Infrastructure is one area of investment that is linked to clear economic benefits. For example, a city transportation project often signals an opportunity for new real estate ventures in the surrounding area. Improving access to business districts and retail destinations with safe, convenient commutes certainly adds value to nearby real estate.
Traditionally, road and railway projects have been the most telling projects. However, the evidence is piling up for the importance of investment in mass public transportation.
Balancing the Positive and Negative
While they often have a positive impact, it’s true that certain infrastructure projects can decrease the value of different real estate sectors. For example, a new or improved airport could mean the nearby commercial real estate will be coveted for logistical reasons. However, that same airport may make neighboring residential areas less desirable because of increased noise, air pollution, and traffic.
The perception of infrastructure also varies by country. In some geographies, being in close proximity to public transportation and busy shopping centers drives interest for residential real estate, leading to a rise in property value. In other areas, the atmosphere and quality of a neighborhood has a greater impact than does proximity to the city.
Regardless of the overall impact, timing is everything for new infrastructure projects and their effect on real estate. The period of time from the start of the project to its completion should be as quick as possible, especially if the construction leads to congested roadways. Similarly, the announcement of a new infrastructure project can lead to a speculative buzz in the area’s real estate industry, so it’s important to keep expectations managed as plans can change based on unexpected barriers, such as budgetary constraints.
The Importance of Government Collaboration
In many areas of new and revitalized development, governments are responsible for leading infrastructure initiatives. Although backed by capital from the private sector, infrastructure remains a market that is dominated by government policies. This isn’t likely to change in the future, so developers are somewhat reliant on government for improvements to the area’s infrastructure. A government’s investment in infrastructure is a long term investment in the growth of the country. Governments should also weigh the cost of repairs and maintaining any large scale capital project over its expected lifespan.
In Canada, the government has noticed that weather-related events often cause problems with the country’s infrastructure. To mitigate potential impacts and strengthen the resilience of Canadian infrastructure, the Disaster Mitigation and Adaptation Fund (DMAF) was created.
Globally, each infrastructure opportunity should be analyzed to assess the potential impact on nearby real estate. Urbanization is advancing, so there is an even higher chance that infrastructure investments will affect the success of surrounding real estate development and sales.