In the wake of a low growth, low yield market, an asset class that is yet to be noticed can be investors' solution from a starving yield. Infrastructure is being considered as a growing "real assets" investment strategy and retail investors are encouraged to get on board. With listed infrastructure investing, where investors put their money in companies that own and/or operate highly important infrastructure assets, investors open their doors for new opportunities that could boost their growth and stability as well as diversify their investment portfolio, National Real Estate Investor reports.
Among the considered sector in the infrastructure opportunity are airports, an area that a few U.S. investors should be familiar with. While most U.S. commercial airports are government-owned, there are avenues of opportunities beyond the borders that can offer potential revenue growth and opportunity.
Multiple revenue streams
A unique business model of private airports is that of a mall with guaranteed foot traffic, a buying and above average consumer profile, as well as captive audience. Add that this mall's utility is regulated and earns in good times or bad for providing a necessary service to the local economy.
There are two main sources of revenue in airports. The first is heavily regulated and from aviation activities such as passenger fees, airplane landing and parking fees, as well as passenger security avenue. The second one, on the other hand, is unregulated and offers opportunity for retail investor investments. This includes parking fees, retail spaces, and the type of real estate used for developing hotels and hangars.
Now this explains why airport security lines open to shops and restaurants; it basically is a mall where planes are being parked. And in order to gauge an airport's retail potential, passenger trend and mix are being factored in.
Enduring value
The number of people flying is at a historic growth, and this is what makes airport investments very attractive. The increase in disposable income has led to increase in the number of people who travel both domestically and internationally. Unlike other sectors, airports are also less susceptible to economic challenges and other external factors such as oil prices.
However, airport investment should be valued carefully. What investors need to understand is that there are also potential risks involving location, regulatory structure as well as long-term traffic trends.
