The United States’ Silicon Valley remains the global poster child for tech hubs, but in the past 10 years it has found competition from similar centres emerging around the world.
These new tech hubs host a number of characteristics similar to Silicon Valley before its real estate boom, and have led the start of a colossal intellectual and real-estate migration.
“Education, demographics, labour and funding all work interdependently to create a haven for a healthy start-up ecosystem,” says JLL’s Head of Asia Pacific Research, Dr. Megan Walters. “Cities which have the relevant infrastructure and environment attract innovative companies that hire educated, forward-thinking people.”
“While Silicon Valley may be the Tech Hub poster-child, our analysis of the tech hub model demonstrates that any city which has the relevant infrastructure and environment also attracts innovative companies that hire educated, forward-thinking people.”
“Cities that possess an innovative atmosphere breeds capabilities to become frontiers for future economies,’ she says.
According to Dr Walters, there are four key requirements for a successful tech hub:
- Inspirational Education: Being in close proximity to universities that advocate free-thinking while providing the necessary resources for a tech-based education is fundamental to the process—young minds need to be nurtured in a space that promotes creativity, collaboration, and vision.
- Eager Participants: Commonly known as the Millennials, people born between 1980-2000 are flocking to cities, looking for intellectually fluid work environments which foster innovative thinking. In time to come, the number and spending power of millennials will only grow and they will become one of the most mobile cohorts, seeking job opportunities across the world.
- Stimulating Job Market: Millennials are eager to join a vibrant community of pioneers and innovators and the tech labour demand in the different cities present an exciting opportunity for them, whether it be overseas or locally.
- Visionary Investors: The importance of venture capitalists to the development of tech hubs cannot be overlooked. In 2015 alone, investment by venture capitals for start-up companies throughout the US was reported to $58.8 billion. In order for the innovations and new ground-breaking technologies to realise, it has to be backed by a multitude of knowledgeable investors whose vision aligns with the direction of technological development and progressive thinking.
JLL’s Dr. Wayne Geary and his global location intelligence team have created ‘MapIt’, an interactive map to identify the potential tech hubs of the not-too-distant future – places where education, tech, funding, market reach, talent and start-up experience successfully combine to create tech hub incubators.
But where does tech potentially marry real estate opportunity in this sector?
From a real estate investment perspective, the top 10 emergent cities to watch are:
- New York City: Moving from 5th place in the previous report to 2nd place, New York has cemented its standing as the most prominent tech ecosystem on the US’ east coast. Its popularity is, in part, based on the choice by foreign start-ups to use New York as a toe-hold into the US market once they have solidified their business in their home country.
- Boston: Boston distinguishes itself from other tech hubs on this list by focusing on life science, biotech, robotic, and pharma-related enterprises, where it is a worldwide leader. Entrepreneurs in Boston benefit from a dense network of mentors and supportive organisations, including start-up accelerators.
- Berlin: Berlin has moved from its rank of 15th in the 2012 report to 9th, and start-ups in the city are expected to create as many as 40,000 new jobs by 2020, driven by a strong creative scene and low living costs. Start-ups in the Berlin ecosystem have historically been successful in markets like e-Commerce, gaming, and marketplaces.
- London: London has risen in the ranks from 7th to 6th. Backing for start-ups is available from the Government, and London’s ecosystem offers exceptional access to affluent consumers, international corporations, and a solid funding landscape.
- Moscow: Start-up culture is an emerging movement in Moscow. The city’s higher education infrastructure feeds the ecosystem with some of the best software engineers in the world.
- Tel Aviv: This city draws its focus on technology from Tel Aviv University and its access to the Israeli Defence Forces. However, it could benefit from more international talent, which can’t compare to other tech hubs such as Silicon Valley.
- Bangalore: The start-up leader of India, Bangalore has had explosive growth in recent years. The wealth of existing start-ups has helped recirculate wealth and expertise back into the ecosystem which has, in turn, drawn attention from the international investor community, who are eager to find high potential, under-valued new start-ups.
- Singapore: Already one of the world’s top financial centres, the Government’s support of the emergent start-up scene has played a large part in its rapid development. Local start-ups benefit from the city’s geographic location and existing business relationships, access to affluent consumers and multi-national corporations.
- Sydney: Sydney captures two-thirds of the country’s start-up activity, but it could be a stronger contender if it demonstrated higher performance, funding and market statistics.
- Sao Paulo: With the best quality talent in South America, Sao Paulo has improved its ranking since 2012, and now sits at 12th. However, it faces several challenges to entrepreneurship, including an economic downturn, reduced investor confidence and high costs.