Jones Lang LaSalle Incorporated (JLL), the American commercial real estate services firm’s latest research with The Business of Cities reveals that no longer are a city’s economic fundamentals the main draw for corporate occupiers and investors. Instead, quality of life, innovation, sustainability, governance, and resilience increasingly factor into location and investment decisions. Cities that adapt to new economic models – such as the innovation economy, experience economy, sharing economy, and circular economy – will enjoy new sources of real estate demand and attract higher cross-border investment.
“What businesses need from cities is changing, as a result of technological disruption, growing concerns over climate change, and geopolitical tensions,” says Jeremy Kelly, Director, Global Research at JLL. “By sifting through more than 500 city indices, we pinpointed key trends that will matter most for our clients.”
Several new economic models are shifting attention to how cities build a customer service culture, foster urban experiences, expand innovation industries, and achieve sustainability:
- The innovation economy demands that locations become flexible, optimize space, and break down barriers between building uses. The model renews focus on central business locations as venues for collaboration, innovation, clustering, and commercialization.
- The experience economy amplifies customer expectations for on-demand services, thrives on customized experiences facilitated by data collection, and fosters concentration of a mix of activities in high-amenity locations.
- The sharing economy promotes the rise of new living and working patterns (including co-working and co-living), raises demand by fast-moving tenants for easily reconfigurable locations, and increases returns from effective space and asset utilization.
- The circular economy creates an imperative for buildings to become more operationally efficient and resilient, and achieve greater density through shared occupancy and longer asset lifespans.
“Global cities are being judged on a wider set of competitive criteria, including their ability to attract and accommodate new forms of value creation,” says Dr. Tim Moonen, Managing Director at The Business of Cities. “The dividends to asset holders in cities that can successfully adjust to these new trends are becoming increasingly apparent.”
The new economic models have a strong impact on the landscape of global cities. Seven cities continue to demonstrate competitive strength – London, New York, Paris, Singapore, Tokyo and Hong Kong have topped JLL and The Business of Cities’ Established World Cities list since 2013, with Seoul joining in 2017. Another group of contending cities follows closely behind, including San Francisco, Los Angeles, Shanghai, Toronto, Chicago, Beijing, Amsterdam, Sydney, Madrid and Washington, DC. This year, Berlin, Munich, Boston and Stockholm joined the global leader board, as they continue to build on their quality of life advantages, innovation capabilities or institutional strength, and punch above their weight as destinations for cross-border real estate investment.