Europe’s next world cities: Istanbul and Moscow? – Greg Clark, Senior Fellow, ULI Europe
The 20th century was, for both Moscow and Istanbul, one of drama, dynamism and eventual decay. The geo-economic and geo-political horizon of the 21st first, however, offers considerable opportunities for these two cultural and political powerhouses to re-establish themselves near the top of the global urban system. Maybe Europe will need more that London and Paris amongst the elite major cities of the world.
Indeed the pair’s performance in city rankings since 2008 suggests that they are gradually assuming the status of world cities, albeit with several serious short- and long-term challenges. While Moscow is included in more international indexes on account of its size and political reputation, and has a larger number of recognised strengths in business and finance metrics, it is Istanbul that tends to achieve superior ratings for brand, culture, liveability and destination power.
The longer-term view of indexes suggest that Moscow has been more successful at attracting global firms and driving increased income and employment over the past 15 years. Brookings Institution figures from 2010 show that Moscow had the 9th best average growth in income and employment between 1993 and 2007 out of 150 world cities, as Istanbul was 44th. Istanbul and Moscow had similar global firm connections in 2000, according to GaWC figures, in 36th and 37th place respectively, but by 2008, Moscow had outstripped its Turkish counterpart by rising dramatically to 12th, while Istanbul ranked 29th.
Istanbul and Moscow were both hit very hard in the immediate aftermath of the global financial crisis but have recovered strongly into a new robust growth pattern. Brookings’ Metro Monitor found Moscow had the sharpest growth dip in the world of 150 world cities in 2007-2008, a remarkable statistic given Moscow’s distance from the global finance centres’ orbit, while Istanbul also suffered badly, rated 143rd, behind even Dubai.
Yet both centres bounced back impressively in the recovery period of 2009-2010, with Istanbul recording the sharpest gain in the world, edging the likes of Singapore and Shanghai, while Moscow recovered in a healthy 47th place. These figures bode well for their capacity to deal with economic shocks in the future, and are a testament to the role city size can play in regenerating lost employment. But the cities’ instability has also led to a reputation decline compared to the more stable patterns seen in East Asia and Latin America. Both Moscow and Istanbul were among the biggest losers in the 2010 Global Cities Index by AT Kearney, falling more than 5 places to 25th and 41st respectively.
Despite recent economic volatility, both cities continue to have the confidence of individuals with large amounts of concentrated wealth. Moscow ranks 2nd behind New York in the 2010 Forbes Billionaire index, while Istanbul is 4th. Both have also proven effective at attracting foreign investment. The Paris Global Attractiveness Survey emphasised Moscow’s strong reputation amongst investors, and fDi Magazine ranks Moscow 3rd in Europe for overall investment potential, following London (1st) and Paris (2nd). And partly because of the demand for infrastructural overhaul, both cities’ real estate markets have been very competitive in recent years. Moscow reached 2nd (of 104 cities) in the La Salle E-REGI index of real estate dynamism having spectacularly entered the top ten in 2009, while Istanbul ranked 25th, up 50 places from 2009. The price of Moscow’s premium retail street, Tverskaya, rose in comparative terms between 2008 and 2010, and is now as costly as the top shopping streets in Madrid and Berlin. Similarly, Istanbul’s prime retail destination Bagdat Caddesi recorded the second strongest price growth in Europe after London’s New Bond Street according to Cushman & Wakefield figures, and now rivals the most expensive in Auckland and Copenhagen.
Impressive investment figures and luxury retail demand are only one side of the story, though, and Istanbul and Moscow are a long way from becoming world-class business and finance hubs, despite signs of improvement. Istanbul’s finance provision had the highest rating improvement in the world in 2010 in the prestigious Global Financial Centres Index, although this still left the city a distant 70th of 75 world cities. Moscow, at 68th, is the only city to be designated an ‘Emerging Global Contender’ because of the worldwide awareness of its finance potential. Other business indexes concur that both have a long way to go before they can compete with the top global cities. The Wealth Report 2010 ranks Moscow at 22nd in terms of its importance to ‘the global tribe of footloose wealthy and influential’ individuals, below even Mexico City. A particularly harsh view is given by the Global Power City Index, which in 2009 classified Moscow as a ‘Vulnerable City’ alongside Cairo, stating that these cities ‘are generally weak in all of the functions’, and subsequently ranking it 32nd of 35 cities in 2010 for all-round provision.
Equally, at the European level, Istanbul and Moscow’s business ambitions are not matched by results in comparative city assessments. Istanbul still places only 26th overall by senior executives in the European Cities Monitor (up from 29th in 2008), while Moscow has been ranked in the bottom four cities in each of the past three years. Here, both rank well below much smaller mid-ranking cities such as Birmingham, Warsaw, Prague and Leeds.
In part, these disappointing rankings are due to wide-ranging infrastructure weaknesses. Moscow’s reputation for telecommunications quality is very poor within Europe, judging by corporate executive opinion, falling from 26th, of 35 European cities, to 33rd between 2008 and 2010, while Istanbul is absolutely last. Both cities lose credibility for their weak external transport links, ranking in the bottom six cities, while Istanbul is ranked second worst for internal transport. Transport is one of the most high-profile issues for Istanbul’s residents and policymakers alike. Less than a fifth of residents in a 2009 Urban Age survey view transport as one of the city’s best assets, while over half identify it as one of the most concerning aspects about living there. The Russian capital has dropped from 10th in terms of ease of access to markets, to 19th between 2008 and 2010, having climbed seven places between 2007 and 2008.
Istanbul and Moscow’s knowledge economy and talent record is in some quarters competitive, but more because of the sheer size of their populations than their density of knowledge workers. Istanbul’s human capital ranking fell from 13th internationally in 2008 to the fringes of the top 20 in the Global Cities Index, with Moscow falling a similar number of places, having placed 15th in 2008. These are still creditable positions, though, on a par with Barcelona and Shanghai. However, their reputation for home-grown talent is relatively weak. Istanbul ranks second last among almost 40 European cities in terms of corporate perceptions of qualified staff, and, despite its melting pot reputation, among the bottom six cities for languages spoken. Moscow achieved similarly poor scores in these ratings. This is backed up by AON Consulting’s study on low-risk cities for recruiting and relocating employees, where Istanbul ranked 70th of 90 world cities, and Moscow 78th. This places both behind the worst-placed Southern European cities, Athens (64th) and Rome (56th). There are some positive signs however in the form of an increasing number attending university. fDi Magazine finds that Istanbul hosts the 4th highest number of higher education students in Europe, just behind Rome and ahead of Madrid, a factor which helped the city to 4th in ‘Southern European Cities of the Future’ in 2010-2011.
In terms of quality of life, Moscow ranks poorly compared to Western European hubs, with Istanbul only slightly better. Moscow is ranked only 166th by Mercer for quality of living, while Istanbul is 112th. Major issues for Moscow include cleanliness, crime and terrorism, with the EIU rating the city outside the top 100 cities for stability. Congestion is a further problem; Moscow was revealed in 2010 as the fourth worst city for Commuter Pain, in an IBM study, behind only Beijing, Mexico and Johannesburg, and worse than New Delhi. 35% of those surveyed said that they could not reach the office at least once a month, higher than any other city polled. Because of these accumulative factors 2009 Global Power City Index describes the capital as ‘remarkably weak’ for liveability and environment.
Low scores in healthcare, education and security also afflict Istanbul. Living standards are not helped by high prices, which at 21st in the world inclusive of rent according to UBS, outstrip net wages, which are behind the best remunerating emerging cities such as Rio and Johannesburg. Moreover there are clear concerns about crime and social cohesion in Istanbul, with public trust in other citizens the lowest among 75 cities in Europe according to a 2010 Eurobarometer survey. And it ranks only 25th of 30 cities in Siemens’ European Green City Index, outperformed by smaller European cities such as Ljubljana (19th), Bratislava (20th) and Tallinn (23rd), due to poor water and air pollution figures. However, the city is gradually becoming recognised as a rich centre for entertainment and culture which is improving its position in more informal and subjective rankings. Istanbul is now the 9th most frequented city visitor destination in the world, overtaking Hong Kong in 2009, and well ahead of Moscow (25th).
The lessons from the global indexes are clear. Istanbul and Moscow are importantly located cities, ideally situated to host global firms and attract large scale investment to match their political and cultural significance. Europe may need them to succeed if the continent is to be competitive in the longer term. However, both powerhouses have struggled to improve their social and physical infrastructure and openness sufficiently to develop their knowledge and business credentials, which is holding them back from taking their recent progress to the next level.
Top image credit: Photobank gallery