There are now around 236 million students in higher education globally. That’s 136 per cent more than at the start of the millennium. In Asia – which has seven times more students than North America – that rise is 237 per cent. This growth is set to continue; UNESCO forecasts the world’s tertiary student population will hit 594 million by 2040.
The world’s best universities are the sources of the most highly skilled workers of the future. Running in tandem, and at some speed, with the increasing demand for higher education is the explosion in specialist ‘clever’ tech sectors – the likes of AI, ClimateTech, Deep Tech and CleanTech – whose sharpest minds are tackling the biggest environmental, scientific, engineering and humanitarian issues the world faces.
Education’s role in business hubs
Businesses want to be where mighty brains congregate. Whether that is through direct links to universities or by recruiting the most skilled graduates, we are seeing a fast-evolving synergy between education and the knowledge economy. Take Bengaluru, a decades-old ‘tech town’ in southern India, where the combination of 150 universities, a strong IT/business process management sector, and an educated and fluent English-speaking labour force all support a good stock of Grade A office space.
There is considerable value in businesses being a part of this synergy, resulting in high demand for best-in-class offices and laboratory space near top-ranking universities. In the US, for example, Boston, the top-ranked city for Life Sciences, is home to a gamut of Harvard- and MIT-incubated spinouts that drive demand for lab space.
In truth, there is a clear link between any given city’s university rankings and the demand for, and value of, its commercial real estate.
Top universities boost commercial real estate values
Analysis of office capital values in top global cities shows that those with a QS Top 200 university have higher capital values ($672 per sq ft on average) than those without ($425 per sq ft). The distribution of cities with higher capital values are strongly skewed to those that are also home to top-ranked institutions.
Real estate at a premium in cities home to top ranking universities
Office capital values in cities with and without top 200 universities
Source: Savills Research using QS and MSCI Global Intel Digest: Property Index
Businesses in search of top talent have a balancing act to perform. The cost of hiring and retaining the best graduates takes on a different hue if you are seeking to base yourself in San Francisco, Silicon Valley or Boston – where the average salary of a scientist comfortably exceeds $100,000 – rather than Bengaluru, where it’s less than $10,000.
The cost of talent to businesses
Scientist salaries compared to the Savills Tech Cities rank
Source: Savills Research, Glassdoor
Naturally, the most in-demand individuals will gravitate to cities with high-performing businesses and prestigious tech clusters that, in turn, push up office rents and capital values. Good news for investors, but a challenge for small and growing companies that need to minimise their costs.
From fringe to honeypot: the tech hub effect
Tech hubs also have a proven track record of beginning in relatively fringe locations – think Shoreditch in London, Kreuzberg in Berlin and Brooklyn in New York – before, arguably, becoming victims of their own success, as prices rise and long-established local enterprises move out to more affordable areas.
Another factor to consider with embryonic tech hubs is how meshed they are into the fabric of the local community. These innovation ecosystems rarely thrive if they exist in isolation – and those that are mindful of their environment, in both eco and community senses, are likely to provide the best return on investment.
The redevelopment of London’s King’s Cross – whose Knowledge Quarter, a major life-sciences and tech hub, is home to Google, Meta and AstraZeneca – was initially anchored by an education tenant.
Build it and they will come – but only if it is in the right place. Investors, and employers in search of the next generation of top talent, take note.
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