In 2017, private investors could continue to exhibit strong interest in European unlisted infrastructure, according to Deutsche Asset Management’s March 2017 European Infrastructure Strategic Outlook.
Europe represents a key global market for infrastructure investment, offering opportunities that range from the core Western European markets, to the growing economies of Eastern Europe, reports Deutsche Asset Management. In addition, infrastructure increasingly plays a key role in governments’ agendas to boost economic growth.
Unlisted infrastructure represents a defensive asset class at a time of rising global political uncertainty, the report notes. Valuations for large, regulated assets in the equity space are supported by stable underlying performance and significant capital chasing the asset class. European infrastructure debt represents a fast-growing market and is supported by a rising number of projects requiring funding, as well as offering a reasonable illiquidity premium compared with infrastructure bond spreads.
Deutsche Asset Management identifies Germany, the Nordics and France as top core markets for infrastructure investments. The firm also states the United Kingdom continues to have one of the most stable and predictable regulatory frameworks globally, and remains a core market for infrastructure investment. Italy and Spain also are key infrastructure markets in Europe.
Transportation infrastructure, particularly airports, will contain high amounts of investment opportunities. In 2016, the European transportation industry recovered further on the back of supportive macroeconomic fundamentals. Airport traffic volumes grew again and are now well above pre-crisis levels in most European hubs, while European toll roads continued their process of gradual recovery.
Electricity demand and energy prices are likely to remain soft across European energy markets in 2017. The shift toward renewables is catalyzing a structural change across energy grids and regulation, with capacity markets, frequency demand response auctions and electricity storage evolving rapidly.
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