Investing in a longer, slower and bumpier cycle

‘Cautious optimism’ has very much been the phrase of choice at real assets investment trade fairs over the past two years. That phrase was thrown out in the hope for better times. The recovery has begun – but this next cycle will be longer, slower and bumpier.

Transaction volumes have been slowly picking up in both real estate and infrastructure. In the last two years of the previous downcycle, capital returns turned negative for real estate. Starting at the end of 2024, we are seeing returning investor interest in real assets.

However, this new cycle is also impacted by ongoing competition from other investment options including liquid assets, as well as continued geopolitical and macroeconomic uncertainty caused by global tariff and trade policies, interest rate changes and diverging economic developments in various markets globally.

In this world in transition, our growth strategy is led by four DUEL megatrends – the digital, urban, energy and living transitions – powered by technology. PATRIZIA started investing in technology and data science over a decade ago. Today, we operate a powerful data lake that integrates real estate performance, demographic trends, satellite imagery and urban infrastructure. Smart data intelligence is a strategic advantage that empowers us to anticipate change, identify opportunity and deliver long-term value for our clients.

And we see technology as a key value driver in the new cycle. Demand for digital services will continue to surge, with rising investments in digital infrastructure, data centres, connectivity and smart building technologies. Urbanisation requires further investments into smart city solutions, modern urban logistics and offices that meet the workforce needs of future generations. The energy transition is unstoppable, providing attractive investment opportunities in real asset solutions for renewable energy, energy storage, decarbonisation efforts and innovative low-carbon energy technologies such as energy-from-waste or smart district heating.

Finally, there is the living sector. Living is the largest real estate investment sector and has been a strategic growth pillar for PATRIZIA for more than 40 years. Today, modern living goes beyond traditional residential real estate and includes fast-growing sub-segments like affordable housing, student housing, micro-living, co-living and senior living – all poised for growth in 2025 and beyond. The number of rental households globally has risen by 10% over the past decade which underlines the strategic importance and continued strong investment opportunities in the living sector.

Modern living is the focus of our latest estatements magazine, where you can read how our Investment Strategy & Data Intelligence team is providing insights to best advise investors on trends in the sector and why living value add is our current risk class of choice.

In addition, we share the impact we are having on communities in the UK and Spain through our Sustainable Communities impact investment strategy. We present a fascinating read on Corkfield – our 375-unit build-to-rent scheme in the UK – and we provide interesting insights into our recent residential platform expansion in Japan by examining the market opportunities in this fascinating and resilient country.

We also provide insights on where to best invest in infrastructure, including an update on the public noise surrounding the EUR 500 billion federal German infrastructure fund, which is a historic opportunity to modernise Germany’s ageing infrastructure and significantly boost the German economy with the mobilisation of private capital.

Finally, we share an update from the PATRIZIA Foundation on two impressive ‘Kinderhaus’ projects, with the Foundation helping to build smarter communities by providing access to education for children in need in Bangladesh and Kenya.

I hope you enjoy reading our insights and find them useful on your own investment journeys.