Core real estate stands to benefit from rising infrastructure risk
Why this matters
The renewed institutional interest in core real estate amid rising infrastructure risk underscores a notable recalibration in capital flows within US real assets. As geopolitical tensions amplify uncertainties around infrastructure investments—often characterized by longer development timelines, regulatory complexity, and political exposure—core real estate’s relative stability and income predictability gain prominence. This shift signals a flight toward assets with lower operational and execution risk, reinforcing core real estate’s role as a defensive allocation in diversified portfolios. For allocators and lenders, the trend suggests a tightening of risk appetites around infrastructure, potentially constraining capital availability and elevating financing costs in that sector. Conversely, core real estate may see increased demand, supporting pricing resilience and liquidity. The dynamic also reflects broader market positioning, where investors prioritize income stability and capital preservation amid macroeconomic and geopolitical headwinds. While infrastructure’s long-term growth prospects remain intact, the near-term risk premium is prompting a rebalancing that could influence sector fundamentals, capital deployment strategies, and lending conditions across US commercial real estate markets.
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The strategy is regaining its appeal as other real assets become more vulnerable amid heightened geopolitical tensions, writes Josh Pristaw, president at Clarion Partners, the investment manager of Franklin Templeton.
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