Why IPAs and real estate advisory teams must work together
To quote a terribly over-used question: if you build it, will they come? This is the quandary faced by economic developers and city planners everywhere, writes Courtney Fingar.
The world of foreign direct investment (FDI) is littered with examples of hulking, half-empty office buildings and industrial parks, built at great expense for a flood of investors who never arrived. Alternatively, a dearth of appropriate properties can rule a location out as a final choice for investment.
It’s not an easy balance to strike and this is one of a number of reasons why economic developers and investment promotion officials need to get closer to the real estate industry. Very often, the city workers charged with attracting inward investment operate separately from those who build, conceptualise, manage or invest in local real estate.
As FDI and site-selection consultant Andreas Dressler points out: “Investors have to invest somewhere: they have to be in a physical property, whether it’s an office, a lab, a logistics facility, a manufacturing plant, a piece of land. So without institutional investors actually creating that, or the public sector taking over their role, which is unlikely, you need institutional investors because they create the physical product.”
Most useful intermediaries
In addition, in the category of what are known as ‘intermediaries’ in the FDI space, real estate advisers are among the most useful. The corporate occupier services teams in real estate advisory firms should be on speed dial for investment promotion agencies (IPAs).
They can offer valuable intel on what their corporate clients are thinking, where they’re expanding and what kind of sites they are looking for. Likewise, by making these advisers aware of attractive sites and properties in their jurisdictions, IPAs can help get their locations on the radar of corporate site selectors. There is a mutual interest in such information sharing, but it doesn’t always happen.
“The corporate occupier services teams in real estate advisory firms should be on speed dial for investment promotion agencies.”
Courtney Fingar, editor
Investment into real estate projects is essential to economic development. Suitability of property sits firmly on the list of site-selection criteria for companies. But not enough IPAs have a defined strategy for engaging with top investors, developers, financiers and other leaders of the real estate industry.
Property fairs like EXPO Real and Mipim are ideal venues for IPAs to get closer to the real estate community. Hopefully, at EXPO in Munich, they will have taken up this opportunity. But the dialogue should be ongoing and year-round.
Special economic zones
The gap between the real estate community and investment promoters tends to be less pronounced in special economic zones. Such zones, as well as industrial and science parks, regardless of their tax status, are at heart real estate plays – and therefore the property offer is front and centre. Turnkey facilities are typical in these parks or zones, and very often investment promoters have the task of filling up spaces that have already been built. This requires coordination from the outset between economic development and zone authorities, and property developers.
Not all zones succeed, but the ones that do are those where the physical spaces are well thought out and fit-for-purpose. The same can be argued for any investment destination. Ultimately, every FDI project involves real estate, so it makes little sense for FDI professionals and real estate professionals to sit on opposite sides of the fence. It’s time they started operating in tandem, for the benefit of corporate clients, investors and local economies alike.
Courtney Fingar is the founding partner of Fingar Direct Investment and a contributing editor to Real Asset INSIGHT. She was editor-in-chief of Investment Monitor and also worked at the Financial Times’ fDi Intelligence.
Read more FDI stories in the October edition of RealFDI
