German Cities of the Future 2016/17: the winners

Frankfurt, the largest city in Germany’s Hesse state, has placed first in fDi's German Cities of the Future 2016/17 ranking. The city, a financial hub at the heart of the Frankfurt-Rhein-Main metropolitan region, is a picture of economic health, boasting a low unemployment rate of just 2.92% and a GDP per capita of more than $50,000 at power purchasing parity. The city is a strong FDI performer, attracting 328 inward investment projects between 2011 and 2015 – the highest number of FDI projects of any city in the study – according to greenfield investment monitor fDi Markets. More than one-quarter of Frankfurt’s inward investment was in software and IT, followed by business services (16.95%) and financial services (14.97%). 

Twenty-four expansion projects were recorded in Frankfurt between 2011 and 2015, reinforcing the city’s reputation for attracting investors. The highest percentage of expansion projects were recorded in the communications sector (accounting for 21.7%), followed by financial services (17.4%) and software and IT services (13%). 

Munich growth

Munich, the capital of Germany’s largest and most southerly state of Bavaria, ranked second overall, scoring highly in both the Economic Potential and Business Friendliness categories. The city’s population is growing at the highest rate of all German cities analysed, while also benefiting from the lowest unemployment rate, of just 2.02%. FDI in the city remained relatively stable between 2011 and 2014. However, in 2015 Munich saw FDI project numbers almost double to 102. Capital investment and job creation also significantly increased to about $696m and nearly 2500 jobs, respectively.

After Berlin, Munich recorded the highest level of FDI job creation of all German cities analysed. US-based technology giant IBM created 1000 jobs in the city in December 2015 when it established the headquarters for its Watson Internet of Things business, focused on the development of smart technology. Munich is a natural home for such companies, with more than 11,000 companies in the city in the knowledge-based sector (8.6% of total companies). The city also recorded the highest number of outward FDI projects at 592 between 2011 and 2015. Munich is home to major international companies including electronics and engineering company Siemens (which invested in 135 FDI projects globally), gas and engineering firm Linde (52) and auto manufacturing giant BMW (50). The majority of Munich’s outward FDI goes to Asia (190 projects), followed by western Europe (179) and North America (81).

Germany’s capital city Berlin ranked third in the study, coming first in the Human Capital and Lifestyle Category, third in Business Friendliness and sixth for Economic Potential. The city generated the highest GDP of all cities analysed, and attracted nearly 300 FDI projects between 2011 and 2015, the second highest in the study. More than 160,000 students are based in the city, which has been an influential factor in investment decisions. Netherlands-based software developer Osudio cited this creative and innovative energy as the reason for opening an office in the city in 2015. Finland-based Vaadin, also a software company, opened an office in Berlin in 2015, crediting its decision to the several universities and technical colleges in the city. Berlin boasts seven of the top 100 German universities according to Webometrics, more than any other city in the country. 

Methodology

To create a shortlist for the fDi German Cities of the Future 2016/17 ranking, the fDi Intelligence division of the Financial Times collected data using the specialist online FDI tools fDi Benchmark and fDi Markets as well as other sources. Data was collected for 34 locations in five categories: Economic Potential, Human Capital and Lifestyle, Cost-effectiveness, Connectivity and Business Friendliness. Locations scored up to a maximum of 10 points for each data point, which were weighted by importance to the FDI decision-making process to compile both the subcategory rankings as well as the overall ranking.

In addition, surveys were collected under a sixth category, FDI Strategy, for which there were 12 submissions. In this category, locations submitted details about their strategy for promoting FDI.

Click on the link below for a PDF version of the complete results: