Amazon’s recent announcement that it is seeking to build a second headquarters in a major North American city has sent cities from Los Angeles, to Chicago, to Toronto scrambling to outbid each other in an attempt to woo the corporate behemoth. Interestingly, as part of its request for proposals, Amazon explicitly expressed a preference for cities with access to good public transit.
Amazon is just one of a series of companies explicitly targeting urban locations with good access to public transit. Companies as diverse as GE, McDonalds, Caterpillar and Aetna are relocating from less easily accessible suburban office parks to downtown office buildings. This corporate migration to cities mirrors the overall population globally, as cities become ever more important centers of economic growth and activity.
In developed markets, in particular, generational preferences and economic imperatives in an increasingly competitive digital economy are driving the current wave of urbanization. While the baby boomer generation was known for its suburban migration, Generation Xers initiated the surge of youth into developed markets’ city centers, and the millennial generation has followed suit thanks to their preference for living in close proximity to work, public transit and entertainment. In the United States, for instance, the share of 25-34 year-olds who prefer close-in neighborhoods (within three miles of a city’s central business district) quintupled from 1990 to 2010. And young adults as a percentage of the total urban population in the United States rose from just 25 percent in 1990 to 40 percent in 2015.
Corporations have followed millennials into the cities as it allows them to take advantage of network effects and recruit a more highly educated workforce, both of which are crucial for continued success in today’s digital economy. Researchers have shown that innovators are more productive when living in proximity to other potential collaborators, highlighting the reason that innovation hubs such as Silicon Valley, New York, London, Tokyo and Toronto have remained among the most innovative cities for years. In fact, all of these cities are among the “global elite” on A.T. Kearney’s Global Cities Index, in part as a result of their strong ecosystems for businesses and innovation.
Amazon’s clear preference for quality public transportation highlights both the challenges and opportunities for cities during this ongoing wave of urbanization. In many cities around the world, rapid urbanization has resulted in increased congestion and strained public transit services. The New York City subway system, for instance, experienced dramatic service challenges in recent years as ridership rose rapidly (and now it faces a backlash). Overcrowding on the London Underground has also increased steadily year over year, leading to warnings by public officials that the city’s growing population could overwhelm the system within the next 15 years.
To address congestion challenges, cities will increasingly need to implement innovative transportation solutions that meet the needs and preferences of growing urban populations. As discussed in the Global Trends 2017-2022 Report, “The Centrality of Governance,” cities are increasingly exploring the use of new technologies such as autonomous vehicles, ride sharing and drone delivery.
Cities are also repurposing older technologies to help reduce congestion and improve public transit. For instance, bus rapid transit – the use of dedicated lanes and specialized on- and off-boarding stations – is currently enjoying a popular resurgence. Dockless bike-sharing has also taken off, combining innovations such as sharing platforms and mobile devices, with the traditional transportation mode of the bicycle. Ofo and Mobike, two leading bike-sharing companies, are both worth over $3 billion and have aggressively expanded across China, Singapore, the United States, the United Kingdom and elsewhere.
There is no single answer to growing urban congestion; a mix of new technologies and systems will help cities cope with transport challenges. Those cities that are able to address their congestion issues in locally appropriate ways will gain a competitive advantage, attracting top talent and major corporations, bringing jobs, prosperity and enhanced quality of life to residents.
Paul A. Laudicina is a Partner and Chairman Emeritus of A.T. Kearney, and Chairman of the Global Business Policy Council. In addition to more than 40 years of private-sector experience, Paul has served in the public sector, including as legislative director to then U.S. Senator Joseph Biden from 1977 to 1982.