• Food retail is regaining popularity among investors – residential remains the most in-demand asset class
• Continued significant interest in real estate debt and data centers
• Risk appetite: core-plus dominates well ahead of core, with value-add catching up significantly
• Benelux, France, and Austria remain the most coveted foreign markets are – interest in the U.S. has fallen sharply
• Infrastructure funds gain momentum, with battery storage, solar, infrastructure debt, fund of funds and wind all in focus
• Secondary market continues to play an important role in the real estate segment

German institutional investors are once again showing greater interest in real estate special AIFs, following signs of a revival already emerging at the end of 2024. Recently, interest has particularly risen in food retail. Alongside residential properties, which remain the most in demand, logistics, real estate debt, and data centers are also in focus. These findings come from the results of the 10th survey for the LAGRANGE Fund Monitor to cover the first half of 2025. This is the bi-annual survey compiled by LAGRANGE Financial Advisory GmbH, in which representatives of institutional investors from insurance companies, banks, pension funds, and pension schemes are asked about their current investment preferences and market assessments.

A look at the proportion of real estate special AIF within the overall special AIF investment portfolio shows the index level at 7.06 points (H2/2024: 6.83 points), indicating slightly increased interest in expanding such investments compared with the previous survey. In this context, a score of 1 would signal a drastic reduction while a score of 11 would imply a drastic increase in the real estate proportion among institutional fund investments. Once again, respondents were asked to rate their degree of interest in infrastructure investments within the segment of special AIF investments, using the same scale. Here, the index reached 7.21 points (H2/2024: 7.10 points), a higher level than in the previous survey, with interest slightly exceeding that for real estate special AIFs.

Compared to the second half of 2024, risk appetite for investments in real estate special AIFs has slightly increased overall. Core-plus investments remained in first place with about 42 % of responses (H2/2024: 48 %), widening the gap over second-place core investments, while interest in value-add investments rose significantly. Core accounted for about 26 % of responses (H2/2024: 32 %), while value-add reached 24 % (H2/2024: 17 %), coming in close behind. Opportunistic investments – though still modest at 8 % – more than doubled compared with the prior survey.

Looking at real estate sectors, residential real estate still dominated, though with a slightly declining share of 13 % of the responses (H2/2024: 16 %). Notably, interest in food retail properties rose sharply, reaching 12 % (H2/2024: 9 %), nearly equaling residential. Logistics, previously in second place, ranked third with 10 % (H2/2024: 14 %), alongside real estate debt at 10 % (H2/2024: 11 %). Data centers followed with 9 % (H2/2024: 10 %). Office gained modestly to 7 % (H2/2024: 5 %), on par with hotels and light industrial at the same level, with healthcare close behind at 6 %. Overall, the survey indicates that earlier sharp distinctions between highly sought-after “core asset classes” and “niches” are narrowing, with the “smaller” asset classes now firmly established in institutional portfolios.

As far as target regions for real estate special AIF investments go, there was no change in the top two: Germany continues to lead as the most important market (16 %), followed by Benelux (14 %). France (10 %), Austria (8 %), and the UK (8 %) round out the top five. Interest in the U.S. fell sharply to 6 % from 12 % in the prior survey.

For infrastructure special AIFs, solar remained the top choice with 21 % of responses. Battery storage jumped into focus at 16 % after previously being in the single digits, marking the most significant shift. Infrastructure debt (14 %) and funds of funds also attracted strong interest (13 %). Regionally, Germany was mentioned more frequently as a target (43 %, H2/2024: 38 %). Other European countries held steady at 38 %, while interest in North America fell to 12 % (H2/2024: 19 %). Asia rose to 7 % (H2/2024: 4 %) but remained far behind.

When asked about the main motives for investing in real estate special AIFs, specific market opportunities (39 %) and portfolio risk diversification (39 %) were cited most frequently (H2/2024: 55 % and 35 % respectively). Management expertise (12 %) and inflation protection (9 %) followed at a distance. For infrastructure special AIFs, respondents emphasized specific market opportunities and diversification as well, with drawing on the management expertise also relevant, while inflation protection and lack of alternative opportunities played only minor roles.

Financing remains the top challenge in real estate special AIF investments (39 %), though this was less dominant than previously (H2/2024: 55 %). High property prices/low initial yields (27 %, H2/2024: 26 %) remained the second most cited concern. The risk of falling prices and rents (18 %, H2/2024: 13 %) and a limited supply of assets on the market (15 %, H2/2024: 6 %) were mentioned less frequently but more often than before. For infrastructure special AIFs, financing and product complexity (24 % each, H2/2024: 25 %) remained the key challenges, followed by risks of falling prices (18 %).

Asked about their inclination to buy units in real estate special AIF on the secondary market, respondents returned an index score of 6.24 points, lower than the relatively high level of the last survey (H2/2024: 7.39) but still positive. This likely reflects an increased interest in the primary market. As regards the inclination to sell units on the secondary market, the index reached 6.58 points, again higher than for acquisition, though well below the previous period (H2/2024: 8.06). Here too, a value of 1 indicates no interest, while 11 indicates very strong interest. The survey suggests that sectors of choice for secondary-market acquisitions include specifically units in funds invested in residential (36 %) and food retail (25 %), broadly mirroring primary market preferences. Secondary market disposal preferences, however, centered mainly on office (48 %), followed by logistics (23 %).

“Investors are once again showing stronger interest in infrastructure funds. In the real estate sector, residential properties remain a key focus, but food-anchored retail has now moved to the forefront - both in the primary and secondary markets. Demand for data centers has risen noticeably, and interest in hotels is also on the upswing. At the same time, the secondary market continues to be an important channel for many investors while deploying capital” says Sven Helmer, Managing Director at LAGRANGE.

Monika Bednarz, Managing Director at LAGRANGE, comments: “The sharp increase in interest in battery storage is particularly noteworthy, something we also observe in our daily conversations with investors. This aligns with the new trend in the infrastructure segment, where - alongside the established mega-funds - specialized managers and sector funds are increasingly gaining importance and coming into focus.”

Company Contact:
Lagrange Financial Advisory GmbH
Monika Bednarz
Managing Director
Phone:  +49 69 50 50 60 4932
Email: monika.bednarz@lagrange-fin.com

Press Contact:
RUECKERCONSULT GmbH
Peter Dietze-Felberg
Phone:  +49 30 2844 987 62
Email: dietze@rueckerconsult.de

About Lagrange Financial Advisory GmbH
Lagrange Financial Advisory GmbH (Chartered Surveyors) Lagrange Financial Advisory is an independent multi-asset financial advisor based in Germany, with focus on alternative assets (infrastructure, real estate, private equity and private debt), experienced both in primary and secondary transactions. The experts of Lagrange cover global markets in fund and debt advisory. Institutional investors predominantly come from Germany, Switzerland and Austria. Over the last 9 years, 46 various alternative investment funds were placed with investors (insurance companies, pension funds, pension schemes, banks, foundations, municipal and church institutions), with a total placement value of ca. EUR 3.2 bn, including more than 118 transactions.