City competitiveness may outrank economic clout in real estate investment decisions

SINGAPORE, 30 September 2019 – Several cities in Asia are emerging as competitive real estate markets, as investors and occupiers increasingly consider factors such as quality of life, innovation, sustainability, governance and resilience in their investment and location decisions, says JLL.

According to the real estate consultancy’s latest research with The Business of Cities, a city’s economic fundamentals are no longer the main draw. What matters more to investors and occupiers is overall competitiveness, a performance benchmark the firm measured across more than 500 indices.

Stuart Crow, CEO, Capital Markets, JLL Asia Pacific says: “More capital sources are targeting economies in Asia that have quality of life advantages, innovation capabilities or institutional strength. ‘Established World Cities’ offering such strengths like Singapore, Tokyo, Seoul, Beijing, Shanghai, Hong Kong, and Sydney have attracted a total of US$65.3 billion over the last three years.”

He adds: “Our clients are telling us that beyond the stability among top-tier cities, they’re also seeking markets that are developing new platforms for innovation and effective resilience strategies.”

The report identifies Guangzhou, Shenzhen, Taipei, Nanjing, Mumbai, Kuala Lumpur, Bangkok and Delhi as the group of ‘Emerging World Cities’ to watch in Asia, as they continue to serve a higher level of domestic demand and become increasingly experienced gateways for international trade and capital. In fact, Guangzhou and Shenzhen have raised a total of US$1.6 billion in foreign real estate investments in 2019 alone.

“By sifting through more than 500 city indices, we pinpointed the key trends that will matter most for our clients,” says Jeremy Kelly, Director, Global Research at JLL. “What businesses need from cities is changing, as a result of technological disruption, growing concerns over climate change, and geopolitical tensions. Looking ahead, there are new economic models that will have a strong impact on the landscape of global cities.”

Besides a city’s all-round competitiveness, JLL points out that those cities that successfully adapt to new economic models will enjoy new sources of real estate demand and attract higher cross-border investment, as follows:

• 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.

For more information, download the Demand & Disruption in Global Cities 2019 report here.