Why investors are following governments into infrastructure 

Governments are increasingly turning to infrastructure investment for a quick lift to jobs and growth, a move that is spurring private investors to follow suit.

In Australia, 27 superannuation industry funds are committing US$14.3 billion (A$19.5 billion) to new projects over the next three years. Canadian group CPPIB is shifting its portfolio towards infrastructure, allocating 8.6 percent in 2020, from 4.7 percent in 2010. The U.K. recently launched a national infrastructure bank, while Mexico started a second round of investment in as many months.

The public sector push to lift economies is boosting the confidence of investors. Private investors are currently raising US$150 billion (A$203b) for infrastructure, Preqin data shows.

“The hit to government finances during the crisis means the requirement for private capital is probably greater now than ever now, and the low cost of finance will increase investor appetite,” says Tim Brown, head of strategic consulting – NSW, JLL. However, he says, “in this uncertain climate there will be extra scrutiny on risk, and allocation of risk.”

Investment efforts are addressing a US$15 trillion gap between the infrastructure currently needed and what is expected to be provided by 2040, according to the World Economic Forum. Globally, a shortage of projects has led to US$162 billion (A$220 billion) of pent up private capital with unlisted infrastructure funds.

The impact of travel and lifestyle restrictions on the pricing of assets will influence investment decisions, Brown says.

Brown believes the M12, airport, and a train line connecting the airport to other public transport links, will lead to significant private sector investment in industrial property.

“The Western Sydney Aerotropolis, within the Parkland City, will account for over 85 percent of the potential future industrial land in Sydney,” he says.