During the most recent US presidential election cycle, spending on US infrastructure was a frequent topic of stump speeches. Most people can agree that the US needs significant investment in its aging airport, highway, and mass transportation systems. Against that backdrop, the massive investment being made on the other side of the world in Asia-Pacific’s transport infrastructure has been underappreciated. Countries throughout the region are providing for their future by significantly investing in their transport-related assets. Airports are being expanded, and new roads and rail lines are being built. Together, these improvements are bringing cities closer, by reducing travel times, and improving the cross-border movement of people and goods. They are also enhancing public transport networks, increasing the efficiency with which people are moving around their cities. Coupled with strong economic fundamentals, including the world’s largest middle class and a rapidly developing consumer base, the outlook in general for property markets in Asia-Pacific is quite favorable. With the long-term investment horizon typical of many institutional investors, a real estate allocation to the Asia-Pacific region should present many opportunities for real estate investments geared toward capitalizing on these favorable dynamics.
Building World-Class Cities
Countries in the Asia-Pacific region are forecast to invest considerably in developing their transport infrastructure. The region’s investment in transport infrastructure is projected to grow from approximately $557 billion in 2014 to approximately $900 billion per year by 2025, a 62% increase in annual spending (Figure 1). In comparison, Western Europe’s investment, which has been constrained in recent years, is only anticipated to return to 2008 levels by 2022. In the US and Canada, investment is expected to grow by just 3% per year over the coming decade, resulting in a decline in their global transport spending from 14% in 2014 to 11% by 2025.
The information and opinions presented in this research piece have been prepared internally and/or obtained from sources which AEW believes to be reliable; however, AEW does not guarantee the accuracy, adequacy, or completeness of such information.