Infra quality ‘top influencer’ of RE investment

The quality of infrastructure systems can make or break deals when it comes to real estate investment and development a new study finds.

The quality of infrastructure – ranging from transportation to utilities to telecommunications – tops the list of factors that can influence decisions regarding real estate investment and development, a study by the non-profit Urban Land Institute (ULI) and advisory firm EY has found.

Of the more than 400 public sector officials and senior-level real estate executives surveyed for the study conducted in January, “88 percent rated infrastructure quality as the top influencer of real estate investment and development,” ULI said in a statement announcing the study’s findings.

Strong telecommunications systems, roads, bridges and affordable and reliable energy were the leading infrastructure categories considered to drive real estate investment decisions.

“The survey findings highlight the critical role infrastructure plays in guiding real estate activity and economic development, and reinforce the need for close coordination between land use planning and infrastructure planning,” said ULI chief executive Patrick L. Phillips.

“We have entered a new era that requires new approaches to funding and building infrastructure to support the creation of communities that are healthier, more livable, economically prosperous, and environmentally sustainable,” he said.

Respondents were also asked to rate the quality of infrastructure and investment priority. The findings showed an inverse correlation between the two, meaning the higher the quality ranking of an infrastructure sub-sector the lower it ranked on the priority list for investment.

Public transit was deemed a top investment priority with only 48 percent of respondents ranking public transit as “good” or “very good.” Next on the list of priorities were roads and bridges, followed by pedestrian facilities.

As for funding, 75 percent of respondents identified cooperation between developers and local governments as the most significant factor in funding new infrastructure.

“All funding strategies offered in the survey – including contributions from federal and state governments – received relatively strong responses, suggesting the need for a range of funding options,” ULI said in the statement.

ULI and EY surveyed 241 public sector officials and 202 real estate executives including developers, investors, lenders, and advisors based in large and mid-sized cities around the world, with most based in the US, Europe and Asia-Pacific.

The findings are included in the report “Infrastructure 2014: Shaping the Competitive City”, released this week at ULI’s 2014 spring meeting in Vancouver, British Columbia.

Founded in 1936 and headquartered in Washington DC, ULI is a non-profit education and research organisation whose mission is to provide leadership in the responsible use of land and in creating and sustaining thriving communities worldwide.

Global consulting firm EY specialises in assurance, tax, transaction and advisory services.