Resurgence in investor confidence for real estate and infrastructure

Patrizia's fifth annual global client survey, which polled 110 major institutional investors representing nearly €1 tn in capital, indicates a significant resurgence of confidence in the real estate market following two difficult years. 

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The survey highlights that investor sentiment is rebounding, with almost 40% of respondents anticipating an increase in asset valuations over the next two years—a first since 2022. This marks a considerable increase from only 2% in 2023 and 27% in 2024. Furthermore, optimism is growing regarding returns, as 80% of respondents now expect total returns to either increase or remain stable, continuing an upward trend from 64% last year and 45% the year before.
Real estate transaction volumes are expected to increase as 73% of institutional investors anticipate greater activity in the next 12 to 24 months, up from 64% in 2024. This growing optimism reflects a widespread belief that valuations have reached their lowest point. With stabilizing market conditions, lower-risk strategies are becoming more attractive, as 61% of investors plan to increase allocations to Core or Core+ strategies, compared to around 40% last year. This shift indicates a renewed interest in reliable, income-generating assets and a broader return to the market. 
Residential properties remain the most favoured asset class, chosen by 47% of investors, followed by modern living strategies like student housing, senior living, and co-living, preferred by 21%. Logistics continues to draw interest at 16%, ahead of offices at 9%, hospitality at 5%, and retail at 3%. Concurrently, operational improvements are gaining more attention, with three out of four investors prioritizing brown-to-green transitions and refurbishments, emphasizing a strategic focus on sustainability and asset enhancement as key drivers for long-term value creation.
A significant 35% of institutional investors plan to further increase their infrastructure allocations, while 57% intend to maintain their current levels. This sustained growth is fuelled by increasingly attractive investment options, with 80% of investors reporting better infrastructure investment opportunities now compared to previous years. This optimism is further bolstered by performance expectations, as 44% of respondents anticipate an increase in infrastructure valuations over the next two years, while only 10% foresee a decrease. These growing allocations are driven by long-term megatrends that are increasingly shaping investment decisions. 
Nearly 40% of respondents are targeting assets related to the energy transition, and 37% are focusing on digital infrastructure like fibre networks and data centres, surpassing interest in traditional sectors such as utilities and transport. A key trend is the convergence of real estate and infrastructure, with over 86% of investors viewing combined RE-Infra strategies as appealing or being open to exploring them. 
Despite current obstacles, a substantial 69% of institutional investors intend to further incorporate ESG criteria into their investment procedures. The primary challenges identified are regulatory complexity and the scarcity of high-quality, standardized data, both cited by 64% of respondents as significant impediments to expanding sustainable investment strategies. Looking forward, investor sentiment is mixed, with 45% believing ESG will gain even greater importance in the coming years, while 37% anticipate its influence will diminish. However, only 13% believe that global political developments will not affect ESG, highlighting the increasingly intricate relationship between sustainability and geopolitics.
Mahdi Mokrane, co-head of Fund Management and Head of Fund Management Real Estate, commented: “The rebound in sentiment marks a real turning point. After more than two cautious years, confidence is returning as valuations stabilise and even start increasing, and appetite grows across select real estate strategies. In this new cycle, investors are well-advised to tap into structural growth opportunities driven by the “DUEL” megatrends: digitalisation, urbanisation, energy and living.”
Graham Matthews, head of Infrastructure at Patrizia, comments: “The decade of infrastructure continues, driven by strong investor appetite to modernise smart real assets in line with our DUEL megatrends. Co-investments and public-private partnerships enable broader investment options across all risk profiles and deal sizes. The convergence of real estate and infrastructure is no longer a vision - it’s already taking shape.”
Edward Pugh, head of Investment Management Sustainability, commented: “Even amid this uncertainty, one message is clear: ESG is no longer a peripheral concern, it is a central lens through which risk, value, and long-term performance are being reassessed, and the investors who adapt fastest will be best positioned to lead in the next cycle of real asset investing.”