Beijing is the most innovative city on the mainland, ranking ahead of Shanghai and the tech hub of Shenzhen, according to JLL’s latest research of the top 20 innovation-oriented cities in the world. Hong Kong did not make the cut.
San Francisco, with its robust start-up scene, topped the list, followed by Tokyo, Singapore, Beijing, and London, respectively. Shanghai and Shenzhen ranked 11th and 15th, respectively.
JLL said that it expects to see more Chinese cities in the global top 20 as they build sophisticated innovation ecosystems.
According to the property services firm, the top 20 innovative cities attracted close to US$100 billion worth of real estate capital over the past three years. In Asia-Pacific, such cities accounted for around 50 per cent of overall annual real estate investment volumes over the past decade.
The study also highlighted the correlation between innovation, talent concentration and office rental growth over the past decade and their ability to attract a higher proportion of real estate capital.
Leading the global top 20 talent hotspots was London, followed by San Francisco, Washington, San Jose, Seattle, and Boston. Only three cities from Asia-Pacific made it to the list, with Sydney in 7th spot; Melbourne at 10th; and Tokyo at 19th.
In determining the rankings, JLL’s criteria included foreign direct investments in hi-tech industries, attraction of venture capital, R&D expenditure, quality of higher education provision, education level of the population, demographics of 20-40 year olds, and employment in hi-tech industries.
“Innovation plays a key role in driving cities’ economic growth by attracting investors and companies,” said Megan Walters, head of Asia-Pacific research at 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 said for Hong Kong to be included in the most innovative cities, the city needs to ramp up its spending on R&D and attract more technology firms.
In 2017, Chief Executive Carrie Lam Cheng Yuet-ngor vowed to double the city's expenditure on R&D to 1.5 per cent of the city’s gross domestic product by 2022 to boost innovation.
“More spending on R&D will improve the city’s innovation credentials,” said Tom Broderick, senior manager of research department at JLL in Hong Kong.
He added that one of the main hurdles for Hong Kong is that Shenzhen, one of Asia’s major innovation hubs, is so close that start-ups are likely to be naturally drawn away from the city.
Innovation plays a key role in driving cities’ economic growth by attracting investors and companies
Megan Walters, head of Asia-Pacific research, JLL
Despite this, Broderick said that there were other factors to consider in determining a city’s real estate investment potential.
“Yes the report concludes that there is a correlation between innovation and stronger office rental growth, however, this is benchmarked across all cities surveyed and is not the only factor to consider. While Hong Kong has a lower proportion of technology firms coming to the city, it makes up for it with an above average attraction of banking and finance firms and other professional services,” he said.
In March, new office lease activity in Hong Kong dropped by nearly a third – the most in five months – amid softening demand from mainland Chinese companies. Despite this, rents held up rising 0. 3 per cent month on month, boosted by grade A office rents in Central.
In February, Knight Frank, another property consultancy, said prime office rents across the city will drop by 1 to 4 per cent, but Hong Kong was likely to keep its crown as the world's most expensive city to lease office space.
The consultancy estimates annual office rents in Hong Kong would cost US$239.54 per square foot in 2019, lower than the US$252.15 achieved in 2018.
More from South China Morning Post:
- Hong Kong an innovation hub? Dream on, or visit Shenzhen
- China’s tech hub Shenzhen misses growth target but leapfrogs Hong Kong into Asia’s top 5, mayor says
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