JLL issues the China12 report; Shanghai tops the list as a “Global Contender”

SHANGHAI, April 19, 2018 – JLL (NYSE:JLL) published the latest research report in its China Cities series—The China12: China’s Cities Go Global.

March 04, 2019

SHANGHAI, April 19, 2018 – JLL (NYSE:JLL) published the latest research report in its China Cities series—The China12: China’s Cities Go Global.

In the report, JLL identifies the 12 mainland cities which best demonstrate innovative economic development and are set to be the most competitive in the future. The cities were chosen based on their record of innovation, their ability to nurture the next generation of businesses and the overall quality of life for their residents. The report draws on in-depth discussions detailing how these cities will expand their influence, and how they will drive developments in global real estate markets.

Eddie Ng, Managing Director of JLL East China commented, “As China enters a new era of innovation and internationalization, the process of measuring a city’s success should focus on how the city embraces change and its ability to create long-term sustainable economic momentum.  Shanghai, the city that has done the most to connect China with the rest of the world through its business transparency and active market innovation, is driving business growth and attracting diverse sets of talent and investors. Such characteristics, I believe, are key to making Shanghai a future Global Contender.”

An innovation-based measure of a city’s potential

The criteria for membership of the China12 group extend beyond traditional metrics to include “future-proofing” credentials such the ability to innovate, an accommodating business environment, and overall livability. As a result, each city’s long-term potential is comprehensively evaluated. Twelve cities were selected from 287 city-candidates, which then were further categorized into three tiers: “Global Contenders”, “Enterprisers” and “Powerhouses”, based on their respective traits and competitive edges. Shanghai and Beijing stand out from the rest of the China12 when it comes to key “future-proofing” metrics, and, in fact, the two cities are projected to join the elite group of the world’s most globally connected and powerful cities in the next 5 years.

A city’s ability to “future-proof” itself provides an increasingly important lead indicator of commercial real estate market activity and performance. JLL predicts that as the China12 move up the value chain, there is potential for medium-term rental uplift in several China12 office markets. JLL anticipates that Shanghai will become a global pioneer in “new retail” concepts, as the retail property market moves into the next phase of development due to the popularization of e-commerce, and that the hotel markets in the China12 will gain from continued expansion of business and leisure travel and growing MICE activities in Shanghai, however, JLL research shows that hotel supply waves are passing and fierce competition will encourage some aging hotels to change to other functions.  In turn, this will help ease the present pressure on supply faced by the hotel industry. For the China12, the need for higher levels of real estate transparency to match their roles as global innovation hubs will become even more pressing, and greater transparency will also stimulate investment markets. Looking forward, Shanghai will cement its position among the Global Top 10 real estate investment destinations.

JLL research has found that cities with higher future competitiveness tend to invest their land in industries at the top of the value chain such as quality commercial space, residential space and advanced manufacturing. In Shanghai, city planners are cutting land supply in low-efficiency industries for example warehousing. Although cities with strong future competitiveness still see high demand for warehousing, developers will find it increasingly difficult to find suitable land for this due to strict land-use policies. This may, however, also have a knock-on effect of stimulating the development of nearby cities, which, with their business ties to Shanghai, will propel the overall development of the Yangtze River Delta.

Shanghai listed at the top of the China12

Among the China12, Shanghai is listed at the top both in terms of traditional metrics and future-proofing credentials. In the measurement of future competitiveness, the city is a leader in livability, transparency, innovation and regional clustering.

Factors that make residents enjoy living in a city include nightlife and dining, cultural attractions and institutions, affordability, and air quality. Shanghai tops the China12 with excellent performance in overall criteria, including relatively transparent planning processes and commercial freedom. In addition, it stands out from its peers in terms of professionalism, standardization and internationalization in the real estate industry. The China12 innovation index, a factor in the overall selection of the China12, is calculated by considering the number of start-ups in a city, the number of patents, its R&D spending and its workplace innovation. Shanghai is one of the cities that dominate the innovation ecosystem in China, and also has one of the highest R&D spending. Many co-working brands have chosen Shanghai to launch their business, and Shanghai now has about 200,000 square meters of Grade A co-working office space.

Leading the development of the Yangtze River Delta

At the beginning of this year, the Shanghai government published its roadmap – The Master Plan of Shanghai City Planning (2017-2035) – which set the goal of building Shanghai into an “excellent international city” by 2035. It also specified that Shanghai will serve the development strategies of both the “Belt and Road Initiative” and the “Yangtze River Economic Belt”. As Shanghai takes the lead in building a world-class city-cluster with global influence, it plans to further coordinate with and integrate into the development of the Yangtze River Delta region. Shanghai is the core city of the Yangtze River Delta, and has long played a leading role in regional development. Under its influence, three other cities from the Yangtze River Delta (Hangzhou, Nanjing and Suzhou) also made the China12 list. “Thanks to the rapid development of inter-city connectivity and the business ecosystem, these cities and Shanghai are forming a global-scale innovation-based city cluster along the Yangtze River economic corridor,” said Joe Zhou, Head of Research, JLL China. “Shanghai is at the centre, while other cities are tapping their distinctive niche markets: Nanjing is an education and research center, Hangzhou is famous for its e-commerce and Suzhou is a leader in advanced manufacturing.”

On track to become a world top 10 influential city in 5 years

As China continues to internationalize, Shanghai will benefit from national “Opening-up” policies and international capital flows. During the recent 2018 Boao Forum for Asia, China unveiled four new “Opening-up” policies, three of which (the expansion of free trade ports, the China International Import Expo, and the further opening-up of China’s financial sectors) will be first launched in Shanghai.  “These new policies will provide an unprecedented impetus for Shanghai to integrate further into the global economy, enhance international interactions and so allow it to give full scope to its global influence,” said Jeremy Kelly, Director in Global Research, JLL. “We believe that as a Global Contender in the China12 cities, Shanghai, hand in with Beijing, is very likely to become one of the top 10 most globalized cities in the world by 2022.”

For more information, please download ‘China12: China’s Cities Go Globalhere.

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