyo and Hong Kong. In 2017 they were joined by Seoul to create the ‘Big Seven’.

The evidence from the world’s major performance benchmarks shows that in 2019 these seven cities remain at the top with the most consistent performance across key global city criteria.

London, New York, Paris, Singapore and Tokyo retain their positions in the ranking, while Hong Kong and Seoul have switched places since 2017.

London

London continues to lead the pack despite a recent slowdown in momentum and increasing risks of losing some important functions to other European competitors due to Brexit. The UK capital continues to record excellent performance as a result of its diversification into fintech, robotics, medtech and retailtech, and its ongoing cycle of infrastructure investment and redevelopment.

Seoul

Seoul maintains its progress regardless of its largely domestic corporate base, investment market and labour force. The winner of the latest World City Prize has become a leader and exporter in urban solutions around transport interchanges, high-quality redevelopment, citizen participation and digital services.

Hong Kong

Meanwhile, Hong Kong’s infrastructure advantage has been slightly eroded by slow progress in adopting and unifying data technologies. The city’s innovation culture is still maturing and political uncertainty is impacting on sentiment in some quarters.

Paris

Paris is benefitting from a positive cycle of policies that foster the ingredients for innovation – especially talent and business climate. The Grand Paris project is catalysing the development of several new nodes and the formation of a polycentric metropolis, while the city is also starting to lead the way in terms of circular economy adoption.

Conclusion

The performance landscape of global cities is revealing that while more cities are seeking to compete for investment capital and for other contested opportunities, their propensity to be consistently successful at doing so varies substantially.

These variations are also becoming starker as pressures surge to respond to climate change, economic transition and quality-of-life expectations. Cities that meet these pressures also buoy the real estate assets invested and occupied within them.

Beneath the apparent stability among the top tier of global cities, JLL can see the rate of improvement among ‘New’ and ‘Emerging World Cities’ as platforms for innovation, lifestyles for talent, and reformers in the quest for resilience. This is translating into new sources of real estate demand and new opportunities to be discovered beyond the places that at first glance possess the strongest growth fundamentals.

There are many cyclical reasons why cities perform well or weakly year-on-year, and patterns vary by city size and geography, but over a longer cycle JLL can observe that cities appear to compete more effectively where they are able to:

  • Continually invest and reinvest in infrastructure to unlock and upgrade locations and ensure business efficiency, and not rely on single cycles of ‘catch-up’ investment.
  • Match their physical ingredients with a climate tuned for business and innovation.
  • Avoid over-reliance on one niche or location, and instead achieve and sequence transformation in multiple locations at once and across multiple industry specialisations.
  • Achieve scale of impact to address citywide challenges, whether to do with housing, transport, placemaking, smart tech or inclusion.
  • Optimise opportunities that come from new infrastructure, global events, national leadership or economic disruption.