Infrastructure 2007: A Global Perspective predicts infrastructure will emerge as a new asset class for institutional investors, such as pension funds, which are seeking stable growth that can keep up with inflation. Already in Europe, the report says, a secondary market is poised to develop in which early-in investment banks sell holdings to longer-term pension funds who have gained confidence in the consistent track records of this new asset class.
The report leads off with the dismaying finding that the US' transportation infrastructure--airports, public transit, railway systems, roads and bridges--is an emerging crisis that will eventually erode cities' abilities to compete globally. This is due to years of underinvestment by the government.
By contrast, countries in Europe, as well as China, Japan and India have been aggressively tapping the private sector and using various permutations of public-private partnerships for funding, construction, operations and management of infrastructure.
But there are a number of hurdles before the US embraces this model. The report's survey of transportation planners found that while 37% predicted privatization would be a likely source of future funding, 44% said it would be unlikely.
Still progress is being made towards attaining this goal of greater public-private partnership: 28 states, for instance, have passed legislation enabling private market investment in infrastructure. Also, there have been a number of funds aimed at infrastructure investment launched over the last year or so, Lawton also notes.
"The best measure against which we can compare where the US should be is overseas. In the UK, which has the greatest material PPP market, between 10% to 15% of government spending on infrastructure is via a PPP model."
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
