Market Research
Infrastructure Quarterly: Q2 2025
June 24, 2025 10 Minute Read Time
Introduction
Author
Head of Infrastructure Research
Author
Senior Research Analyst
Although the start of 2025 saw rollercoaster market volatility and tense global trade dynamics, infrastructure markets demonstrated resilience and adaptability. The rise in capital inflows and doubling of greenfield deal activity in data centers and renewable energy speaks to the market demand for infrastructure despite pending tariffs and policy uncertainty. From the surge in AI-driven data centers to the structural uptake in clean energy deployment, investors are navigating a complex, but opportunity-rich environment. In this edition of the Infrastructure Quarterly, we speak with a global forecasting firm Oxford Economics about the potential impact of an escalating tariff war on global trade and the transport segments at risk.
Market performance
Listed infrastructure outperforms broader equities
Listed infrastructure outperformed relative to broader public equities, marking a shift not observed in recent years. Over the trailing 12-month period to Q1 2025, the asset class outperformed global equities—as represented by the MSCI World index—by approximately 660 basis points (Figure 1). In a turbulent start to the year, driven in part by renewed geopolitical tensions and tariff announcements from the U.S., listed infrastructure served as a relative safe haven for investors due to its defensive characteristics.
Figure 1: Infrastructure, bonds and equities annualized total returns, %
Private infrastructure continues to exhibit consistent performance with returns ranging from 8%-11%. This stability highlights resilience of the asset class to macroeconomic headwinds and market volatility. According to the MSCI Global Private Infrastructure Asset Index, Australia emerged as a standout performer in Q4 2024, delivering a 100 basis point improvement quarter-over-quarter. The region presents compelling long-term opportunities, particularly in transport and renewable energy, where project pipelines align with national efficiency and environmental objectives.
Digital infrastructure remains a key driver of outperformance within the broader infrastructure landscape. As illustrated in Figure 2, the sector consistently exceeded the returns of the private infrastructure index, with a differential of approximately 300 basis points. Tariff pressures may increase the cost of construction and pressure data center developers’ margins to the extent they are not covered by cost pass-through mechanisms and hedging strategies. The strategic importance of artificial intelligence and sustained global investment in digital connectivity is reinforcing sovereign interest and creating local investment opportunities.
Figure 2: Private infrastructure and private digital infrastructure annualized total returns, %
Positive momentum in fundraising
Q1 2025 recorded the third-highest first quarter fundraising in the past five years, reaching $48 billion (Figure 3). This rebound suggests renewed investor appetite and growing confidence in the asset class. The pipeline of mega funds currently in the market further supports the potential for a strong fundraising year ahead. Emerging managers and new entrants continue to face headwinds, with fewer funds reaching final close and extended time on the road. Other structural challenges, such as lower M&A transaction volumes, contributed to a slowdown in exits for closed-end funds.
Data centers are emerging as a central investment theme in 2025. The sector is poised to benefit from accelerating demand driven by AI-related infrastructure needs, reinforcing its strategic importance within diversified infrastructure portfolios. While renewable energy continues to dominate, data centers accounted for 25% of all sector-specific capital raised and the broader digital infrastructure universe represented another 9%, according to Infrastructure Investor.
Figure 3: Private infrastructure fundraising, $ billions
The investor base continues to broaden, with retail investors increasingly recognized as a major frontier for fundraising (Figure 4). GPs are witnessing a marked rise in private market capital inflows, supported by a growing number of strategies tailored to individual investors. According to Bain & Company, private markets are projected to expand at twice the pace of public markets, reaching an estimated $60–$65 trillion by 2032 from $25 trillion in 2022.
To meet the rising demand, innovative vehicles, such as evergreen funds are launching. According to Adams Street Partners’ latest survey, 44% of financial advisors favor open-end evergreen funds versus 37% that favored traditional closed-end funds. These funds provide periodic liquidity beyond the lock-up period, eliminate capital calls and simplify taxes.
Figure 4: Percentage of assets under management by investor type
Deals
M&A activity hits a new low
Deal activity in Q1 2025 remained in line with the same period last year with total transaction value reaching $221 billion (Figure 5a). Due to cautious investor sentiment, M&A activity continued its multi-year downward trend, falling 9% compared to Q1 2024.
Greenfield investment provided a bright spot, fully offsetting the decline in M&A. This uptick underscores growing investor interest in new infrastructure development, particularly in sectors aligned with long-term sustainability and digital transformation themes.Renewable energy posted its strongest quarter on record, accounting for approximately one-third of total infrastructure deal volume (Figure 5b). A notable transaction in the quarter was the $1.74 billion acquisition of National Grid Renewables LLC, encompassing utility-scale solar, battery storage and onshore wind assets in the United States. This deal highlights continued investor conviction in the long-term fundamental value of renewable energy and the pricing opportunities in times of energy policy uncertainty.
Investors are also increasingly more interested in natural gas-fired generation assets signaling a strategic repositioning as the U.S. electricity demand continues to rise and the priorities of the U.S. government shift toward fossil fuels. NRG Energy intends to acquire 13 gigawatts (GW) of gas-fired generation capacity alongside 6 GW of virtual power plant capacity owned by LS Power Development. This effectively doubles its total generation footprint and aligns with a broader policy pivot toward domestic energy security.
In the digital infrastructure space, data centers solidified their stellar status. Investment in new data centers quadrupled, compared to the same period last year. The six largest data center greenfield announcements exceeded $2 billion and were all in the U.S.
Figure 5a: Private infrastructure dealmaking, values by deal type, $ billions
Figure 5b: Private infrastructure dealmaking, market share by sector, %
Sector insights
Power and utilities
With the increased penetration of intermittent renewable sources, the need for grid stability and the investment in battery energy storage has become more pressing. According to the U.S. Energy Information Administration (EIA), battery storage capacity is projected to total 29% of all new power generation capacity in 2025 (Figure 6). Developers have expressed strong commitments to sourcing domestically produced batteries, and with streamlined federal and state permitting policies, the U.S. could accelerate its transition toward a more secure energy future.
Faced with potential tariff increases on imports, the American Clean Power Association recently announced a landmark $100 billion commitment to manufacture and procure U.S.-produced batteries. The industry trade group aims to meet the entire domestic energy storage demand for batteries by 2030. This ambitious investment is expected to significantly bolster the U.S. energy sector, stimulate domestic manufacturing and generate substantial employment opportunities.
Despite the bold vision, the path forward is fraught with challenges. The proposed investment is contingent on stable tax and trade policies, and global competition, particularly from China, is intense. China currently dominates the battery market, producing nearly 90% of the world’s supply and maintaining a stronghold. According to Wood Mackenzie, only 30%–40% of U.S. domestic energy storage demand is expected to be met by domestic batteries by 2030. U.S. manufacturers face steep hurdles, including higher production costs, limited supply chains and a decade-long lag in production capacity.
Figure 6: U.S. planned utility-scale electric-generating capacity additions in 2025
Renewables
Clean energy technologies remain well-positioned despite macroeconomic volatility marked by elevated interest rates, unpredictable input costs and rising trade barriers. Renewables and electric vehicles continue to expand globally as declining costs, increasing technological maturity and innovation drive faster adoption. BloombergNEF projects renewable generation will increase 84% by 2030 and then double again by 2050, while the share of fossil fuels (coal, gas and oil) in the power system will fall from 58% to 25% (Figure 7). The speed of fossil fuel decline is uncertain since natural gas is an important source to fuel the insatiable power demand of proliferating data centers.
Figure 7: Electricity generation in terawatt-hour (TWh) on a global basis
Manufacturing has been the fastest-growing segment in U.S. clean energy since the Inflation Reduction Act (IRA) was passed in 2022. After peaking in 2024, investment slowed in 2025 and potential cuts to clean energy incentives raised concerns on the viability of projects. Announcements of clean energy manufacturing projects declined 23% year-over-year (Y-o-Y). Q1 2025 also marked a record high in clean manufacturing investment cancellations, with six projects totaling $6.9 billion withdrawn, according to data from Rhodium Group and MIT-CEEPR. These cancellations reflect growing uncertainty tied to shifting tariff policies, evolving federal regulations and escalating trade tensions.1
Uncertainty about the future of IRA incentives could adversely impact renewable energy development. The U.S. budget bill passed by the House of Representatives on May 22 accelerates the expiration of key incentives, compressing project timelines and eliminating critical safeguards such as safe harbor provisions. It also restricts access to incentives for projects with ties to China, disrupting renewable energy supply chains and potentially slowing deployment. The long-term implications remain unclear as the bill can still see modifications by the U.S. Senate that could have less impact on IRA incentives and renewable energy development. Market demand for new power load remains strong.2
Digital infrastructure
North America’s data center market experienced unprecedented growth in 2024, propelled by accelerating demand, particularly from AI-driven workloads. According to CBRE data center research, supply in primary markets expanded 34% Y-o-Y, reaching just below 7,000 megawatts (MW), with 6,350 MW currently under construction—more than double the prior year. Artificial intelligence is reshaping data center site selection and infrastructure design, with occupiers prioritizing scalable power and advanced connectivity. Emerging markets such as Charlotte, Northern Louisiana and Indiana are gaining momentum, supported by favorable tax incentives, land availability and power access.
The surge in demand has driven vacancy rates to a historic low of 2%, underscoring acute supply constraints. Average asking rates for 250-to-500-kW deployments rose 13% Y-o-Y to $184 per kW/month, reflecting sustained demand and limited availability (Figure 8). Traditionally, large tenants benefited from volume-based pricing discounts; however, the scarcity of contiguous space has significantly reduced or eliminated these incentives, increasing costs for hyperscale users.
CBRE also sees a widening pricing gap between legacy and new-build facilities. Modern data centers command a premium due to their energy-efficient infrastructure, which is critical for supporting high-density computing needs. Technologies such as liquid and immersion cooling are increasingly favored over traditional air systems, despite higher costs, as they meet evolving performance and sustainability standards.
Figure 8: Average asking rental rate for a 250-500 kilowatt requirement in primary markets, $ per kW/month
These shifts are reflected in capital trends. Hyperscalers continue to scale aggressively, with total capex projected to reach $390 billion by 2027. For 2025, capex is expected to grow 35% Y-o-Y, reaching $363 billion (Figure 9). Rising geopolitical tensions are behind strategic initiatives favoring non-U.S. markets. Microsoft reaffirmed its commitment to digital resilience by accelerating the expansion of its cloud and AI infrastructure across Europe. The company recently announced plans to boost its European data center capacity by 40% over the next two years, a move expected to significantly enhance the continent’s economic growth and global competitiveness.
Figure 9: Capex trends at major tech companies, $ billions
Transport
As global trade patterns evolve, key gateway regions will remain central to transport infrastructure investment and supply chain strategy. The U.S. administration’s stance will likely reduce international trade volumes, compounding demand pressures at major coastal ports.
Ten major U.S. markets account for the majority of foreign trade volumes, highlighting the concentrated nature of port activity. While international trade is vital to the U.S. economy, it represents a relatively small share of total freight movement in most regions. In Greater Los Angeles, which includes Los Angeles, Orange County and the Inland Empire, international freight accounts for just 31% of total volume, and in Greater New York, which includes the ports of New York and New Jersey, the figure stands at 25% (Bureau of Transportation Statistics).
Most ports reported rising traffic through Q1 2025, with the exception of Baltimore, where volumes declined following the collapse of the Francis Scott Key Bridge (Figure 10). Houston’s port continues to expand, supported by strong petroleum-based exports and enabled by its robust industrial base. The strong U.S. shipping demand may be temporary, reflecting inventory re-stocking and frontloading ahead of tariff implementation (CBRE Port Watch series).
Figure 10: Container traffic at major U.S. ports: trailing 12-month total relative to December 2019, twenty-foot equivalent unit (TEU)
Trade and cargo disruptions may also create long-term investment opportunities in transport and the logistics sector. Markets like Greater Los Angeles and Greater New York, facing near-term losses, could offer value for investors with extended time horizons. Inland markets, with limited exposure to global trade but strong manufacturing bases, are well-positioned to benefit from a shift toward domestic production.
Q&A
Q&A with Nico Palesch, Senior Economist at Oxford Economics
In this edition of Infrastructure Quarterly, we interview Nico Palesch, Senior Economist at global forecasting and consulting firm Oxford Economics covering the transport and logistics sector.
What is Oxford Economics’ view on the impact of recent tariff announcements on global transport freight activity?
The cumulative effect of all the tariffs announced since President Trump took office will be to put a severe and lasting dampener on global trade. We see exports across the world falling over the next three quarters, with the real value of goods shipped being over 4% lower by early next year than they would have been absent the tariffs. The bulk of this contraction in trade, and the freight activity that would otherwise have transported those goods, will be concentrated in the main combatants of the trade war, the U.S. and China. But no part of the world escapes unscathed because of the 10% global tariff and the interconnected nature of global industry. We’ve already seen some moves by Chinese suppliers to re-route goods through other countries like Vietnam and Thailand, boosting the local freight and logistics economies of those places, but we don’t think this kind of diversion can offset most of the lost activity globally.
World export of goods with constant price and exchange rate, $ trillions
Are there any segments of transport that are going to be more adversely affected, and why?
Truck and ocean freight stand out as the two segments most likely to bear the brunt of the trade war. Truck transport is going to be adversely affected anywhere where the tariffs result in lower industrial production and activity which, as per our forecasts, is almost everywhere in the world. Ocean freight, particularly along that crucial China-U.S. Pacific Ocean route, is also going to face a challenging environment: lower demand will eventually exert downward pressure on ocean freight rates, but there is also likely to be quite a bit of volatility in pricing as firms try to navigate shifting windows of opportunity to restock, as has been the case since the mid-May “truce” announced by President Trump.
If we focus on the United States, has your transport industry forecast changed, and how does it take into consideration the ongoing inventory front-loading?
Yes, our forecast for U.S. transport and logistics services has shifted quite a lot in the last few months. Though the data hasn’t officially come in yet, we expect the first quarter will show a surge in output, reflecting exactly that front-loading phenomenon already visible in the trade data. This should be followed by a significant decline in Q2 as the effects of what was essentially a multi-week trade embargo on China become visible in the data. The third quarter should be mixed: on the one hand we think that there will be quite a boost provided by incoming goods from China as firms rush to put in and take receipt of orders during the 90-day tariff truce with China; but on the other hand, we expect demand from U.S. industry to start taking a turn for the worse as uncertainty weighs down investment spending and the sectors that produce capital goods.
Conclusion
- Infrastructure presents an opportunity for investors seeking resilience and stability in a year of heightened geopolitical tensions and unpredictable tariff developments.
- Digital infrastructure continues to outperform the broader private infrastructure market, delivering a 300 basis points higher return on average. Hyperscalers are aggressively growing their capex, a large portion of which is devoted to AI and the cloud.
- The transport freight segments are likely to be most affected by tariff developments due to dampened global trade and reduced economic output. A shift toward local manufacturing will create transport opportunities for U.S. inland markets.
2 The new normal: How trade tensions and policy uncertainty may reshape the US cleantech landscape, S&P Global, May 28, 2025