Themes of the Year: Real estate firms taking on infra

With heavyweights PAG and ESR honing in on renewable energy and data centres in 2022, more real estate firms could be set to enter the infra space.

Infrastructure as an asset class isn’t likely to escape the volatility of the current macroeconomic environment entirely unscathed, but the overriding view of key players in the industry throughout the year was this: despite the slings and arrows thrown at the asset class, strong investment opportunities still remain. And 2022, it seems, was the year traditionally real estate-focused firms – particularly those centred on Asia – decided to go after those opportunities.

Take, for example, PAG, which made serious in-roads in not one, but two infrastructure sectors this year, establishing platforms in the renewable energy and digital infrastructure space.

First came the firm’s launch of FLOW Digital Infrastructure late last year. The company – which, in May, partnered with Manila-headquartered real estate developer AyalaLand Logistics to focus on data centre development in the Philippines – intends to invest upwards of $10 billion into digital infrastructure across the APAC region.

Doubling down on its infrastructure strategy, PAG followed this up with the July launch of its Asia renewables platform, PAG Renewables. Wholly owned by the firm, the platform plans to invest over $1 billion in renewable energy projects across Asia.

“The PAG Renewables platform, like FLOW Digital Infrastructure, will allow PAG to capture the increasingly attractive opportunities we are seeing in the infrastructure space,” PAG group president Jon-Paul Toppino told Infrastructure Investor at the time. “There is significant runway for growth in these industries, and we see PAG at the forefront of that expansion.”

Also jumping on the infra train this year was ESR. In July, the firm, which bills itself as the world’s third-largest real estate investment manager, reached a $1 billion first close for its Asia-Pacific-focused inaugural data centre fund ESR DC Fund 1 – which the firm very much views as an infrastructure fund, despite its extensive real estate expertise.

While data centres may be seen as something of a grey area between real estate and infrastructure, ESR also announced its first foray into traditional infrastructure when its wholly-owned subsidiary ARA Asset Management – acquired by ESR in January – launched China-ASEAN Investment Cooperation Fund II, which reached a $1 billion final close in November.

With infrastructure appearing to prove its resilience in these uncertain times and the overall surge in investment in the energy transition and digital sectors expected to continue, it’s no wonder firms not usually focused on the asset class are struck by its appeal. Add to that the undeniable momentum of Asia’s market growth, and it looks like it may be full steam ahead for more APAC-focused real estate firms like PAG and ESR jumping on board.