Near Shoring – Common Sense All Round?
10 August 2011Allen & Overy’s recent 35,000 sq ft commitment to Belfast signals the second significant example of what has been coined 'near shoring' by a UK law firm in the past 12 months. The principle of back-office relocation is clearly not a new phenomenon, but keeping things close-by appears logical all round.
Pic: Obel Tower
The current economic climate provides an opportunity for Northern Ireland to promote its advantageous position in this respect as professional firms seek to re-engineer their cost bases. First, we have a highly skilled and qualified employment base, second, it is estimated that depending on seniority a London-based professional practice can expect to see salary savings of up to 45% and finally, occupational costs are also significantly lower than any comparable regional centre elsewhere in the United Kingdom.
Unsurprisingly, Invest NI is believed to be actively targeting the legal profession, however, in order to maximise this opportunity surely a partnership approach is required with Invest NI offering the incentive and the private sector supplying the product?
We have previously commented about the dwindling supply of genuine Grade A office accommodation, and with meaningful lending still non-existent, the development pipeline remains almost completely constipated.
Clearly, given current global economic difficulties, this is a very challenging and competitive arena with Belfast competing in a world market of service centres that includes Budapest, Warsaw, Cairo and Manila not to mention various centres in India and South Africa. Setting aside the obvious removal of any cultural or language barriers, from a UK occupier's perspective, Belfast provides greater scope for UK corporate scrutiny whilst also engendering confidence in clients that their instructions can be effectively and confidentially dealt with leading to improved client satisfaction.
If we are genuinely committed to attracting inward investment then we must be able to deliver product of the quality required. This can only currently be supplied by the private sector and thus the process also has the potential to stimulate the market provided sufficient demand can be created. Office rents will still look attractive to the rest of the UK at £15/Sqft and developers and their banks shouldn’t be too shy about holding out for them.
There is no doubt that an opportunity exists and it will be most interesting to see in the coming months whether active partnerships can be forged between public and private sector with a view to capitalising on Belfast’s advantageous position. The Corporation Tax position is also central and movement here could be the catalyst to deliver further 'near shoring' opportunities.