Hot Take - What would a trade war mean for real assets?
The United States has announced a series of tariffs and other countries like China, Canada and Mexico are responding.
There are many things in finance that exist only on paper. Real assets aren’t one of those things.
With the potential to deliver a range of portfolio benefits—from less volatile capital movements to consistent distribution streams—real assets are one of the world’s fastest-growing asset classes. As a result, demand for high-quality real assets has recently increased among professional and retail investors alike. From shopping centres, healthcare facilities, and industrial warehouses to toll roads, airports, and schools, real assets have a tangible, beneficial presence in the world.
Commercial real estate is at a pivotal moment. After years of rising interest rates and changing consumer behaviours, the landscape is shifting—bringing renewed optimism and fresh opportunities. Falling interest rates and stabilising property values are delivering greater confidence in real assets due to their ability to provide a level of tangible stability, inflation protection, and long-term growth potential. As global markets navigate economic shifts, real assets can offer a defensive investment avenue, benefiting from predictable income streams, population growth tailwinds, and sustainability-driven value appreciation.
The five key benefits of real assets
1. Real assets, real diversification, real choice
Infrastructure and real estate both have a land component to their value, but what connects them is their importance to the economy at large and the relatively consistent distribution streams they have delivered.
Real Assets encompass everything from wind farms, life science buildings, offices, and mobile phone towers to convenience retail, airports, student accommodation, service stations, retirement living, and industrial warehouses. Diversification benefits and attractive risk-adjusted return potential make them ideal options for income-oriented investment portfolios.
In 2025, investors are increasingly drawn to real assets for their ability to hedge against market volatility while maintaining strong income generation.
2. Deliver growth and income opportunities
Over the past 10 years, real assets—including infrastructure and real estate — have offered returns commensurate with or above those for Australian equities, at significantly lower volatility.
They are defensive thanks to the predictability of the income they deliver. Regardless of the profitability of tenants, the rent on the properties they lease—whether that be warehouses, retail space, or head office locations—is still typically reliable. This makes distributions paid from rents generally more reliable than dividends paid from corporate earnings.
Even during a once-in-100-year pandemic, assisted by the Government’s leasing code of conduct and landlord support, most rental streams held up. In a sign of their financial strength, rent collection rates have now largely returned to normal. It’s the rent collected from tenants, secured by long-term leases, that delivers the distribution of relatively high, sustainable income to real estate property investors.
3. Inflation protection
The value of real assets and the income they generate tends to keep pace with inflation over extended periods.
In real estate, rents can be increased (but not reduced) over the lease period, typically triggered by inflation protection clauses in the lease or regular rent reviews. While rents can fall at the end of a lease, regular reviews may mitigate against inflation.
Many infrastructure assets also provide inflation protection through contract-mandated price increases. Both factors are particularly important to investors in retirement, who are living on the income and distributions their assets generate.
4. Population growth drives demand
Australia is one of the few advanced countries with a rapidly growing population. As more people enter the country, real assets tend to experience more per square metre usage, without a corresponding increase in costs.
Population growth leads to highly profitable marginal income for infrastructure assets like toll roads and airports but also for real estate like shopping centres and industrial warehouses. Migration, like tourism, is great for infrastructure and real estate investors.
In the coming years, both are forecast to rise rapidly1,2, delivering a powerful tailwind to real asset investors. With urban expansion and infrastructure development accelerating, real assets are positioned for sustained demand and profitability.
5. Real sustainability, real performance
From construction to everyday usage, tangible assets tend to be large emitters of carbon. Buildings are currently responsible for 39% of global energy-related carbon emissions: 28% from operational emissions, and the remaining 11% from materials and construction. That begs a question—can emissions be reduced without it costing the earth or impacting returns?
There’s a growing body of evidence indicating that investing according to ESG principles leads to higher long-term share price performance. New York University’s Stern Centre for Sustainable Business conducted a meta-study titled ESG and Financial Performance, finding ‘a positive relationship between ESG and financial performance for 58% of the corporate studies focused on operational metrics such as ROE, ROA, or stock price’.
In 2025, sustainability is no longer optional—it’s a key driver of asset value and investor preference. Real assets that integrate ESG principles are increasingly sort after, benefiting from regulatory incentives and growing demand for environmentally responsible investments.
1. Tourism forecasts for Australia 2022-2027
https://www.tra.gov.au/economic-analysis/tourism-forecasts-australia/tourism-forecasts-for-australia-2022-2027
2. 2022-23 Budget: Australia’s Future Population
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