Europe-Middle East Region Claims Most New Activity by Three Key Measures - Site Selection Magazine

From Site Selection magazine, March 2000

1 9 9 9 G L O B A L L O C A T I O N A C T I V I T Y

Europe-Middle East Region
Claims Most New Activity by
Three Key Measures

b y M A R K A R E N D

New facilities sited in 1999 required larger investments,
employed more people and were larger in size on average than the previous year,
reveal Site Selection's New Plant database tallies.

Talk of the Asian economic crisis in 1999 was more about which markets were recovering faster than about which were sinking deeper. That's testimony to the strength of the recent and current global economic climate, the tide of which lifted even the boats sitting in muck not too long ago. The Indonesian political crisis and a few other hotspots notwithstanding, businesses expanded in all markets in Asia and globally, particularly in Europe and the Middle East, according to Conway Data's New Plant database, the leading source of new and expanded facilities data.

In all three major expansion-indicator categories -- investment, employees and floor space -- Europe and the Middle East saw the most activity in 1999 excluding the United States. In this report, Site Selection's 1999 numbers reflect New Plant database-listed facilities located outside the United States with an investment of US$100 million or more (94 in total), 200 or more jobs generated (68) and 80,000 sq. ft. (7,400 sq. m.) or more of floor space (54). The top 20 facilities globally in each category are listed on The Top 20 Global Facilities for 1999 (43k). Before examining how the global regions fared in attracting new or expanded facilities, it's interesting to note the overall increase in investment value, number of employees associated with the site and facility size compared to 1998 figures.

Above right: Microsoft will join dozens of other global companies neawr Amsterdam's Schipol Airport. Europe saw robust business expansion activity in 1999.
For instance, in 1998, the average investment value of the top 20 facilities was $788 million. The average in 1999 was $1.2 billion, with half the top 20 facilities valued at $1 billion or more compared to six in 1998 that could make that claim. The average top 20 facility in 1998 added 920 jobs to the local economy. In 1999, that figured jumped to more than 1,500 new jobs on average, with three-quarters of the top 20 facilities creating 1,000 or more jobs. Just six were in that league in 1998. Floor size, too, jumped substantially in 1999 from the previous year. In 1998, the average size of the top 20 global facilities was 315,000 sq. ft. (29, 200 sq. m.). Last year's average top 20 facility size was 415,000 sq. ft. (38,500 sq. m.).
Asia Garners Biggest Investments
Europe and the Middle East captured 35 percent of the facilities based on dollar value, yet the top 20 suggest the bigger facilities went to Asia. China, in fact, took two of the top three with Taiwan, Singapore and India rounding out the top five. As a region, Asia and Australia claimed 31 percent of the facilities; Latin and South America claimed 19 percent of the total, and Canada was selected for one in 10 new or expanded facilities in the investment category.
In fact, if it weren't for new facilities in Israel, Bahrain and Saudi Arabia, only three facilities from the Europe/Middle East region would have made it into the top 20 (see chart). Most of the region's entries are in the $100 million to $300 million range. Europe was particularly strong in 1999 in attracting automotive facilities, such as Porsche/Volkswagen's new sport utility vehicle plant in Leipzig, Germany; a new automobile plant for BMW in Oxford, United Kingdom; and Toyota Motor Corp.'s new transmission plant in Poland. Italy, too, won a new sport utility vehicle plant from Fiat/Mitsubishi, and Russia will see construction of a new truck manufacturing plant. These facilities combined represent an investment of $1.1 billion in Europe.
Canada Fends Off Stiff Competition
The Europe/Middle East region made an even stronger showing in the employment category with 51 percent of the new plants and expansions generating more than 200 jobs going to the region. But the most impressive performance comes from Canada, which single handedly won 34 percent of the projects in this category. All of Asia and Australia combined took just 9 percent; a handful of these projects went to Latin and South America. Projects going to Canada span the industrial spectrum, from Cognicase's new software facility in Montreal to Astra's pharmaceutical plant in Mississauga to call centers and other service industry facilities. On average, Canada did best in the high-tech sector, reflecting recognition on the part of the global business community of the country's well-educated, affordable work force.
Research commissioned by Devencore Ltd., a Montreal-based real estate brokerage and advisory firm, indicates that Toronto and Montreal have distinct cost advantages, in terms of real estate, energy and labor costs, relative to major northeastern U.S. markets. And they are just as well suited from a logistics and distribution perspective to servicing the major population centers in the United States east of the Mississippi River.
"Results of our studies are pretty exciting," says Philip O'Brien, Devencore's chairman and CEO. "It's not just the difference between the value of the Canadian and American dollar, but it's labor rates and a big difference in real estate costs. A 250,000-sq.-ft. (23,200-sq.-m.) added-value distribution center with a staff of 200 to 300 people would cost about $25 million per year to operate in the Montreal corridor; the same thing in the New Jersey corridor would cost about $48 million to operate."
Even in the third key measure -- facility size -- Europe and the Middle East saw the biggest footprints on average with more than a third of the facilities larger than 80,000 sq. ft. (7,400 sq. m.) being sited there. Canada came in second, claiming a quarter of these facilities, and Asia and Latin America split the difference.
The interesting news in this sector is not that France has three major new facilities in the top 20, but that Lorraine, France, has three in this group. Two of these are logistics services facilities, hinting at the importance of such centers to regions wanting a place at the distribution services head table in the evolving "e"conomy. Large-project activity was robust globally, the New Plant figures indicate, with Asia particularly well represented in the top tier of facilities. SS