Investors pivot to real assets, favouring living and infrastructure

Institutional investors are pivoting toward real assets with resilient cashflows in response to higher financing costs and geopolitical uncertainty, marking the start of a new investment cycle.

Mahdi Mokrane

According to Patrizia’s 2026 global survey, conviction is strongest in the residential living and infrastructure sectors, particularly those related to energy transition and digital infrastructure.

The survey, which represents nearly €1 trillion in capital, reveals that capital deployment is becoming increasingly selective. In this new environment, investors are prioritising deep sector expertise, operational value creation, and strong local market capabilities to navigate a fragmented geopolitical landscape.

Residential and living sectors

The residential and modern living segments—including affordable, student, and senior housing, as well as co-living—command the highest conviction. 77% of respondents plan to expand their exposure to these areas over the next five years, with traditional apartments (40%) and affordable housing (34%) ranking as the most attractive segments.

Operational value creation remains a central theme. Asset owners are prioritising refurbishment and brown-to-green initiatives to modernise portfolios, enhance building performance, and future-proof assets against evolving regulatory and occupier demands.

This flight to resilience is also evident in investment strategies. Roughly two-thirds of investors intend to increase allocations to Core and Core+ approaches, emphasising income stability and asset quality. Furthermore, with seven out of ten investors anticipating higher financing costs over the next two years, a disciplined and selective approach to capital deployment across real estate markets has become standard.

Mahdi Mokrane, head of Fund Management Real Estate at Patrizia, commented: “There is a clear willingness among investors to move from strategy into execution again, although deployment remains selective and carefully calibrated to risk. What’s striking is that across many parts of European real estate, fundamentals have held up better than market sentiment over recent years. Investors are looking for sectors where long-term demand remains strong, and cashflows are resilient. That’s why residential and modern living continue to stand out - structural undersupply, together with changing demographics and the need for modern housing, create compelling opportunities for long-term capital.”

Infrastructure conviction

Investor confidence in infrastructure remains robust, as institutional capital seeks exposure to structural growth drivers and reliable, long-duration income streams. According to the survey, nearly half of respondents (45%) plan to increase their infrastructure allocations over the next five years, marking a rise from the previous year.

The energy transition sector commands the highest interest, with 41% of investors intending to expand their exposure. Digital infrastructure continues to attract significant capital, while social infrastructure saw a dramatic surge in interest, jumping to 17% from only 2% in 2025.

Market sentiment regarding transaction activity is optimistic. Despite tighter financing conditions leading to more measured return expectations, nearly three-quarters of investors anticipate an uptick in infrastructure deal flow over the next two years. This positive outlook is underpinned by relentless demand for assets tied to decarbonization, digitalisation, and the modernisation of essential services, cementing infrastructure's status as a premier long-term allocation within real assets.

Phoebe Smith, head of Infrastructure Fund Management, Europe, at Patrizia, said: “The energy transition is increasingly a resilience story. Investors are looking beyond generation capacity alone and focusing on the infrastructure required to strengthen energy security and support more decentralised systems. The same is true in digital infrastructure, where localised investment is becoming increasingly important as demand for resilient and distributed networks grows across Europe. We believe this favours managers with genuine local expertise because many of the most attractive opportunities are not large-scale projects. They are embedded in local economies and require an understanding of how infrastructure is evolving at a regional level.”

Geopolitical fragmentation

Geopolitical uncertainty is actively reshaping institutional capital allocation strategies, with roughly 85% of respondents reporting that geopolitical volatility is having a moderate to significant impact on their real asset portfolios. Consequently, investors are exercising heightened selectivity regarding asset classes, geographies, and investment partners.

Despite these fragmented conditions, Europe remains an increasingly attractive destination for long-term capital. Nearly one-quarter of investors (24%) plan to increase their European exposure over the next three years, compared to only 4%) who intend to reduce it, signalling strong demand for stability, institutional quality, and long-term structural opportunities.

In this environment, local market expertise and operational execution have become critical differentiators in manager selection. More than 80% of investors identified dedicated local teams and deep European market expertise as vital criteria when choosing investment partners. Furthermore, the survey confirms that investors remain focused on long-term structural drivers—specifically digitalisation, the energy transition, and living-related sectors—despite near-term macroeconomic and geopolitical headwinds.

Konrad Finkenzeller, head of Client Division at Patrizia, said: “Investors today are far more selective, by geography, sector and investment partner. Rather than broad market exposure, many allocators are increasingly looking for targeted exposure and managers with genuine local market expertise. Europe continues to strengthen its position as an attractive destination for institutional capital, supported by long-term structural demand, deep urbanisation trends and a highly institutional investment environment.”