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26 September 2024 • 6 minute read

Trends in infrastructure: An evolving asset class

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Our new report, in collaboration with Infralogic, analyses the infrastructure sector, capturing its latest trends and investment strategies. To compile the report, we surveyed senior executives who invested in the infrastructure sector in the past 24 months. The report aims to provide a global pulse check and roadmap for navigating this dynamic asset class. It offers a 10-point guide to the current landscape, its key opportunities and emerging risks.

Key insights from the report include:
  • Fundraising and investment intentions: Almost three-quarters (70%) of respondents expect their level of infrastructure fundraising to increase over the next 24 months, with 30% anticipating a substantial increase.
  • Energy transition is a primary driver: The global push towards decarbonisation is one of the most significant drivers of infrastructure investment. Nearly 54% of survey respondents identify the energy transition as a main catalyst for investment, with renewables and energy efficiency projects leading the charge.
  • The unstoppable rise of digital infrastructure: Digital infrastructure is rapidly becoming a focal point for investors, with 36% of respondents citing digitalisation as a primary investment driver. The expansion of data centres, cloud computing and AI is driving significant capital flows, particularly in developed markets such as Europe and North America.
  • Healthcare and social infrastructure deficit: The COVID-19 pandemic highlighted significant deficits in healthcare and social infrastructure. In response, 35% of total respondents expect increased investment in these sectors in Asia Pacific (APAC) over the next 24 months.
  • Risk mitigation strategies: At least two-thirds of respondents across all regions rely on proactive asset monitoring and management and independent experts to inform their decision-making and protect their investments from downside risks.
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Infrastructure: A resilient asset class

Infrastructure has experienced one of the most remarkable growth stories of any asset class over the past decade. Our report finds that this trajectory is set to continue.

From 2015 to 2022, the infrastructure asset class witnessed an exponential expansion, a confluence of tailwinds pushing it into the mainstream. In 2015, the infrastructure M&A market recorded 551 deals valued at USD148.5 billion. By 2022, these figures had skyrocketed to 2,105 deals worth USD658.4 billion, representing increases of 282% in volume and 343% in value. This impressive growth was fuelled by a favourable zero-interest rate policy (ZIRP) environment, which made borrowing for large-scale critical projects more attractive.

However, 2023 marked a reversal in the ascent. While still historically strong, dealmaking activity dampened compared to the previous record year. The number of transactions decreased by 14.5% to 1,800, and total M&A value fell by 43.7% to USD370.8 billion. This decline can be attributed to several factors, including high interest rates and tight debt markets, an escalation in geopolitical tensions and a wider pullback in private markets that is most evident in a slower leveraged buyout market. Yet, it appears that 2023’s downturn may only be temporary. While not yet on track to reach 2022’s peak, 2024’s deal performance demonstrates the sector’s resilience. With 909 deals valued at USD281.6 billion (as of August 2024), this year looks set to match 2023 on a value basis.

Looking ahead, there’s cautious optimism for a continued rebound. Stabilising interest rates, more realistic valuations, the unstoppable digitalisation wave and the pressing need for renewable energy infrastructure are expected to support activity. Moreover, the estimated USD286 billion in dedicated dry powder, as well as private equity’s growing interest in the sector, indicates unprecedented growth lies ahead.

"Achieving higher yields in this environment is about finding the right opportunities that offer differentiation and access to alpha. We focus on proprietary and bilateral deals – those that aren’t available to everyone which are driven by relationships and therefore we can avoid expensive auction processes."
Amanda Woods, Chief Investment Officer of Amber Infrastructure
"The last few years have presented the infrastructure asset class with both huge challenges – such as the pandemic, energy crisis, geopolitical tensions and higher interest rates – but also huge opportunities, including energy transition, digitalisation and governments' need for private sector funding to help meet their infrastructure and energy aims."
Martin Nelson-Jones, Partner, Global Chair of Infrastructure, Construction and Transport at DLA Piper

The road to energy transition

The decarbonisation journey continues apace and is seen as a major catalyst for future investment in the infrastructure space. The global energy mix is undergoing a rapid transformation. The International Energy Agency (IEA) has urged governments to support several pillars for action, including tripling renewable energy capacity by 2030. At present, this capacity looks set  to reach 7,300 GW by 2030, with an implied run rate of 2.5 times current levels being achieved by then. Even if countries under their current policies do fall short of reaching the IEA’s goal, it’s clear that this is a market in a pronounced growth phase.

Which of the following factors will be key drivers of infrastructure investments over the next 12-24 months? (Select top two)

Which of the following sectors offer the greatest opportunities for infrastructure investment globally over the next 24 months? (Select one)

Digitalisation: A strong catalyst for infrastructure investment growth

Digital infrastructure covers a gamut of asset types, ranging from data centres and telecoms towers to submarine cables and fibre to the premises, all of which enable digitalisation.

Scanning the horizon for investment opportunities, 18% of survey participants globally see digital-related projects presenting the greatest potential in the next 24 months. It follows then that expectations are high that capital will flow in this direction.

"Infrastructure remains an innovative and exciting asset class that has, yet again, responded to global change effectively and is evolving into an even stronger proposition for investors as the sector responds to the increasing need for high quality assets across jurisdictions."
Alison Fagan, Partner at DLA Piper
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Opportunities in healthcare, education and social care

Deeply entrenched demographic pressures have overstretched healthcare systems around the world for decades. The COVID-19 pandemic further exposed this major deficit, which is being compounded by advances in medicine. Novel treatments for chronic diseases, including gene and cell therapies, often require specialised infrastructure and outpatient care facilities to meet needs that existing infrastructure is often ill-equipped to address. Many governments have faced significant challenges in delivering on their mandate, highlighting the need for urgent investment. It comes as little surprise then that within the healthcare, education, and social (HES) infrastructure sub-sector, 78% of respondents expect healthcare specifically to attract the most investment over the next 24 months.

Within the healthcare and social sector, which of the following will attract the most investment globally over the next 24 months? (Select top two)

"Healthcare, education and social infrastructure is crucial to the normal functioning of any society and, whilst there is an undeniable need for it, it is clear investors are seeing varying levels of success in this sector."
Maria Pereira, Partner at DLA Piper

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Key contacts

Martin Nelson-Jones
Martin Nelson-Jones
Partner
Alison Fagan
Partner
Maria Pereira
Partner
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