Germany: a new era of city competitiveness

In the ‘metropolitan century’, established European cities are facing intense competition from around the globe, as cities increasingly compete to attract business, talent and investment. As more and more emerging cities appear on the international radar, many mature cities are facing a fight to remain globally competitive.

How are German cities performing on the international stage in this new era of ‘city competitiveness’?

Germany has a unique city system within which there is a strong multi-polar hierarchy. While Germany has no dominant city – in the mould of Paris, Tokyo, or London – each of its major cities is successfully carving out its own international identity. Generally, German cities have amongst the healthiest economies in Europe, having performed strongly since the Global Financial Crisis. Berlin and Munich stand out as two of the top performers post-crisis, while Germany’s specialised industrial centres are also performing well. In fact, all eight of Germany’s secondary cities rank above the national average in terms of GDP – compared to just two in France and one in the United Kingdom. Each of Germany’s major cities has its own strengths:

Munich is consistently ranked as Germany’s best city in which to live, work and invest. It is ranked by Mercer as one of the top five most liveable cities in the world, while JLL’s City Momentum and Investment Intensity Indices reveal Munich as Germany’s leading city, in terms of dynamism and real estate investment relative to its size.

Berlin is riding high on its reputation as a cool, creative European hub. Berlin is increasingly Germany’s technological, digital and creative heart. As with most German cities, it also has strong green credentials and scores highly for liveability. With its capacity for innovation and strong branding, Berlin is on the rise.

Frankfurt is Germany’s traditional financial centre, considered one of Europe’s secondary financial hubs behind London. Frankfurt’s strengths lie in its excellent global connectivity, world-class infrastructure and record of corporate innovation. Increasingly, the city is promoting its ‘green’ credentials – self-styled as ‘Green City Frankfurt’ – and has been rated the world’s most sustainable city by Arcadis.

Hamburg excels as Germany’s ‘smartest’ city, as well as being highly liveable and maintaining a strong manufacturing sector. Hamburg’s huge ‘HafenCity’ redevelopment scheme is one of the world’s most talked about and most ambitious urban regeneration projects.

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Overall, German cities are punching above their weight in terms of real estate investment. Three cities – Munich, Frankfurt and Berlin – feature in the Top 20 of JLL’s Investment Intensity Index, which is based upon the ratio of real estate investment to city GDP. Germany’s cities clearly remain attractive targets for investment due to a winning mix of economic robustness, resilience, stability, market transparency and real estate liquidity. Equally, German cities are both liveable and green, offering amongst the highest quality of living in the world.

But where German cities excel – and a key contributor to the bright outlook for many German cities – is the level of research & development investment across the country. Berlin is Germany’s start-up hub, with start-ups raising $1.1 billion in capital in 2014, a 140% increase on 2013; Hamburg follows as the second-biggest generator of start-ups throughout the last decade. Munich is one of Europe’s top city-regions for high-tech employment and patents per million people; with Stuttgart third in the number of patents in Europe (per million inhabitants). Meanwhile, Frankfurt saw a 50% increase in employment in the ‘digital economy’ between 2008 and 2012. The urban hierarchy demonstrates huge strength in depth.

The attraction of German cities is set to continue. JLL’s City Momentum Index, which combines short-term socio-economic and real estate variables with longer-term incubator variables, ranks Berlin and Munich as two of the most dynamic cities in Europe. They score particularly well in longer-term indicators, such as innovation and education, showing long-term potential to strengthen their positions.

Competition between cities will undoubtedly become more intense, but Germany’s cities are in a good position to take advantage of the new global system. However, they cannot rest on their laurels. Cities are no longer just competing domestically, or even regionally. Instead, city competitiveness is a global game. To fully capitalise on this, cities must harness Germany’s economic strength as a whole, by building ties, creating networks and strengthening co-operation. Ultimately, each city must continue to adapt to the evolving landscape of city competitiveness.

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