News & media Blurred Lines: Infrastructure, Real Estate, and the Rise of Hybrid Assets
By Haig Bezian
The boundaries between traditional infrastructure and real estate are becoming increasingly porous. Nowhere is this more evident than in the evolution of data centres, assets that defy easy categorisation and challenge long-held assumptions about risk, return and asset class identity.
Historically, infrastructure has been characterised by high barriers to entry, long-term contracts, strong counterparties and the provision of essential services. Real estate, by contrast, has often been associated with cyclical demand, shorter lease durations and greater exposure to market volatility. Yet, as digital transformation accelerates, data centres have emerged as a hybrid asset class, one that straddles both worlds.
An evolution further fuelled by the increasing interconnectedness between infrastructure and real estate verticals. Assets once viewed as standalone are now shaped by the performance of the systems around them, such as energy supply, water access and digital connectivity. The integration of these verticals blending the risk profiles and operating considerations of once distinct asset classes.
A spectrum of operating models
At first glance, the term ‘data centre’ suggests a monolithic asset type. In reality, it encompasses a spectrum of business models. At one end, colocation facilities resemble unbranded hotels, with short-term leases, high tenant churn and operational intensity. These facilities often rely on multiple tenants, each with varying requirements and risk profiles. The operational complexity introduces a layer of risk more commonly associated with real estate.
At the other end, hyperscale data centres, leased to single tenants like cloud providers under long-term, triple-net arrangements, offer a more passive investment profile. These assets mirror core infrastructure: predictable cash flows, long-duration contracts, and limited operational involvement.
Sitting between these extremes are edge data centres, smaller, distributed facilities located closer to end-users to reduce latency and support real-time applications. These assets often serve regional demand and require flexible financing structures. Their hybrid nature makes them particularly illustrative of the sector’s convergence.
Digitalisation as an investment theme
In private markets, we’re seeing a widening range of exposures designed to cater to the digitalisation theme, even when removing the current AI hype, which we view as a long-term tailwind rather than the core exposure. Much of the investment thesis still rests on the fundamentals of cloud computing infrastructure.
Operationally intensive assets, such as colocation or edge facilities, may require corporate-level leverage structures, with a focus on cash flow coverage and operational resilience.
In contrast, hyperscale assets with long-term leases and single-tenant exposure may be better suited to asset-level financing, with LTV-based structures and greater emphasis on tenant credit quality. This bifurcation between operational risk and credit income is increasingly shaping approaches to underwriting.
Furthermore, investors are increasingly having to assess not only the assets themselves but also the interconnected verticals that make them operable, with power availability being a particularly decisive consideration when underwriting data centres.
Market treatment of hybrid assets
This diversity is also reflected in capital markets treatment. Stabilised hyperscale data centres often qualify for commercial mortgage-backed security (CMBS) financing, benefiting from rating agency criteria similar to traditional real estate. Their long-term leases and creditworthy tenants make them attractive to fixed-income investors seeking yield and duration. Conversely, data centres with more operational complexity may align more closely with asset-backed security (ABS) or, in some cases, whole business securitisation (WBS) methodologies. These structures focus on granular cash flow analysis, tenant diversification and operational performance, all hallmarks of real estate credit underwriting, but increasingly relevant to infrastructure-style assets.
Moreover, these financing decisions now often take account of whether the surrounding infrastructure is robust enough to sustain long-term operations, since the value of the asset can hinge on the strength of these linked systems.
Importantly, this convergence isn’t exclusive to data centres. Infrastructure investors are increasingly exposed to ancillary sectors, including transportation and housing. For instance, a logistics asset adjacent to a port raises the question: is it infrastructure logistics or simply real estate logistics? Similarly, social housing prompts debate, is it social infrastructure or private rented sector (PRS) real estate? Even if traditional investors don’t classify these as infrastructure, the underlying dynamics suggest otherwise.
As sectors converge, one open question remains: what still sets infrastructure apart from traditional real estate? A key differentiator is the high barrier to entry. Infrastructure assets often serve mission-critical functions and are strategically located. For example, a logistics facility adjacent to a major port may be considered infrastructure due to its irreplaceable positioning and limited alternatives. In contrast, a warehouse near a motorway may be more dependent on planning permissions and market dynamics, resembling traditional real estate. This distinction directly informs how we underwrite and structure our lending at Cordiant.
Our approach
At Cordiant, we approach these assets by underwriting the equity first to determine the size of the credit. Just as in real estate, the financing structure, whether fully amortising or bullet, is shaped by operational considerations, tenant risk and the nature of the asset. We assess whether the structure should reflect corporate-level leverage or asset-level LTV, and whether the tenant profile supports a credit income strategy versus operational exposure.
This lens enables us to capture the influence of adjacent infrastructure that may be essential to the asset’s performance, reflecting a market where cross-sector dependencies are now a core component of credit assessment.
Ultimately, it almost doesn’t matter how the asset is labelled. What matters is whether it aligns with our definition of ‘mission-critical’ and ‘real asset’, a framework that resonates with both infrastructure and real estate investors.
As these sectors continue to converge, we see growing alignment among investor groups and a shared interest in assets that combine durability, utility and operational relevance.