Infrastructure returns expected to dip

MotorwayTransport projects have been the best performing assets in the infrastructure over the past three years, but expected rates of return across the broad asset class are expected to dip, a report shows.

Ports, ‘other transport’ assets and rail/metro assets performed well, according to 25 European infrastructure investors that Deloitte surveyed.

Infrastructure services and telecoms also performed well, while private finance initiatives and public private partnerships, along with water and regulated utility assets, saw the lowest returns.

Deloitte, the business services firm, found that respondents to its fourth infrastructure survey expected returns to fall.

Returns in all asset classes were lower than those reported in Deloitte’s previous infrastructure survey, which was conducted in 2013. Investors have cut their target ‘internal rates of return’, with 43% predicting returns of between 10% and 12%.

In the 2013 survey, 41% of respondents were expecting returns of between 12% and 14%.

Political and regulatory risks dominate investors’ concerns. Overall, 92% said that regulatory risk had increased over the past five years, and a quarter said it had increased significantly.

Within Europe the most attractive locations for investors were the UK, Scandinavia and Germany. Since 2013’s survey, investors’ interest has also increased in Italy, Iberia and France.

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