Tech City Tiers: Tech Megacities

Global connectivity, complementary industries and a deep talent pool make Tech Megacities highly attractive to both scaling and established companies. Business ecosystems of likeminded people help tech companies located here to grow. Tech Megacities are also leading funding hubs. Even in 2020, with all of its attendant upheavals, megacities remain magnets for VC investment.

The US-China trade war has shifted the dynamics of global investment, and investment into some cities is growing faster than others as a result. Singapore, for example, saw VC investment volumes grow by more than 230% between 2016-17 and 2018-19.

This came, in part, as tech investment grew more rapidly in cities outside the US and Chinese hubs. Singapore is considered a neutral city with good links to both Asia and the US. Chinese tech companies have made moves to expand in the city.

Ease of doing business plays a big role in the attractiveness of the Tech Megacities, a metric in which Singapore also performs very well. Looking more broadly, over a third of Savills Tech Cities are located in the five most business-friendly countries (see chart).

Future of the Tech Megacity

Rising costs have long been a challenge for occupiers in the Tech Megacities. Now, with health and wellbeing at the top of the agenda, large and crowded metropolises have another hurdle to overcome. Many are responding by expanding pedestrian and cycle networks in a bid to boost personal mobility. Paris is piloting the ‘15 minute city’ where most amenities residents’ need are within a 15 minute walk or cycle from their home. Shanghai is creating cycle lanes along its riverside while preserving adjacent historical structures. The City of London introduced wider footpaths, narrower driving lanes and timed road closures in light of the pandemic and changing mobility patterns in the city.

In China the Megacity rules and will continue to do so. Of the 16 cities we classify as Tech Megacities, six are in China. Big cities dominate the tech landscape here, in large part because of the top-down approach the central government takes towards many aspects of the state and the economy, designating cities and districts for specific purposes. In China, big cities are seen as places of progress, job opportunities in tech have fuelled massive amounts of in-migration. Shenzhen and Hangzhou, in particular, are developing quickly, with population growth of 3.2% and 3.5% respectively, in 2019 alone.

From scaling start-ups to global mega corporations, the Tech Megacities will remain essential places for the industry to locate. The size of these cities alone means they can offer a depth of talent so important to the sector. But the pandemic has been a catalyst for change and has brought the particular challenges these big cities face to the fore – pollution, crowding, and high costs of living. They must respond to these challenges to ensure they remain attractive to the talent that underpins their success.