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Infrastructure Strategic Outlook 2025

Infrastructure
Alternatives

1/17/2024

Richard Marshall

Head of Infrastructure Research

  • The macroeconomic outlook for infrastructure is favourable in 2025. Interest rates have begun to moderate which should relieve some of the pressure that assets faced over 2024, while economic growth and inflation are expected to remain supportive to earnings growth. However, risks are weighted to the downside from the uncertainty around a potentially more challenging – and inflationary – trade environment.
  • Infrastructure continued to deliver positive returns in 2024 for investors, although we expect performance to improve in 2025. In particular, assets with greenfield development pipelines have faced increased scrutiny under the higher rate environment, boosting investor confidence that valuations are solidifying.
  • The relationship between transactions activity and fundraising volumes was made stark over 2024, but as confidence in the M&A market returns, liquidity should increase and infrastructure’s fundraising will likely recover.
  • The re-election of Donald Trump in the United States has seen uncertainty return. For infrastructure investors, much will depend on the level at which the new administration will intervene in markets, be they global trade markets or domestic clean energy markets.

 

Infrastructure Strategic Outlook 2025

A More Supportive Environment for Recovery

2025 is set to be a more positive year for the unlisted infrastructure market in our opinion, although 2024 laid much of the groundwork for a recovery to fully take hold. Valuations have remained robust for the market as a whole, and those sectors which have experienced repricing – namely those with high capital expenditure profiles – have now settled and are beginning to attract investor attention. As confidence (and the need to divest) builds, transactions activity likely will tick upwards, releasing liquidity into the fundraising market, satisfying a continued demand from investors to allocate higher levels of capital to the strong performing infrastructure asset class.

1 / Macro Update

What was a comparatively benign outlook for the global economy following the moderation of inflation and interest rates over 2024, has now shifted to a more defensive stance as markets brace for the potential impacts from tariff-related trade disruptions.

 

1.1 Focus Shifts to Trade & Growth

With the infrastructure asset class having performed well during the last few years of macroeconomic volatility, prospects for more uncertainty in the global economy is not necessarily a threat to that continuing. However, as seen in the transactions and fundraising markets over 2023 and 2024, perceptions of risk and uncertainty can be damaging by constricting market activity.

In 2025, our outlook is for a more positive global growth environment with inflation having fallen and interest rates in Europe and the U.S. having begun the transition towards the neutral rates. The victory of Donald Trump in the November 2024 U.S. presidential election, however, does raise the prospect of the expected more benign monetary policy and inflationary conditions being derailed through the implementation of numerous trade tariffs towards the end of 2025 (see Section 3.1).

A resilient US economy and recovering growth across Europe is expected to lift global economic growth to 2.8% in 2025 and 2.9% in 2026[Disclaimer: Oxford Economics forecast, December 2024.]] – a marked improvement on 2024, particularly in Europe. That being said, industrial activity in Europe will likely remain a weak spot due to cost pressures and competition from China, while the potential imposition of trade tariffs will pare back fixed investment in economies across Europe, Asia and the Americas with heavy exposure to the US. It is not until late-2025 that the potential direct impacts of new tariffs may take effect, meaning their impact on inflation conditions will likely remain subdued for the time being. The extent to which the US implements new trade tariffs is still an unknown, with most economic forecasters’ baseline scenarios now expecting a relatively tempered approach to tariffs from the new Trump administration. The risk of more severe economic policies, including the utilisation of tariffs to the point of triggering a global trade war, does weigh heavily on most investor confidence in many surveys, and would significantly eat into global GDP growth from 2026 onwards (see Chart 2).

Infrastructure Strategic Outlook 2025
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