Infrastructure Demands of an Urban World

McKinsey Global Institute today published a report on worldwide urban growth.  Urban World: Cities and the Rise of the Consuming Class provides data that scream for huge investments in emerging markets' urban infrastructure.  The McKinsey report is so consistent with the city-building work at Gale International, that, like a sales pitch, it reaffirms our convictions of expanding middle classes and global urban needs.  Here are some excerpts from the report:

• Cities that fail to meet the aspirations of the millions who are migrating in search of better opportunities run the risk of congestion, pollution, and insufficient public services becoming barriers to growth.

• To deliver the benefits of economies of scale while minimizing the hazards of rapid growth, cities need to have professional planning and coordination, capable and accountable governance, and sustainable and responsible fiscal management.

• If cities manage their capacity building well, there is a large opportunity not only for the world's investors but also to build more productive capacity that is less costly and more efficient in environmental terms for decades to come.  Importantly, the urban planning and infrastructure investment choices made today will determine how well cities are prepared for sustained growth after the expansive urbanization wave passes.  After most people have already moved to urban regions, cities will need to find new sources of productivity gains and economic growth.  Urban centers that have built well-functioning and efficient environments for businesses and individuals will be in a better position to attract skilled works and grow more productive businesses.

• Cities will need annual physical capital investment to more than double from nearly $10 trillion today to more than $20 trillion by 2025.  Urban centers in emerging economies will make most of this investment.

• McKinsey research in India suggests that it can be 30 to 50 percent less expensive for large cities to deliver basic services including water, housing, and education than it is in more sparsely populated rural areas.

• Emerging market cities will account for close to half (47 percent) of expected global GDP growth between 2010 and 2025.

• In China, for instance, spending on dining out starts to take off at annual incomes of around $3,000 per household and, by about $9,000, is on a firm and steep upward trajectory.  Spending on transport and communications starts increasing strongly as incomes reach around $6,000 per annum...Travel for leisure and retail banking services for deposits start climbing once per capita income reaches $18,000 per annum.

• By 2025, cities will need to construct floor space equivalent to 85 percent of all of today's urban residential and commercial building stock...The urban building boom will require cumulative investment, including for replacement buildings, of nearly $80 trillion.

• The investment needed to expand port capacity to 2025 exceeds $200 billion by our reckoning, with 85 percent of it taking place in emerging markets.

Infrastructure Demands of an Urban World