recent article from the consultancy Oxford Analytica (www.oxan.com), “Financial Power Shifts Away From U.S.,” makes the case that the U.S. is at risk of losing its preeminence as a financial-services center to markets in Asia and Europe, particularly the United Kingdom. But it’s for different reasons than why the U.S. allegedly lost its manufacturing sector – which any reader of this issue of Site Selection, with its tallies of new and expanding industrial facilities in the U.S. and elsewhere, would know to be a disingenuous viewpoint.
The piece, which ran on Forbes.com on February 15th, cites four reasons to be concerned about the future of the United States’ finance sector: (1) Sarbanes-Oxley compliance costs will keep non-U.S. companies from listing in the U.S.; (2) the U.S. regulatory system is too complex and stifles innovation; (3) litigation risk and costs are too high; and (4) immigration restrictions jeopardize the talent pool.
Wait – it gets worse. Financial market growth potential is limited in the U.S., other markets are becoming more sophisticated, London “gets” market-based finance and the regulatory burden will cost New York its competitiveness. All of which, to my mind, is a tad alarmist. I am all for other markets becoming more sophisticated. But I doubt very many will surpass the U.S.’s ability to deliver electronic securities trading and settlement systems or provide more capital for expanding enterprises. As for the regulatory scene, things could be a lot worse than they are in the U.S., as most global investors will tell you.
This matters to corporate real estate managers to the extent that it could affect their cost structures – their cost of capital – if any of this does come to pass. If demand for capital exceeds supply, because the capital markets are more liquid in London or Singapore or Shanghai, then capital becomes more costly in New York.
That matters when we’re talking about financing projects the size of the ones listed on page 222 and elsewhere in this issue, dedicated to our New Plant Database tallies for 2006 global industrial activity.
Beyond that, “America is not going to lose its supremacy in the capital markets, although there may be a little more prominence of some offerings overseas,” says Walter Van Dorn, a partner at the law firm of Thacher Proffitt in New York City, who specializes in U.S. securities law.
As for the 2002 law that everyone loves to hate, SOX, “I don’t think it’s as bad as everyone makes it out to be,” says Van Dorn. “Many of the things it prohibits are quite reasonable and are on the books already. It’s a bit of a tempest in a teapot,” he says, while acknowledging the unwelcome costs to comply with the law.
The point of raising this issue is to set the stage for the global capital investment projects to be found in these pages. You likely will notice an even larger dose of international projects than normal in this issue. But as the numbers will show, the U.S. is none the worse for wear.
Till next time,
Mark Arend