How Rapid Urbanisation is Shaping the Future
The world is constantly changing, and many of these shifts have the potential to alter the investment landscape.
While some of these changes can be temporary and fleeting, others can be powerful, transformative “megatrends” that shape how society is organized at a fundamental level.
One such megatrend that has been in place for decades is the rapid rate of population growth in urban areas – and while it’s been highly influential thus far, we’ve likely only seen the beginning of its formative impact on the global economy.
An Intro to Rapid Urbanisation
Today’s infographic comes to us from iShares by BlackRock, and it highlights the case for rapid urbanisation as being one of the most important overarching trends to watch in markets over the long term.
It’s a trend that originated in developed economies in the 21st century, as people transitioned from agricultural work to factory and service jobs.
|Region||Urban share of population (1900)||Urban share of population (2016)|
In these developed economies today, cities are major sources of innovation and wealth creation, and the World Bank estimates that over 80% of global GDP is now generated in cities.
A Global Shift
Over the coming decades, the large-scale role of cities will become even more amplified as rapid urbanisation spills over to the rest of the world.
Billions of people – especially in Asia and Africa – will be seeking opportunities in cities over the coming decades. Between 2018 and 2050, the global urban population will increase from 55% to 68%, adding another 2.5 billion people to cities around the world.
|Rank||Country||Urban population growth (2018-2050)|
|#1||India||416 million people|
|#2||China||255 million people|
|#3||Nigeria||189 million people|
Nearly 90% of this growth will be in Africa and Asia, with India alone adding 416 million new people to its cities – more than any other country in the world over this timeframe.
The Dawn of the Megacity
People are not only flocking to cities, they are flocking to megacities – urban conglomerations with more than 10 million people.
In just 40 years, the total amount of megacities will quadruple, gaining nearly 600 million residents in the process:
|Year||# of Megacities||Population||% of Urban Population|
With billions of new people living in urban areas – and many of them living in megacities – we will have to rethink how our cities are designed and engineered.
And as this happens, the city as we know it will be revolutionised.
The Urban Opportunity
Rapid urbanisation will create both opportunities and challenges for society, and a plethora of investment possibilities in the process.
As global cities become more integrated with technology, new business models will emerge as cities become smarter, denser, and more connected.
These potential opportunities include:
- Smarter cities
Cities will embrace technology to improve services and infrastructure, adding tech-driven features like smart lighting or real-time traffic updates.
- New infrastructure
Cities and companies will invest heavily to build next generation infrastructure, such as data centers, green energy, and citywide WiFi.
- A focus on personal security
With higher crime rates in cities than rural areas, governments will employ elevated levels of surveillance on citizens in cities. Increasing connectivity means that every activity is logged and monitored.
- New services
As cities become more connected, non-traditional players – such as cybersecurity experts or cleantech engineers – will be needed as a part of city planning processes.
- No car ownership
A lack of space and the rise of autonomous cars will mean fewer people will own a car, preferring to use ‘summon-able’ services instead.
- New healthcare systems
As population density grows to unprecedented levels, existing healthcare systems will need to be radically overhauled to deal with this influx.
Rapid urbanisation will have a wide-ranging impact on global economics, demographics, and society as a whole.
As rapid urbanisation and other megatrends collide and feed off each other, there’s no doubt that even more thematic investment opportunities will be created.
Mapped: The World’s Top 10 Cities in 2035
Cities are heavy hitters in the global economy. Where will the top 10 cities be in 2035—based on GDP, population, and annual growth?
Mapped: Where Will The Top 10 Cities Be in 2035?
Cities are the engines of the modern economy. Over half of the world now lives in urban areas, and urbanization continues to shape the trajectory of global growth in unprecedented ways.
However, the most important cities of today may be quite different than those leading the charge in the future. This week’s chart looks forward to 2035, using a report by Oxford Economics to forecast the top 10 cities by measures of economic size, population, and GDP growth rate.
Each map is categorized by one of these metrics—and depending on which one you look at, the leaders vary greatly.
Top 10 Cities by Projected GDP
The top 10 cities by gross domestic product (GDP) in 2035 will be fairly widespread. Three cities are expected to be in the U.S.—New York, Los Angeles, and Chicago. The Big Apple’s forecasted $2.5 trillion GDP likely stems from its strong banking and finance sectors.
|#1||New York||🇺🇸 United States||$2.5T|
|#3||Los Angeles||🇺🇸 United States||$1.5T|
|#4||London||🇬🇧 United Kingdom||$1.3T|
|#8||Chicago||🇺🇸 United States||$1.0T|
Four cities will be found in China, while London, Paris, and Tokyo are set to round out the last three. Interestingly, Tokyo is the #1 city today, with an estimated $1.6 trillion GDP in 2019.
Altogether, these top 10 cities will contribute an impressive $13.5 trillion in GDP by 2035. Clusters of such metropolitan areas are typically considered megaregions—which account for a large share of global economic activity.
Top 10 Cities by Future Population
Next, it’s clear that top cities by population will follow a distinct global distribution. By 2035, the most highly-populated cities will shift towards the East, with seven cities located in Asia.
|#1||Jakarta||🇮🇩 Indonesia||38 million|
|#2||Tokyo||🇯🇵 Japan||37.8 million|
|#3||Chongqing||🇨🇳 China||32.2 million|
|#4||Dhaka||🇧🇩 Bangladesh||31.2 million|
|#5||Shanghai||🇨🇳 China||25.3 million|
|#6||Karachi||🇵🇰 Pakistan||24.8 million|
|#7||Kinshasa||🇨🇩 DR Congo||24.7 million|
|#8||Lagos||🇳🇬 Nigeria||24.2 million|
|#9||Mexico City||🇲🇽 Mexico||23.5 million|
|#10||Mumbai||🇮🇳 India||23.1 million|
While Jakarta’s 38 million-strong population is expected to emerge in first place, the city may not retain its status as Indonesia’s capital for much longer. Rising sea levels and poor water infrastructure management mean that Jakarta is rapidly sinking—and the government now plans to pivot the capital to Borneo island.
On the African continent, Kinshasa and Lagos are already among the world’s largest megacities (home to over 10 million people), and will hold top spots by the turn of the century.
Population and demographics can be major assets to a country’s growth. For example, India’s burgeoning working-age demographics will present a unique advantage—and the country is projected to contain several of the fastest growing cities in the coming years.
Top 10 Cities By Estimated Annual GDP Growth
When comparing cities based on their pace of economic growth, there are some clear standouts. Average annual GDP growth across cities is 2.6%, but the top 10 surpass this by a fair amount.
The kicker? All of 2035’s major players will be found in Asia: four of the fastest-growing cities will be in mainland China, another four in India, and the last two in Southeast Asia.
At #1 by 2035 is Bangalore with an expected 8.5% annual growth forecast—its high-quality talent pool makes the city a breeding ground for tech startups. Jakarta makes another appearance, with its projected 5.2% growth at double the city average.
Shanghai finds its way onto all three lists. The commercial capital hosts the world’s busiest port, and one of China’s two major stock exchanges. These sectors could help boost Shanghai’s annual GDP growth to 5% in 2035.
Looking to the Future
Of course, any number of variables could impact these 2035 projections, from financial recessions and political uncertainty, to rapid urbanization and technological advances.
But one thing’s certain—in the coming decades, cities are where many of these factors will converge and play out.
Form and Function: Visualizing the Shape of Cities and Economies
Economies create distinct spatial patterns. This week’s chart visualizes the relationships businesses and industry imprint on the urban environment.
Visualizing the Shape of Cities and Economies
The Industrial Revolution changed the form and function of cities. New patterns of work resulted in massive wealth and distinct advantages for certain regions. Urbanization emerged as a defining characteristic of this age.
During the latter part of the Industrial Revolution, Cambridge School economist Alfred Marshall looked at a particular question: why did certain industries concentrate in specific places?
Marshall argued that the local concentration of industry created powerful economies promoting technical dynamism and innovation.
This Chart of the Week highlights the spatial patterns and business relationships created at the urban scale. Marshall’s insights from the past help us understand present-day tech and media economies and the massive growth of urban regions.
The Logic of Concentration
Marshall observed that industrial concentration led to long-term tendencies such as increasing returns on capital and compounding regional advantages.
The heart of this observation is that knowledge resides within the companies that make up a particular industry. Over time, these companies can accumulate even more information and direct the flow of new and innovative ideas. This creates local specialization and increasing profits, while also concentrating success, knowledge, and wealth into one key locale.
He defined this pattern as a Marshallian Industrial District.
An Evolving Landscape: Four Patterns
Marshall’s work would later influence the work of Ann Markusen, who created a typology of three additional industrial patterns. The patterns identify what makes a city attractive or repellent to income-generating activities.
|Marshallian Industrial District||This is a clustering of firms in a similar industry, operating within a certain geographic area.||Social media marketing companies in San Francisco|
|Satellite Platform District||A set of unconnected branches with links beyond regional boundaries, each part of its own globally oriented supply chain.||Suburban neighborhoods|
|Hub and Spoke District||An industrial sector with suppliers clustering around one, or several, dominant firms.||Airplane manufacturer Boeing and the region of Seattle.|
|State-anchored District||Industrial activities are anchored to a region by a public or non-profit entity, such as a military base, a university, or a concentration of public laboratories or government offices.||Madison, WI and Columbus, OH are examples of university towns, as are many cities with large defense installations such as Pearl Harbor in Hawaii.|
There are both benefits and problems—called “externalities”—associated with the spatial agglomeration of physical capital, companies, consumers, and workers:
Clusters for a Digital Age
In the past, the physical constraints of an area defined the structure of cities. Now that so many companies are free from the shackles of producing physical goods, does geography still matter?
Researcher Marlen Komorowski re-examined the concept of clustering with this question in mind. Here are five types of media clusters identified in her research.
|The Creative Region||A metropolitan region that provides advantages due to readily available infrastructures and institutions, and encourages the development of face-to-face interaction and collaboration networks.||Berlin, Singapore, Amsterdam|
|The Giant Anchor||A location defined by the activities of one or several large media institutions, which attract complementary firms to agglomerate. Similar to the hub-and-spoke cluster model.||Seattle, (Microsoft, Amazon), and Cambridge (Harvard, MIT)|
|The Specialized Area||A media cluster that is located either in a neighborhood within a big metropolitan area or in a small urbanized area. The Specialized Area is marked by a readily available, large pool of employees from a specialized field.||Soho (London), Silicon Valley|
|The Attracting Enabler||Determined by the location of certain facilities or resources that can be shared that enable media activities. Movie studios are a prime example.||Los Angeles, Vancouver|
|The Real Estate||This type of cluster is centered around office space, sometimes purpose-built for media and creative companies. This space can also include incubators / accelerators.||Dubai Media City, Dublin’s Digital Hub|
Four rationales drive these patterns: agglomeration, urbanization, localization economies. and artificial formation.
The Shadow of the Industrial Revolution
Alfred Marshall made the argument that local concentration of industry can offer powerful economies and technical dynamism and innovation.
We now see this pattern with the emergence of megacities that accrue the majority of the financial and knowledge returns. These megaregions set the perfect stage for dynamic economic exchanges between skilled labor, technology, and networks.
What does your city look like?
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