Investment in Public Infrastructure will spur Real Estate Development

1. FMCE AFRICA 2020
VIRTUAL CONFERENCE
FACILITY MANAGEMENT CONFERENCE & EXHIBITION
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WORKING TOGETHER TO ACCELERATE
ADOPTION OF FACILITIES MANAGEMENT
ACROSS AFRICA.
13- 14 OCTOBER 2020
How investment in
public infrastructure
can spur the real
estate industry.
By
Dr. MKO Balogun
13th October, 2020

2. FMCE Africa | 2020
THEMES
• Definition of terms
• Infrastructure and economic growth
• Real Estate and Economic Growth
• How investment in infrastructure affects Real Estate development and growth
• What kind of investment – PPP, Public or Private solely?
• Q & A

3. DEFINITION OF TERMS

4. FMCE Africa | 2020
Definition of Terms
Infrastructure
Infrastructure is the general term for the basic physical systems of a business, region, or nation. Examples of
infrastructure include transportation systems, communication networks, sewage, water, and electric systems. These
systems tend to be capital intensive and high-cost investments, and are vital to a country's economic development
and prosperity.
Projects related to infrastructure improvements may be funded publicly, privately, or through public private
partnerships. In economic terms, infrastructure often involves the production of public goods – social services.
KEY TAKEAWAYS
• Infrastructure are the basic systems that undergird the structure of the economy.
• Examples of infrastructure include transportation facilities, telecommunications networks, and water supplies.
• Large scale infrastructure is usually produced by the public sector or publicly regulated monopolies, but at smaller
scales infrastructure can often be produced by private firms or through local collective action.
• As an investment, infrastructure tends to be less volatile than some other asset classes and is sometimes sought
as an investment.
By JIM CHAPPELOW - INVESTOPEDIA

5. FMCE Africa | 2020
Definition of Terms
Infrastructure
Types of Infrastructure
Soft Infrastructure
These types of infrastructure make up institutions that help maintain the economy. These usually require human
capital and help deliver certain services to the population. Examples include the healthcare system, financial
institutions, governmental systems, law enforcement, and education systems.
Hard Infrastructure
Examples include roads, highways, bridges, as well as the capital/assets needed to make them operational (transit
buses, vehicles, oil rigs/refineries).
Critical Infrastructure
These are assets defined by a government as being essential to the functioning of a society and economy, such as
facilities for shelter and heating, telecommunication, public health, agriculture,. Along with the aforementioned
sectors, infrastructure includes waste disposal services, such as garbage pickup and local dumps. Certain
administrative functions, often covered by various government agencies, are also considered part of the
infrastructure. Educational and healthcare facilities may also be included, along with specific research and
development functions and necessary training facilities.

6. FMCE Africa | 2020
Definition of Terms
Infrastructure
Special Considerations
IT Infrastructure
Many technical systems are often referred to as infrastructures, such as networking equipment and servers, due to
the critical function they provide within specific business environments. Without the information technology (IT)
infrastructure, many businesses struggle to share and move data in a way that promotes efficiency within the
workplace. If IT infrastructure fails, many business functions cannot be performed.
Private Investment in Public Infrastructure
Sometimes private companies choose to invest in a country's infrastructure development as part of a business
expansion effort. For example, an energy company may build pipelines and railways in a country where it wants to
refine petroleum. This investment can benefit both the company and the country.

7. INFRASTRUCTURE & ECONOMIC GROWTH

8. FMCE Africa | 2020
Infrastructure and Economic Growth
According to - Katherine Davisson - Head of Shaping the Future of Cities, Infrastructure and Urban Services, and Joseph Losavio, Community Specialist,
Infrastructure and Development Initiatives, both of World Economic Forum in their article on infrastructure and economic growth
• Low and middle-income countries could see $4 return for every $1 spent on building infrastructure that focuses on
long-term resilience.
The economic fallout caused by the COVID-19 pandemic is forcing governments around the world to come up with
policies for stimulating the global economy. Many are considering a tried-and-true method to boost economies in the
short-term and provide wide societal benefits in the long term: infrastructure investment.
Countries around the globe are set to launch the biggest round of infrastructure investment since the post-2008
financial crisis stimulus measures. It's easy to see why: the demand is enormous. The world is on-trend to face a $15
Trillion gab between the infrastructure investment needed and the amount provided by 2040. On the supply side,
when 1% of GDP is invested in infrastructure, economic output increases by about 0.4% in the same year and by 1.5%
four years later.
Economically, the case for technologically advanced, resilient and sustainable infrastructure is clear. Low and middle-
income countries alone could see a net benefit of $4.2trillion from investing in infrastructure that prioritizes future-
focused resiliency. That's a $4 return for every $1 spent.
Integrating new technologies during the design, construction and operational phase of an infrastructure asset can
significantly lower the cost while improving the functionality.

9. REAL ESTATE & ECONOMIC GROWTH

10. FMCE Africa | 2020
Real Estate
Real Estate is a conversion of an asset to economic use through transformation
for the economic, social, emotional benefit of investors and users as well as their
safety and stem, financial institutions, governmental systems, law enforcement,
and education systems.
Real Estate plays an integral role in any economy. Residential real estate provides
housing for families. It's the greatest source of wealth and savings for many
Americans. Commercial real estate, which includes apartment buildings, creates
jobs and spaces for retail, offices, and manufacturing. Real estate business and
investment provide a source of revenue for millions.
Real Estate leads to development of cities and cities to development of nations

11. FMCE Africa | 2020
Real Estate
The economic impact of real estate is huge – the 1990 global recession was
caused by real estate
How do we improve the development of cities with development of value based
real estate and its accompanying infrastructure framework? – The ideas of
Circular and sustainable cities
What are the major infrastructures needed to ensure cities developed efficiently
and adequately leading to boost in real estate investment?
What infrastructures are social – public and which are economic – which private
investment can go to?

12. FMCE Africa | 2020
Circular Economy
“A circular economy describes an economic system that is based on
business models which replace the ‘endof-life’ concept with
reducing, alternatively reusing, recycling and recovering materials
in production/distribution and consumption processes, thus
operating at the micro level (products, companies, consumers),
meso level (eco-industrial parks) and macro level (city, region,
nation and beyond), with the aim to accomplish sustainable
development, which implies creating environmental quality,
economic prosperity and social equity, to the benefit of current and
future generations.”

13. Circular
Cities

14. FMCE Africa | 2020
Circular City
“According to the Ellen MacArthur Foundation, a circular city
embeds the principles of a circular economy across all of its
functions, establishing an urban system that is regenerative and
restorative by design. In such a city, the idea of waste is
eliminated, with assets kept at their highest levels of utility at all
times and the use of digital technologies a vital process enabler.
A circular city aims to generate prosperity and economic
resilience for itself and its citizens, while decoupling value
creation from the consumption of finite resources.”

15. FMCE Africa | 2020
Examples of counties working on Circular Cities
1. Rwanda
2. South Africa
3. Morocco
4. US
5. Wales
6. Scotland
7. Netherlands
8. China
9. South Korea
10. Denmark

16. Sustainable
Cities

17. FMCE Africa | 2020
Sustainable City
Sustainable cities, also referred to as an eco-cities, work towards creating
environmentally, economically, and socially resilient surroundings for their
citizens without compromising the needs of the future generation to thrive in the
same environment. According to the Sustainable Cities Index, sustainable cities
can be evaluated on three parameters that can be summed up as such:
•Profit
The profit factor measures the value of real estate and the ease of starting and
running businesses.
•People
The people index focuses on the living standard of the people, literacy, education,
and health.
•Planet
The planet factor focuses on transportation, water, sanitation, air pollution, and
carbon emission among other factors.

18. FMCE Africa | 2020
Examples of Sustainable Cities
1. London
2. Stockholm
3. Edinburg
4. Singapore
5. Vienna
6. Zurich
7. Munich
8. Oslo
9. Hong Kong
10. Frankfurt

19. HOW INVESTMENT IN INFRASTRUCTURE IMPACTS
REAL ESTATE GROWTH

20. FMCE Africa | 2020
Impact of Real Estate & impact on infrastructure
Urbanization
Between 1900 and 2015 urbanization population increased from 14% to 54% and
it is projected to rise to 66% by 2050
Waste Generation
Waste generated in cities was 1.3b tonnes in 2012 to grow to 2.2 billion Tonnes
in 2025
Energy
More than two-third of the worlds energy is consumed in cities accounting for
70% of Global CO2 emissions

21. FMCE Africa | 2020
Social Infrastructure
Social infrastructure are basic services needed for a city or community to
function and support their quality of life, and usually free.
Examples
• Education
• Transport – roads and transport
• Health
• Housing
• Sports and recreation centres
• Public safety & justice system
• Public water supply
• Waste disposal and management
.

22. FMCE Africa | 2020
Economic Infrastructure
Economic infrastructure supports economic activity and directly benefit the
process of production and distribution of an economy.
Examples
• Technology & communication
• Financial services
• Power & Energy
• Large transport – airports, major roads – interstate or intercity
• Environment
• Standards and rules
.

23. FMCE Africa | 2020
Investment Required and Impact
As stated in earlier slides there are 2 types of infrastructure and meaning there
will be 2 types of investment required, often times investment is misplace where
public funds are invested in economic infrastructure at the detriment of social
infrastructure because of government drive for revenue through taxes. However,
private investment in form of PPPs can work to deliver the needed economic
infrastructure to develop citied leading to the drive for real estate investment.
In Africa most investors most of the times invest in social infrastructure around
their projects such as medical, roads, water etc, at the basic level this are social
which must be delivered by government. It is also imperative for real estate
investors to focus on sustainable development or circular city development to
create efficient cities and provide needed infrastructure to support their
investment

24. FMCE Africa | 2020
Investment Required and Impact
One of the major challenges of real estate development in most cities in Africa is lack
of city planning and the desire of the investors to take advantage of that rather than
work with local authorities to create a city master plan, invest in appropriate
infrastructure to develop cities that will ensure return on investment.
I am confident there are huge capital available globally to support development of
appropriate city models that will create value for the real estate investors on the
medium and long term.
There is huge opportunity for real estate growth has demand for housing, buildings,
retails centers, airports, etc will continue to increase with population increase. The
right mix of both public and private investment in infrastructure properly utilized
based on a sustainable city model will spur real estate investment.

26. FMCE Africa | 2020
References
• https://www.worldatlas.com/articles/the-world-s-most-sustainable-
cities.html
• https://www.ellenmacarthurfoundation.org/our-
work/activities/circular-economy-in-cities
• https://www.thebalance.com/how-does-real-estate-affect-the-u-s-
economy-3306018
• Circular Economy in Cities Evolving the model for a sustainable urban future in collaboration
with PwC – A white paper by World Economic Forum
.

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