Case examples of our city development

support and key learnings

January 2015
Contents

Examples of city development projects

Key learnings
Consideration on tender process

McKinsey & Company | 1

McKinsey has considerable expertise in cities work, having conducted
600+ projects around the globe over the past 7 years
Studies 2008 – First Quarter 2015 Type of engagements

Percent of engagements (n=619) Economic

Development
Infrastructure
18% 23%

Education 14% 12%

15%
12% Others
6%
North
Europe (22%) Organization
America City operation
SRP efficiency
(30%)
Asia (32%)
Africa/
ME (12%) Engagements
356
Latin
105 105
America 93
(4%) 82 77
69
58

30

2008 2009 2010 2011 2012 2013 2014 2015

Q1

McKinsey & Company | 2

Developing a vision for new Hyderabad

Client situation/objectives

▪ Hyderabad currently faces certain structural barriers to

growth that have adversely affected the city’s
attractiveness as an investment destination
– Population expected to double in 10-15 years
▪ State Government aspired to build a new city:
– Proposed location: ~15 km west of city center
– Total area: 10X10 km
– Expected population: ~10 million

McKinsey approach End products/client impact

Established development plan in close cooperation with ▪ New Hyderabad will be developed over the next 5
government and internationally renowned town planners years into a model city to be an engine for future
around seven core aspects: economic growth in the state
▪ Business district ▪ New Hyderabad will be a benchmark for other Indian
▪ Residential housing cities and will place Hyderabad on the world map
▪ Government
▪ Health care
▪ Education
▪ Retail/Entertainment
▪ Public Spaces

SOURCE: McKinsey McKinsey & Company | 3

Developing the growth strategy and detailed implementation for Xi’an High
Tech Park
Client situation/objectives

▪ As one of the most important development zones in

West China, Xi’an High-tech Park has distinctive
advantages in its skilled labor force and research
capabilities and aspires to become a leading player in
high-tech manufacturing sector
▪ However, it also faces high competition from over 110
zones across China, especially when targeting
knowledge-based, high-value added industries
▪ Therefore, Xi’an Government invited McKinney to help
it develop a strategy and implementation roadmap to
attract investments in desired sectors

McKinsey approach End products/client impact

• McKinsey diagnosed the intrinsic assets and
systemically prioritized the new industry portfolio,
pointed out initiatives to tackle the internal barriers and
develop implementation plan
• In addition, the team identified infrastructure needs,
brought forward suggestions on organization structure
and detailed the implementation plan
▪ After the implementation of the new strategy, various
economic indicators of the zone have been growing by
about 40%.
▪ The zone has made several key tenants, including
Infineon, which set up its largest R&D center in Asia-
pacific inside the Xi’an High-tech Park

SOURCE: McKinsey McKinsey & Company | 4

Developing King Abdullah Economic City in Saudi Arabia as a greenfield
city with focus on non-hydrocarbon sectors
Context
Background
▪ Ambitious effort launched under
the patronage of King Abdullah to
develop a greenfield city along
the West Coast of Saudi Arabia
near Jeddah
▪ City conceived to address the
economic disparities that existed
within the Kingdom and diversify
into non-hydrocarbon sectors
Objective
▪ Develop a city of 200-300K
residents by 2030
▪ Contribute 1-2 % of the non-oil
GDP of Saudi Arabia
▪ Address per-capita income
distribution issues within the
Saudi economy
▪ Develop a large greenfield port
along with the city that would
become the logistics gateway to
the Kingdom
1 operators (eg: industrial park operator) and
SOURCE: McKinsey
Approach
Impact
3 Key activities ▪ City has seen significant
Phase 1: Define the cluster/sector strategy for investment to the extent of
the city and the economic master-plan $3 bn till date from both the
public and private sector
▪ Developed a cluster/sector strategy and city
operating model by evaluating competitive
▪ Initial city infrastructure is in
advantages, vision and potential impact
place (roads, bridges, utility
▪ Layout an economic master-plan that helps provision for initial ramp-up,
sequence jobs, population and derived impact industrial park) and first
on all city infrastructure residents have moved in
Phase 2: De-risk PPPs for key assets
▪ Developed a business plan and set-up PPPs ▪ First fully owned and
for city enablers (eg: social infra) and revenue operated private port in the
generators (port, SEZ, real estate, utilities etc) Arabian Peninsula has gone
▪ Established a solid basis for financial viability live (1.7 million TEU)
Phase 3: Enable city competitiveness and
scale-up tenant attraction ▪ ~ 100 major tenants
including several MNCs
▪ Developed a regulatory strategy for the city have started operations
including key incentives and regulations (eg:
bonded zone, foreign ownership)
▪ Supported each of the business units of the
master developer in bringing in external
4 tenants (eg: large anchor projects)
McKinsey & Company | 5
Developing growth strategy and investment attraction capabilities in
Wuhan
Client situation/objectives

▪ Aspired to become “China’s Silicon Valley”, Wuhan

High-tech Zone has a national-leading reputation in
optical electronics, and achieved a CAGR of over 30%
from 1996 to 2002.
▪ However, this niche sector hit a downturn and outside
investors had concern about Wuhan’s overall
attractiveness.
▪ Local zone authorities therefore invited McKinsey to
help develop a new growth strategy, as well as build
new skills and capabilities in order to attract
investment in 2003

McKinsey approach End products/client impact

▪ McKinsey conducted overall diagnostic and helped the
zone quickly prioritize the new industry portfolio, frame
the value propositions, and develop an implementation
plan. The team also helped the client adjust the
organization structure, set up investment attraction
KPI systems and train the client BD team on new skills
▪ Overall development plan gained high recognition and
approval from Wuhan Municipality leaders; Wuhan
High-tech Zone is aggressively implementing the new
strategy and continuously seeks McKinsey’s feedback
on new action plans

SOURCE: McKinsey McKinsey & Company | 6

Massive city and housing development in the GCC

Client situation/objectives

▪ The government of a GCC country has mandated a

developer with the task to develop a city for more than
1 million inhabitants from scratch
▪ The city shall meet the housing and employment
requirements of the growing population of the country

McKinsey approach End products/client impact

▪ Performed market assessment and found that “if you ▪ Organization up and running – staffed with
build it they will come” model will not work approximately 300 professionals
▪ Defined strategy for development around key industries ▪ Masterplan substantially changed from high-end to
▪ Developed model of demographics of future population affordable housing
based on industrial and commercial footprint ▪ Basic infrastructure in place
▪ Defined masterplan and housing products based on
▪ First 1000 units finished
future population and its demographics
▪ Developed organizational setup of developer and
designed its core processes
▪ Defined service strategy (eg on healthcare and
education) to provide services for future population

SOURCE: McKinsey McKinsey & Company | 7

Helping Huangpu district develop strategy to attract and retain modern
service companies
Client situation/objectives

▪ Following our earlier successful cooperation on

Nanjing Road project, Shanghai Huangpu District
Government retained McKinsey to develop practical
strategy and approach for attracting, retaining and
expanding its modern service industries and leading
companies in 2003.
▪ Two teams were engaged to work first on strategy
then implementation efforts

McKinsey approach End products/client impact

▪ McKinsey helped develop new value propositions for
Huangpu, based on diagnosis of client’s main
strengths and weaknesses, prioritization of modern
service industries and sub-sectors, and key learnings
from relevant international cases
▪ McKinsey also played a big role in implementation,
helping the client to launch a series of customized
programs to attract leading modern service
companies, and designing the client’s organization
structure to make it more customer-oriented
▪ As a result of the project, Huangpu’s newly set up
Modern Service Development Office has started to
implement specific sales and marketing processes and
incentive programs to attract targeted companies.
▪ Huangpu successfully attracted leading MNCs e.g., HP,
Nokia, TPG, Ebay

SOURCE: McKinsey McKinsey & Company | 8

Strategic positioning and business plan development for Shanghai
international auto town
Client situation/objectives

▪ Shanghai Municipal Government plans to build

Shanghai International Auto Town with auto trading,
R&D, manufacturing, logistics, exhibition and tourism
functions and has asked McKinsey to help develop
overall strategy and detailed business plan

McKinsey approach End products/client impact

• McKinsey helped frame the development model, ▪ Through McKinsey’s work, city officials have agreed to
phased development construction procedures and the development plan and the client is moving ahead
targets, and detailed out a functional layout plan aggressively with detailed urban planning and
• McKinsey also helped to determine value proposition developer attraction efforts
for different potential investors, prioritized these
investors, and made initial contact with them
• In addition, McKinsey developed an operational model
for the management company, identified required
resources and government support, and developed
financial forecasts

SOURCE: McKinsey McKinsey & Company | 9

Masterplan and implementation for Gujarat International Finance Tech-city
(GIFT)
Client situation/objectives

▪ GIFT aspires to catalyse India’s large financial

services potential by offering to global and local
financial services firms world-class infrastructure to tap
the opportunity and best-in-class quality of life to
attract top talent in the country

McKinsey approach End products/client impact

• The McKinsey team created a bottoms-up model to ▪ GIFT is currently being implemented based on our
estimate demand for talent and real estate space suggestions
across all financial services slivers, defined a
comprehensive infrastructure plan, designed a ▪ Housing and office space for over 50,000 people is or
differentiated approach to real estate pricing based on will be under construction
extensive benchmarking and likely pricing evolution,
identified enabling tax polices and regulations to
attract major clients, defined an integrated approach to
short-term and long-term talent management, crafted
a focused business development plan and designed a
strong project organization to drive execution

SOURCE: McKinsey McKinsey & Company | 10

Selected examples of innovation hub McKinsey support
Location (client) Year Description
UK Prime Minister’s 2011 ▪ Supported the Prime Minister office in developing a life sciences strategy for the UK
Office ▪ Strategy has already been endorsed in a speech by the PM

UK Prime Minister’s 2011 ▪ Supported the Prime Minister’s office in developing a strategy to make East London into a hi-tech hub
Office ▪ Strategy adopted, and is currently being rolled out (e.g., setting up Entrepreneur First)
2010- ▪ Supported Skolkovo on multiple occasions on launching and developing innovation clusters in biomedicine
2012 and IT
Moscow (Skolkovo)
▪ Funding for initiatives has already been approved by Skolkovo and the Russian government, and many are
being rolled out

Lower Saxony
2010 ▪ Development of regional growth including assessment of strengths and weaknesses; identification of sectors
with high potential for growth
2003- ▪ Supported the Crown Prince of Bahrain on developing and implementing an economic development policy for
Bahrain (Crown) 2010 the country
2010 ▪ Supporting Shanghai city to unlock economic value through growth of healthcare services
Shanghai (mayor)
▪ Planned medical center located, serving a district with 1 million inhabitants in Shanghai

South East Asian 2009- ▪ Supporting a set of HC and government clients in Malaysia, to redefine high quality Medical care, Research,
country 2010 and Teaching through partnership with a world-leading AMC

Singapore 2008 ▪ Developed strategy for Singapore Medicine, a government-industry partnership tasked with turning country
(government) into a medical-hub
2004- ▪ Establishing a broad economic development strategy, including developing innovation clusters
North African
country
2008 ▪ Strategy fully endorsed by the government; project resulted in creation of thousands of new jobs, and launch
of a new cluster
2007 ▪ Identify sectors for investment and social/economic development
Russia (central gov’t)

1999 ▪ Establish an economic development strategy to create 80,000 new jobs by 2015, with focus on IT and
Dortmund (mayor) logistics
n/a ▪ Built robust business case to support public and private sector healthcare growth partnership and reform in
Ohio (Governor) the state of Ohio

SOURCE: McKinsey McKinsey & Company | 11

Contents

Examples of city development projects

Key learnings
Consideration on tender process

McKinsey & Company | 12

Learnings from successful city development projects worldwide
Learning

1 Job is the primary driver for most of the 6 Uniqueness in the value
successful developments proposition and public spaces
ensuring individual
characteristics to make the
place stand out and offer
improved/different liveability
2 Proximity to the main city and convenient from the rest of the city
commute a major driver to making a city pre-
ferred by all classes of society 7 Creation of iconic
symbols/institutions adds to
the growth and attractiveness
3 Basic social infrastructure like school, grocery of the area
store, required for even normal growth. Lack of this
results in slower growth & resident dis-satisfaction 8 Thriving food and beverage
magnet is a great crowd
puller
4 Cater to some degree of live, work, shop,
play, learn to ensure that needs of the target 9 Lack of integrated master
customers are met planning results in sporadic
development, delayed social
infrastructure and less of ho-
5 Commercial-social infrastructure (like malls, listic community development
multiplex) over & above the “must-haves” like
school & hospital accelerates absorption and
creates vibrancy 10 Mobilisation of government
very significant in context of
successful Indian
developments

SOURCE: Interviews with experts and residents; Team analysis McKinsey & Company | 13
Successful developments have addressed most of High Medium Low
the critical factors
Vibrant Distinct
Anchor Proximity/ 5 pronge social value Integrated Gov.
jobs connectivity dev dev. prop Iconic dev. planning F&B support

1 Digital Media
city

2 Birmingham

3 Downtown
Successful
developments
4 Hitec City

5 Magarpatta

6 Newport

7 La Defense

8 Hinjewadi

Unsuccessful
9 Aamby valley
developments

10 Lavasa

11 Ibiza

SOURCE: Interviews with experts and residents; Team analysis McKinsey & Company | 14

8 Case example: Hinjewadi
Background
▪ Brief: Developed as
the IT hub of Pune &
spearheaded by MIDC
▪ Location: 18 km from
Pune city centre
▪ Period: 15+ years;
Started in early 2000s
▪ Area: 500+ acres
▪ Workforce: 4 lakh+
working in Hinjewadi
▪ Population: N/A
▪ Real estate: INR 5-6K
per sqft (50% of
Koregaon area)
SOURCE: Interviews with experts and residents; Press searches
High
Medium
Overall Low
Key learnings
Success ▪ Developed as the IT hub of Pune, attracting young working
population to stay in the city
– One of the biggest employment hubs in the city and most
people stay to be close to place of work
▪ Situated close to the mainland of Pune (<20 km) proved a big
advantage in the early stages
▪ Support by government in terms of getting companies to set
up offices and provide physical infrastructure
Short- ▪ No social magnets in the city developed, resulting in city being
comings “dead” post office hours e.g.,o retail mall in the area
▪ No elements of “play or shop” in the area and no uniqueness
in the quality of life
▪ Though situated close to the city, inadequate public transport
and roads a major cause of dissatisfaction among residents
▪ Lack of integrated outlook of city planning as result of which,
no social development in 15 years
McKinsey & Company | 15
8 Pune’s IT hub, Hinjewadi, only focused on jobs but not on a vibrant
community

TCS IT park Plain vanilla housing

Infosys park, one of the largest parks Under planned infrastructure

McKinsey & Company | 16

 8 Hinjewadi developed on the back of state policy and IT jobs;
but has no social development
▪ Development driven by MIDC with procured land being offered at subsidized rates
– Land procured by MIDC and offered to IT companies at “throwaway prices”
– Multiple partners roped in to develop and invest in the city including Singapore government
▪ Connectivity with main city and international airport
– 40 minutes' drive from Pune to Hinjewadi and well connected to Mumbai through the expressway
▪ Availability of talent and educational development within Hinjewadi
– Absorption rate in the IT park due to availability of young educated people in the city of Pune
– Multiple educational institutes established within Hinjewadi like Symobiosis International University,
Indian Institute of Information technology
▪ Residential properties primarily catering to people working in Hinjewadi
– Large private townships developed near the IT parks like Blue Ridge, Megapolis, etc. spanning over a
million square feet
– Major occupants are the people working in and around Rajiv Gandhi Infotech city that can afford flats
worth over 50lakh
▪ Transport has become a challenge given under provisioning of traffic
– Due to more than planned growth in the number of people traveling in and out of the city every day
and limited physical infrastructure development, travel is the biggest challenge being faced by the city
▪ City lacks the vibrancy like the main city of Pune:
– No malls or multiplex or nightlife places in the area for people to visit socially
– People visit Pune over the weekend with a day-long agenda

SOURCE: McKinsey analysis, web search McKinsey & Company | 17

 9 Hinjewadi considered a workplace rather than a home
Would consider it a successful city
With lakhs of people travelling to the
city each day and high occupancy
rates, would call it fairly successful
Nothing to do on a weekend
There is absolutely nothing to do on a
weekend. People just go to Pune for
any sort of activity. Wakad is much
more vibrant and a better place to stay
for folks working in Hijewadi.
SOURCE: Quotes from tripadvisor
Underplanned infra
The city could have been much more
successful was there proper road &
public transport infra. There are jobs so
people commute, but it’s very painful
Lop sided development
It has grown just as a distinct pocket in
the city. Property prices are high since
people know that working population
wants to stay close by. It has not grown
as a vibrant community like a Pune.
McKinsey & Company | 18
 High
7 Case example: La Défense Medium
Low
Overall

Background Key learnings

▪ Brief: La Défense is
the modern high-rise
and office-tower
district of Paris
▪ Location: suburbs of
Paris
▪ Period: -
▪ Area: over 400 acre
▪ Workforce: 150,000
employees
▪ Population: 25000
▪ Real estate: 600-700
euros per sqft( 800-
1200 euros in main
city of Paris)
▪ Houses La Grande
Arche, one of Paris'
important landmarks
Success ▪ Significant captive population created with over 150K jobs in
the district
▪ Caters to multiple target segment including residential, office,
shopping mall, tourist attractions
▪ Strong individual character, with tall structures, differentiating
it from the rest of Paris:
▪ Unique art installations forming an open-air museum a central
attribute of La Defense and a big tourist attraction
▪ Creates vibrancy through cultural activities like concerts,
festivals, and shopping events
▪ La Défense is well connected to old Paris through all modes of
transport
Short- ▪ Residential spaces not planned in the initial master plan and
comings hence quite isolated
▪ No permanent social anchors or social developments like
clubs, malls, etc. in the place
▪ Deserted in evenings and weekends
▪ No places of primary education in the place

SOURCE: Interviews with experts and residents; Press searches McKinsey & Company | 19
 7 La Défense has successfully created a large thriving PRELIMINARY

community through thoughtful urban planning and placemaking

! Cater to multiple target segment:

- Provides a plethora of choices from residential, office, shopping mall, tourist attractions
(eg., museum, convention centre) to cater to all aspects of life
! Strong individual character differentiating it from the rest of Paris:
- Primarily all tall structures giving it a significantly different look than the rest of Paris
(which is characterized by low-rises)
! Unique installations forming an open-air museum:
- Art for everyone is a central attribute of La Défense. The district features an open-air
sculpture museum with ~87 original works by contemporary artists
! Creating vibrancy through cultural activities and shopping events:
- La Defense’ activity calendar includes a variety of ticketed and free events such as
concerts, music festivals, circus, charity races etc.
- Continuing to strengthen the lively and energetic character of the place by designing
new meeting places and events
! Proximity and Connectivity:
- Built on the historic axis extending from the Champs-Elysées, and offers a unique view
of the Arc de Triomphe, the Luxor obelisk and the Louvre museum
- La Défense is well connected to old Paris through all modes of transport

SOURCE: McKinsey analysis, web search McKinsey & Company | 20

 7 While the district itself has been successful the residential per se has
not been very successful
Key reason for not being successful as a residential destination
Key issue
A Deserted city in the
evenings with limited
community feel
B Isolated residential area
from main business district
C Image of the residential not
in line with the high end
business situated out here
SOURCE: Interview with Parisians,
What have we heard
▪ “After 7pm and on week-ends it is deserted and
somewhat depressing and scary”
▪ Not much going on after work hours or
weekends. There are a couple of areas to the
north and south where you might find more
going on and more of a 'community' feel
▪ “The residential areas are too isolated in their own
zones contrary to Lower Manhattan which has
residential right at its edges ”
▪ “Never designed to be residential”
▪ “20000 low to mid income people live here” – New
York times
▪ “Sure it is nice area to come as a tourist, or even
to work, but it is terrible to live in La Defense”
McKinsey & Company | 21
Contents

Examples of city development projects

Key learnings
Consideration on tender process

McKinsey & Company | 22

Potential tender process elements seen in other cases to ensure high
quality of selected consultant
Potential elements Example of eligibility/selection criteria

▪ 2 Phases: 1. Eligibility/ a. Conditii minime:

Selection; 2. Offering - Cifra de afaceri medie pe ultimii 3 ani: 9 Mil lei
- Cel putin 1 contract pe servicii similare in ultimii 3 ani in valoare
de min 4.4 Mill lei
▪ Limited number of - Minim 7 specialisti cu experienta relevanta in proiecte similare (cu
consultants admitted to CV-uri si informatii despre proiectele din CV)
the second phase (e.g.,
5-6) b. Criterii de selectie:
- Experienta a min 5 specialisti in domeniul reorganizarii de
companii (punctaj maxim daca era mai mare de 5 ani pentru
▪ Mix of technical and fiecare)
commercial criteria for - Participarea liderului de proiect la proiecte similare (punctaj
both phases maxim daca e cel putin un proiect)
- Criteriu de departajare: cifra de afaceri globala (astfel incat dupa
faza de eligibilitate sa ramana max 6 consultanti)
▪ Live presentation from
consultants in the
second phase to validate
experts

McKinsey & Company | 23