2024 Infrastructure outlook

Although infra-skeptics have raised some valid concerns about the asset class, we also believe that sentiment has turned too bearish. We see silver linings going into 2024.

Alex Leung, Head of Infrastructure Research & Strategy

Private infrastructure had a challenging 2023. Although performance remained relatively stable, fundraising is at the weakest levels in 10 years, while deal volumes have fallen 40% year-on-year due to wide bid-ask spreads. High interest rates, mixed economic outlook, and geopolitical tensions continue to weigh on the industry.

In our 2023 infrastructure outlook last year, we were relatively cautious about the asset class due to uncertainties in the macro environment. But with most of 2023 behind us, we now wonder whether markets have actually become too bearish. Infra-skeptics often express disbelief around infrastructure’s current valuations and performance, and suggest that it is best to remain on the sidelines before the eventual correction.

Other skeptics also point to sectors specific issues, including concerns about the big secular trends that we highlighted our research insight `Infrastructure investing – the myths and realities’ in 2023. For example, on deglobalization, they question whether onshoring is actually real, since global trade volumes are still rising. On digitalization, cynics are wary of the hype around artificial intelligence (AI), especially since digital infrastructure has seen a pullback in investor expectations. On decarbonization, they worry about the backlash against clean energy, given the growing number of negative headlines about anti-renewable policies and project cost inflation.

In our view, some of these questions are valid, but the negative sentiment also appears overdone. The evolution and development of private infrastructure has never been a straight line. Looking into 2024, we see silver linings for the asset class. In this year’s outlook, we will explore how 2023 played out compared to our expectations, and we will also answer five tough questions that investors are asking:

1. Valuations: is infrastructure’s resilience too good to be true?
2. Market timing: should we wait for the correction to buy the dip?
3. Deglobalization: if this is real, why are trade volumes still rising?
4. Digitalization: is AI just another fad for digital infrastructure?
5. Decarbonization: are we underestimating the clean energy backlash?