Institutional investors expect an end to the “wait-and-see” approach in the real estate market and are planning to increase their investments in the energy transition and digitalisation, according to a recent survey.
According to Patrizia’s fourth annual client survey, over half of respondents plan to increase their investments in the energy transition, including renewables and alternative energy solutions, within the next five years. Meanwhile, more than 40% intend to invest more in digitalisation, such as data centres or fibre-optic networks.
Nearly two-thirds of institutional investors anticipate an increase in real estate transactions over the next two years, with only 18% predicting further decline. This marks a significant shift from last year’s survey, where 64% expected a decrease in market activity, the survey disclosed.
James Muir, head of the investment division at Patrizia, said: “Similar to our own investment view, we see a growing sentiment that investors are beginning to align their portfolios with the key megatrends of digitalisation, urbanisation, energy transition, as well as the living transition, which all represent attractive investment opportunities. Most investors also expect significantly more investment activity in real estate in contrast to last year’s sceptical outlook.
“They are seeking opportunities to get exposure to investments in smart real asset solutions with the convergence of real estate and infrastructure now occurring almost everywhere, be it digital infrastructure, mobility, connectivity, the transition to renewable energy or modern, service-oriented living.”
According to the survey, institutional investors are focusing on logistics and residential, with many planning to increase allocations to these sectors. They also see a growing importance of asset management and are expanding their investments in infrastructure, particularly renewable energy and digital infrastructure.
Mahdi Mokrane, head of investment strategy and research and fund management real estate at Patrizia, said: “The combination of smart infrastructure and real estate investments is key for long-term investment success. Both asset classes allow investors to benefit from the megatrends of our time that are driving the next growth phase of our industry.
“We see a growing need for intelligent solutions that integrate both asset classes and we believe this can be a key differentiator for us given our technology expertise and long track record in real estate and infrastructure investments to shape the future of the real assets industry.”
According to Patrizia, 73% of respondents now consider ESG criteria important in their investment process, up from 60% two years ago. When tracking ESG, investors prioritise energy consumption, with 71% aiming to monitor this across their real estate and infrastructure portfolios.
However, 59% cite a lack of data quality and standardisation as the biggest obstacle to more sustainable investments, followed by changing regulatory requirements (57%). Only 11% perceive a lack of sustainable investment opportunities as a major challenge, the survey found.
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