Subways: The New Urban Status Symbol

Many cities are constructing new mass transit systems to cope with overcrowding and high energy costs. But some are just hoping to gain some big-city glamour

It seems like everywhere you turn these days, a new high-speed train is whisking more passengers across longer distances faster than ever before. A ride to Paris from London is quicker than flying; Japanese bullet trains traverse the 320 miles from Tokyo to Osaka in two and a half hours; and magnetic levitating trains in Shanghai cut through the city at 268 miles per hour. But while high-speed trains may grab all the glamour, the more mundane business of subway construction is what's driving the biggest growth for transportation companies.

Indeed, the world is seeing an unprecedented boom in new subways and expansion to existing systems. Thanks to surging economic growth and urban populations, demand for subways is soaring in China and India. Lots of other places around the world also are building new lines, from Dubai to Santo Domingo, capital of the Dominican Republic. And many European and American cities—including even such improbable locales as Los Angeles and Phoenix—have caught the transit bug.

Problem-Solving and Prestige

Some cities build out of necessity. Rising prosperity prompted Dubai residents to buy so many cars that they found themselves without room to drive them. Others are keen on the environmental benefits of metros, which produce far less pollution and encourage drivers to leave cars at home. Some places, mainly in the Middle East, are looking to diversify their oil-dependent economies. And others, to be honest, are chasing an urban status symbol. Building a metro won't turn any old town into Paris or London, but it does tell the world that you've arrived.

"You have in some cases a prestige issue, which is more the case in young cities in need of an image," says Jean-Noël Debroise, vice-president for product and strategy at Alstom (ALSO.PA), the French transport company that has built a quarter of the world's metros.

Rennes is an example of the new trend. The city of about 212,000 people in northwestern France was looking to raise its profile when it installed a metro in 2002. It raised the bar by opting for a driverless system made by Siemens—just like the shiny new No. 14 line in Paris—protecting passengers from the French penchant for transit strikes. Turin, Italy, did the same to help win its bid for the 2006 Winter Olympics; its driverless system opened just before the games. Even the Spanish island of Mallorca inaugurated a short metro line in April in hopes of luring even more tourists to its capital, Palma. Alas, it closed indefinitely in September due to flooding, amid charges of mismanagement.

A Boon for Transit Builders

The world's three largest metro manufacturers, Montreal-based Bombardier (BBDB.TO), Alstom, and Munich-based Siemens (SI) report high demand for mass transit, including tramways and light-rail systems that run both under and above ground. The global subway market was worth $9.3 billion in 2005 and is projected to grow at a rate of 2.7% per year until 2015, according to a 2007 study by the European Railway Industry Assn. Subway lines are being built or extended in 20 European cities and five Middle Eastern ones, and dozens of towns are constructing light-rail systems, reports the Brussels-based International Association of Public Transport.

The size of a city determines its need for a metro system. Cities of a few million people—or those anticipating huge population growth—really can't do without a mass transit system. But cities of one or two million inhabitants can choose between a subway and a surface tramway, which costs far less but also runs more slowly. Unless funding is an issue, cities usually will spring for a subway, says Debroise. "The tramway has a very old image of the 19th century, with horses in the streets," he says.

In the Middle East, congestion caused by economic development spurred the current wave of subway and light-rail construction in cities like Riyadh, Abu Dhabi, and Algiers. "They were rich, they could buy big cars, and suddenly they realized they could no longer drive these cars because they were stuck in traffic," says Hans Rat, secretary general of the International Association of Public Transport, which opened a Middle East and North Africa division four years ago. At the same time a new generation of internationally trained leaders emerged, who started to measure their urban development with that of world-class cities. "They became aware these cities poured a lot of money into public transport," Rat says.

For a look at 10 cities in Europe, the Middle East, and Africa beefing up their public transport systems, check out our slide show.

Before it's here, it's on the Bloomberg Terminal.