Urbanization today is powering a transformation in the prosperity of billions of people in the world's emerging economies. The global consuming classes -- made up of people with incomes of more than $10 a day, sufficient for discretionary spending on goods and services beyond the basics of food, shelter and clothes -- will grow to 4.2 billion in 2025, up from about 1.2 billion in 1990. And more than half of those 4.2 billion will live in only about 440 mostly mid-sized cities in emerging markets. Consumers living in cities could spend an additional $20 trillion a year by 2025, a powerful growth opportunity for companies and the global economy.
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China's growth dwarfs that of other countries -- and even entire continents. According to current trends, the country's urban population is expected to grow from about 570 million in 2005 to 925 million in 2025 -- an increase larger than the entire current population of the United States. By 2025, China's cities, 29 of which made our list of the 75 Most Dynamic Cities of 2025, will also account for nearly 40 percent of global urban demand growth for buildings, nearly 30 percent of urban demand growth for additional port capacity, and more than one-quarter of additional municipal water demand globally.
But what it will take for the world's cities to serve their expanding, and ever more prosperous, citizens while still sustaining growth? Our analysis of expected GDP growth and past investment patterns shows that the world's cities will need to more than double their physical capital investment from nearly $10 trillion today to more than $20 trillion by 2025. If this much-needed injection of additional spending into the world economy -- some $30 trillion -- comes to pass, urbanization could offer a rare bright spot in an otherwise cloudy outlook for the world economy. Here's how we think that money should be spent.
Buildings
Expanding cities -- and the rising incomes of many of their citizens -- will necessitate a building boom. To meet demand, residential and commercial floor space needs to increase by more than 80,000 square kilometers (including replacement buildings), an area equivalent to the entirety of Austria.
China alone will be responsible for almost 40 percent of that total between now and 2025. Three-quarters of that space will need to be residential, as the number of urban households in China rises and individuals become richer and demand more living space.
Indeed, cities in emerging markets like China are expected to account for more than 80 percent of growth in urban demand for residential floor space. And more than half of all new urban construction taking place between now and 2025 is likely to be in the cities of China and South Asia alone. These cities are set to build 27,000 square kilometers and 7,000 square kilometers, respectively. Together, that's the equivalent of the entire land area of the Netherlands. In total, the investment needed to power this building boom is likely to be almost $80 trillion in just 15 years.
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