The Facts: Jersey’s International Finance Centre
To say there has been a lot of debate around Jersey’s new finance centre would be a huge understatement!
Just like our island, the concept of a finance centre has been through a huge amount of change since 2006 when the idea for the development of the Esplanade Quarter first became public, due to market and economic factors, which are constantly evolving.
We are now reaching a critical point where the first stage of building will commence, so it is understandable that people are concerned about what this will mean for Jersey – whereas previously this was just an idea, it will very soon be a reality that will change our town landscape.
In the course of the last three years I have been asked a lot of questions about the development, and it has become very clear that certain issues need more explanation so that everyone can understand the reason behind the development and what the benefits of it will be. What follows is my attempt to summarise the most frequent questions in my own words in a way that will hopefully help with this understanding.
1. Why is government developing real estate? Why not let a private developer do it?
The public owns considerable land holdings either directly though the SoJ, or through JDC. Our purpose is to manage and develop property on behalf of Jersey in order to:
* Provide returns to the taxpayer that are overall at least 150% higher than direct land sales – for example if we were to simply to sell the land at the Esplanade we would probably get about £15 million back for the taxpayer, but no longer own the land, and have much less control over the public spaces. By developing the land ourselves we would have assets worth more like £50 million, along with rental income, while creating lasting, appropriate public spaces.
* Develop attractive community spaces that will stand the test of time – something that private developers are under much less of an obligation to do
* Support the economy by generating work and infrastructure for business to grow and providing alternative schemes for tenants to choose from.
It is true that JDC must make a profit, but because we are owned by SoJ we are not purely profit driven – it is our job to carefully balance development and community space, and to ensure what we will build will stand the test of time. A good example of this is to compare the quality of the community open space around the CineWorld complex that was delivered by a private developer, versus Weighbridge Square that was delivered by JDC.
2. This all seems too risky! Is it?
No, not particularly. There is always some risk when making investments, but there is a lot that we have and are doing to reduce this. This includes:
* Entering into fixed price construction contracts so that costs don’t spiral
* Only proceeding with construction when there are legally binding pre-lets in place
* Progressing the work in a phased way one building at a time, so we always limit exposure and so that we can evolve the plan to suit the island’s needs and market demands
3. Aren’t there better ways to spend these public funds?
Just like any other developer, we have secured third party private funding to cover the costs of the construction – this means that no public funds are being used for the construction. This means that there aren’t actually ‘funds that could be spent elsewhere’ as some seem to believe - JDC sells the land now for the sum of £15m or uses private funding to develop the land to make a return of £50m.
4. Why does it have to be an International Finance Centre, why not something else?
The local finance industry has made it very clear that new premises are needed for them to grow. New prospective finance firms and employers considering the island have also made it clear they need Grade A accommodation. Here are a few additional facts, which illustrate the importance of supporting the needs of our finance industry:
* The finance industry accounts for approximately 50% of total tax revenue in Jersey
* The finance industry also spent £310 million on goods and services in 2014, much of which will have been payments to local non-financial businesses, generating further economic activity – and ultimately tax revenue – in the island
* 90% of all finance employees are local
* The Global Financial Centres Index names ‘infrastructure’ in its top 5 competitiveness criteria
5. Why do we need more office accommodation?
There is currently only 15,000 sq. feet of Grade A office space available in Jersey, and this is spread across 4 buildings – the vacancy rate for this type of accommodation is less than 1%!
This means that there is nowhere for existing local businesses to expand and grow. It also means that new businesses thinking about moving to Jersey have very little choice, which puts us at a competitive disadvantage, at a very critical time for the island where employers, both new and existing, are needed to create local jobs. There are some new buildings being developed, however a significant proportion of this new space is already pre-let.
6. There are lots of empty offices across town - can't these be refurbished?
Larger businesses generally require Grade A space; that is modern accommodation of the right level in a good location and the appropriate space for open plan floor layouts. Unfortunately many of the vacant offices are not able to provide this due to their structural design/layout and they are now technologically out-of-date and not suitable.
This isn’t something that can be solved with refurbishment. However, this does not mean that this empty space will be wasted – it is suitable for smaller businesses, which also make up a vibrant part of the business community in Jersey and are now returning to growth or alternative uses such as residential.
7. Won’t we lose parking? Or won’t moving the parking be bad for shops?
There will be absolutely no loss of public parking spaces when development begins – there will still be 525 spaces, they will simply be moved 170 metres to be in front of the Radisson. However, we have looked into the main reason that people use the Esplanade car park, and it is overwhelmingly used, not by shoppers, but by commuters
8. Won’t parts of town ‘die’ when the clusters of offices move to the Esplanade?
Business has been migrating to the Esplanade since the 1990s and this trend is set to continue. The Esplanade is the one area of town that provides the space that is needed by larger, locally based international finance companies. Two things generally happen at the moment when companies move out from smaller offices to larger ones at the Esplanade;
* In the case of good quality offices, the landowner refurbishes the building and lets the office accommodation to other, smaller business such as Ogier's former premises at Waverly Place and Whiteley Chambers; or
* In the case of poor quality offices, the landowner secures a change of use to residential and either redevelops the building or sells it to a developer.
In the last 18 months this has happened at PwCs former premises on Colomberie, RBSi’s former offices on Bath Street (opposite their headquarters) and Voisin / Volaw's former premises on Don Street.
We believe that the end result will actually be more people living and working in town, which should create a more vibrant St. Helier and solve some of the Island’s issues around housing.
9. What about the impact on the environment?
JDC has carried out detailed site investigations over the site. We have found that the contamination level will be 4%, as opposed to the Victoria & Albert Pier apartments, which had a contamination level of 25%. Nearly all the contamination is below 4.5m which is below the ground that is to be removed. All material that is being removed is also being scanned for visible contamination and this will be removed before dumping at La Collette.
10. What would happen if we didn’t build the centre at all?
Put very simply:
* There would be considerable financial losses to JDC, which is owned by the public.
* There would ultimately be only one major developer on the island, meaning there would be no significant competition.
* Because of this, prices for office accommodation, would probably go up and community open space would not be delivered in the same quantity, or at as high a quality.
* Businesses looking to relocate would continue to find it challenging to choose Jersey as with such little available Grade A office accommodation available.
* If businesses choose other jurisdictions over Jersey, this will limit tax revenues, which may ultimately increase taxes.
Article written by Lee Henry