JLL’s hot markets to watch

India and China dominate the league of the most impressive urban centres expanding anywhere in the world today.

India emerged in front of its main rival according to the sixth City Momentum Index published by JLL, underlined by “robust technology and innovation ecosystems.” Bengaluru was found to be the world’s most dynamic city among 131 major established and emerging business hubs globally.

With 19 of the top 20 cities from Asia Pacific, the rankings highlight and showcase the region’s continued rapid urbanization and strong economic growth.

The Index’s top 10 most dynamic cities:

1. Bengaluru, India
2. Hyderabad, India
3. Hanoi, Vietnam
4. Delhi, India
5. Pune, India
6. Nairobi, Kenya
7. Chennai, India
8. Ho Chi Minh City, Vietnam
9. Xi’an, China
10. Guangzhou, China

Indian hubs draw investment

Whilst currently lacking in infrastructure, India continues to be a hotspot for foreign investment, with areas such as Bengaluru having a worldwide reputation for technology design and development.

Bangalore / Bengaluru is nicknamed the Silicon Valley of India. Pictured is Bagmane Tech Park, the home of many ‘deep tech’ companies

In Hyderabad, there is a growing number of tech companies focusing on ‘deep tech’, such as India’s largest tech start-up incubator, T-Hub, which is helping to drive substantial growth. With further improvements to real estate investment transparency and the current efforts being made to improve infrastructure, India’s cities could be primed for the proptech revolution in the future.

Ramesh Nair heads up JLL India

Ramesh Nair, CEO and country head, JLL India, said: “Some of India’s fastest growing cities have been successful in recent years in drawing high levels of foreign direct investment, with structural reforms also encouraging greater interest from foreign real estate investors who are seeking to tap into the country’s favourable growth dynamics.

“Following the implementation of landmark policy reforms such as the Real Estate Regulation and Development Act, and the Goods and Services Tax coupled with a focus on improving infrastructure and ease of doing business, the government’s reforms-driven agenda and measures are expected to bring in more transparency in the real estate sector and give a strong impetus to the sector.”

“A key theme in this year’s index is of many of the top-ranking cities having a robust technology and innovation ecosystem. The technology sector is a key driver of real estate and economic momentum, and is propelled not only by large dominant tech firms but also by a robust startup culture. Both Bengaluru and Hyderabad have a thriving information technology and startup culture which has helped them top the rankings.

“As the Silicon Valley of India, Bengaluru has continued to witness much traction in its real estate sector over the years. Backed by a strong commercial sector, the city’s retail, hospitality and residential sectors have also gained prominence with the city being recognized as the third largest hospitality market and the leading retail market in India.”

“Hyderabad as an emerging investment destination has been in the spotlight for its growth potential and investments from major technology led companies around the globe. The real estate market of Hyderabad has been one of the best performing in India for the last few years in terms of the absorption and launches.”

Transparency is key

Jeremy Kelly, global research director, JLL

Jeremy Kelly, director of global research at JLL, said: “Asia continues to show strong momentum, with cities that are successfully expanding their innovation economy punching above their weight in terms of attracting capital, companies and people. These cities need to address the environmental and social impacts of rapid growth such as social inequality, congestion and environmental degradation. The provision of smart, efficient and productive real estate and increased transparency are key factors in driving long-term sustainable growth.

“Proptech adoption is greatest in the highly transparent markets such as the US, the Netherlands, Canada and Australia, and is also moving the needle in semi-transparent markets like China, Dubai, Mexico and Brazil.

‘Proptech is allowing some countries to leapfrog the normal processes of market maturity’

“Many proptech firms are unconstrained by the national market boundaries used in our Index. While companies might be based in a particular market, their software platforms can often be used nearly anywhere. The best innovations can jump between regions, with faster diffusion for pure software firms, such as those involved in 3D imagery or AI lease abstraction, and slower diffusion for companies reliant on analysis of idiosyncratic local data.”

Chinese cities fast-track towards maturity

In China, the real estate market is maturing, with massive investment into infrastructure and an emphasis on real estate innovation. Smarter infrastructure is helping to reduce pollution in leading cities, and in Xi’an and Guangzhou real estate development is gathering strong momentum.

China continues to be home to many of the world’s most dynamic cities, with 9 of its major cities: Xi’an (9th), Guangzhou (10th), Nanjing (11th), Beijing (13th), Shanghai (14th), Chongqing (16th), Hangzhou (17th), Shenzhen (19th) and Chengdu (20th) – featuring in this year’s CMI Top 20.

The cities continue to benefit from huge ongoing transport infrastructure investment, including expansion of the national high-speed rail network, new urban metro systems and greater airport capacity.

From infrastructure to innovation

Yet the drivers of China’s cities are now changing as they tilt increasingly towards becoming more innovation-oriented economies. A new system of Chinese cities is evolving of truly global scale, where momentum is more and more dependent on levels of innovation, entrepreneurship and liveability.

They are home to a new breed of energetic tech-savvy firms that are extending their global footprints, facilitated by China’s ambitious ‘Belt and Road Initiative’.

Guangzhou ranks as the 10th most dynamic urban centre in the world

However, China’s cities are certainly not without their challenges, with environmental and transparency issues affecting their global competitiveness, while growing international linkages have increased their vulnerability to global trade tensions.

Progress is nonetheless being made on several fronts. Pollution is now falling in many cities as China’s government introduces radical measures to reduce emissions. Real estate transparency is steadily improving, with its premier cities, Beijing and Shanghai, on the cusp of joining the ranks of the world’s ‘transparent’ real estate markets.

Of the 13 cities in Greater China covered by the CMI, Xi’an has for the first time emerged in top position nationally (9th globally). This western China city has traditionally lagged its coastal peers, but it is catching up on the back of its strategic position on the Silk Road and its strengths in innovation and R&D. Struggling with severe air pollution, the city is now seeking innovative solutions such as the installation of a 100-metre-high air-purifying tower to reduce smog.

Guangzhou fares well on several socioeconomic measures and currently has stronger real estate momentum than its national peers. Having lost some ground in recent years to neighbouring Shenzhen, the city is regaining momentum as it prioritises R&D, biotech and IT, as well as financial services and advanced manufacturing. Guangzhou is geographically well placed to benefit from agglomeration benefits of the Greater Bay Area, one of the world’s most dynamic mega-regions.

The challenges of rapid momentum

Momentum can have both positive and negative aspects. Cities growing quickly tend to punch above their weight in attracting capital, companies and people.

However, this can create challenges, particularly in terms of environmental and social impacts. If these challenges are left unchecked, it is unlikely that this momentum will be sustainable and a city’s economy will struggle to mature and move to the next level of development. The myriad issues created by rapid momentum include pollution, congestion, overcrowding, affordability, inequality and a deficiency of appropriate infrastructure.

Cities take different paths to growth; no two cities’ challenges or solutions will be identical. For example, Indian and Chinese cities are both facing severe environmental impacts but are taking divergent approaches to combatting them.

Download the latest edition of the PlaceTech quarterly TRENDS report in full