Social infrastructure on way to ‘core’ status in property: PFA Conference
High population growth and our changing community needs will spur significant ongoing investment in social infrastructure in Australia, according to Rob de Vos, Managing Director of ARENA REIT.
Mr de Vos, speaking this week at the Property Fund Association’s 2019 Conference in Hobart, said there are challenges and opportunity in social infrastructure. “An ageing population and proportionately fewer tax payers will create challenges for government funding, but this opens up significant opportunities for the private sector and for investors.”
“As a country Australia is still not seeing how big the social infrastructure sector can be.”
He said social infrastructure investment was rapidly becoming more mainstream. “Social infrastructure is still considered an alternative but when you look at the investment required over the next 20 years it may eventually be considered a core real estate asset class.”
“There are good reasons why investors are taking notice of social infrastructure investments, including early learning centres. It’s a property asset class which is supported by strong macroeconomic themes that relies on bricks and mortar. It will require physical assets for a long time, meaning the obsolescence risk is low.”
“Early learning assets hold long-term value as they typically have long term triple net leases where the rental income is linked to CPI. There is also a land component underpinning the investment, providing the opportunity for capital growth.”
“This contrasts with traditional asset classes such as retail, which is being rapidly disrupted by online shopping.”
Mr de Vos said government is not in a position to fund all of these works. “The private sector has a huge role to play in creating more places, which will bring more opportunities to investors – whether via a pure private investment or via public private partnerships.”
The Property Funds Association 2019 Conference is themed Critical Change: Crisis, Challenge or Catalyst for Property Investment and concludes on 7 May 2019.
