Asian cities are moving up the innovation rankings, with Tokyo, Singapore and Beijing among the top five most innovative cities globally. According to new research from JLL, these tech-savvy cities have attracted close to $100 billion of real estate capital over the past three years, as investors look to tap into growing demand.
The Innovation Geographies report, which looks at factors such as talent pool, investment in high-tech industries, and research and development expenditure, reveals that in addition to drawing capital, innovation-oriented cities with highly skilled workforces also attract corporations interested in hiring the best employees.
“Innovation plays a key role in driving cities’ economic growth by attracting investors and companies,” said Dr. Megan Walters, head of Asia Pacific research, JLL. “Investors tend to focus on locations that are capable of sustaining long-term occupier demand, while corporates are drawn to those that have deep talent pools and sophisticated innovation ecosystems to ensure they are well-placed to succeed in the global marketplace.”
JLL’s research indicates that innovation-oriented cities have a strong competitive advantage in today’s technology-driven world. Of the 109 cities analyzed, the seven leading Asia Pacific cities — Tokyo, Singapore, Beijing, Seoul, Shanghai, Shenzhen and Sydney — accounted for around 50 percent of overall annual real estate investment volumes over the past decade in the region.
Some cities that rank just below these leaders have also seen a significant uplift in transaction volumes since the global financial crisis. For example, direct real estate investment has grown by 548 percent in Auckland and 283 percent in Guangzhou since the financial crisis.
Attracting corporate occupiers
Like real estate investors, corporate occupiers search for locations that have advanced innovation ecosystems. These cities sustain highly skilled workforces and are best placed to succeed in the future, says JLL. However, the report points out that talent concentration is not as evenly balanced across the three regions, as Asia Pacific lags behind its European and the U.S. counterparts.
Only three Asia Pacific cities — Sydney, Melbourne and Tokyo — are in the top 20 for talent concentration. Australia has established itself as a hub of innovation with Sydney and Melbourne performing well on both innovation and talent. For cost-conscious businesses, the most affordable hubs relative to their innovation and talent offerings are second-tier Australian cities such as Brisbane and Perth, offering a significant discount with more attractive yields, and rents up to 67 percent lower than in Sydney.
Elsewhere in the region, Shenzhen has emerged as a leading tech hub. One of the challenges it faces to propel forward in its talent offer is a lack of high quality universities and the continued need to attract talent from outside the city. Likewise, Bengaluru and Hyderabad are fast growing markets with young, well-educated workforces. The report points out that both Indian cities could strengthen their reputation as global innovation hubs if they are able to overcome social, environmental and infrastructure challenges they are currently facing.
“Asian cities have made rapid progress toward developing sophisticated future-looking business ecosystems, while China’s government is committed to cementing its position as a leading innovator by improving the quality of the country’s higher education to make it even more competitive,” concluded Dr. Walters. “Looking ahead, we believe that Shenzhen, Bengaluru and Hyderabad will continue to expand their capabilities and reputations as tech hubs.”
For more information, download the Innovation Geographies report here.