by Brianna Crandall — February 14, 2014—Recognizing that commercial real estate (CRE) is no longer just a consequence of a city’s success but a driver of it, global financial and professional services firm 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 goes beyond traditional, static economic rankings to delve into the underlying drivers that are the hallmark of highly dynamic cities and affect the corporate facilities that are located within them.
According to Jeremy Kelly, director of global research for Jones Lang LaSalle, “The new City Momentum Index offers a fresh and uniquely comprehensive perspective that identifies the signals of change and characteristics of city momentum. By focusing on the features of a city that are likely to underpin future performance, the CMI stands apart from the standard historic performance upon which most indices are based. It is such measures of dynamism in infrastructure, connectivity and innovation that we believe will be steering many investment and location decisions in the future, though investors and corporates should note that high momentum can pose both risk and opportunity.”
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 to 2013: San Francisco (1), London (2), Dubai (3), New York (6), Hong Kong (8), Singapore (10), Los Angeles (15), 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), Seattle (18)
- Smaller, innovation-friendly cities that gained rapid momentum to achieve global position: Austin (7)
- 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), Tianjin (16)
- Growth hotspots beyond the BRICs driven by urban consumerism: Jakarta (12), Lima (20)
- Resurgent cities gearing up for events in 2020 with renewed vigor: Tokyo (19)—2020 Summer Olympics, 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, notes JLL.
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 socio-economic and CRE momentum variables such as GDP and population projections, corporate headquarters presence, office net absorption, office construction and rents, and retail construction and rents, as well as longer-term variables that are likely to determine future economic strength and real estate momentum including high-value incubator indicators such as university presence and educational infrastructure, innovation capability, and presence of technology and venture capital firms.
