The U.S. metros of New York City, Chicago, Los Angeles, Houston, Miami, Atlanta, Washington, D.C., Las Vegas, San Francisco and Boston, according to Information intelligence firm GlobalData, are among the 50 “construction mega cities” around the world that have more than $30 billion of investment value in their construction project pipelines.
Led by Dubai ($611 billion) and London ($343 billion) the combined pipeline value of all cities in GlobalData’s list is $5.3 trillion spread across more than 8,200 projects in all stages of development. Cities in the Asia-Pacific region, led by Shenzhen, China, ($143 billion) make up half of the top 50 cities and have a combined pipeline investment value of $2.1 trillion.
One of the key drivers of construction activity in these cities is population growth. Today, more than half the world lives in urban areas and by 2050, that number will increase to two-thirds.
U.S. cities on the list, along with their pipeline investment values are:
- $285 billion – New York City
- $97 billion – Chicago
- $91 billion – Los Angeles
- $47 billion – Houston
- $44 billion – Miami
- $43 billion – Atlanta
- $41 billion – Washington, D.C.
- $40 billion – Las Vegas
- $39 billion – San Francisco
- $38 billion – Boston
But, aside from population, what makes these and other cities so ripe for development?
“That’s the billion-dollar question,” said Jill Jamieson, a managing director at JLL. “I don’t think there is a silver-bullet answer, but I do think there are some characteristics that any company or anyone looking to invest is going to look at.”
Demographics, Jamieson said, is part of the winning formula that will attract investors. “You need an educated population and people to buy your services or to be in your employment pool, but that’s no longer necessarily the driving force.” Some companies today are setting up shop in lower-cost areas so that they can attract employees who are looking for a reasonable cost of living.
Infrastructure that will support development is also important if cities expect to draw development. Since federal spending has been essentially flat for decades, despite the new plans that surface from time to time, it’s fallen to state and local governments to pick up the slack, she said. “Those who are investing well and have a consistent pipeline of projects and improvements are tending to attract [new development],” she said. “They have the infrastructure to move goods and services and to get people in and out of their communities.”
Amazon’s search for a second North American headquarters last year was an example of how the largest companies look to cities and states to make their locations more attractive by offering to foot the bill for necessary infrastructure, as well as pay for other incentives.
Planning and zoning also factor into how attractive metros are to developers. “You need to have a road map of where you are going to go in the future,” Jamieson said. Those cities that have invested and thought everything through from affordable housing to infrastructure to industrial zoning have been able to attract investment. “They have a clear vision of where they’re going to go, and I think that gives some comfort to developers,” she said.
Fiscal responsibility and adequate resources also factor in.”No developer is completely insulated or isolated from the economics of the city around it,” Jamieson said. One of the reasons that larger cities, which tend to be more liquid, attract a lot of the developers is that they have those resources and are typically more sophisticated as far as the incentive packages they can offer.
Affordability has also started to play a role in developer decisions. “There are some great cities out there that are really expensive,” she said. Developers are thinking about affordability in the sense that their employees have to be able to live there. Some developers are investing in and subsidizing reasonably-priced housing themselves. The extra money does, however, increase the cost of the investment.
Transparency in government process is also important, she said. Investors want certainty in terms of who is making decisions and how they’re being made. “When it comes to zoning and planning,” Jamieson said, “if you leave it to backroom political decisions or conversations that are not inclusive, it becomes quite expensive and a higher risk, and they need to price that in.”