The structural rise of infrastructure capital in commercial real estate

Infrastructure capital has become a key driver of commercial real estate investment. Sectors such as Living, Data Centres, and Healthcare, once considered Alternative real estate, have become increasingly institutionalised and are now actively contested between traditional real estate investors and infrastructure mandates. The convergence is being driven by structural demand trends, supportive government policy, and an expanding pool of long-term capital seeking the stability characteristics that these assets provide.

In 2025, investment into UK Alternative and Living sectors totalled £29.9bn. This included £13bn invested into the Healthcare sector. Similarly, in Europe (excluding the UK), Alternatives and Living totalled £48.9bn in 2025. These amounts represented a substantial share of investment into real estate last year, with this share having risen substantially over the past ten years. In the UK and Ireland, the share of investment has increased from 15% in 2016 to 44% in 2025. Across the rest of Europe, the increase has also been notable, with the share rising from 23% in 2016 to 33% in 2025.

Figure 1: Share of Europe and UK investment – Alternatives and Living

Attributes that these assets tend to exhibit include:

• The provision of essential services
• High barriers to entry
• Specialist asset management
• Stable and often index‑linked income streams
• Low volatility
• Support from government policy objectives

Many of these characteristics are also found in infrastructure investments. As a result, these sectors have received increased investment because they appeal to real estate investors and infrastructure investors alike. And while real estate fundraising has been challenging in recent years, capital targeting infrastructure assets has increased to address structural economic and social trends.

Global structural trends such as digitalisation, decarbonisation, demographics, and deglobalisation are reshaping long-term demand for infrastructure. Rapid advancements in AI and cloud services are increasing national computer requirements and intensifying reliance on data centres; the UK demand for computing power is expected to increase more than five-fold by 2035. At the same time, the energy transition is reinforcing the need for expanded grid capacity and renewable energy infrastructure.

Across Europe, ageing populations and the rising prevalence of long-term health conditions are underpinning sustained growth in demand for Healthcare services. The UK over 65 population is projected to grow by 25% by 2050 and the overall population by 7%, amplifying the system-wide need for elderly care homes, healthcare capacity, and wider transport, housing, and civic infrastructure. Older people are living longer; however, healthy life expectancy has not kept pace, meaning demand for both NHS services and adult social care has risen. There is also an insufficient supply of age-appropriate housing which creates pressure on care homes. However, senior housing could reduce NHS pressures, provide intermediary accommodation pre-care, and recycle family-size houses back into the wider market.

Figure 2: UK population projections

Reinforced by ongoing geopolitical volatility, these trends are increasing requirements for infrastructure and redirecting investor attention towards sectors which are fundamental to social and economic resilience. Investors typically regard infrastructure as a stable, long-term investment as its essential nature supports stabilised cashflows and a relative resilience to inflation. For real estate investors, this is an opportunity to shape long-term demand for housing and healthcare assets, as well as improve income security through adding assets to the portfolio that exhibit less cyclical cash flow characteristics.

As societal demand for infrastructure has been growing, so have investor allocations to the asset class. Hodes Weill & Associates and Cornell University run an annual survey of institutional investors to assess allocations and investment objectives for infrastructure as an asset class. The 2025 Infrastructure Allocations Monitor surveyed 115 institutional investors in 25 countries with a total AUM of over US$10.6 trillion. Investor target allocations to infrastructure increased for the second consecutive year to 5.9%, and 98% of investors were expecting to either increase or keep their allocations the same over the next 12 months.

Figure 3: Target allocations across infrastructure investors and global infrastructure fundraising

Infrastructure fundraising rose sharply in 2025, increasing by 120% year‑on‑year to reach $289bn. At the same time, the proportion of institutions identifying themselves as under‑allocated to infrastructure in Hodes Weill & Associates’ survey declined to 56% in 2025 from 58% in 2024, and 61% in 2023. This reduction in under‑allocation, despite continued increases in target allocations, suggests that investor commitments are increasingly translating into capital deployment.

Reinforcing this trend in the UK is the 2025 Mansion House Accord. This agreement was made by 17 major UK Defined Contribution (DC) pension providers and is strongly supported by the UK Government. Institutions have committed to allocate at least 10% of their DC funds into private markets by 2030 with a further commitment of a minimum of 5% dedicated to UK private markets. The Accord’s intent is to unlock long term-capital for UK infrastructure, clean energy, private equity, and growth assets. As at May 2025, the signatories collectively managed over £252bn of assets.

The impact for UK real estate markets is that more capital will be targeting assets with predictable cashflows, lower volatility, strong governance, and transparency. Assets that can credibly be framed as long-term growth enablers are structurally advantaged. Pension providers have stated that deployment depends on existence of ‘suitable investible assets’ at scale, so in practice, this favours platforms over single assets, and portfolios over one-off deals. The 5% dedication to UK private markets will also benefit local authorities, creating opportunities for councils to partner with pension-backed capital for regeneration projects and social infrastructure such as social and senior housing, and healthcare facilities.

Real estate investor allocations to infrastructure-overlapping assets have also been rising. Evidence from CBRE’s annual European Investor Intentions Survey indicates strong investor appetite for infrastructure-adjacent sectors. In 2026, 69% of respondents reported an intention to allocate capital to at least one alternative sector, up from 62% in 2025. Several of the targeted Alternative sectors, such as Affordable Housing, Data Centres, and Healthcare, share fundamental characteristics with infrastructure, and investors directly targeting social and economic infrastructure increased from 10% in 2023 to 17% in 2026.

Figure 4: Proportion of investors targeting alternative sectors

A key attraction for investors to invest in infrastructure is the cash flows associated with the assets. Income from these assets can often be underpinned by long-term government contracts; has inflation-linked income growth; or is typically based on usage that is associated with non-discretionary spending. For this reason, income for infrastructure investments can be more stable than other asset classes and yields form a main component of total returns.

This holds true when aggregating sector performance in the CBRE UK Long Income Index, which includes real estate sectors and asset types that overlap with infrastructure. Figure 5 shows infrastructure-related sectors and the other sectors in the Index achieved the same average annual income growth over the past 10 years, at 3.8%.

However, infrastructure-overlapping sectors have significantly more stable income growth compared with other sectors (1.4% vs. 2.4%), illustrating the more attractive risk-adjusted income growth characteristics of real estate assets that have infrastructure attributes.

Figure 5: Average annual income growth and volatility, 2016-2025

The risk-adjusted advantage of these sectors is also reflected when looking at total returns over the same period. Figure 6 illustrates that infrastructure-overlapping sectors have achieved comparative annual total returns to other sectors. However, a far lower standard deviation (6.1% vs. 9.1%) translates to higher risk-adjusted returns compared with other real estate sectors in the index.

Figure 6: Annual total returns and volatility, 2016-2025

The improved income stability and risk-adjusted returns of infrastructure-overlapping sectors explains the growth in capital targeting these sectors. An increasing alignment between certain operational real assets and infrastructure is progressively positioning them within the broader infrastructure investment universe.

The evidence above establishes why infrastructure and real estate capital is targeting these assets – structural demand, compelling risk-adjusted returns, and an expanding institutional mandate. The question that follows for real estate asset owners and investors is how this is affecting the market and pricing dynamics, deal certainty, and the competitive landscape across specific sectors.

For property owners looking to divest, there is an upside. With infrastructure investors overlapping into a traditionally real estate space, there is now a broader buyer pool which has compounding effects.

An increase in the number of competing bidders is contributing to more aggressive pricing, particularly on assets with long lease terms, index-linked income, or essential-use characteristics. These assets may now attract infrastructure fund pricing, with lower yield expectations, alongside traditional real estate bids, effectively resulting in a valuation arbitrage in the vendor’s favour.

We undertook a comprehensive analysis of investor bids across several relevant processes managed by CBRE in recent years and infrastructure‑led capital has consistently formed a significant share of advanced‑stage bidders, often driving pricing tension and improving execution certainty.

Collectively, these cases demonstrate that infrastructure investors are no longer niche participants but core buyers across long‑income, operational, and socially essential real estate, materially widening the buyer pool and strengthening vendor outcomes.

Infrastructure mandates often have greater equity funding and are less reliant on leverage. In a market where debt remains relatively expensive, an all-equity or low-leverage infrastructure buyer can potentially move faster and with fewer conditions than a leveraged real estate fund. For vendors, this translates into a material risk reduction in deal execution.

Assets that were previously too operationally complex or niche for standard real estate capital, such as battery storage co-located with logistics, EV charging infrastructure embedded in retail parks, or NHS-adjacent primary care, are increasingly investible as infrastructure capital is also targeting them.

The divergence in buyer depth between infrastructure-adjacent and traditional real estate has widened, which is itself a strategic consideration for any owner managing a mixed portfolio. However, for vendors seeking to position assets to infrastructure capital, there are important considerations as infrastructure buyers can differ from real estate funds in their underwriting and diligence requirements:

• Infrastructure buyers typically have more stringent ESG, covenant, and operational due diligence requirements, which increases process complexity. Vendors should expect more comprehensive data requests than for a typical real estate process
• Infrastructure funds can seek tighter lease terms on stabilised assets, and vendors should consider how this affects negotiation and due diligence timeframes because of re-leasing risk

Differences in regulatory and valuation methodologies can cause friction in mixed-use or hybrid assets. Infrastructure funds typically value on a discounted cash flow basis rather than comparable yield. Aligning methodologies may require advisory input and can extend transaction timelines.

While the convergence of infrastructure and real estate capital creates compelling opportunities, there exists a set of risks for infrastructure investors to consider when deploying capital:

• Liquidity risk: Real estate assets are still exposed to liquidity risk, where prices have moved and buyer depth may vary between entry and exit. However, infrastructure investors have greater exposure liquidity risk typically, particularly for energy or transport assets, and are more familiar with liquidity risk
• Operational risk: Sectors such as care homes, student accommodation, and marinas involve greater operational complexity than most infrastructure assets. Returns are linked to management quality, occupancy, regulatory compliance and staffing, often requiring specialist operators or partners that infrastructure investors may not have in-house
• Regulatory risk: Several infrastructure-adjacent real estate sectors, such as social housing, Healthcare, adult social care, are heavily dependent on government funding and regulatory frameworks, which can affect long-term income assumptions. However, economic infrastructure assets, such as roads and energy infrastructure, are also heavily influenced by government regulation

The convergence of infrastructure and real estate capital is a structural realignment that is reshaping who buys real estate, how it is valued, and what outcomes are achievable for vendors and investors. For vendors, well-structured, clearly positioned assets can tap into a materially deeper and more competitive buyer universe. For core real estate investors, the accelerating inflow of infrastructure capital is fundamentally expanding the opportunity set and unlocking access to stabilised assets capable of materially enhancing portfolio risk-adjusted returns. Success will be defined by the ability to accurately identify where these capital pools converge and to move decisively to capture value as this structural shift accelerates.