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David Ji

Recent years have seen a renaissance in what Knight Frank calls the global cities. These are the cities major airlines consider it essential to offer flights to, and where the Fortune 500 companies will have an office and international hotel groups invariably have a five-star property.
Among these cities one would find the major financial hubs and commercial centres of the world, including London, New York, Tokyo, Singapore and Hong Kong.
With an expected 1.1 billion new city dwellers in the world over the next 15 years, the global cities - as indentified in Knight Frank's latest report - are the driving force behind their host economies in attracting capital and talent.
This gravitational pull will change the face of office markets in these cities, making them target locations for global property investors as future tenants, landlords and investors look closely into these changes to capitalise on them.
The first change we have noticed is that firms are increasingly relying on high-value knowledge workers to drive business growth, making the workers of the global cities among the most productive in the world, typically outperforming other workers in their host countries.
In terms of gross domestic product per capita, London and Paris largely outperform the British and French economies by 72 per cent and 66.8 per cent respectively, while New York beats the US economy by 35.7 per cent.
Setting up offices in the global cities serves as a talent magnet for securing knowledge workers, who usually prefer the lifestyles available in such cities. As a result, multinational corporations feel it is essential to locate in the global cities, consequently pushing up prices for real estate in cities with the most high-value knowledge workers.
Demand for office space is expected to increase in these cities, with rents rising even further and vacancies dropping in the next five years. Within global cities like London, San Francisco and New York, new districts have emerged and are of increasing significance. Some are former industrial districts that were hit by de-industrialisation during the 1960s, but transformed during the '80s and saw the development of large-scale offices in the '90s.
In recent years, the digital economy has further moved these new districts - the so-called nano core - towards the centre stage of the modern city economy. These former industrial districts are now among the hottest locations for office, residential and shopping developments in the global cities.
More companies are moving to these locations on the edge of the central business district, creating new office hubs and bringing the workplace closer to where their younger staff live and socialise. This helps in employee retention.
Another interesting trend that investors, landlords and tenants need to watch is rapid changes in technology, especially communications applications like the iPad. They are changing the economic growth pattern in many countries from one that is finance-led to a new creativity-led model.
This is borne out by the fact that rents in the new nano-core districts are growing much faster than in the traditional financial areas. Even in the traditional business districts, potential occupiers are no longer financial firms but technology, media and telecommunications multinationals.
In London, Amazon and Skype have taken new headquarters in districts traditionally associated with law firms, while in New York, the Empire State Building is developing a reputation as a technology hub.
In Beijing, the Zhongguancun science and technology zone is home to some of the world's largest technology companies, like Google, Intel, Oracle and Sony.
This marks the transition to the next phase for the city-centre economy. The creative economy is expected to become a general reality across cities and has many years to run. Real estate must adapt to its needs.
In summary, the search for professional talent, the emergence of new districts and a structural transformation of the industry will be some of the most important features in the next cycle of the real estate market in the leading cities. Failure to seize these opportunities will cause cities - and their host economies - to miss out on potential growth.
David Ji is director and head of research and consultancy at Knight Frank Greater China


Growing clout of global cities offers property opportunities

Knowledge workers in global cities like London are more productive than their counterparts in the rest of the country. Photo: Bloomberg

Among the Global Cities are the major financial hubs and commercial centres of the world, including Hong Kong, London, New York, Tokyo and Singapore. Photo: Nora Tam

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Top urban centres will seek to attract talent with non-traditional business districts, and investors should be looking at these new zones


Recent years have seen a renaissance in what Knight Frank calls the global cities.


Growing clout of global cities offers property opportunities

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Top urban centres will seek to attract talent with non-traditional business districts, and investors should be looking at these new zones

Top urban centres will seek to attract talent with non-traditional business districts, and investors should be looking at these new zones