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US city comparison

Cities worldwide are in a race for talent and investment. Here’s how U.S. cities stack up.

Real estate experts measure U.S. cities against global competitive metrics.

By Caroline Brooks | Caroline.Brooks@am.jll.com | @CarolineKBrooks

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With 3.64 billion people—or half of the world’s population—living in cities, and that share projected to exceed 70 percent by 2050, civic leaders across the globe are focused on making their cities as habitable and prosperous as they can be. And because real estate will clearly play a crucial role in the development of urban centers, from affordable housing development to sustainable office buildings, real estate executives are also paying close attention to what makes cities most attractive to both residents and businesses.

To help understand why some cities thrive and become destinations for desirable populations and businesses, while others wither, the World Economic Forum (WEF) recently released its 35th annual Competitiveness of Cities Report, offering case studies of 33 global cities and new perspectives on what makes them attractive. The report identifies four key factors that define a city’s competitive profile:

  1. Institutions – governance or decision-making framework
  2. Policies – regulatory framework and business environment
  3. Hard Connectivity – core physical infrastructure
  4. Soft Connectivity – social capital

Real estate plays an obvious role in one of these factors—a city’s hard connectivity depends largely on its buildings—and a less obvious but crucial role in all four. From construction and development to investor interest and awareness, a city’s real estate market, including assets and activity, serves as a critical indicator of a city’s competitiveness.

Satellite view of North America (image)
  • Development

    11

    Cities expected to be among the world's 30 largest by GDP in 2020 (JLL)

  • Education

    4,599

    Colleges or universities (National Center for Education Statistics)

  • Connected

    27

    Cities with mass commuter rail transit systems (APTA)

  • Productivity

    500 M

    Square meters of office space – nearly half of the global total (JLL)

  • Workforce

    250

    Average number of resumes received for every corporate job opening (TIME)

  • Business

    128

    Global FORTUNE 500 companies headquartered in the U.S (FORTUNE)

Peering through the lenses of the WEF report and JLL research, here’s a look at here’s a look at the state of U.S. cities as they gear up for heated global competition.

Institutions

The WEF found that when public and private sectors align around the same goals and pull together to achieve them, cities become more successful and competitive. Real estate, a high-profile investment for both the public and private sectors, spurs economic development at several levels.

The increase in foreign investment into the U.S. has become a major institutional trend and one of the primary means of foreign direct investment throughout American cities. From Canadian powerhouse Brookfield to emerging Chinese player Greenland, companies have set sights on U.S. real estate as a long-term net gain as they seek to diversify their holdings. Even central banks, such as Norges, are confident in the U.S. real estate market beyond just the current cycle. - JLL

These companies are investing in top-tier, core assets that are increasingly emblematic of cities: Brookfield is now the dominant landlord in Downtown Los Angeles, while Greenland is investing significant sums in Brooklyn’s Atlantic Yards mega-development, for example.

Policies

At both national and municipal levels, a competitive policy profile should feature sound fiscal procedures; transparent business regulation and flexible labor markets; simple taxation and a welcoming environment for trade and foreign investment.

Even in U.S. cities considered gateway markets, there are often policy shortcomings. In that case it behooves commercial real-estate investors to build strong relationships with government leaders. In San Francisco, for instance, concerns over Proposition M, which caps the amount of office space that can be approved in a given year, have led major investors such as Boston Properties, Kilroy and Jay Paul to become deeply involved in the city’s planning and development approval process.

In a demonstration of how this engagement pays off, last year San Francisco Mayor Ed Lee welcomed Jay Paul’s entry into the Bay Area’s Transbay District, calling the commercial developer’s move “a critical anchor for economic development and jobs,” that would enhance the area through “cities, great transit access, innovation and dynamic mixed-use urban centers.”

Local governments are the dominant players in urban development; they see demographic and economic fluctuations first-hand, control zoning, preside over development application and proposals and participate in corporate recruitment. Clearly, real-estate investors must be highly attuned to the machinations of these bodies and to changes in community planning and regulatory policy.

As with other areas, the real estate industry is inextricably linked with these changes in public policy and is influential in shaping outcomes that affect the future of cities. From where cities should be growing to revitalizing neighborhoods, real estate plays a crucial role and the industry stands at the forefront of making these changes happen. - JLL.

Hard connectivity

Now more than ever, real-estate investors are using city and submarket connectivity and infrastructure to undertake more well-rounded assessments of market expansion projects. And civic leaders and investors are frequently working together to shape where and how the next wave of development (and redevelopment) will take place. Manhattan, with its street grid and relentless expansion (especially over the last 200 years), might be the world’s greatest example of a hard-connected city. In recent years other cities, including Chicago, have embraced urban density, transit and improved amenities in city centers, reclaiming many corporate headquarters and affluent professional populations from the surrounding suburbs.

In U.S. cities, transit-accessible and central locations still make for the most competitive markets, but submarket districts are becoming more attractive.

Hudson Yards in Manhattan, Mid-Market in San Francisco, River North and West Loop of Chicago, South Lake Union and Belltown in Seattle, the Seaport District in Boston and LoDo in Denver are just some of the emerging CBD-adjacent areas that have become the centers of new development that are helping to rein in urban sprawl somewhat while providing a better balance of office, residential, retail and hospitality than in traditional cores. - JLL.

JLL forecasts that, because of their hard-connectivity disadvantage, secondary U.S. markets may never fully match the economic power of top-tier American cities, but “they’ll grow at rates significantly faster than [top-tier] markets, and geographies will see more bifurcated growth in areas with stable infrastructures.”

Atlanta, long a model for suburban sprawl, is seeing high-profile developments and investor interest in the Midtown, Buckhead and the Central Perimeter neighborhoods. While these will be considered suburban Atlanta for the immediate future, the “public and private sectors alike recognize hard connectivity as a critical asset to increase property values and garner attention from investors and tenants both inside and outside of the market,” says a JLL report.

Soft connectivity

Social capital is what keeps city residents and businesses connected. In cities like Boston, Pittsburgh and St. Louis this takes the form of education, which has helped these markets escape post-industrial decline by attracting industries seeking to capitalize on the talent and intellectual property produced by universities. JLL finds that nearly all cities and industries benefit from soft connectivity, especially when it comes to accessing university talent and investment. “The fast-growing sectors of tech, health care, life sciences and engineering are incredibly reliant on these institutions,” a JLL report says. “And markets such as Boston, Philadelphia, Austin and Raleigh-Durham are just some of the places that are maximizing their proximity to universities, hospitals and research centers.”

Globally, cities must also seek to foster robust digital infrastructures and provide amenities that make them “more liveable.” While getting residents into jobs in cities is one thing, keeping them there after work is an entirely different challenge.

Changes in demographics and lifestyle preferences have pushed livability to the forefront of ranking indexes. In our increasingly mobile world, corporations have labeled employee well-being and talent attraction as critical for their continued success and overall productivity. Deutsche Bank and Goldman Sachs’ creation of satellite offices in Jacksonville and Salt Lake City respectively, and moved employees away from traditional financial centers such as New York. Yet, employee satisfaction has remained remarkably high. That doesn’t mean that New York is over, but it shows the importance of options for employees and factoring in livability. – JLL

Comparing findings from the WEF Competitiveness report with insights from real estate experts, the impact of global dynamics on U.S. markets becomes clearer, and offers a glimpse to where growth opportunities will be in tomorrow’s most competitive cities.


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