Editorial for special issue on infrastructure and real estate
The coronavirus disease 2019 (COVID-19) pandemic has reinforced the importance of infrastructure not only in enhancing connectivity and utility services but also stimulating the economy. It was estimated that global infrastructure investment needs will reach US$94tn by 2040 (Oxford Economics, 2017). However, United Nations (2020) found that critical infrastructure, including telecommunication infrastructure in developing countries, remains scarce. These clearly highlight the urgent need for infrastructure investment.
Despite the infrastructure asset class being the focus of growing attention, studies on infrastructure investment are somewhat limited. This special issue attempts to address the critical research gap in the real estate and infrastructure literature. We are pleased to put together the special issue of Infrastructure and Real Estate. A total of six papers have been selected for publication in this special issue of the Journal of Property Investment and Finance. The papers cover various infrastructure topics, including infrastructure investment, infrastructure financing mechanisms (e.g. land value capture), infrastructure modelling and infrastructure stakeholders in different regions (Europe, Asia Pacific and Africa).
Firstly, Mazuki and Newell's paper examines the investment opportunity of non-listed infrastructure for global institutional investors. Importantly, their studies show that non-listed infrastructure plays a vital role in a mixed asset portfolio. This indicates that non-listed infrastructure is an effective alternative asset with strong return performance and less volatility.
The interface between infrastructure and real estate is the focus of the work by McGaffin, Viruly and Boyle. The paper discusses the extent to which real estate could support the delivering of infrastructure projects by reducing the reliance on the traditional public funding. Specifically, this paper critically reviews and discusses how land-based financing can be used to fund infrastructure in South Africa. However, they recommend the use of tax-increment finance as many land-based financing mechanisms, in an emerging country context, do not raise sufficient funding for infrastructure investment in meeting the infrastructure needs in South Africa.
In contrast, Lee and Locke highlight the unique passive land value capture mechanism that has been widely adopted in Australia. Using the Sydney Metro City and Southwest project in Sydney as a case study, they find that the passive value capture mechanism is an effective form of value capture mechanism to capture the value uplift. However, they also raise the concern of the sensitivity of this model to unprecedented events such as the COVID-19 pandemic. As such, a shift towards a broad-based land tax is recommended. Both papers have clearly highlighted real estate is a key element in supporting infrastructure.
Recognising the potential differences amongst different sub-sectors of infrastructure, another infrastructure investment paper from Mazuki and Newell focusses on a sub-sector analysis. They demonstrate the satellite and telecommunication infrastructure has taken an increased role since the global financial crisis. This again highlights that the opportunity of investors seeking exposure in the increasingly important communication infrastructure assets sector.
To enhance a greater involvement of related stakeholders in delivering a successful infrastructure project, a paper from Wojewnik-Filipkowska, Dziadkiewicz, Dryl, Dryl and Bęben demonstrates the importance of early public engagement in enhancing infrastructure-project value. Using a combination of methods, including case studies in Poland and interviews of Polish stakeholders, their findings also highlight the opportunities and challenges faced by stakeholder management.
Lastly, Steininger discusses one of the key challenges for managing infrastructure projects. The challenges would be the cost and time management for an infrastructure project. They have identified a number of reasons for the cost overrun and delay of Stuttgart 21 rail project in Germany. Importantly, they apply the reference class forecasting (RCF) model to estimate the time and cost of the Stuttgart 21 project. They find that the RCF model offers superior forecasting results.
This special issue is a belated effort to bring into focus the role of infrastructure and how it relates to real estate. By doing so, we hope to stimulate more intellectual discourse and conversation on the increasing importance and interlinkages between infrastructure and real estate.
The support from the National University of Singapore – Jurong Town Corporation Industrial Infrastructure Innovation Centre is greatly appreciated.This paper forms part of a special section “Industrial Infrastructure and Real Estate”, guest edited by Professor Seow Eng Ong, Associate Professor Chyi Lin Lee.
