Selective capital: institutionals shift focus to residentials and infrastructure

This is the key finding of PATRIZIA’s sixth annual global investor survey, which gathered responses from institutional investors managing assets totalling nearly €1 trillion.

According to the survey, investors are gradually returning to new investment activity, although capital allocation is now subject to more stringent criteria, with priority given to sectors supported by long-term structural trends and resilient demand.

Residential assets remain the top investment choice

The residential sector and modern housing segments—including affordable housing, student accommodation, senior living and co-living developments—have emerged as the preferred investment destination for institutional investors.

Some 77% of respondents said they intend to increase their allocations to these sectors over the next five years. Conventional residential apartments ranked as the most attractive asset class (40%), followed by affordable housing (34%).

At the same time, investors continue to focus on value creation through the upgrading of existing properties. Refurbishment projects and brown-to-green investments aimed at improving energy efficiency and meeting evolving environmental standards remain key priorities.

The survey also points to a growing preference for defensive investment strategies. Around two-thirds of institutional investors plan to increase their exposure to Core and Core+ strategies, seeking stable income streams and high-quality assets.

Meanwhile, seven out of ten investors expect financing costs to rise further over the next two years, reinforcing a more selective approach to new investments.

Infrastructure continues to attract capital

Investor appetite for infrastructure assets also remains strong, with the sector continuing to rank among the most attractive real asset classes. Nearly half of respondents (45%) plan to increase their infrastructure allocations over the next five years, while 41% identified investments linked to the energy transition as a priority.

Digital infrastructure—including data centres and communications networks—continues to attract significant interest, while social infrastructure has recorded one of the sharpest increases in investor demand. The proportion of investors planning allocations to the sector rose to 17%, compared with just 2% in last year’s survey.

Confidence in the sector remains high, with nearly three-quarters of investors (73%) expecting infrastructure investment activity to increase over the next two years, driven primarily by growing demand for projects related to digitalisation, decarbonisation and the modernisation of essential infrastructure.

Geopolitical uncertainty redirects capital towards Europe

The survey also highlights the growing influence of geopolitical developments on investment decisions.

Some 85% of institutional investors said geopolitical instability has a significant or moderate impact on their real asset investment decisions, prompting a more cautious approach not only to sector selection but also to geographic allocation.

Against this backdrop, Europe is strengthening its position as a safe destination for long-term institutional capital. Almost one in four investors (24%) plans to increase exposure to the European market over the next three years, while only 4% intend to reduce their allocations.

Local expertise becomes increasingly important

The selection of investment managers is also becoming more demanding. More than 80% of respondents consider the presence of strong local teams and deep knowledge of European markets to be a key criterion when selecting an investment manager.

According to PATRIZIA, institutional investors are moving away from broad-based market exposure and increasingly seeking specialised investment opportunities in sectors supported by long-term structural trends, including digitalisation, the energy transition, urbanisation and residential real estate.