Institutional investors remain committed to infrastructure. When it comes to property, however, they differentiate more strongly according to type of use and location. Geographically, too, the investors surveyed have clear priorities: established European markets are at the forefront. This is shown by the latest INTREAL investor survey, ‘Which real-asset (funds) will prove most attractive in 2027?’. For this survey, 48 German institutional investors answered 21 questions on property, infrastructure and private debt. The respondents included banks, family offices, pension funds, savings banks, foundations, insurance companies and pension schemes.
Investors are refining their infrastructure strategies
Around 67 per cent of those surveyed intend to maintain their current allocation to infrastructure in 2027, whilst just under 30 per cent are even planning to increase it. Only three per cent intend to reduce their allocation to infrastructure.
“Infrastructure has become an integral part of many investment portfolios,” says Andreas Ertle, Managing Director of INTREAL. “For some investors, the key question now is which infrastructure segments and markets to direct their capital towards. The market is thus entering a new phase in which investors are allocating capital in a more targeted manner and assessing investment strategies more closely against their return targets. Investments that are sustainable in the long term whilst offering a compelling return profile are particularly in demand.”
In terms of sectors, renewable energy and digital infrastructure – including data centres and communications – are neck and neck, each accounting for around 62 per cent. 42 per cent of respondents find the utilities sector attractive. The transport and traffic sector stands at 38 per cent, ten percentage points higher than in last year’s survey.
In terms of infrastructure, respondents favour European markets: around 85 per cent cite Europe as an investment destination, whilst 59 per cent name Germany. The US accounts for around seven per cent. Funds are the most popular investment vehicle, at 64 per cent. In addition, 36 per cent are considering private equity funds and 32 per cent infrastructure debt funds.
Logistics is the most popular property sector for the first time
Preferences are also shifting within the property sector. At 59 per cent, logistics has taken the top spot for the first time as the most attractive type of property use. Residential property follows with 56 per cent. The trend in the hotels and serviced apartments segment is particularly striking: their share has risen from seven to 22 per cent compared with the previous year. Local retail properties are cited by 29 per cent of respondents.
Jan Ferdinand, Executive Director of Sales at INTREAL, comments: “The results point to a significantly more selective approach to the property market. Investors today are much more discerning about which property types offer compelling prospects under current market conditions. The stability of the logistics sector and the marked increase in interest in hotels demonstrate just how rapidly preferences can shift. It is therefore increasingly important for fund providers to tailor their investment approach to areas where investors once again see attractive prospects.”
This greater selectivity is also evident in the planned allocation to property. 56 per cent intend to reduce their allocation in 2027, 29 per cent plan to maintain their allocation at the same level, and 15 per cent plan to increase it.
At the same time, return expectations have risen significantly. Around 27 per cent of those surveyed expect an initial distribution yield of more than five per cent from new property funds. The largest group, around 34 per cent, expects a yield of between 4.1 and 4.5 per cent. Only twelve per cent now expect a yield of between 3.5 and 4.0 per cent, compared with 40 per cent last year.
Investors are focusing on Europe
When it comes to property, respondents favour established European markets. 70 per cent cite Europe as an investment destination, whilst 68 per cent name Germany. The US plays a minor role, accounting for three per cent.
Within Europe, the DACH region leads the way with 83 per cent. The Benelux region is gaining particularly strongly: 61 per cent name the region as their preferred destination, up from 40 per cent last year. Scandinavia stands at 43 per cent.
Despite greater differentiation, the market environment remains challenging. 68 per cent of investors see potential falls in prices and values as the greatest challenge for the property investment market in 2027. 55 per cent cite high price levels or low initial yields, whilst 40 per cent cite the availability of finance. From the respondents’ perspective, the most important influencing factors include interest rate levels, economic development and economic policy.
