B |
elfast is struggling to regain its footing as one of Europe’s most inexpensive locations for foreign companies as the U.S. economic slowdown dampens Yankee investor enthusiasm Europewide. After a boom year 2000, uptake of new office space in Belfast fell in the first half of this year to an estimated 185,000 sq. ft. (17,187 sq. m.) — barely half of 1999 levels.
Full-year 2000 uptake of 725,000 sq. ft. (67,355 sq. m.) of office space, more than doubled the 340,000 sq. ft. (31,587 sq. m.) of 1999.
This year, activity could return to 1999 levels.
Following the Irish Republic’s lead, the province has become a haven for high tech companies, which accounted for 80 percent of the value of total new investment last year, But the high tech collapse is expected to cool the inflow.
Says Leslie Ross, acting chief executive officer of the Industrial Development Board (IDB): “We’re feeling the whipsaw of a slowdown in the US economy and a decline in the information, communications and telecommunications (ICT) sectors. But we’re being hit far less than our competitors, and the numbers are deceptive. As investment shifts away from capital-intensive sectors and toward people-intensive high tech, less money is needed to start new businesses. Nortel has more employees in Northern Ireland today than it had a year ago. Beyond the current decline, the ICT companies we’re talking to still foresee achieving their three-year objectives, and we’ll participate in this achievement.”
Northern Ireland Markets Still Active
Vacancy rates have edged up from 2.9 percent last year at the peak of the supply famine, to a still modest 3.5 percent as bidders turn shy in face of new supply coming onto the market. Total office stock rose 3.5 percent last year to 7.4 million sq. ft. (687,482 sq. m.).
Despite the brushfire demand of last year, rents remain modest by EU standards, though figures in the secretive, unstructured market remain scarce. A measure of the modest rent levels, Fujitsu took 80,000 sq. ft. (7,432 sq. m.) late last year for $19 per square foot. Among the major takers of prelet space, PriceWaterhouseCoopers took 67,500 sq. ft. (6,271 sq. m.), but is keeping mum on the rates.
IDB points to a robust GDP growth of 3 percent this year as a falling tax burden boosts disposable income. Construction and high tech are taking over from traditional industries. So the province expects to keep its position as the fastest growing within the U.K.
Says IDB’s Ross: “Our share of foreign direct investment in the U.K. is up to 10 percent from 4 percent a few years ago, and we expect this to improve, even if the total U.K. investment pie is smaller.”
The attractions are worth noting. According to IDB figures, unit labor costs fell from 15.5 percent above the U.K. average in 1988 to more than 10 percent below the U.K. level in 1999. Within Northern Ireland’s meager 5,500-sq.-mile (1.4 million-hectare) land area, no plant is more than an hour from an air or seaport. IDB claims minimum 48-hour delivery time to the rest of Europe.
ICT inward investors feed on the province’s young, well-educated work force. More than half the 1.7 million population is under the age of 30, and 60 percent of local high school students go on to university. Employee turnover rates in the nearly 760,000-member work force are among the lowest in Europe. Despite the world economic slowdown and with quality space in short supply, major providers see demand pressures boosting prices over the near term.
Says Stephen Bell, head of business space & corporate services at Observe King Ltd: “Belfast is dirt cheap and will probably remain cheap vis-a-vis the rest of Europe over the near term. But as the attractions become apparent, you’ll see rents rising to $21 to $22.50 per square foot towards the end of next year.”
High demand has already generated a significant uptake of industrial land in the West Belfast area. City planners have inked in plans for a 23-acre (9.3-hectare) Northern Ireland Science Park east of the Lagon River, which runs through the city. A separate business development is going up nearby in the Titanic quarter
In view of the interest from ICT firms, some speculative building is also emerging in the city center that’s likely to accelerate the rise in the level of class A properties from the current 43 percent of total stock.
Yanks have contributed most of the new arrivals, with Germany the major European taker. Last year, the UK’s Halifax PLC invested $63.3 million to build a 165,000-sq.-ft. (15,329-sq.-m.) call center — one of the country’s largest, highlighting the strong local British presence.
Call centers will benefit from a provincewide digital, fiber-optic, ATM-switched communications system installed by British Telecom. The US’ NTL is investing some $844 million to set up its own telecommunications system to support its call center, raising NTL’s total investment in Belfast to $1.4 billion. Nortel Network has spent $41 million to set up locally one of only seven systems houses in its worldwide network to produce high-speed optical transmission equipment. Locally operated software providers Nortel, Seagate, AVX, Kyocera and Fujitsu are benefiting downstream from the boom in demand for software.
In a nod to the attraction of some local quality firms, Silicon Valley telecommunications software producer Phone.com set up shop through purchase of Apton, a local provider of telecommunications software.
Deregulation Helps Lower Costs
Increased competition following deregulation of the telecommunications sector has lowered networking costs. Capacity of the digital system, reported one of the best in the EU, will be nearly quadrupled to 10 gigabits by the middle of next year.
Plant managers can count on dependable power supply as deregulation of the energy sector generates competition and lowers prices. Energy supply will also benefit from an undersea link to Scotland’s natural gas output. A $703 million link will connect the two province’s electricity grids.
The IDB offers a tempting package of incentives, among the most generous in the EU, to lure investors. Capital grants of up to 50 percent for buildings and equipment are supplemented by grants for everything from R&D to rent and new hires. But IDB officials downplay the outlays as a lure.
Says IDB’s Ross: “Frankly these benefits are not what bring companies to Northern Ireland. As a development body, our outlays per job to get companies to come here have more than halved to $10,180 from $26,000 a few years ago. It’s getting easier to sell Northern Ireland, because companies want to come here.”
