Agglomeration Economies and Global Cities: The case of London, New York and relativity

This paper evaluates the manner in which agglomeration influenced formation of cities and how this has changed with the evolution of ‘global cities’. Furthermore, a study of global cities concentrating on London and New York, investigating the sales turnover of commercial real estate, is undertaken to investigate any changes in relativity.Changes in capital flows recorded in commercial real estate transactions over time will be analysed using market data supplied by RCA for each city sector studied. As a consequence of electronic communications and reduced costs of travel, earlier predictions were made of the ‘end of geography’ with reference to ending the importance of strategic fixed locations. Despite this, studies of agglomeration reveal that once a path dependency is established, a self-augmenting process with existing structure and infrastructure, direct contacts between firms, local information flows, joint use of facilities and provision of venture capital provided by existing firms in the location, maintains a local momentum. Firms create their own ‘externalities’ in a location resulting in positive effects on that industry. Whether this can continue to maintain or extend the life of an international financial centre has not been studied in great depth. In recent years the global network of world cities has undergone some alteration in balance of activity. A number of cities from developing nations are playing an increasingly significant part in global economic activity.The research confirms the significance of cities as a global base for business has not declined. However, agglomeration economies in the new wealth producing firms in global cities have altered from those important to former wealth producers in manufacturing. Furthermore, technological development has manifested vast changes in global competitive and economic advantages altering balances accordingly.