Macquarie Likes the 2021 Outlook for Infrastructure Investment

Notwithstanding the headwinds facing some sectors to varying degrees, the real assets arena remains a go-to stop for investors. That’s among the themes sounded by Macquarie Investment in its “Outlook 2021: Resolve Amid Disorder” forecast, which nonetheless gives the infrastructure end of the investment spectrum a broader endorsement in the current economic environment.

“Infrastructure and real assets provide essential services, have continued to operate through the pandemic, and have shown resilience through the current environment,” said Jenny Chan, managing director at Macquarie Infrastructure and Real Assets (MIRA).

She added, “2020 has certainly highlighted the benefits for investors of holding a diversified portfolio of infrastructure investments across a number of sub-sectors. While certain infrastructure assets are directly tied to general macroeconomic factors, digital infrastructure assets like data centers, wireless towers, and fiber networks don’t have that same correlation. We expect to see these assets continue to deliver strong growth in 2021, driven by ongoing end-user data demand and movement of data to the cloud.”

Within this space, Chan said MIRA expects to see “increasing investor focus on ESG factors, particularly sustainability, in infrastructure investments. On a related note, she added, “We expect to see strong investor demand and further investment in infrastructure related to energy transition, decarbonization, and addressing expected climate change impacts over time.

At a public policy level, Chan said, “We believe the Biden administration will look to encourage further infrastructure activity across the U.S., which may include initiatives such as the introduction or extension of certain tax incentives, grant programs, increased federal government lending, and asset recycling.”

In the traditional commercial property sectors, forecasting the outlook becomes a little more complicated. Some sectors have been buoyed by the shifting macroeconomic tides, while others have encountered choppy seas.
“Accelerated trends in technology use for work and leisure, online shopping, and remote working are affecting real estate demand across sectors and locations,” wrote Rod Cornish and David Roberts, respectively division director and associate director with MIRA Real Estate Strategy.

“Strong growth of online sales and data consumption were already taking place in the pre-COVID-19 environment,” they continued. Pandemic-related disruptions have helped accelerate much of the adjustment, with demand for industrial space, cold-storage facilities, and data centers as key beneficiaries.

Cornish and Roberts added, “Demand for affordable rental housing and decentralised office space is also likely to remain solid as occupiers diversify their corporate footprints and people move to less expensive locations for jobs. In other sectors, such as leisure, entertainment and hotels, the demand recovery should depend on the extent to which the virus can be contained.”