The infrastructures of Tomorrow
As covid-19 sweeps the globe, the coronavirus pandemic threatens to stress-test the asset class like never before. While transportation assets are in the eye of the storm right now, other sectors – like digital infrastructure and healthcare – are likely to gain in importance. This page will bring you all the latest updates on how covid-19 is impacting infrastructure.
The change of mindset and rethinking of transport, urban and city planners is required. The above strategies will be useful for emerging small and medium sized cities to model and plan cities based on public transport and active mobility before these cities are locked in and influenced by car-centric development path.
Engineering and Construction
Coronavirus (COVID-19) is having a significant impact on the Engineering and infrastructure sector. Infrastructure projects are likely to be vulnerable to delays during the construction phase and/or disruption to services during the operational phase caused by:
- unavailability/shortage of staff due to public health measures and/or sickness;
- supply chain disruption; and
- Government action, e.g. lock-down of the project area, or restrictions on the use of essential facilities such as transport infrastructure.
Travel and Transportation
COVID-19 prompts rethinking seriously the future of mobility and city planning.
Mobility is an essential part of urban life. People travel for various reasons, such as going to work, educational institutions, recreation and shopping. Asian cities offer diverse means of commuting: walking, cycling, motorcycles, public and mass transport, micro-mobility, paratransit, private cars, public taxis and ride hailing systems.
The outbreak of COVID-19 has had a profound impact on transport and mobility. Countries and cities in the region have announced measures to restrict travel and social gatherings while prescribing that all maintain social/physical distance and personal hygiene to limit the spread of the coronavirus.
Travel restrictions are discouraging the use of public transport in the short term. In some cities, public transport operators are employing sanitization and physical distance policies for passengers such as staggered seating. Yet, winning the confidence of users remains difficult for psychological and behavioral reasons.
On the other hand, we have seen improvement in air quality and reductions in CO2 emissions due to the decrease in transport activity. But these are short-term gains and air pollution and emissions are expected rise again once the situation is resolved.
Current challenges faced by public transport and mobility due to COVID-19 and benefits of active mobility provide new impetus to transport and city planners to rethink on forms of mobility and city planning. In the medium and long run, it would be wiser to plan emerging small and medium-sized cities based on public transport and active mobility.
Logistics Companies
As for the industrial and logistics companies, they are seeing some interruptions in supply chains and several major manufacturers including Aerospace and Automotive industry companies have announced temporary closings. The Covid-19 has raised the demand for online retail sales and Amazon has announced that it is hiring 100,000 more people globally. In the long term it is the virus, along with other pressures such as increasing protectionism, may encourage companies to “relocate” some manufacturing activities in Asia and to maintain more inventories in Europe. We are already hearing from the boards of directors of logistics companies and manufacturing who want to reduce the risk of reliance on larger suppliers and manufacturers scope.
Telco and IT
Once the crisis is over, it is expected that telecommunications companies will work well as the world will be more connected and companies will be better prepared for this type of adversity.
In the long term, the outlook remains positive, as reliable connectivity has become a critical commodity. By leaving Covid-19, millions of users worldwide will be more connected and more familiar with digital tools.
The need for robotic healthcare workers, biometric virus predictors and AI health management tools will provide new use cases and justification for the investment for 5G.
General outlook
The coronavirus has put the infrastructures sector of our economy in check. The challenge of recovery leads us to analyze the prospects for investment and survival of Infrastructures in an environment never seen before. There will be more resilient sectors due to its long-term perspective, such as infrastructure one.
Infrastructures are underpinned by essential services, and demand is not expected to be as affected as in sectors exposed to discretionary spending (such as retail, hospitality or leisure) or commodity prices (for example, oil future contracts in US). In fact, demand for telecom and IT infrastructure has been increase substantially during COVID-19 outbreak.
The profitability of infrastructure sector will be evaluated in the long term. A long-term investment in infrastructure will be less affected by short-term macroeconomic shocks than an investment with a repayment in a couple of years. The sector is not susceptible to disruption of the global supply chain (as in the case of industrial companies, for example, automobile companies).
But we let’s analyze the impact of other infrastructure subsectors exposed to the coronavirus (transport: airports, ports, toll roads) and those that are not (renewable energy, regulated assets, water and waste).
Consumers will change their habits, they will analyze more for example what mean sof transport thy will use, private car, public transport. Remote working will also impact on the need for public infrastructure like new roads.
And nothing to say that reduction in the leisure trips will change city planning for airports, railways od other long-distance mans of transport.
Mobility and Business Office spaces
On the other side, ecommerce is growing in demand together with IT and telco infrastructure. We are purchasing more in ecommerce platforms to be delivered at our homes. We will decrease our needs of mobility, we will use car less than before, remote working will allow this together with the promotion of alternative ways of urban transport like bikes.
Most of the companies have been able to maintain their operations by asking staff to work remotely from their homes. One question is whether this will drive companies to rethink their business office space needs and if they can use them more efficiently with agile work. This would create a turn towards prime spaces and to better and more flexible spaces in the most global cities.
We believe in SAP that offices remain the best place to communicate with colleagues, meet customers and promote business culture. Covid-19 will put pressure on suppliers of office services, since people will distance themselves socially and some operators will go bankrupt.
Engineering and Construction
We have not seen any major construction projects stopped yet, but we expect some delays, either due to the shortage of materials, or due to illness of the workers. Those delays could increase costs and reduce returns. In the short term, promoters are likely to hesitate before starting new projects.
