Beijing’s rise to global innovation hub

BEIJING, 8 July 2019 – Beijing now ranks among the top cities in the world for innovation according to new research from global real estate consultant JLL. An innovative business environment boosted by strong performance in areas such as patent applications and venture capital funding have elevated China’s capital into the top five in the worldwide rankings, with Shanghai and Shenzhen also featuring among the Global Top 20 for Innovation.

The Innovation Geographies report examines areas such as investment in high-tech industries, venture capital (VC) funding, and research and development expenditure, to create a global ranking of the cities with the strongest innovation ecosystems. As Jeremy Kelly, Director of Global Research, JLL points out, “Innovation is a crucial factor in today’s technology-driven world. Our findings reveal that in addition to attracting capital, cities with highly skilled workforces and an innovation-oriented environment also attract corporations interested in hiring the best employees.”

A focal point for funding

Beijing’s ranking of fourth was supported by its outstanding performance in certain metrics, one of which was the level of VC funding. As seen in the table below, the city ranked third in the world in this area, breaking the US$100 billion mark for the period assessed. It was topped only by the long-standing tech powerhouses of the San Francisco Bay Area, attracting more than double the funding of the next nearest competitor Seattle, and 300-400% that of established hubs such as New York and London.

Beijing’s position as a magnet for VC funding is based on the city’s thriving tech start-up scene. This is a result of the capital being home to the telecom operators and major internet companies, as well as having many of the best universities in the country for engineering and computer sciences. “Besides the fact Beijing has the best universities for engineering, it is historically the place where mobile value added service companies were set up, to be close to the operators”, says Nicolas Du Cray, Partner at Cathay Innovation, a tech-focused global fund with operations in China. ”Companies such as Sina and Sohu were set up in Beijing due to this, forming the beginning of an entrepreneurial and tech scene, and later the largest internet companies, top expertise in AI, and corresponding talent followed.”

So how do China’s other cities compare against the capital when it comes to innovation? Shenzhen, which came 14^th globally, was second only to Tokyo when it came to patent applications (see chart below), clearly demonstrating its innovative credentials. However, Beijing still occupies the central role when looking at the wider national picture. As Du Cray explains, “Beijing has roughly 50% of start-ups in China, and 50% of VC money. Top talents in AI are in Beijing, and the most experienced entrepreneurs and tech people are also in the capital, which is pretty diversified in terms of tech sub-sectors, while other cities tend to specialize, such as hardware for Shenzhen, e-commerce for Hangzhou, and fintech for Shanghai.”

Global leader in high-tech leasing

When it comes to leasing, Beijing is the global leader in terms of the percentage of total real estate occupied by global tech companies. This is testament to how active the city’s tech scene is, but what is behind this tech real estate boom? The capital’s concentration of state-owned enterprises and multinational firms are one aspect, but the municipal government has also provided long-running support for many tech zones such as Zhongguancun. Located in the northwest of the city, the area has developed into one of China’s top technology hubs, while the leading national universities have established incubators and other initiatives which provide a supportive atmosphere for start-ups, factors which have all bolstered the tech real-estate market. Over the past few decades, many famous IT giants have been established and matured in this area, bringing an exponential increase in Beijing’s office demand. Foreign IT enterprises also favor the area, with Microsoft, IBM, Apple, Google and other global leading IT companies all based there. With great growth momentum and contributions from both domestic and foreign IT players, Zhongguancun is viewed as China’s Silicon Valley.  

This was a key factor for Guanchun Wang, Chairman and CEO of Laiye, when the company were searching for a location. ”As an enterprise which focuses on innovative technologies with AI at their core, we knew that choosing a location in Haidian District would help us to find the best scientific and technological talent.” Proximity to other like-minded enterprises to form clusters is also a common phenomenon in the tech-industry, as Wang explains, ”We also paid attention to the industry layout and who our neighbors would be. We are neighbors to outstanding companies such as Google, Apple, and Intel, which makes it is easier to facilitate exchanges and learning, helping us become a smart robotics company with global influence.”

Transparency will assist development

Overall, Beijing’s world-class scores in innovation metric, along with its strong tech leasing sector, and its incubation of enterprises such as e-commerce giant JD.com and smartphone maker Xiaomi, hail a bright future for innovation. To support this development however, transparency in the real-estate market will be increasingly important. “To accompany the city’s rise up the value chain into more innovative activities, the need for higher levels of real estate transparency to match Beijing’s role as a global hub of innovation will increase,” sums up Julien Zhang, Managing Director of North China & Beijing, JLL. “Transparent real estate markets encourage efficient, business-friendly and innovative real estate space solutions, help companies to manage costs, and create safer built environments for workers and residents. In this way we believe that Beijing will continue to remain at the forefront of Chinese and indeed global innovation.”

For more information, download the Innovation Geographies report here.

Methodology

JLL’s Innovation Geographies study covers over 100 cities globally and tracks a broad range of factors to assess a city’s innovation capacity and the relative strength of its talent pool. Innovation is defined by the level of foreign direct investment in high-tech industries; research and development expenditure; the number of patents awarded and venture capital activity. The strength of a city’s talent pool is determined by its demographics, the quality of its higher education institutions, the proportion of people with a bachelor’s degree and employment in high-tech industries. 

About JLL

JLL (NYSE: JLL) is a leading professional services firm that specialises in real estate and investment management. Our vision is to reimagine the world of real estate, creating rewarding opportunities and amazing spaces where people can achieve their ambitions. In doing so, we will build a better tomorrow for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $16.3 billion, operations in over 80 countries and a global workforce of over 91,000 as of March 31, 2019. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com