The issue of accelerating demand for housing in the U.K. and the fact that the private rental sector (PRS) is now the fastest-growing form of housing tenure is at the core of Standard & Poor’s most recent issue of Infrastructure Outlook, its monthly newsletter summarising key infrastructure and project finance-related research and rating update news.
In a prominent two page spread, S&P analysts Rachel Goult and Nicole Reinhardt explore why the U.K. PRS is now viewed as one of the most desirable assets for European institutional investors and how their attitudes to investment are changing. For example, investors are keen to get involved from initial procurement phases, whereas traditionally the early high-risk construction stages meant investors shied away until buildings were fully functional, and consequently, less likely to default. Additionally, investors are increasingly keen to hold onto such assets for the longer term, not wishing to sell up immediately but reap high-returns through renting. S&P’s research suggests that this trend is spurred on by a burgeoning demand for more flexible lifestyles, especially in urban areas and with the young working professional generation, otherwise known as “generation rent”.
In general, the project finance sector is showing signs of improvement. Diane Vazza, a managing director based in New York, explains in a separate feature that project finance defaults have remained depressed in recent years. In fact, Vazza reveals that S&P only experienced two defaulted issues in 2014, and none at all in 2013. She also looks towards future developments, citing low commodity prices and a move towards renewable energy as the key drivers behind these expected attitude shifts to project finance globally.
Indeed, the energy transition is covered in depth this month, with managing director and head of global environmental & climate risk research, Michael Wilkins, explaining why the U.K. government’s ‘Contracts for Difference’ scheme will play a vital role in securing the country’s low-carbon energy future. And in a guest opinion piece from Martin Fraenkel, global head of content at Platts, we see why what goes up must come down in the commodity market.
In other news, S&P has issued new ratings on two Spanish toll roads; the Autopista del Sol project in the south-east was given a ‘BBB’ rating, while Autovia del Noroeste in the same region achieved ‘BB+’.
Elsewhere in Europe weak power prices and enhanced regulatory risk triggered multiple negative ratings actions for a number of utility companies
To view these articles and more, please see the full version of S&P’s April infrastructure newsletter in PDF or e-book format.