We are in a new era of city competition, with urbanisation and globalisation transforming the global geography of economic and real estate opportunity.
With nearly 1,700 major cities around the world, and two or three new cities crossing the US$100 billion GDP threshold every year, more cities than ever before are ‘going global’ and competing for corporations, capital and talent. This is contributing to a breaking down of rigid urban hierarchies, with deep implications for city performance and commercial property prospects.
In order to make sense of the potential this rapid expansion in urbanisation and globalisation is offering the real estate industry, our recent report Global300: The New Commercial Geography of Cities identifies the 300 cities that we predict will account for the bulk of economic and commercial real estate activity over the next decade.
An update of research originally undertaken in 2012, the Global300 is based on an Index of Commercial Attraction which measures a city’s economic and real estate power and status. The Index is unique in that it includes key real estate measures (namely investment volumes and commercial real estate stock), as well as socio-economic and business indicators such as economic output, population, air connectivity and corporate presence.
The world’s most powerful, productive and connected cities
The cities which make up the Global300 are the world’s most powerful, productive and connected. Their 1.3 billion citizens account for nearly 40% of global economic activity, more than Europe and North America combined. They host 88% of the headquarters of the world’s 2,000 largest listed companies, generate 40% of the world’s finance and business employment, and more than 80% of the world’s air passengers pass through their airports.
The Global300 also represent the bulk of commercial real estate market activity, accounting for nearly three-quarters of global direct commercial real estate investment and over 90% of the world’s prime office stock. They are the overwhelming focus of international corporations, retailers, hotel brands and real estate investors and we expect these cities to form the bedrock of economic and commercial real estate activity over the next 10 years.
The geography of opportunity continues to expand
Globalisation is propelling an increasing number of emerging cities into the Global300 – Asia now accounts for the largest share of cities, while Sub-Saharan Africa has added three new cities to this year’s list – and an analysis of the 10 cities whose commercial attraction has improved the most over the past year highlights the broad array of cities which are reinventing themselves and finding ways to compete, and succeed, in contested global markets.
This year’s list of top 10 improvers includes some of the world’s largest mega-cities – such as Cairo, Istanbul, Jakarta, Lagos and Mumbai – which are discovering renewed potential, with many taking steps to build out the infrastructure and modern real estate which will be keys drivers of future competitiveness. In Jakarta, for example, economic growth is expected to accelerate from 2016 on the back of infrastructure spending on projects such as the new Mass Rapid Transit system. Istanbul is investing in new metro lines, a third bridge over the Bosphorus and a new airport, while the city’s Grade A office stock is set to grow by nearly 60% over the next three years as it builds on its status as a regional financial and services centre.
Smaller cities such as Jeddah and Riyadh also join the top improvers this year. Ambitious infrastructure projects and Riyadh’s emerging presence as a regional finance hub are helping to underpin their increased commercial attraction, with the number of Forbes 2000 companies headquartered in Riyadh tripling over the last 10 years. Tehran also joins the list of top improvers, as one of the MENA region’s largest urban economies begins to re-emerge onto the world stage.
Madrid and Milan round out the top 10 improvers in the Global300 over the past year. Madrid is at the forefront of the recovery in the Eurozone, with employment and GDP growth increasing at their fastest rate in seven years. This is contributing to renewed momentum in the city’s real estate market, which is expected to register amongst the highest office rental growth levels in Europe over 2016. In Milan, major projects such as the Nuova Bovisa development, which is set to bring together higher education institutions and industry to focus on energy and sustainable mobility research, are building on the city’s status as a global innovation centre to reinvigorate its economy.
The current cycle of globalisation is accelerating the breaking down of old urban hierarchies and redrawing the commercial geography of opportunity for business and real estate. Cities are the new economic powerhouses, and in this new era of city competition the Global300 are positioned to provide the foundations of global economic and real estate activity over the coming years.