At Reading we’ve been having some discussions about whether and (if so) how we should incorporate infrastructure into the real estate curriculum. In terms of whether, we’ve had some feedback from major employers that they’d like us to include some content on infrastructure. Most of the major real estate advisory firms now provide an infrastructure consulting service. The similarities between infrastructure and real estate in terms of investment attributes are fairly obvious. Both asset classes typically consist of lumpy, relatively illiquid, heterogeneous and (nearly always) physical assets that generate income streams and require operational management. New assets can be developed or existing assets can be acquired. Direct and indirect investment is possible. Indirect investment can be in the form of listed or unlisted vehicles. For directly held assets, performance measurement requires valuations. So – there’s lots of commonalities.
The key differences tend to concern the sheer diversity of infrastructure – ports, pipes, energy facilities, schools, airports, hospitals, roads, bridges, telecoms etc. – relative to real estate. Infrastructure seems to be less mature in terms of the existence of industry bodies like INREV, IPF, RICS and EPRA. In this sense, it is also probably less mature as a market with few established performance indices, professional bodies or networks of market intermediaries facilitating acquisitions and disposals. I also strongly suspect that there is substantially more political risk. Nevertheless, many argue that there has never been a better macro-economic environment for infrastructure investment. A key issue seems to be how to ensure that the long term investment needs of pension funds can be aligned with the long term infrastructure needs of many economies.
I may be wrong. I think that it was Peter Hobbs team at RREEF who about ten years ago really started to highlight the real estate-infrastructure linkages. Albeit, I don’t sense any huge groundswell in investment in infrastructure by the usual suspects in the real estate sector. However, there have been recent reports of some fund management firms pooling their real estate and infrastructure groups. I think that there’s broad agreement that infrastructure is a growing area, that it has important links to real estate and that, ideally, we should introduce it into the curriculum.
So we tend to agree that we should be introducing it into the real estate curriculum, er, in principle. But- who’s going to teach and assess it? We don’t have an infrastructure specialist at Reading. UCL’s School of Construction and Project Management run an MSc in Infrastructure Investment and Finance (interesting that it’s accredited by the RICS). Initially and possibly still, UCL had a lot of support from the European Investment Bank to deliver this Masters. John Hopkins University in Baltimore offers a Masters in Real Estate and Infrastructure which, at an admittedly superficial glance, looks like a real estate Masters with a bit of infrastructure bolted onto it.
How should it be incorporate into programmes? It doesn’t feel like a cross-cutting theme like sustainability or globalization that can (theoretically at least) be reflected in nearly every module. Whilst I’m sure that you could have a whole programme consisting of modules on infrastructure development, infrastructure appraisal, infrastructure management, infrastructure investment, sustainable infrastructure, PPP and PFI structures etc., then you’re just delivering a programme on infrastructure. It’s tricky but I suppose we’ll need to start somewhere.
I haven’t really answered the important questions. How should we incorporate infrastructure into the real estate curriculum? Should infrastructure appraisal be in a real estate appraisal module or should it be in an infrastructure module? How much space in the curriculum should we allocate to it? Less obviously, what should it replace? Perhaps more selfishly, who will teach and assess it? Volunteers, please.