Despite widespread changes to how we work and live, the importance of innovation to economic growth is only intensifying

Digital segments of the economy – already comprising 15% of global economic output and rising rapidly – are upending sectors and society more broadly. From traditional areas such as software development and hardware manufacturing to genomics, challenger banks and space tech, the scope of the digital economy is expanding at breath-taking speed. This will require a proactive response from companies looking at their location strategies with a need to balance talent, operating environment, risk and cost requirements. Location strategy will also be key for owners seeking to attract high-growth occupiers.

The ubiquity of innovation has similarly profound effects on the built environment and demand for commercial real estate. After the most severe correction on record during the pandemic, shifting demands from innovation-focused users across the office, industrial, lab and data center classes pose further questions but also opportunities for occupiers, investors and public bodies alike.

JLL’s third edition of Innovation Geographies covers the dynamics of 108 cities globally, spanning more than 720 million residents, US$40 trillion in annual output, nearly 900 million square metres of office product and 37 million high-tech employees. These cities have been ranked and clustered on a range of output, funding and talent indicators to provide an up-to-date perspective into the rapidly evolving innovation landscape at the global, regional and local levels.

Migration to affordability

Migration to affordability

A shifting hierarchy of innovation hubs

A shifting hierarchy of innovation hubs

New and emerging innovation sectors

New and emerging innovation sectors

Geopolitical tension and barriers to trade

Geopolitical tension and barriers to trade

Sustainability-focused mixed-use regeneration

Sustainability-focused mixed-use regeneration

Key considerations for occupiers, investors and public authorities

Key considerations for occupiers, investors and public authorities

Secondary cities are competing with the world’s largest innovation hubs for talent, corporate presence and investment

In recent years, talent shortages, rising home prices and regulatory pressures have catalyzed expansion into lower-cost markets, aided by more flexible working patterns and technology. As a result, cities such as Austin have moved into the global tier of innovation hubs, while secondary and tertiary cities including Brisbane, Hangzhou, Lisbon, Manchester and Raleigh all registered marked improvements in both innovation and talent. 

In other cases, such as Adelaide, Leeds, Rotterdam and Stuttgart, growth has disproportionately come from individuals moving for quality-of-life reasons and pushing up talent concentration scores. Simultaneously, destinations for investment capital and business including Dublin, Frankfurt, Las Vegas, Melbourne and Warsaw are at the top of the board for gains in innovation output, particularly patents and venture capital deployment.

Cities that have developed specializations in emerging technologies will have a competitive advantage

Driving much of this market maturation and development of increasingly specialized clusters has been an injection of capital into newer technologies, eroding the previous dominance of traditional tech segments and companies. Leading this has been generative AI, which received US$22.3 billion in venture capital funding in 2023, along with growth in electric mobility, batteries, space tech, green buildings, hydrogen, challenger banks, drug development and synthetic biology to bring new innovation funding to US$54.7 billion throughout the year, more than doubling since 2020.

Local research and development hubs will play an increasingly important role

The geography of innovation is further being shaped by external geopolitical forces. More aggressive trade and industrial policy in the United States, the European Union and China, among other players, is incentivizing onshoring and domestic production of critical components at levels not seen in decades. Although this has been most notable in terms of semiconductor manufacturing, evidenced by the CHIPS Act in the United States, it is also coming in the form of legislation such as the European Union’s Net-Zero Industry Act.

Over the long-term, this realignment will place additional emphasis on in-house research and development, as well as co-location with manufacturing firms’ access to transportation and logistics nodes. Phoenix, Columbus, Fukuoka and Berlin are just some of the cities with multi-billion-dollar semiconductor or high-tech materials fabrication plants being built in or near their metropolitan areas due to these policies.

Partnerships between the public and the private sector will be crucial to the success of city transformation projects

Cities across the globe are grappling with the challenges posed by an ever-greater share of the built environment risking obsolescence in terms of both meeting not only newer occupier and investor requirements, but also those posed by more stringent efficiency and sustainability standards. At the same time, the intensifying pace of urbanization is placing additional pressure on public authorities to increase the scale and longer-term planning to accommodate future growth in a more holistic and environmentally focused manner.

Innovation anchors are and will continue to be vital to the success of these initiatives. In recent years, they have been at the core of highly localized economies of scale with outsized prominence at the global and regional levels. Precincts such as Tech Central in Sydney, the Jurong Innovation District in Singapore, Schuylkill Yards in Philadelphia and ID in Manchester exemplify the ability of innovation to catalyze multi-faceted regeneration. Importantly, these comprize cross-sector investment in housing, office, lab space, research incubators, medical and diagnostic facilities and manufacturing and production hubs, all tied together with consideration towards improved amenitization, green space and infrastructure provisions.