Strategic View: First quarter 2025 confirmed a structural shift where AI infrastructure and data centers displaced office and retail as the preferred “real asset” allocation for institutional club investors. Major platforms including Blackstone and Brookfield are deploying billions into power generation and cooling systems for AI-ready facilities .
Full story: Q1 2025 marked the definitive moment when “AI Infrastructure” officially became the new “Prime Office Real Estate” for institutional capital deployment. Major alternative asset managers including Blackstone, Brookfield, and KKR are systematically redirecting capital from traditional commercial real estate into power generation, cooling systems, and data center construction specifically designed for AI workload computing .
The shift reflects fundamental changes in return profiles and demand drivers. While office occupancy struggles post-pandemic and retail faces e-commerce disruption, AI data centers offer multiple compelling advantages: long-term contracts with hyperscale tenants, inflation-protected lease escalators tied to power costs, and structural demand growth driven by foundation model training requirements. Unlike speculative office development, AI infrastructure benefits from visible, multi-year tenant commitment pipelines .
The “club” dimension emerges from sheer capital requirements. Building AI-ready data centers demands utility-scale investment—often $5-10 billion per campus—encompassing not just physical construction but dedicated power substations, advanced cooling infrastructure, and fiber connectivity. These magnitudes exceed typical real estate fund capacities, necessitating collaboration between real estate platforms and energy infrastructure specialists. Blackstone’s data center platform, for example, partners with energy funds to develop integrated power-and-cooling solutions .
This convergence creates a new asset class: “Digital Infrastructure.” Traditional boundaries between real estate, utilities, and telecommunications blur as data centers become complex systems integrating multiple infrastructure layers. The investment thesis centers on AI’s insatiable appetite for compute power—a secular growth driver that appears far more durable than cyclical office demand or discretionary retail spending. For institutional allocators, this represents rare combination of infrastructure-like stability with technology-driven growth potential .
Summary: Institutional capital’s aggressive pivot from traditional commercial real estate into AI data centers and energy infrastructure represents a fundamental reallocation toward assets offering long-term contracted revenues, inflation protection, and secular AI-driven demand growth. The utility-scale capital requirements necessitate club structures combining real estate and energy infrastructure expertise in integrated development platforms .
Source: KPMG Pulse of PE Q1’25
