Why smaller cities are gaining (and will continue to gain) ground in the competition for cultural innovation

A recent report placed Berlin at the top of the list of the world’s fastest rising housing prices in 2017. Alarmingly, four of the top ten cities were in Germany (Hamburg, Munich and Frankfurt took places 7, 8 & 10, respectively) – each had had an increase in property (purchase) prices of more than 13% in 2017. This is by no means a new phenomenon – one look at London, New York, or, increasingly, a range of other cities gives a potential trajectory of the path that German cities are on.


But, as I lay out in my book about urban development through culture (English translation coming this fall!), much of the flair and innovation that drives the demand for these properties is generated by a creative social milieu which is rich in social, creative, and human capital, but is often disproportionately characterized by precarious work conditions, risk of poverty in old age, and low comparative financial power. These members of the creative class are dependent on affordable spaces to live and work – and these affordable spaces are increasingly scarce in large cities.

Based on my research, if the rent price increases in large cities are not reined in, they will have two significant results on the spatial distribution of the creative class.

First, large cities will become less attractive/attainable for creatives as a place to live and work. As rent prices for apartments, studios, workshops, and low-rent offices rise out of their reach, those with high creative capital but low financial capital will be forced to find accommodations elsewhere. If they are dependent on a social or professional network in the large city, then they will try to stay as close as possible, thus causing spillover effects in the neighboring areas.

However, for creatives who are still in the consolidation phase of their professional life, another option presents itself. The second effect of this situation is that smaller and mid-sized cities, in particular those within a comfortable travel distance from large cities, will become increasingly attractive for creatives as spaces to live and work. This represents a combination of the push effects (high rent prices, overburdened infrastructure, overcrowding) and a variety of pull effects, including:

  • The relative abundance of affordable housing and work spaces
  • “More bang for your buck” – affordable spaces mean that those with a lower financial capacity can buy or rent more space
  • Undeveloped and/or vacant properties
  • “Undiscovered” spaces

A recent article in the Financial Times places the new focus on cities between 500,000 and one million inhabitants. This is also where I expect the brunt of creative and cultural innovation to take place in the next half century.

Smaller cities should therefore have the foresight to plan to attract and keep the creative class and secure sustainable, future-oriented growth. There are a range of ways to support this type of development, but the most effective I’ve found so far is to facilitate the creatives’ own ideas and promote self-organization from day one – in particular through cooperatives, co-production, and needs-based development. Smaller and mid-sized cities who practice facilitation and real (instead of alibi) participation can expect to reap the benefits of word-of-mouth within this highly networked group.

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