Asia Pacific is home to half of the top 10 performing cities in the world for innovation and talent, including Beijing (2^nd), Tokyo (4^th), Seoul (6^th), Singapore (7^th) and Shanghai (9^th), according to JLL (NYSE: JLL) analysis. Throughout the next decade, market specialisation, talent migration, sustainability goals and new technologies such as AI will continue to shape the global knowledge economy and high-tech industry ecosystem, with JLL projecting Asia Pacific cities to be major beneficiaries.

The third edition of JLL's Innovation Geographies examines how innovation continues to influence real estate location and portfolio strategies, based on the dynamics of 108 cities globally. Despite the increasing competition for talent and challenges relating to costs of housing and doing business, these innovation hubs remain distinguished by access to critical capital and funding as well as the breadth and depth of skilled workers.

“Innovation has reshaped the built environment and demand for commercial real estate as its importance to economic growth intensifies. Companies in Asia Pacific will need to balance talent, operating environment, risk and cost requirements in their location strategy. For owners seeking to attract high-growth occupiers, location strategy will also be key,” said Roddy Allan, Chief Research Officer, Asia Pacific, JLL.”

Top performing cities for innovation and talent in Asia Pacific

Tokyo, Seoul, Shanghai, Beijing, Singapore and Shenzhen all outperform in innovation output, while Beijing, Tokyo and Singapore are high in talent concentration. It will be critical for innovation-related firms to maintain – and in some cases expand – their footholds in these cities, to realise the benefits of such structural advantages that are unlikely to be replicated elsewhere.

In Singapore, sustained investment in infrastructure, education and health care is driving its already strong innovation presence. Venture capital rose by a further 10% to a new high of US$ 32 billion over the past three years, while its net migration rate of 2.4% is well above regional and global averages.

Furthermore, the need to cope with the disproportionate burden of the effects of climate change on real estate investment is driving investment into alternative sectors including generative AI, electric mobility, EV batteries, space tech, green buildings, hydrogen, challenger banks, drug development and synthetic biology.

An injection of capital into newer technologies has driven the market maturation and development of increasingly specialised clusters, eroding the previous dominance of traditional tech segments and companies. Leading this injection of capital is generative AI, with Beijing being the city in Asia Pacific that has received the greatest AI-specific VC funding over the past three years at US$ 23 billion, followed by Shanghai (US$12.4 billion), Shenzhen (US$ 7.7 billion) and Singapore (US$ 6.0 billion).

Apart from generative AI, investors seeking to harness the growth potential of alternative innovation clusters in Asia Pacific can also look towards Tokyo, Hangzhou and Shanghai for electric mobility, Tokyo for EV batteries, Beijing for space tech and hydrogen, and Seoul and Singapore for challenger banks. Collectively, alternative sectors have brought new innovation funding across the world to US$ 54.7 billion throughout 2023, more than doubling since 2020.

“As opportunities for innovation continue to grow globally, corporations and investors must navigate a landscape where mature and emerging hubs complement each other,” said Phil Ryan, Research Director at JLL. “Finding the right balance of assets across established markets and emerging secondary and tertiary markets globally will be crucial for sustained growth and resilience, especially as emerging markets become more competitive.”

Innovation anchors are and will continue to be vital to the success of initiatives to accommodate future growth in a holistic and environmentally focused manner. In recent years, they have been at the core of highly localised economies of scale with outsized prominence at the global and regional levels. Precincts such as Tech Central in Sydney and the Jurong Innovation District in Singapore exemplify the ability of innovation to catalyse multi-faceted regeneration. Importantly, these comprise 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 amenitisation, green space and infrastructure provisions.