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Mid-sized, specialized cities are drawing capital, corporations and talent
CHICAGO, Nov. 4, 2015 - New research from JLL (NYSE:JLL) in conjunction with The Business of Cities reveals that the old world order and the traditional hierarchy of cities is breaking down, giving way to an evolving group of new world cities that is redefining what it means to be global.
These cities, which are typically mid-sized, have strong technology credentials, are highly liveable with favorable infrastructure and are often supported by global specialties. The cities, which include the likes of Boston, Denver, Miami, Montreal, Seattle, Toronto and Vancouver, are attracting talent and corporations, as well as a disproportionate share of global real estate investment. JLL predicts these cities will be at the forefront of innovations in real estate, living and work styles by virtue of creating urban development models that are smart, sustainable and resilient.
“We see these cities as being particularly attractive to mobile entrepreneurs, students and young institutions,” said Jeremy Kelly, Director of Global Research Programs at JLL. “Because they will be leading the way in energy efficiency and smart buildings, they will prove to be popular for real estate investors who are considering liveability, sustainability and technology in their decision-making.”
Globalization, urbanization and technological advancement, along with a deeper understanding of what makes cities competitive and attractive, have forced a major shift in the world’s urban commercial geography. The report, ‘Globalisation and Competition: The New World of Cities’ explains how this is resulting in an evolution of new types, styles and clusters of cities, which will significantly change the future geography of real estate investment.
In addition to New World Cities, JLL’s report identifies two other broad categories of global cities.
The Emerging World Cities, given their long-term growth opportunities, are attracting increasing volumes of real estate activity, but the rise of these ‘Emerging World Cities’ is uneven. Shanghai and Beijing, as well as Istanbul, Taipei and Kuala Lumpur are fast tracking to maturity, but others are struggling to keep up with the pace of change.
The Established World Cities, notably the ‘Big Six’ of New York, Tokyo, London, Paris, Hong Kong and Singapore will maintain their dominance, but will need to execute bold and ambitious urban transformation projects to accommodate growth and maintain their global competitiveness.
These categories of cities are not static or mutually exclusive. Some cities, such as Dubai, Shenzhen, Bangalore, Buenos Aires and Santiago, are ‘Hybrids’ and are ones to watch because they display many characteristics of ‘Emerging World Cities,’ as well as the agility and value-creation of ‘New World Cities.’ Singapore, Berlin and Toronto and have the characteristics of being both Established World Cities and New World Cities. Seoul and Moscow are both Emerging World Cities and have many of the features of Established World Cities.
The real estate perspectiveWhile the ‘Big Six’ Established World Cities account for more than one-fifth of total global real estate investment activity, they will need to execute bold urban transformation plans (such as the ambitious ‘Grand Paris’ project) to support the shift to new modes of economic activity and to ensure the efficient recycling of land.
Emerging World Cities like Shanghai, Mexico City and Istanbul are witnessing massive expansion through the construction of impressive mixed-use schemes and trophy developments. But as these cities move to the next phase in their evolution, the real estate sector will play a more pivotal role in creating a ‘sense of place’ and contributing to city identity, uniqueness and well-being. As these are some of the world’s most environmentally challenged cities, real estate will be a key driver of more sustainable urban models. Improvements in real estate transparency also need to progress at much greater speed, not only to attract new capital, but to enhance the business operating environment and contribute to the quality of life of its citizens.
New World Cities are the home of many ‘millennials’; a demographic that demands less conventional real estate and has a preference for characterful properties and locations in vibrant mixed-use neighbourhoods. Real estate will play a particularly crucial role in building alliances between businesses, universities and civil society. ‘New World Cities’ are proving to be particularly attractive for real estate investors who are, either implicitly or explicitly, taking into consideration issues of liveability, sustainability and technological prowess in their strategic decision-making.
“This new economic and technological order offers cities the opportunity for re-invention, for the creation of a new economic and social dynamism and improved quality of life,” said Rosemary Feenan, director of Global Research at JLL. “This new set of city clusters is carefully assessing how to capture and leverage those opportunities in ways that are consistent with their vision and with the realities of what is realistically deliverable. The result is that cities are redefining urban strategies and taking clear positions on the policies required to achieve their visons and style objectives. For real estate investors who are assessing and choosing cities to target, the move away from city hierarchies to these new clusters presents an opportunity to more readily identify very real future opportunities.”
About JLLJLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. A Fortune 500 company with annual fee revenue of $4.7 billion and gross revenue of $5.4 billion, JLL has more than 230 corporate offices, operates in 80 countries and has a global workforce of approximately 58,000. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 3.4 billion square feet, or 316 million square meters, and completed $118 billion in sales, acquisitions and finance transactions in 2014. Its investment management business, LaSalle Investment Management, has $57.2 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com.
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