Singapore is the third most innovative city in the world, with innovation now an important part of real estate investment strategies, according to a new report from global property consultant JLL.
The Republic, behind San Francisco and Tokyo, is supported by significant levels of foreign domestic investments, and a rapidly growing startup scene. It is a regional hub for R&D (research and development) and services, and is the world’s top destination for foreign direct investment in high-tech industries, said JLL’s Innovation Geographies report.
“Targeting innovative cities has now become an explicit part of investment strategies. This is partly because innovation-centric cities appear to be more resilient to economic shocks,” said Tay Huey Ying, head of research and consultancy at JLL Singapore. “For example, tech-savvy cities such as Seoul, Berlin and Chicago, saw average real estate capital values fall less and bounce back more quickly.”
Over US$10 billion has been invested over the last three years in sectors ranging from software design to semiconductor manufacturing. Global tech companies such as Google and Facebook have established regional operations in the city, with over US$10 billion of venture capital invested in local startups over the same period, said JLL.
Talent-wise, Singapore has fallen out of JLL’s top 20 talent hotspots, mainly due to the drag of a slow growing “engine room” population, that is, those in the 20-40 years cohort.
Singapore scored well on other talent attributes such as its well-educated workforce, the presence of three world-class universities and an above-average proportion of the workforce employed in high-tech industries.
Ms Tay said the study reinforces JLL’s optimism for Singapore property investment and office markets to stay vibrant in the short to medium-term, barring adverse external shocks.
On the other hand, she noted that competition is heating up and many cities are making rapid progress towards developing sophisticated future-looking business ecosystems.
“Singapore must not rest on its laurels, but instead strive to stay ahead of the competition by continuing to nurture an innovative culture, for example through allocating a higher budget for research and development,” she said.
Elaborating further on the innovation-property connection, JLL said innovation ecosystems within cities are key to driving productivity and in turn lead to economic growth and, by implication, demand for real estate, particularly when combined with a high concentration of human capital.
This relationship has been endorsed by a wide array of organisations including the European Central Bank and the World Bank, added JLL.
Megan Walters, JLL’s head of Asia-Pacific research, said innovation helps cities to attract investors and companies: “Investors tend to focus on locations that are capable of sustaining long-term occupier demand, while corporates are drawn to those that have sophisticated innovation ecosystems and deep talent pools to ensure they are well-placed to succeed in the global marketplace.”
The report looked at factors such as investment in high-tech industries, research and development expenditure and talent pool. Of the 109 cities analysed, the seven leading Asia-Pacific cities – Tokyo, Singapore, Beijing, Seoul, Shanghai, Shenzhen and Sydney – accounted for more than 50 per cent of total annual real estate investment volumes over the past decade in the region.