Countries and cities are competing to attract the industries of the future. But winning investment increasingly depends on their ability to turn economic potential into projects that companies, developers and financiers can actually deliver.
Almost every country or city seeking investment can point to compelling opportunities. There are industrial sites awaiting development, ambitious regeneration districts, emerging technology clusters and infrastructure projects promising to transform local economies.
Yet there is often a considerable distance between identifying an opportunity and securing the capital to realise it.
This is what I think of as the investability gap: the space between a location's economic ambitions and the practical conditions required for investors to commit.
It is becoming an increasingly important issue as foreign direct investment (FDI) flows towards industries with demanding physical requirements, while the cost and complexity of developing the necessary infrastructure continue to rise.
In my first Capital Destinations column, I argued that corporate investment and real estate capital are becoming more closely intertwined. Following the occupier can reveal where demand for property and infrastructure will emerge. But that raises a further question: what happens when the occupier wants to invest, yet the destination cannot provide the conditions to make the project work?
The answer is that investment may go elsewhere, or never materialise at all.
Consider an advanced manufacturing company evaluating locations for a new facility. A destination may offer a skilled workforce, attractive incentives and access to customers. But if the proposed site requires extensive remediation, the grid connection will take years, or the surrounding transport infrastructure is inadequate, those advantages can quickly lose their appeal.
The same applies to data centres, semiconductor facilities, research campuses and large urban regeneration projects. The underlying demand may be convincing, but the project must also be technically feasible, commercially viable and deliverable within a credible timeframe.
For institutional capital, these considerations are fundamental. Investors need to understand the risks, potential returns, ownership structures and routes to deployment. A promising economic development strategy does not automatically constitute an investable proposition.
This creates a particular challenge for public authorities. They may have the land, the economic vision and the political mandate, but lack the resources or financial mechanisms to bridge the gap between the project's costs and its commercial value.
Increasingly, their role involves making projects ready for private capital.
That can mean funding land remediation, delivering enabling infrastructure, assembling sites, securing planning permissions or contributing public assets and financing to improve project viability.
There are encouraging examples of this approach. At a recent Property Forum discussion I chaired in London, Newcastle City Council described how an agreement to retain business rates across designated development areas enabled it to borrow approximately £100 million for remediation and infrastructure. The intervention helped unlock more than one million square feet of commercial development, with the borrowing subsequently repaid.
The significance of this example extends beyond Newcastle. It demonstrates how public investment, structured around a credible financial mechanism, can address obstacles that would otherwise prevent private capital from participating.
But investability also depends on scale.
A city may have a dozen attractive development sites, each too small or complicated to interest a major international institution. Packaging complementary opportunities into a coherent portfolio can make them more relevant to investors seeking substantial commitments.
This is particularly important when engaging pension funds, sovereign wealth funds and other large pools of capital. Their investment criteria may differ considerably from those of a local developer or corporate occupier.
Understanding those differences should shape how opportunities are prepared and presented.
There is also a strategic dimension that goes beyond individual projects. Investors are increasingly interested in the strength of the wider ecosystem: the companies operating in a location, its research institutions, talent pipeline, infrastructure and capacity for future growth.
A technology campus supported by universities, established businesses and specialist suppliers has a different proposition from an isolated office development. An industrial park connected to a growing manufacturing cluster may offer stronger long-term demand than one marketed primarily on the availability of inexpensive land.
This is where investment promotion and real estate development need to work more closely together.
Economic development agencies possess valuable intelligence about which industries are expanding, what companies require and where corporate investment might land. Developers and capital providers understand the financial and physical conditions necessary to accommodate that demand.
Bringing these perspectives together earlier could help destinations identify which projects deserve priority, which risks require public intervention and which sources of capital are most appropriate.
It could also help avoid a familiar problem: promoting sites that look attractive on paper but are insufficiently prepared to withstand investor scrutiny.
None of this suggests that every project should be made commercially attractive through public subsidy. Public resources are limited, and not every development ambition will justify intervention. The challenge is to identify where targeted action can unlock wider economic value and attract sustainable private investment.
A destination's investment proposition is only as strong as its ability to deliver. Companies choosing where to expand need confidence that sites, power, transport and specialist facilities will be available when required. Institutional investors need credible opportunities with risks they can assess and manage.
And governments need to understand where their intervention can make the greatest difference.
The next generation of successful investment destinations will be distinguished by their ability to connect these requirements: aligning corporate demand, physical development and financial capital around opportunities that are ready to proceed.
Attracting attention is one thing. Making a place investable is what turns that attention into investment.
