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.
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.