Macro Backdrop: Divergence and Adaptation
The global rate cycle has entered a new phase. After the aggressive tightening of 2022–2024, central banks in developed markets are now pursuing divergent paths: the Federal Reserve has begun a measured easing cycle while the ECB maintains a cautious stance given persistent services inflation across the eurozone. This divergence is reshaping capital flows into real assets globally.
For real estate, higher-for-longer rates in Europe have extended the repricing cycle — particularly in office and secondary retail — but have also created selective buying opportunities as motivated sellers accept discounts that were unthinkable three years ago. For infrastructure, the impact has been more muted; long-duration contracted assets with regulated returns have proven remarkably resilient.
Real Estate Outlook 2026
We enter 2026 with a constructive view on high-quality logistics, residential, and selected office assets in supply-constrained gateway markets. Logistics continues to benefit from the structural shift to e-commerce and supply chain regionalisation. Urban residential demand remains robust across European cities where housing supply chronically undershoots demand.
Office markets are bifurcating sharply. Grade-A, sustainability-certified buildings in core CBD locations continue to attract premium rents as occupiers concentrate their footprint in the best space. Older, energy-inefficient offices face secular obsolescence. We are actively avoiding secondary office exposure and selectively acquiring best-in-class assets at attractive yield spreads to bonds.
Infrastructure Outlook 2026
The energy transition remains the defining structural theme for infrastructure investing over the next decade. Renewable energy, grid modernisation, green hydrogen, and EV charging infrastructure all require substantial long-term capital. Government policy frameworks — the EU Green Deal, the US Inflation Reduction Act, and equivalent programmes in APAC — provide durable tailwinds for private capital deployment in this space.
Digital infrastructure — data centres, fibre networks, and cell towers — continues to benefit from structural demand growth driven by AI adoption and cloud migration. We expect digital infrastructure to account for a growing share of institutional infrastructure allocations over the next five years, displacing more mature sectors such as regulated utilities and toll roads at the margin.
Key Risks to Monitor
The principal risks to our constructive base case include a resurgence of inflation driven by energy price volatility or geopolitical supply shocks, a sharper-than-expected economic slowdown in Europe or China, and continued tightening of credit conditions in the commercial real estate debt markets. We are positioning portfolios defensively on leverage, prioritising assets with strong operational cash flows over development or value-add plays that rely on future financing conditions.