The Most Profound Change: Global Urbanization and its Implications

2. The Most Profound Change • Of the many profound changes of the first half of the 21st century, none will be more challenging than the significant increase in global urbanization. • According to the United Nations, the world’s urban population will increase to 66% by 2050, or 6.3 billion people, and 90% of the increase will occur in urban areas of Africa and Asia. • Northern America is forecast to have the highest percentage of urbanization by 2050, or 81.5%.

3. From Farm to City • As recently as 1950, 70% of the world’s population lived in rural settlements, compared to 30 percent in urban settings. • Since then, the gap has been closing, with 2007, as the first year that more people in the world lived in urban environments than rural environments. By 2014, 54% of the world’s population was urban. • From 1900 to 2000, the rural population of the US declined from 60% of the total population to 20% and the farm population decreased from a 39% share to a 2% share.

4. City Size • Only 12% of the world’s total urban population lived in 28 megacities of 10 million or more residents during 2014. By 2030, there will be 41 megacities and 26 of them in China, India, Africa and Latin America. • During 2014, almost 20% of the urban population actually lived in medium-sized cities of 1 million to 5 million and almost 50% in small cities and towns with less than 500,000 inhabitants (almost 50%). • By 2030, the population of medium-sized cities will increase 36% from 827 million to 1.1 billion as well as those living in cities of 500,000 to 1 million, increasing from 363 million to 509 million. The small cities and towns will still account for 45% of all urban dwellers during 2030.

5. Innovations in The New City • Mannheim, Germany is already a “smart” city. Its smart energy network monitors energy use of every home, programming, for example, household appliances to operate when more renewable energy is available, and at a lower cost. • To provide as much as 60% more sunlight in the urban environment, the London office of NBBJ architects will build two high-rise structures, with panels on the northern building reflecting the light striking the south-facing building to the streets. • Bicycle travel accounts for approximately 13% of all city trips in Berlin. Bicycle traffic has increased seven-fold in Seville, Spain since 2000 and London is building 138 miles of elevated bike paths with a capacity of 12,000 cyclists per hour.

6. More Consumers with Money to Spend • There will be one billion more people in the world entering the consuming class by 2025, with 60% of them living in approximately 440 cities in emerging countries. • These countries are forecast to account for almost 50% of the growth in worldwide GDP from 2010 to 2025 and their consumers could spend an additional $20 trillion per year by 2025. • Just 600 global cities are expected to contribute collectively 65% of the world’s economic growth from 2010 to 2025, with 440 of these cities in emerging countries generating 47% of this GDP increase.

7. Future “Hot Spots” • By 2025, the “top 20 hot spots for growth” with elderly, higher-income consumers are forecast to be Shanghai, Beijing, Tokyo, Tianjin and Mumbai. Among North American cities, New York will be #12; Los Angeles, #18; and Toronto, #19. • The hot spots for young, entry-level consumers are expected to be Lagos, Nigeria; Dar es Salaam, Tanzania; Dhaka, Bangladesh; Ouagadougou, Burkina Faso; and Khartoum, Sudan. (No North American cities are in the top 20.) • The top 5 hot spots for commercial floor space growth will be New York, Beijing, Shanghai, Los Angeles and Tokyo. Washington, DC is #6, Dallas #7, Chicago, #10, Houston, #11, Atlanta #14, Miami #15 and Phoenix #19.

8. Big Business in Emerging Countries • In its report, Urban World: The Shifting Global Business Landscape, McKinsey Global Institute states that there were approximately 8,000 global companies with $1 billion or more in revenues during 2013. • The Institute predicts another 7,000 companies will enter this category by 2025 and 70 percent of them will be located in emerging economic regions of the world. • McKinsey forecasts that 45% of the Fortune Global 500 companies will be in these emerging regions and approximately 120 of the 500 in China.

9. Entrepreneurs’ Economic Lift • According to EY’s Megatrends 2015: Making Sense of a World in Motion report, emerging regions of the world already had a greater rate of entrepreneurial growth than the developed regions. • TEA, or Total Early Stage Entrepreneurial Activity Index, is a measurement of persons, 18 to 64 years of age, who are in the midst of launching a business or operating a new business. • During 2013, the TEA for North America was 11% and the European Union, 8%, compared to 27% in Sub-Saharan Africa, 19% in Latin America and 12% in the Asia-Pacific region.

10. The New Breed of Entrepreneurs • The McKinsey report also indicated that almost 50% of entrepreneurs around the globe are 25 to 44 years of age and the highest rate of entrepreneurship is among young adults (Millennials), 25 to 34 years of age. • In the US, female-owned businesses are increasing more than twice as fast as all other companies. Globally, there were approximately 8 million to 10 million small businesses with at least one woman among the ownership. • Although access to financial capital is often entrepreneurs’ biggest challenges, crowdfunding in developing countries is forecast to increase from $5 billion during 2013 to $96 billion by 2025.

11. The Brand and Marketing Challenge • Urbanization will lead to mobile surpassing the “immobility” of desktop and laptop devices and forcing companies to evolve content and page designs to conform to mobile devices’ screen size and improved resolution. • By 2025, 2.5 billion people across the globe will be what are called “digital natives,” or those whose entire lives have been lived in a digital world. Branding and marketing will have to adjust to their hyper-speed consuming behavior. • The combination of the two trends above will give more consumer power to groups of people who have not traditionally had it, such as women and minorities, which will also cause companies to create new types of messages and message structures.

12. How The New City Will Change the Auto Industry • The density of cities by 2025 and beyond is likely to discourage more people from owning and operating a motor vehicle. The ride-sharing industry is already having an effect on this future scenario. • According to research from IHS, when a city becomes 80% urbanized, the motorization rate, or the number of vehicles per 1,000 people, reaches its highest point, and then begins to decline. • As younger adults, who will be older adults during the next 10 to 20 years, continue to view digital mobility as more important than personal mobility, automakers will likely have to make major changes to their business model.

13. Cities of Opportunity • In its February 2015 report, Cities of Opportunity: The Urban Rhythm of Entertainment and Media (E & M), PwC identified the 30 biggest urban markets for entertainment and media spending, which were dubbed 30 Cities of Opportunity. • Tokyo was the biggest spending city for E & M during 2009, at $17.6 billion, but, by 2014, New York had surpassed it with a total of $19.7 billion in spending, compared to Tokyo’s $19.5 billion. • By 2018, the gap will be even larger, with New York at $23.6 billion and Tokyo at $20.1 billion. Other North American cities on the list of the biggest spending cities for 2018 include Los Angeles, #6; Chicago, #10; and Toronto, #13.

14. Media Thrives in The New City • Although most of the 30 Cities of Opportunity are still in developed countries, the fastest rates of entertainment and media growth will occur in cities in emerging countries. • During 2009, E & M spending in the developed Cities of Opportunity was $95 billion, which will increase to $130 billion by 2018, or a 37% increase; however, in emerging Cities of Opportunity will increase 108% from $26 billion to $54 billion. • From 2013 to 2018, consumer spending for E & M in the 30 Cities of Opportunity will increase from $69 to $80 billion; advertising, from $47 billion to $59 billion; and Internet access, from $32 billion to $45 billion.

15. Succeeding in The New City • The increasing urbanization of the world will be both exciting and challenging. • Businesses of every size, including those in the media, will be forced to make swift, revolutionary and even uncomfortable changes. • Their branding, marketing and use of media must evolve to reach and maintain contact and strengthen relationships with The New Consumer populating The New City.