Invest in infrastructure or real estate? | BizPortal

by time news

“The private sector is expected to double its investment in infrastructure within 5 years, bypassing real estate. The connection between the obsolescence of infrastructure and the need to refresh it, logistical systems affected by the Corona plague, and the pursuit of a zero-carbon economy, requires local authorities, states and organizations and international organizations to focus on closing infrastructure financing gaps. ” , Directors of directors in the private sector, in Neuberger Berman.

“These gaps are estimated at about $ 15 trillion. Countries and governments can cover some, but not all, of this funding. As a result, projects in a wide range of sectors in diverse infrastructures are increasingly turning to private markets to raise capital. This means switching to energy.” New, urbanization and supply chain improvement, should provide the most attractive investment opportunities over the coming decades. ”

When they talk about a $ 15 trillion deficit this is not a problem of one country or another but of a lack of investment all over the world over the years. The same $ 15 trillion deficit is expected to stand at this monstrous number in 2040, and this is the forecast of the developed countries, the G20.

So is it possible to invest in the field without significantly increasing the risk levels?
McCarthy and Miller: “Private investors are looking for investment opportunities without significantly increasing the levels of risk in their investment portfolio. On the other hand, the ambition is that these investments will provide stable cash flows, similar to what exists in real estate. When we talk about infrastructure, we mean bridges, roads and tunnels. Infrastructures are also power grids, hospitals and schools, communications networks, ports and the list goes on. All infrastructures alike are critical to the continued functioning and growth of the global economy.

“The demand for private capital investment in infrastructure is constantly rising. This is because critical global infrastructures are becoming obsolete, and need extensive financial investment. These are infrastructures that international, national and local economies alike need to continue to function. But governments, no matter what countries and Their wealth, they are unable to finance the full amounts required.It is estimated that within five years the volume of private investment in the private sector infrastructure will rise to a value of $ 1.9 trillion, and will even bypass the real estate sector as the largest real estate asset.

What actually gives an investment in infrastructure?
McCarthy and Miller: “There are 4 built-in benefits here. Inflation protection: The pricing formulas of infrastructure assets are usually CPI-linked. As such, they make them income-producing assets even in times of inflation. High investment barriers: Infrastructure projects take a long time, and investing in them is subject to tight regulation. As a result, competition in the field is also limited and does not allow for fierce competition. Finally, stable cash flow: services provided through assets Infrastructures are usually regulated by long-term contracts. Such contracts provide a good forecast for a stable future cash flow. Moreover, the use of essential assets remains relatively consistent, and is not dependent on changes in users’ pricing and revenues. , Which may be available for distribution to investors or used to finance capital expenditures.

Can the infrastructure sector help even in a period of recession?
McCarthy and Miller: “Infrastructure assets can be stable even in times of economic recession: transportation, communications and digital, electricity and renewable energy, energy, water, waste and social housing assets, all of which often come with particularly protective properties. This is compatible with most scenarios. ”

Try to break it down into factors. Can you give four areas specifically?
McCarthy and Miller: “The first is digitization. Decreasing the cost of dedicated equipment on the one hand, and network connectivity on the other, pushes more people and institutions around the world, including in Israel, to use the Internet and adopt digitization processes. The population and the rise of the “Internet of Things” (operating home appliances remotely via the Internet MK), significantly increase the use of the Internet and with it the demand for telecommunications infrastructure and 5G Advanced. The shift to remote work during the Corona epidemic around the world has accelerated similar trends even in areas where Internet access was already widespread. At the same time, digitization has accelerated the trend of big data and analysis of insights.

“This means accelerating global demand for more cloud computing power, increasing bandwidth and the addition of data centers. In addition, the demand for fiber-based connectivity and other wireless solutions has accelerated and increased. All of these create significant investment opportunities in telecommunications infrastructure around the world in the coming years.”

What is the second area?
McCarthy and Miller: “The shift to renewable energy. In the last decade, activity around the world to significantly reduce carbon emissions has increased significantly. Coal-fired power plants, the main source of energy, are being replaced.The push to reduce greenhouse gas emissions is taking place in parallel with the growing demand for electricity, especially in emerging markets.In these markets, access to reliable energy is still a crucial factor in improving quality of life. They are obsolete, or are not intended for current requirements and technologies, and need to be repaired or replaced. ”

The third domain?
McCarthy and Miller: “Urbanization. Infrastructures, such as highways and public transportation systems, do not keep pace with urbanization (urbanization), with one of the most prominent countries in this regard being the United States. In this country, investment in infrastructure has been much lower than necessary in recent decades. On the other hand, in the last two years, opposite trends have also developed, as a result of rising house prices on the one hand and greater flexibility in remote work on the other. These trends are pushing people to move from large, crowded cities to suburbs, or to more remote cities.

“One way or another, the need for new infrastructure and the improvement of old infrastructure exists. At the same time, local authorities and countries have limited budgets, which forces policymakers to turn to private investment in the field as well.

And what’s the last area?
“Logistics and supply chains. Globalization, increasingly complex supply chains and the rise of e-commerce have put logistics systems to the test over the past three decades and increased the demand for stronger transportation infrastructure. .

You may also like

Leave a Comment