Closer alignment with IPAs can unlock institutional investor potential

Andreas Dressler, managing director of Berlin-based consultancy FDI Center, is an expert in global foreign direct investment, advising locations on how to attract investment and companies on site selection.

RealFDI spoke to him following his participation as a speaker at June’s CEE Summit in Warsaw about the need for investment promoters to get closer to institutional investors, and vice versa.

What, in your mind, is the relevance of institutional investment to the kind of work that investment promotion agencies (IPAs) do?

Institutional investors are instrumental because they’re an important part of the product – they create the physical product where investors ultimately go. Investors have to invest somewhere: they have to be in a physical property whether it’s an office, a lab, a logistics facility, or a manufacturing plant. Unless the public sector takes over their role, which is unlikely, you need institutional investors because they create the physical product. That’s essential to attracting investment.

Is there enough interaction between IPAs and institutional investors, and why is there a gap between the two?

IPAs typically focus on attracting occupiers for a property, so they’re out there trying to attract companies that are ultimately going to undertake an activity inside a physical space. In most of the countries we work in there is very rarely any interaction between them and institutional investors.

I think there should be more interaction for a number of reasons, the first being again you need that physical product, but what institutional investors do should be aligned with what IPAs are trying to achieve. For example, if institutional investors think there’s a lot of potential in logistics, that’s what they’ll be building. But if IPAs are trying to attract something else, such as research and development activities, there’s a misalignment.

“You need that physical product, but what institutional investors do should be aligned with what IPAs are trying to achieve.”

Andreas Dressler, FDI Center

So they need to be aligned in terms of what they can do. I think institutional investors can also find out from IPAs what some of the opportunities are. For example, if the location is trying to build up a talent base, is there enough housing to attract young people that is affordable and attractive enough for them?

Finally, in the area of aftercare, I think institutional investors, in the sense of landlords, are very close to investors; they’re probably closer than everybody else, so they know a lot about what investors are planning to do – expansions, contractions, etc – and they can share that and collaborate with IPAs. I think both can really benefit.

What tips do you have for IPAs as to how could they carry out their outreach and work more productively and more closely with institutional investors?

It’s all about regular collaboration, speaking to one another: what are you seeing in the market, what are the trends, where do you believe the growth will come from?

Also, it’s useful to conduct some longer-term planning that will benefit both parties. Both IPAs and institutional investors tend to be metrics-driven: they have annual metrics, whether those are profitability or returns or a number of jobs. But just trying to look into the future to see how each can work together to create an overall package and improve the product as a whole would be a really good starting point.

For more on foreign direct investment see October’s edition of RealFDI