Building back the market: How public-private capital is rewiring U.S. infrastructure

The U.S. infrastructure market is emerging from a period of higher rates and cautious deal flow into something more durable. That was the throughline of a recent panel at the 2026 Proximo Congress, Foundational Infrastructure: Building Back the Market, which included Tom Mulvihill, Managing Director and head of Infrastructure and Public-Private Partnerships (P3) team at KeyBanc Capital Markets. Mulvihill — along with experts across development, investment, advisory, and bond insurance — examined how asset classes are converging, how risk is being repriced, and how public and private capital can be structured together.

The task at hand is formidable. The American Society of Civil Engineers’ 2025 Report Card graded U.S. infrastructure a “C” and pegged the 10-year investment gap at $3.7 trillion, while a PwC–Oxford Economics outlook estimates a $32.7 trillion U.S. investment “super-cycle” through 2050.^1,2 Against that backdrop, the panel’s message was clear: the headwinds are real, but they are not stopping deals from getting done.

A higher-rate reality — but not a stalled market

Higher-for-longer has settled in as the market’s base case, and dealmakers are now accounting for that interest rate recalibration in their underwriting. One year ago, few would have bet on the market pricing in fresh increases. Today, panelists were candid that elevated rates are testing patience. However, the prevailing view at the conference was that the pressure is not severe enough to slow deal flow materially. What matters more is rate stability: predictable financing costs, not a particular level, are what let business cases move forward with conviction.

The panel pointed to catalysts that could unlock the next wave of transactions: limited partners pressing for distributions; 2018 – 2020 vintage funds reaching the end of their investment periods; and an AI- and energy-transition capital-expenditure supercycle. The data reinforces that last point: the five largest U.S. hyperscalers are on track to spend roughly $725 billion on AI infrastructure in 2026, a 64% jump over 2025.³

Where the activity is

Higher education emerged as a notable bright spot in the conversation despite the negative 2026 outlooks issues by Fitch, Moody’s, and S&P Global due to enrollment declines, rising costs, and federal-policy uncertainty.⁴ Yet that pressure is precisely what is drawing institutions toward private capital. As Mulvihill observed, universities have “finally bought in that we don’t need to use our debt for everything — let’s bring private capital in,” fueling activity across student housing, energy, parking, research labs, and even campus hotels.

Transportation is reigniting as well, with managed-lane projects gaining fresh traction and federal efforts advancing surface-transportation reauthorization. Panelists touched on private healthcare, airport redevelopment, and university energy concessions, reflecting how the definition of “infrastructure” is broadening as asset classes converge.

Risk transfer and the power of a champion

If one theme cuts across today’s market, it is that appropriate risk transfer determines whether a project reaches financial close. Deals can turn based on how fairly construction, revenue, and termination risks are allocated between partners.

Panelists repeatedly stated that on the private-to-private side, they hinge on the credit quality and genuine buy-in of the sponsor. On the public side, Mulvihill noted that the transactions actually closing are the ones with a committed public champion empowered to negotiate and make decisions. In fact, KeyBanc Capital Markets’ infrastructure team publishes a quarterly deal pipeline where some prospects without that leader can linger for years.

Unlocking value — and new pools of capital

Value creation is emerging as a quieter source of opportunity, with much of it hiding in plain sight on public balance sheets. Too few owners ever fully assess what they hold.

“It would be great if owners actually tried to understand what they own and what the value could be if they did something else with it,” said Mulvihill. He pointed to land-rich, cash-poor universities weighing long-term ground leases that generate revenue while enhancing the campus. The consensus among investors, though, was a note of discipline: such real-estate-linked upside works best as genuine additional value, not a crutch for coverage, with certainty of cash flow paramount.

Funding social infrastructure is a harder, largely unsolved challenge. Availability-payment deals for courthouses and bundled school projects have been slower to materialize than expected, often because public owners lack the funding capacity to support the required payments. Several panelists suggested that the solution lies in greater creativity around capital — identifying additional sources of federal, state, and local funding and, as Mulvihill put it, having advisors “turn over every couch cushion” to make projects affordable.

Reasons for optimism

Federal efforts have been encouraging, with the U.S. Department of Transportation and Build America Bureau working to centralize P3 expertise and funding advisory capacity for state and local sponsors. States like Virginia have long been recognized as leaders in sharing knowledge across agencies. And the math itself is encouraging. With a multi-trillion-dollar investment gap to close, the sheer scale of the need is the opportunity, one that the panel concluded will reward the firms that show up as genuine partners to the public sector.

For KeyBanc Capital Markets, that partnership orientation is the point. Success is less about waiting for rates to fall and more about structuring financeable deals that pair the right capital with the right champions.
 

Learn more about our industry-leading public-private partnerships practice

To speak to an expert, contact Tom Mulvihill, Group Head, or Stephen Hill, Managing Director, Infrastructure Finance, KeyBanc Capital Markets.

Explore our recent deals and visit key.com/p3 to discover how we can help you with your next project and stay ahead of market trends.