City Momentum Index Identifies The World’s 20 Most Dynamic Cities
As business and political leaders convene to discuss global challenges at the World Economic Forum annual meeting in Davos, Switzerland, there is a greater appreciation for the importance of real estate in reshaping cities and, therefore, the world’s commercial geography. Recognizing that commercial real estate is no longer just a consequence of a city’s success but a driver of it, Jones Lang LaSalle has identified San Francisco, London, Dubai, Shanghai and Wuhan at the forefront of cities that demonstrate the combination of strong short term socio-economic and commercial real estate momentum and longer term foundations for success. In its new, City Momentum Index (CMI), Jones Lang LaSalle looks at the underlying drivers that are the hallmark of highly dynamic cities.
According to Jeremy Kelly, Director, Global Research for Jones Lang LaSalle: “City momentum is about far more than just raw GDP growth. The true foundation of highly dynamic cities emerges from such factors as speed of innovation and creation of cutting-edge businesses along with new building construction, property price movement and investment in real estate from cross-border investors and corporations.
“By focusing on the features of a city that are likely to underpin future performance, the CMI measures dynamism in infrastructure, connectivity and innovation that we believe will be steering many investment and location decisions in the future.”
The cities that top the CMI are characterized by these dynamics:
Elite cities that wield clear economic might on the global stage, accounting for one-quarter of the world’s direct commercial real estate investment activity from 2012-2013:
San Francisco (1), London (2), Dubai (3), New York (6), Hong Kong (8), Singapore (10), Los Angeles (15) and Tokyo (19)
Technology-rich cities that took early advantage of technology trends and provide fertile environments for innovation:
San Francisco (1), Austin (7), San Jose (9), Boston (17) and Seattle (18)
Smaller, innovation-friendly cities that gained rapid momentum to achieve global position:
Rapidly urbanizing cities in China that continue to grow with massive city-building programs despite a slowing economy:
Shanghai (4), Wuhan (5), Shenzhen (11), Beijing (13), Chengdu (14) and Tianjin (16)
Growth hotspots beyond the BRICs driven by urban consumerism:
Jakarta (12) and Lima (20)
Resurgent cities gearing up for events in 2020 with renewed vigor:
Tokyo (19) – 2020 Summer Olympics and Dubai (3) – Expo 2020
While Continental European cities are under-represented at the very top of the list and show lower momentum in comparison with emerging cities, several powerful and successful European cities possess the attributes for longer term success as validated by the ongoing high levels of real estate capital inflows. Demonstrating success factors relating to education, innovation, sustainability and transparency, Paris, Berlin and Amsterdam, for example, are distinguished by their strengths in talent and new technologies, while Copenhagen has among the world’s strongest “green” credentials.
The City Momentum Index assesses 111 cities world-wide with a weighted overall score based on 34 short-term and longer term variables.
Short-term socio-economic momentum variables (40 percent of the model) include recent and projected changes in GDP and population, air passenger traffic, corporate headquarter presence and recent levels of foreign direct investment as a proportion of a city’s economy.
Short-term commercial real estate momentum variables (30 percent of the model) include recent and projected percentage changes in office net absorption, office construction, office rents, shopping mall construction and retail rents, direct commercial real estate investment volumes and real estate transparency.
Longer term variables (30 percent of the model) that are likely to determine future economic strength and real estate momentum include high-value incubator indicators such as university presence and educational infrastructure, innovation capability and presence of technology and venture capital firms.
Kelly comments further: “While most indices provide only a static picture of city competitiveness, by taking a unique look at the combination of short-term variables and sustainable long-term characteristics the CMI provides a look into underlying city dynamics, adaptability and real estate market characteristics.”
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