(Photo by Dan Kitwood/Getty Images)
In today’s globalised economy, competition between cities aspiring to be world leaders has never been greater.
Judged on an ever-evolving set of criteria – from innovation to long-term resilience – cities around the world are fighting to meet the expectations of business and residents alike, while maintaining and fuelling their economies.
And London, while not perfect, best ticks all the boxes, according to JLL’s demand and disruption in global cities report, fending off strong competition from New York, Paris, Singapore, Tokyo, Seoul and Hong Kong.
“London has nurtured a winning combination of technological innovation and a robust cycle of infrastructure investment and redevelopment to give it the edge on all-round competitiveness,” explains Jeremy Kelly, JLL’s director of global research programs.
“Its strength helps it to remain resilient in the face of political uncertainty, surging urbanization and rapid tech-driven change, and it continues to draw in high-levels of real estate investment.”
Here are three key reasons why London is maintaining its position as a global leader:
1. A strong and agile tech sector
London tops the global chart for talent, with 58.5 percent of its workforce educated to degree level and 14.5 percent employed in high tech sectors like AI, fintech, cyber security and blockchain. “There are very few other world cities with such a high concentration of top global universities, and this is a major contributor to London’s impressive talent pool, ” says Kelly.
At the same time, the city has a vibrant startup scene that attracts international investment. In the year to June 2019, the UK’s tech sector produced one ‘unicorn’—a company valued at US$1 billion—each month. Over a third of Europe’s fastest-growing tech companies are currently based in Britain.
London’s talent coupled with its innovative economy will help the city withstand, shape and leverage the changes and challenges of tomorrow, says Owen King, JLL’s UK director of corporate research.
“The UK has a very strong tech start-up ecosystem, which feeds into all sectors from financial to the legal sector and life sciences, and that’s supported by a wide network of investors, he says.
Venture funding into AI firms based in the UK reached £736 million in 2018 alone – almost double what was invested in 2017. Ares like cyber-security, fintech and data analytics are set to be a big growth area in the future, according to King.
And these companies are actively looking for high quality, centrally-located places to work. Between 2014 and 2018, tech firms – including Google and Facebook – leased 13.5 million square feet of office space in London—representing almost a quarter of all office take up.
2. Investment in infrastructure
“Robust infrastructure for both urban mobility and intercity connectivity are core attributes of a successful city,” says Kelly.
London scores particularly well on international connectivity, with six international airports and the Eurostar terminal at St. Pancras. While ongoing projects are strengthening its domestic infrastructure. Crossrail plans to increase rail capacity by 10 percent in central London and give an additional 1.5 million people from across the southeast access to the capital within 45 minutes. HS2 meanwhile, currently under review, aims to link London with cities including Birmingham and Manchester to boost economic growth.
London may have competition in the future though, as other global cities invest more heavily in infrastructure. France’s ambitious Grand Paris initiative has been hailed as Europe’s largest transport project while Shanghai has undertaken rapid expansion of its already extensive metro system.
3. Ambitious urban transformation
Across London, redevelopment projects are transforming the cityscape, from Battersea Power Station’s ongoing metamorphosis into a vast mixed-use complex, to the planned £1.1 billion East Bank culture, education and innovation hub at Stratford.
While the redevelopment of transport hubs such as King’s Cross and Paddington are providing new offices, public spaces, shopping areas and housing.
“By providing inspiring and collaborative spaces in central locations with a host desirable amenities, these regeneration projects play a major role in enabling cities to boost their innovation economy and are a magnet for both companies and talent,” says Kelly.
Yet skilled workers still need somewhere to live. “Where London falls behind is its ability to offer affordable housing. If this is not addressed people could be put off moving to the city,” says King.
The question of affordability also extends to the city’s office space, where limited supply and low vacancy rates are keeping rents high while competition from smaller European cities like Berlin, Amsterdam and Stockholm continues to grow.
“The real estate market may be enjoying low vacancy, but that needs to be balanced against what the city needs overall, which is available and affordable space,” says Kelly.
Yet despite the challenges, ongoing Brexit uncertainty and intensifying competition between cities, Kelly is optimistic about London’s resilience: “As a city, it’s sufficiently agile to continue reinventing itself.”
Click to find out what Europe’s economic outlook means for its real estate.