Why Secondary Cities Are the New Urban Champions

What do cities of Toulouse, Eindhoven or Manchester have in common? They’re all “second-tier cities” in their countries and have outperformed their respective capital city in terms of GDP growth over 2009-2013. And across all continents, numerous second-tier cities, from Brazil to China, from India to the United States, are gaining economic impact and increasing their contribution to their national GDP.

In a context of growing urbanization which could push larger cities beyond the threshold – and where diseconomies make them less competitive – second-tier cities are emerging as new urban champions and the next places of growth. They will turn their higher agility and their easier decision-making process into advantages which will pave the way to more sustainable and livable cities in a competition to attract talent, investment and business.

According to a report from the University of Liverpool, the OECD’s policy position is that the economic contribution of middle regions is typically underestimated. EPSON’S policy brief also highlights that “evidence has shown that a greater distribution of investments within countries is associated with stronger economic performance of their second-tier cities”, thus concluding that “it is important for policymakers to keep in mind the significance of strong second-tier cities for economic growth and jobs.” Governments and policymakers should therefore dedicate more thought to their second-tier cities for the benefit of the whole national economy.

Although correctly oriented policies could indeed affect their growth and development, second-tier cities are also on a trend with their very own momentum. Capital cities have admittedly strong advantages deriving from agglomeration and from being a political and economic power center. However, growing urbanization may push them over the size limits where negative externalities generate additional costs and limit the marginal returns of additional investments. The attractiveness of second-tier cities for investments therefore increases, all the more that they often offer better access to most services and that the advent of connectivity and digital solutions ease the access to all other resources.

In addition, second-tier cities can offer better quality of life to their inhabitants, and this meets increasingly important aspirations from people. Actually, some second-tier cities already attract and retain more educated people than their capital city. Some of them even get an international positioning through the development of a specific industry or excellence center.

This potential of growth will create an emulation among cities, which will try to attract investments, businesses and people. Their size, the fact that urban issues remain solvable and the opportunity to plan new development all allow second-tier cities to adopt a holistic view of their actual and future challenges. Such a global approach is by essence the path towards a global optimum for the city, which may not be within reach when looking issue by issue, vertical by vertical.

More agile in their decision process than larger cities, less constrained by existing infrastructures and urban layout, boosted by their increasing attractiveness, and accompanied by industrial players such as ENGIE, second-tier cities have all the cards to be the new urban champions.