PwC Says This Is The ‘Hottest Piece’ Of Real Estate In 2025
Investing in commercial real estate (CRE) can be challenging, with many looking for assets that promise high returns. For 2025, one sector that stands out is data centers, which PwC’s Bill Staffieri, alongside his partner Ricardo Ruiz, referred to as the “hottest piece of real estate right now” during their presentation at the ULI New York: Real Estate Outlook 2025 event at NYU Stern School of Business.
The AI Impact
Staffieri’s bullish stance on data centers is closely linked to the rise of artificial intelligence (AI), which is creating significant demand for these facilities.
“AI spending was just shy of $200 billion in 2024,” Staffieri noted, “and we expect that number to soar to over $800 billion in the next five years.”
Major Investments in Data Centers
Tech giants are rapidly ramping up their investments in data centers to capitalize on this growing demand. One of the biggest moves has been EDGNEX Data Centers, a subsidiary of DAMAC, which recently announced a $20 billion investment in data centers and related platforms. This investment marks DAMAC’s first venture into the U.S. market.
Amazon is also making waves, with its Web Services division planning to invest around $11 billion in AI infrastructure and cloud computing in Georgia, aiming to expand its data center presence and create 550 new jobs.
Meta is following suit, announcing a $10 billion AI-focused data center project in Richland Parish, Louisiana, one of the state’s largest-ever private investments.
With so much activity surrounding the sector, Staffieri added, “If I won the lottery, I’d invest in data centers. I believe this trend will continue for years.”
Don’t Overlook Retail and Self Storage
While data centers are generating a lot of attention, Staffieri also sees potential in the retail sector. While retail has had to adapt in the face of e-commerce growth, there’s still a solid outlook for certain types of retail.
“Most retail subtypes are seeing rent growth and stability,” he observed. However, he pointed out that power centers and outlet centers are facing challenges.
Additionally, Ruiz highlighted another sector to watch: self-storage. Despite facing some recent cap rate compression, self-storage remains strong. “It’s largely institutionalized, with strong demand,” he explained.
On the other hand, Ruiz expressed concerns about the life sciences sector, which he ranked as one of the weakest in terms of investment potential. “Oversupply in many markets is really affecting this space,” he noted.
As we head into 2025, it’s clear that while data centers are drawing the most attention, there are still promising opportunities in retail and self-storage, while caution is advised for life sciences investments.
Source: GlobeSt.