Innovation Economy Will Drive CRE’s Next Recovery Cycle 

As the global economy continues to improve despite ongoing challenges, innovation-oriented industries and availability of talent will be key growth drivers for the next cycle of urban and real estate recovery. New research from JLL, Innovation Geographies, shows that cities that perform best on these measures will be best positioned for economic growth post-pandemic, demonstrating a strong link between innovation, talent ecosystems and real estate performance. 

The COVID-19 pandemic has accelerated trends that were already underway in reshaping cities, including shifting work and lifestyle preferences, the core role of the digital economy and the need for more sustainable and resilient community infrastructure. To respond to these changes and drive the next phase of urban regeneration, strong innovation industries–ranging from high-tech services to life sciences and advanced manufacturing—will be critical to the recovery of cities and the real estate market, JLL says. As the pandemic overlaps with other global crises, including climate change, innovative cities will also play a vital role in driving sustainability solutions and creating resilience. 

“Despite the challenge of new variants, commercial real estate should benefit from the ongoing economic expansion in 2022,” said Carol Hodgson, global research director at JLL. “With people eager to return to offices, travel and socializing this year, large, talent-rich cities like San Francisco, Tokyo and London will have the advantage in leading the way for a more robust recovery. This also indicates signs of optimism for the office market, as it realizes a new purpose post-pandemic as a hub for innovation and collaboration.” 

To arrive at its Innovation Geographies rankings, JLL combined factors that gauge the relative strengths of these markets. For its innovation ranking, JLL looked at patent applications, R&D expenditures, attraction of venture capital and foreign direct investment in high-tech industries. For talent concentration, JLL weighed employment in high-tech industries, demographics, education level and quality of higher education provision. 

As in 2019, the U.S. is dominating the global innovation scene, with nearly 50% of the top markets in the Innovation Geographies 2022 ranking. San Jose tops the ranking globally for both innovation and talent concentration, while cities like Boston and New York continue to attract capital and corporates, as well as top talent, due to their close proximity to major research universities. 

However, JLL sees rising stars emerging in other parts of the world, including Seoul and Beijing, which have joined Tokyo in the elite top 10 global leaders. Several Indian and Chinese cities, such as Bengaluru and Guangzhou, are moving up in the rankings as they develop more sophisticated innovation ecosystems.

Europe also fared particularly well for talent with seven of the top 15 cities globally including London (No. 4), Berlin (No. 10) and Stockholm (No. 11). The region shows potential for greater innovation across a wide range of cities.