INVESTING IN A WORLD OF CONSTRAINTS

REAL ASSETS FOR NEW REALITIES

In a world of constraints, real assets may deliver inflation protection, income generation, and diversification through exposure to essential resources.

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Why Real Assets Now

We define real assets as ownership of private real estate, private infrastructure, and commodities and believe the defining investment challenge of the next decade may be less about identifying the next breakthrough and more about identifying the real assets required to support it.

Investing in a World of Constraints

The effects of near- and long-term constraints on real asset availability emphasize the need for significant investment in various forms. Yet, new infrastructure takes time to build, has limitations in planning and resources, and is capital intensive. 

 

Takeaways

  • The new macro regime is tightening constraints on real asset capacity; understanding the effects of the various constraints is critical for investors 
  • Most of the investment needed through 2050 is in traditional infrastructure, such as roads, rails, and electrical transmission 
  • With data center construction expected to plateau, segment the construction phase from equipment upgrade cycles 
  • The new macro regime includes elevated inflation pressure; real asset sectors respond to inflation differently, warranting active management 
  • Determine the real asset mix to pursue investment objectives, such as growth, income, inflation sensitivity, and diversification outcomes 
Bar chart showing projected infrastructure investment in 2050 and expected percentage change from 2026 across multiple sectors. Roads and bridges have the largest projected investment at $1.4 trillion, followed by rail at $875 billion. Most sectors show growth, including storage at 176%, rail at 119%, and transmission and distribution at 110%. Data centers are the only sector projected to decline, with investment falling 53%. The chart highlights significant long-term infrastructure spending opportunities, although growth varies by sector.
Source: PwC. As of April 2026. Spending figures are in real 2023 U.S. dollars. The exhibit reflects expectations, assumptions, or estimates as of a specified date and that actual outcomes may differ materially.

Real Estate Reset’s Global Opportunities

New supply across global property markets is expected to remain limited, even as development attractiveness reaches its highest levels in more than a decade.

 

Takeaways

  • Real estate valuations are recovering from the lowest levels in more than a decade; the sector’s returns historically follow periods of value recovery 
  • In a regime of structurally higher inflation and interest rates, income and rent growth will likely drive returns as opposed to yield compression 
  • Rental income fluctuates over the short term, but tends to track, or even outpace, inflation over the long run 
  • Real estate constraints can be acute in regional markets, leading to areas of specific opportunities, such as industrial facilities 
Bar and line chart comparing global industrial property supply growth with a model-based supply indicator from 1986 through a forecast period ending around 2030. Historical supply growth generally ranged between 2% and 4% annually. The forecast section shows supply growth declining to approximately 1% to 1.6% per year, while the supply indicator remains relatively stable. The chart suggests limited future supply additions that may support occupancy levels and rental growth.
Sources: CoStar, JLL, PMA, Oxford Economics, Bureau for Labor Statistics, World Bank, and PGIM. As of April 2026. Note: Construction Attractiveness Index is estimated using a regression that includes real global construction costs (three-year lag) and real prime global all property rents (two-year lag). Forecast is from 2026-2030. The exhibit reflects expectations, assumptions, or estimates as of a specified date and that actual outcomes may differ materially.

Data Center Constraints and the AI Buildout

The impact of the AI-demand shock is not only apparent in the prices for tangible inputs, such as electric components, suitable land, and power, but it is also visible in data centers themselves.

 

Takeaways

  • About 60% of the data center investment opportunity is through real assets, underscoring AI’s need for hard assets to scale 
  • We favor cloud-capable hubs and certain frontier markets; long-term leases are preferable 
  • Technology’s creative destruction and rapid advancements heighten the emphasis on capital-intensive, low obsolescent assets 
  • The political effects from mounting negative sentiment towards AI is another constraint for investors to navigate 
Combined bubble and bar chart showing U.S. primary-market data center rents and vacancy rates from 2021 to 2025. Monthly asking rents increased steadily from $120 per kilowatt in 2021 to $196 per kilowatt in 2025. Vacancy rates declined from 5.0% to 1.4% over the same period. The chart suggests demand has outpaced supply, contributing to rising rents and lower vacancy rates.
Source: CBRE North America Data Center Trends (H2 2022, H2 2023 , H2 2025; national average asking rate, 250–500 kW, primary markets) and JLL (year-end 2025). 2021 and 2024 rents interpolated from CBRE-reported year-over-year growth.

Connections to Commodities

Within a portfolio, commodities can complement public market exposures with a source of historically uncorrelated returns.

 

Takeaways

  • Consider commodities for a near-term, relatively liquid inflation hedge 
  • Focus on scarce resources supported by durable demand 
  • Weather-related developments play a significant role; determine the effects by geography and asset class 
  • Actively adjust exposure as inflation and supply conditions shift 
Bar chart comparing nominal and real returns during periods of elevated inflation. Commodities produced the highest returns, with a 14.4% nominal return and 7.1% real return. U.S. equities returned 4.8% nominally but lost 2.5% after inflation. U.S. Treasuries returned 6.1% nominally but had a negative real return of 1.2%. The chart indicates commodities historically provided the strongest inflation protection among the asset classes shown.
Source: PGIM, FactSet, Datastream, and Bloomberg. As of March 2026. High-inflation periods consist of average inflation of 7.3%. Based on a quarterly sample period from Q2 1973 to Q4 2025. Historical observations are not indicative of future results and that commodity-related investments involve risk, including possible loss of capital.

Approaches to Financing Real Assets

Financing approaches offer access to the sector with various attributes, including income generation, corporate credit diversification, and compelling relative value.

 

Takeaways

  • Consider financing for income generation, structural protection, and relative value
  • Look beyond yield to collateral, covenants, and payment priority
  • Assess diversification from corporate credit through asset-backed cash flows
  • Weigh relative value considerations from illiquidity and complexity
Line chart showing cumulative default and loss rates from 1983 to 2022 for non-financial corporate debt and infrastructure debt. By year 10, non-financial corporate debt reached a 14.3% default rate and an 8.9% loss rate. Infrastructure debt remained substantially lower, ending with a 1.3% default rate and a 0.5% loss rate. The chart illustrates that infrastructure debt historically experienced fewer defaults and losses than corporate debt.
Source: Moody’s Investors Service. Data from 1983-2022, latest data available.

Building a Real Asset Allocation

Aligning investment objectives with real asset exposures, associated risks, and liquidity needs can help build a real asset allocation.

 

Takeaways

  • We enhanced a 60/40 portfolio with a 20% allocation to the real asset-related sectors referenced within this report
  • The annual expected return of 6.75% represents a pickup of 28 bps over our base 60/40 portfolio
  • As private real assets were added, volatility measures declined, improving expected risk-adjusted performance
  • The Sharpe ratio in our enhanced portfolio improved by 6 bps to 0.43
  • Our even allocations to real asset sectors reiterate that specific exposures can be increased—such as an increase in commodities exposure as a short-term inflation hedge—or decreased depending on objectives
Line chart comparing expected annual portfolio returns before and after adding real assets. The income portfolio increases from 5.87% to 6.08%, the balanced portfolio increases from 6.43% to 6.88%, and the growth portfolio increases from 6.79% to 7.31%. Improvements are shown as 21, 45, and 52 basis points, respectively. The chart indicates that incorporating real assets may increase expected returns across different portfolio strategies.
Source: PGIM. As of August 2026. For illustrative purposes only. The core real estate allocation contains a 20% leverage assumption. See our Real Assets for New Realities report for additional detail.

More than one way to invest

Today's real assets opportunity extends beyond direct ownership. Investors can access housing, energy, digital infrastructure, food production, and logistics through private assets, public markets, and financing strategies.

 

*For illustrative purposes only. The examples shown are not representative of all PGIM capabilities or offerings. Availability is subject to investor eligibility and applicable legal, regulatory, and jurisdictional requirements.

PGIM CONNECTS ASSETS, CAPITAL, AND INSIGHTS

Capturing opportunities across real assets requires more than expertise in a single asset class. PGIM brings together real estate, infrastructure, and private credit insights to help investors navigate an increasingly interconnected real assets ecosystem.

Flexible Capital Solutions

PGIM invests across debt and equity, fixed and floating rates, and throughout the capital stack, offering flexibility across market environments.

Local Underwriting

PGIM pairs on-the-ground underwriting expertise with a global platform, offering insight into opportunities across regions and sectors.

Cross-Sector Experience

PGIM’s integrated platform helps connect trends and insights across the real assets ecosystem.

Asset-level Expertise

PGIM brings practical insight that can help inform investment decisions and risk assessment.

Featured Real Assets Offerings

Real Estate

Invest across global real estate markets through a broad platform of strategies and financing solutions.

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Infrastructure

Access infrastructure opportunities across credit, energy, digital infrastructure, and specialized debt strategies.

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