March 10, 2011
A look at two very modern European countries.
Spanish Cities were the most dynamic cities in Europe in the 25 years from 1982 to 2007. Barcelona, Bilbao, Sevilla, Valencia, and Malaga all repositioned themselves as centres for growth. In the case of Barcelona the changes have been dramatic and they have propelled the city into the league of the leading cities in Europe.
Madrid, of course, following the regional/national capitals, observed these trends and found its own way back. But after two decades of dynamic growth, international positioning and record immigration, most Spanish cities have recently suffered a dramatic slump in employment, with limited demand from export markets, and damage to their real estate sectors. Only Barcelona seems to have really retained the productivity advantages that will be needed for future success.
Polish cities meanwhile are leading the pack of vibrant Eastern European urban centres finding new niches in the post-recessional global economy. Polish urban dynamism in this new cycle begins to reflect the dynamism of Spanish cities in the last cycle.
The Globalization and World Cities Research Cluster (GaWC) measurement of the most connected cities to advanced global firm networks finds that only three cities in Spain and Poland are in the top 150 cities worldwide. Madrid leads the way, in 11th, followed by an impressively emerging Warsaw, which is now in 20th place having overtaken the likes of Zurich, Frankfurt and Amsterdam in the last decade. Barcelona has held its own in 46th place, after which there is a huge gap to Krakow, which is just inside the top 200 cities. Valencia and Seville are the only other cities from these two nations to feature in the 300 city list.
Like many Polish cities, Warsaw has been an outstanding performer in Europe since 2007, benefiting from strong trade ties to Germany and improved provision for international business. Brookings Institution figures indicate Warsaw’s minimum growth year was the 15th mildest of 150 world cities, while its 56th rank in terms of 2009-10 recovery growth is superior to almost every European city, including Bucharest (65th), Prague (79th) and Paris (96th). Meanwhile the Polish capital recorded a 61 point gain in its financial centre rating in the Global Financial Centres Index in 2010, although it is rising from a low base, at 67th out of 75 global hubs. The Z/Yen index identifies Warsaw as a diversified provider of services but only with local reach, in contrast to Moscow which appears to have greater international span.
Warsaw is the only Polish city to have appeared in the European Cities Monitor business executive survey in the last two decades. Although it has remained fairly static in around 25th position since 1990, this amounts to a strong performance given the introduction of over ten new cities in the survey since then. While in 1990 the Polish capital ranked last of 25 cities, in 2010 it was well clear of cities previously ranked above it, including Glasgow, Budapest, Athens and Moscow.
Warsaw is fairly highly regarded for availability of qualified staff (18th) and languages spoken (16th), which accounts for its strong performance in AON Consulting’s People Risk Index, where it matches Western European centres of Milan and Lisbon to rank inside the top 50. It is also seen as offering cheap office space (6th) and affordable labour costs (1st). European executives see Warsaw as offering the third best incentives and tax policies in Europe, rivalling London, and therefore the city is the second most likely European destination to which companies might expand, ahead of Istanbul and behind Moscow.
Polish cities are gradually emerging as attractive destinations for international investment. Warsaw has entered the top 25 European Cities of the Future for investment potential as adjudged by fDi Magazine in 2010, who use a combination of statistical and qualitative metrics. Most notably Warsaw witnessed the fifth highest number of FDI megaprojects in Europe in 2009-10, behind Bucharest, Moscow, St. Petersburg and London. The capital placed second in Eastern Europe behind Bucharest, and within the region Poland had three cities in the top ten, with Krakow 6th and Wroclaw 10th. At a wider city-regional level, Poland recorded five of the ten most competitive city-regions in Eastern Europe, led by 4th place Masovia. While Romanian and Lithuanian cities are seen as having cheaper labour costs, Lódz appears in the top five European cities of 0.5-1 million population for cost effectiveness.
Polish hubs are also challenging the stranglehold of Middle Eastern and East Asian free trade zones which have been pre-dominant in recent years. In fDi Magazine’s new Global Free Zones of the Future 2010/11, both Lódz and Walbrzych Special Economic Zones are in the world’s top 20, at 11th and 17th, the only European zones to achieve this feat. Similar positive news can be seen in Polish cities’ emergence as proximate services centres for Western European and Scandinavian client markets, based on its large employable talent pool. Krakow is rated by Tholons as the 4th most dynamic global outsourcing market in the world, immediately behind Shanghai and Beijing, credited with outstanding provision in business analytics, F&A, HR and R&D.
ULI/PWC noted that Polish cities have the most stable property markets in Central and Eastern Europe in 2010. Warsaw is ranked an impressive 8th of 27 European cities for investment opportunities in new property, comparable to Vienna and Milan. Within Europe, Warsaw and Istanbul were identified by investors as the two most interesting emerging markets in ULI’s survey. Cushman & Wakefield’s global survey of retail rental prices also finds that Warsaw’s most expensive street, Nowy Swiat, is about the same cost as Lisbon’s prime street, and more than 20% pricier than any retail destination in Bulgaria or Romania. The next most expensive streets in Polish cities are in Krakow and Katowice. And La Salle’s E-REGI growth survey finds double-digit position rises for three Polish hubs – Poznan, Wroclaw and Tricity (Gdansk/Gdynia).
Tracking Polish cities’ quality of life is difficult given the lack of comparative studies. Warsaw is the only Polish city to feature in the EIU and Mercer liveability surveys, where it ranks 71st of 140 cities (Moscow 70th, Tianjin 72nd), and 84th of 221 cities respectively. Warsaw performs well in terms of stability, due to a low terrorism threat and calm civil society, but struggles in the areas of healthcare and education, where it loses ground to Moscow. Elsewhere indications of Polish urban cosmopolitanism can be found in the EU’s Eurobarometer survey. Here citizens in four Polish cities – Krakow, Bialystok, Gdansk and Warsaw – are highly enthusiastic at the presence of foreigners in the city, with all 4 ranked in the top 15 of 75 European cities by support. These figures compare very favourably to more hostile responses in cities in Spain and other Western European countries. Less positively, concern about health service quality is among the two most serious concerns in each of the four cities.
Areas where Polish cities have room to strengthen include their technology and R&D provision, and brand development. No Polish city appears in Buck Consultants top 30 European Tech Cities. Meanwhile Saffron Consultants finds that all six Polish cities studied have under-utilised assets that indicate below-par branding. Krakow is rated the strongest urban brand in the country, at 33rd of 72 European cities, while Warsaw is ranked alongside Belfast and Sarajevo, outside the top 50. These results suggest international positioning and differentiation strategies need to be more focused if Polish cities are to capitalise on their competitive advantages.
By contrast, Spain’s top cities have very strong brand utilisation ratings, which are gradually helping them recover from a particularly acute recession. Madrid, Valencia and Barcelona all recorded among the ten slowest recoveries of 150 cities worldwide according to Brookings’ Global Metro Monitor, making Spanish cities among the worst hit in the world. However the recovery appears mixed across Spain, with some cities proving more competitive than others. Bilbao and Zaragoza for example both lost more than 25 places in the La Salle European rankings of real estate growth, while Barcelona, Valencia and Seville all rose up the charts in 2010.
It is Barcelona’s performance across city indexes that makes for the most positive reading in Spain. The 2010 European Cities Monitor grades the city the 5th best for business, 1 place down from its a record high (since 1990) in 2009, when it overtook Brussels. The Catalan capital has previously been rated as decisively the European city improving itself most for business promotion, and is now second to Berlin as of 2010. It is also ranked 5th in Europe for foreign direct investment potential in the fDi European Cities of the Future 2010/11 list, and top in Southern Europe. It is well clear of Madrid (11th), with no other Spanish cities in the top 25.
Given its comparative size, Barcelona performs exceptionally well in many quality of life indices. It ranks 1st in Europe for employee quality of life – a position it has held for a number of years – with a score almost 40% superior to the next best city Munich. It is slightly ahead of Madrid in both the Mercer and EIU liveability surveys. The 1992 Olympic hosts’ exceptional image among visitors has translated to another improvement in the Euromonitor destination rankings, where it is now the 16th most visited city in the world, just behind Los Angeles.
For its part, the capital, Madrid, appears as the dominant city nationally in many measures of finance competitiveness and business density. It is the only Spanish city to appear in the Global Financial Centres Index top 75 financial hubs, improving to 39th in 2010 which situates it as a mid-level European provider alongside Milan and Stockholm. In the Global Cities Index and Global Power City Index Madrid dropped at least three places in 2010 and is now ranked 17th and 15th respectively, but the city is still in world-class company. Finally Madrid performs well in Siemens’ new Green City Index, with the 9th lowest carbon emissions, finishing overall ahead of every city in Southern and Eastern Europe.
So, although Polish Cities maybe the new Spanish Cities of this cycle, it would be wrong to conclude that Spanish cities have all gone backwards. Madrid’s vigorous investment programme will yield productivity returns in the medium term and Barcelona has successfully shifted into a higher gear for entrepreneurship, quality of life, and international competitiveness. Spain is not one market, but several, just as Poland will be shortly.