State of Play 2025: The Great Real Assets Reshuffle
- Marie-Laure Mikkelsen
- Oct 7
- 5 min read
What is the landscape for real assets (real estate and infrastructure) in 2025? Amid high interest rates, geopolitical tensions, and the energy transition, investors are navigating troubled waters, but lucrative opportunities are surfacing for adaptive players.
"State of the Industry: Real Assets in 2025and Beyond" Panel Discussion
Insight from The 9th Annual Switzerland Institutional Forum | MarketsGroup
A profound shift is underway in institutional portfolios. Recent research such as the Invesco's 2025 Global Sovereign Asset Management Study reveals what many industry insiders have sensed: Infrastructure allocations (8.1%) have decisively surpassed Real Estate (7.3%) among sovereign wealth funds. This historic crossover, marking the third consecutive year of declining Real Estate allocations, formed the crucial backdrop for our recent panel discussion on "State of the Industry: Real Assets in 2025 and Beyond."
This allocation shift signals more than just changing preferences—it represents a fundamental rethinking of how institutional investors approach real assets in a world of higher interest rates, geopolitical uncertainty, and urgent sustainability imperatives.
So, the central question for our panel discussion was not if the landscape is changing, but why, and what it means for investors and providers. How are macroeconomic forces, technology, and global uncertainty reshaping the very definition of real assets?
To explore this, we were joined by an exceptional group of experts:
Moderator Dr. Marie-Laure Mikkelsen, Founding Partner, Alfinas Alternative Investment Advisers
Panelists
Andrew Angeli, Global Head of Real Estate Research & Strategy, Zurich Insurance
Thomas Veraguth, Chief Investment Officer Global Real Estate Strategy, UBS Wealth Management
Leonard Niesel, CFA , Principal, Infrastructure, Mercer
Christoph Stagl, Partner & Investment Director, Vauban Infrastructure
The End of Cap Rate Compression Era The panel unanimously agreed that the era of relying on 'cap rate compression' to drive returns is over.
As Thomas Veraguth emphasized, rising long-term interest rates have fundamentally altered the investment landscape. The increased cost of capital and more appealing fixed-income alternatives have reduced buyers' willingness to pay premium prices, particularly in sectors like office and select retail where values are stabilizing or declining.
Leonard Niesel highlighted how this has materially increased return targets by for core infrastructure funds to compensate for the higher cost of capital.
Andrew Angeli noted the profound impact on underwriting standards, with deals increasingly falling through due to revised discount rates.
The Macroeconomic Backdrop: The Repricing of Risk The numbers tell a clear story: Real Estate's allocation decline from 2022 to in 2025 reflects the challenging interest rate environment described by our panelists. The core investment calculus has fundamentally changed:
Higher Return Targets: Thomas Veraguth emphasized how rising long-term interest rates have fundamentally altered valuations. This was underscored by Leonard Niesel, who noted a corresponding increase in return targets for core/core+ infrastructure funds to compensate for the higher cost of capital.
Geopolitical Strain: Beyond rates, the consensus was that geopolitical uncertainty is acting as a major accelerator, creating a bifurcated market and slowing transaction activity.
Why Infrastructure is Ascending
Our infrastructure specialists, Christoph Stagl and Leonard Niesel, identified several clear factors driving Infrastructure's ascendancy and its new leadership position in the allocation mix:
Inflation Resilience: Infrastructure’s natural hedging characteristics and regulated return frameworks provide stability in volatile markets.
Long-term Visibility: The asset class offers predictable cash flows that align perfectly with institutional liabilities.
Thematic Tailwinds: Energy transition, digital infrastructure, and supply chain resilience represent massive, addressable markets.
The Operational Imperative: From Passive Holding to Active Value Creation With financial engineering and broad market exposure (beta) no longer driving returns, the focus has shifted decisively to active, operational excellence—a strategy that requires new capabilities from investors.
Christoph Stagl shared compelling examples of how strategic repositioning of mid-cap assets—particularly family-owned infrastructure businesses—can transform them from private equity targets to infrastructure profiles, commanding entirely different valuation multiples.
Operational Adaptation in Real Estate Rather than signaling Real Estate's demise, this shift highlights its changing function within portfolios. As Andrew Angeli explained, the sector is moving from broad beta exposure to targeted alpha generation through:
Operational Intensification: Hands-on management to drive genuine NOI growth.
Sector Specialization: Focusing on high-growth, high-demand property types.
Technological Transformation: Leveraging technology for efficiency, revenue optimization, and platform efficiencies.
The panel identified that Real Estate M&A activity is now increasingly driven by investors seeking strategic acquisitions that offer operational upside through hands-on management and property repositioning opportunities, rather than just buying portfolios.
Convergence and the Energy Fundamental
During our discussion, we explored how the traditional boundaries between Real Estate and Infrastructure are blurring, with energy acting as the primary convergence accelerator. As highlighted in a recent industry analysis, firms are now combining their real estate and infrastructure platforms to better address power constraints—a trend our panelists confirmed is increasingly prevalent.
Energy & Innovation: The New Fundamental
Our panel identified energy constraints as a critical factor reshaping investment decisions across sectors:
Beyond Data Centers: While AI and data centers dominate headlines, energy considerations are now impacting industrial, logistics, and even traditional office assets.
On-Site Generation: The ability to generate and manage power on-site is transitioning from a cost center to a value-creation opportunity.
Grid Limitations: Aging power infrastructure and rising demand are forcing real asset owners to take greater control of their energy destiny, making strategic energy management an essential lever for driving NOI growth. Leonard Niesel highlighted how infrastructure investors are increasingly looking at energy solutions that serve real estate portfolios.
The Global Growth Hunt and The New Investment Framework The consensus from our panel was clear: success in this new environment requires embracing both sides of the Real Assets equation. The future belongs to investors who can balance infrastructure's defensive characteristics with real estate's repositioning opportunities while maintaining discipline across both asset classes.
Andrew Angeli provided crucial insights on cross-border strategies, explaining both why Swiss investors must look abroad for growth and why Switzerland remains compelling for foreign capital. This theme expanded into a broader discussion about capital flowing toward markets with favorable demographics, lower capital costs, and stronger growth fundamentals.
Furthermore, both Andrew Angeli and Thomas Veraguth agreed that the overall outlook for the Swiss Real Estate sector remains positive, pointing to persistent opportunities across the residential, industrial, retail, and office segments.
The New Investment Framework
The panel established that investors will be able to maintain attractive returns and resilient portfolios in this new environment by adhering to a sophisticated framework:
Look beyond the "infrastructure versus real estate" binary.
Recognize energy as a fundamental driver of asset value across both classes.
Build capability to navigate this converged landscape.
Identify opportunities where on-site power generation can enhance returns.
A crucial point noted by Thomas Veraguth is the need to understand that energy constraints in real estate represent both a risk to mitigate and an opportunity to capture value.
KEY TAKEAWAYS FOR 2025:
Active Value Creation: Passive holding strategies must give way to active, operational value creation.
NOI Growth: Real NOI growth through hands-on asset management is the new priority.
Convergence: Recognize energy as a fundamental driver of asset value across both classes.
Geographic Diversification: It is crucial for accessing growth in a fragmented world.
Disciplined Focus: Pair revenue certainty in core assets with strategic bets on agile operators in emerging sectors.
The panel concluded that success in this new environment requires a disciplined approach pairing revenue certainty in core assets with strategic bets on agile operators in emerging sectors.The future of real assets belongs not to those who choose between real estate and infrastructure, but to those who can skillfully navigate their convergence while maintaining discipline across both asset classes.
How is your organization adapting to this new era of active real asset management? Share your experiences below.
Team Alfinas
Learn More
For more information about the 8th Switzerland Institutional Forum and to explore the full program, visit the Market Group website: Introduction | MarketsGroup.
You can also download the program directly here:
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