JLL’s 2015 City Momentum Index ranks global cities on real estate and socio-economic factors
Chicago,
London, 23 January, 2015
– Providing a new view into what makes cities dynamic and
attractive for future opportunities, JLL today released its second
annual City Momentum Index (CMI). London, San Jose, Beijing, Shenzhen
and Shanghai lead the 2015 CMI, which also features six new cities in
the top 20: Ho Chi Minh City (6) Sydney (11), Dublin (14), Nairobi
(15), Melbourne (16) and Nanjing (20). The CMI goes beyond
traditional static economic rankings by delving into the underlying
drivers that keep cities competitive and dynamic, as well as
identifying signals for change that will impact their future.
Jeremy
Kelly, Director, Global Research for JLL, explains the
differentiating factors of the CMI, “While typical real estate
performance rankings reveal most active investment and occupier
markets, JLL’s CMI identifies the global cities changing fastest.
By widening our lens to combine real estate dynamics such as
investment, property prices and construction with socio-economic
factors, we can better understand the drivers of city success by
examining signals of change over the years.
“Having
strong momentum presents cities with opportunities, but also risk.
While the 2015 CMI highlights a city’s success and pace of change
today, it doesn’t guarantee the future performance of commercial
real estate or identify the hottest investment markets. We have seen
the technology industry driving cities’ real estate markets year
over year, but other trends, ranging from environment to education,
impacted the pace of change, resulting in a shuffle of cities’
positions on the CMI,” Kelly said.
The
list of top 20 cities reveals major trends and changes driving global
momentum:
• Technology-rich
cities dominate the CMI. Several of the world’s most tech-rich
cities maintained a position in the top 20, including London (1), San
Jose (2), Boston (7) and San Francisco (9). Newcomers to the top 20,
thanks to the technology sector, include Sydney (11), Bangalore (12),
Dublin (14), Nairobi (15) and Melbourne (16).
• China’s
cities buoyant despite economic slowdown. China’s recent
economic performance has not impeded seven of its cities appearing in
the global top 20, underpinned by the continued expansion of its
domestic market and middle class population. Trade and connectivity
prove critical to Chinese cities, demonstrated in the “corridor of
dynamics” along the Yangtze River connecting Shanghai (5), Wuhan
(8), Chongqing (10) and Nanjing (20). As China moves up the value
chain, the technology sector has become an important driver of city
success, helping to boost cities such as Beijing (3) and Shenzhen
(4).
• London
and Dublin outperform continental Europe. While continental
European cities were once again absent from the list of most dynamic
cities, London topped the 2015 CMI and Dublin entered the top 20 at
14. London’s strong economic fundamentals, cross-border investment,
positive outlook and reputation as a global tech hub boosted its
position. Dublin is currently the world’s fastest-growing office
rental market.
Moscow
and St. Petersburg are in the bottom quartile of the Index.
“Their poor performance in the CMI is particularly due to the real
estate drivers, including negative rental change and falling
investment volumes. Their performances have not been helped by
moderating GDP growth, slowing FDI, and weak and volatile rouble.”
– Olesya Dzuba, Deputy Head of Research, JLL, Russia & CIS,
comments.
While
six new cities entered the 2015 CMI, established tech and creative
hubs, such as Austin, Los Angeles and Seattle, dropped to just
outside the top 20. Hong Kong and Tokyo fell outside this year’s
top 20 due to a temporary loss of impetus, but nonetheless have
strong long term fundamentals. For the first time, cities in India
and Sub-Saharan Africa were represented in the CMI due to the robust
demand for office space from technology companies (Bangalore, 12) and
MNC expansion (Nairobi, 15).
The
City Momentum Index, the most downloaded report from JLL’s
Cities Research Center, assesses 120 cities with a weighted overall
score based on 37 short-term and longer term variables.
Short-term
socio-economic momentum variables (40 percent of the
model) include recent and projected changes in GDP and population,
air passenger traffic, corporate headquarter presence and recent
levels of foreign direct investment as a proportion of a city’s
economy.
Short-term
commercial real estate momentum variables (30 percent of the
model) include recent and projected percentage changes in office net
absorption, office construction, office rents, shopping mall
construction and retail rents, direct commercial real estate
investment volumes and real estate transparency.
Longer
term variables (30 percent of the model) that are likely to
determine future economic strength and real estate momentum include
high-value incubator indicators such as university presence and
educational infrastructure, innovation capability, international
patent applications and presence of technology and venture capital
firms.
