Tianjin scores high marks in JLL's global city ranking

By Chelsea Cai, Senior Analyst of JLL,Tianjin

Determining in which countries to expand and invest can be difficult for any company decision makers, and gauging what cities to go to next can be even more daunting. However, JLL - a professional services and investment management firm offering specialized real estate services - has made that decision-making process a little easier with its City Momentum Index (CMI), and one of the standout city's on the 2015 CMI is Tianjin.

The index tracks the speed of change of a city's economic base and its commercial real estate market, combining measures of short-term economic and real estate momentum with longer-term success factors, and covers 120 major global cities. The CMI is unique in that it captures the dynamics of a city's real estate market - its rates of construction and absorption, price movement and the attraction of a city's built environment for cross-border capital.

In producing this index, JLL's intention has been to alert the market to signals of change and to highlight the characteristics of city success. It does not necessarily hold that those cities at the top of the CMI will provide the strongest future performance of commercial real estate, or the most immediately attractive real estate investment environments, but rather that they are the cities where change is occurring fastest and are the ones to be closely monitored.

JLL produced its first CMI in 2014, providing new insights into what makes cities dynamic and attractive for future opportunities. In the recently released second annual CMI, London and Shanghai were the only global cities to remain in the top five from the previous year, with London taking the top spot, moving up from second place, and Shanghai moving from fifth to fourth place. The shifting positions among the top 20 cities reveal major trends and changes driving global momentum:

-Technology-rich cities dominate the CMI. Several of the world's most tech-rich cities maintained a position in the top 20, including London (1), San Jose (2), Boston (7) and San Francisco (9). Newcomers to the top 20, thanks to the technology sector, include Sydney (11), Bangalore (12), Dublin (14), Nairobi (15) and Melbourne (16).

-China's cities are buoyant despite the economic slowdown. China's recent economic performance has not impeded seven of its cities appearing in the global top 20, underpinned by the continued expansion of its domestic market and middle class population. Trade and connectivity prove critical to Chinese cities, demonstrated in the "corridor of dynamics" along the Yangtze River connecting Shanghai (5), Wuhan (8), Chongqing (10) and Nanjing (20). As China moves up the value chain, the technology sector has become an important driver of city success, helping to boost cities such as Beijing (3) and Shenzhen (4).

-London and Dublin outperform continental Europe. While continental European cities were once again absent from the list of the most dynamic cities, London topped the 2015 CMI and Dublin entered the top 20 at 14. London's strong economic fundamentals, cross-border investment, positive outlook and reputation as a global tech hub boosted its position. Dublin is currently the world's fastest growing office rental market.

While six new cities entered the 2015 CMI, established tech and creative hubs, such as Austin, Los Angeles and Seattle, dropped to just outside the top 20. Hong Kong and Tokyo fell outside this year's top 20 due to a temporary loss of impetus, but nonetheless have strong long-term fundamentals. For the first time, cities in India and sub-Saharan Africa were represented in the CMI due to the robust demand for office space from technology companies (Bangalore, 12) and MNC expansion (Nairobi, 15).

Tianjin had a strong showing in this year's CMI because the municipality continued to outperform the majority of the world's cities and many cities in China, as it yet again ranked in the top 20. Tianjin was able to beat out many other world cities because of the rapid pace of Tianjin's economic expansion and the improving quality of its real estate market. Tianjin's top scores in the CMI (rank out of 120 cities) included:

-GDP Growth 2014, 2015, 2015-17 (1)
-Air Passenger Growth (1)
-Office Completions (as percentage of stock) 2014 (5)
-Retail Rental Growth 2014 (5)
-FDI Intensity (FDI volumes as a percentage of city GDP) (8)

As one of the fastest growing economies in China and in the world for several years now, opportunities abound in the city, which is why Tianjin has led the country in terms of FDI. In addition, many MNCs have recognized the business prospects and the potential of the city, with Volkswagen and Airbus opening new plants and assembly lines, and Standard Chartered Bank becoming the first foreign bank to transact a cross-border Chinese renminbi loan in China at the Sino-Singapore Tianjin Eco-city. Moreover, Tianjin has just been approved to establish a new free trade zone near its seaport, which is the world's fourth largest port by throughput. The city's planned free trade zone has already started to attract foreign investors, and the new CBD proposed in the area will be world-class in terms of planning and design, and is already attracting large foreign and domestic developers.

Source: Municipal Statistics Bureaus, CEIC

With Tianjin's economy on pace to overtake Shenzhen's and Guangzhou's in the next five years, Tianjin is gaining the momentum that many cities around the globe are looking to duplicate. As the government continues to invest in making the city more innovative with a new national innovation demonstration zone in the Tianjin Binhai Hi-tech Industrial Development Area and the city looks to become more global, Tianjin is likely to maintain its position among the top 20 cities in the CMI.

Michael Hart, Managing Director at JLL Tianjin, said, "Tianjin has received some criticism for building too much, but what this index recognizes is that Tianjin is laying the groundwork for an even stronger future. As the economy shifts toward the service sector, new office buildings, hotels and retail centers will be the basis for additional economic activity and are turning Tianjin into a first-class city. The city's recent expansion of the airport, improvement in subway lines and the addition of new and exciting restaurants are making Tianjin a great place to live, take a holiday or open a business."

For more information about the CMI and global city research, visit JLL's Cities Research Center at http://www.jll.com/cities-research.

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