Gateway Cities That Lead in Innovation Expected to Make a Comeback This Year

A new report from JLL ranking cities with the best innovation and talent ecosystems predicts a resurgence of commercial real estate in “gateway” cities that are global leaders in innovation.

The Innovation Geographies report, which surveyed 100 cities around the world, says 2022 will see a “rejuvenation” of urban centers in gateway cities “with people eager to return to offices.” The report also found “a powerful link” between CRE recovery and inclusive talent pipelines in these cities.

“Despite the pandemic, we expect to see young people moving back to the gateway cities attracted once again by opportunities, amenities and lifestyle,” the report said. “Reflecting their critical mass of talent, diverse industry mix, anchor institutions and agglomeration benefits, the dominance of (these) global leaders as corporate hubs will continue.”

The JLL report said the CRE recovery in gateway cities will be driven by “holistic mixed-use transformational projects” and new innovation districts that embrace diversity and “bring people back to the urban core.”

City centers also will be transformed by sustainability initiatives, the report said. Residential and commercial buildings generate an estimated 40 percent of the greenhouse gas emissions in the US.

“The real estate industry and technology sectors working together hold the key to creating scalable smart-city solutions to drive city-wide energy and resource efficiency,” JLL said.

JLL’s rankings factored in high-tech employment, venture capital, R&D, foreign direct investment, population growth and workforce education levels.

San Jose, CA was JLL’s top-ranked city for Innovation, followed by Tokyo, San Francisco, Boston and New York. San Jose, Boston and San Francisco were the top three cities in the ranking for Talent Concentration, with Washington DC, Austin and Seattle also making the top 10 for talent ecosystems.

“Cities that outperform on these metrics are best positioned to record the strongest economic recoveries in the coming years, and (the survey) also demonstrates a powerful link between innovation and talent ecosystems and real estate performance,” JLL said.

The migration of millennials to smaller cities that offer a lower cost of living and a superior quality of life, also a factor in JLL’s evaluation, put millennial magnets Raleigh-Durham and Denver in the top 25 in the survey’s rankings. Lower office occupation costs also are benefitting smaller gateway cities, the report said.

JLL said CRE investors are increasingly drawing on innovation and talent metrics when making strategic decisions on which cities to invest.