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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.

 

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Artificial Intelligence (AI) is one of many forms of technology that’s found its way into the commercial real estate sector and it could potentially radically transform how industry stakeholders operate and transact, CREXi’s Shanti Ryle recently wrote for WealthManagement.

AI’s impact on CRE could include improving productivity, decreasing operational spending and enhancing industry professionals’ ability to find, research and close deals.

“We’ve already seen transformation,” Ryle said. “AI’s recent advancements are ushering in a new era of technology tools to enhance commercial real estate’s relationship-driven business.”

Ryle identified five key areas where the CRE industry could leverage AI:

Administrative Tasks

As natural language processing ChatGPT and other AI versions have improved, technologies can handle different administrative processes. With AI taking care of those, CRE stakeholders and brokers have more time to focus on their business relationships and tasks that need their expertise. AI-powered tech can collect market and data reports, schedule meetings and property tours and update property listings. Additionally, AI bots continue to sound more natural when communicating with clients, which offers a seamless computer experience and frees up investors’ and brokers’ time.

Data Analysis and Research

AI has the potential to make the research and data collection process even faster. It can provide insights and metrics in almost real-time, compared to the days or weeks it would take analysts to complete. As macroeconomic conditions move faster, it’s critical that stakeholders receive property market information as quickly as possible.

CRE owners can also leverage AI’s forward-looking abilities. The technology can identify and predict trends in specific markets, assisting potential investors and brokers in determining what office space demand might look like in certain cities. The technology can also help industry professionals understand the risk factors that exist in a given area as well as determine potential development sites based on changing demographic information.

Automated Marketing

More CRE professionals have turned to AI to help generate their marketing materials, according to Ryle. Leaning on tech to create blog posts, listing copy and targeted social media ads is saving team members time and energy, which can be put toward other tasks. While helpful, some experts advise relying solely on AI to create marketing content—some human guidance should be involved.

Data Management

CRE yields a lot of information. AI can make it easier to sift through; it can pull data from reports faster as well as let individuals know when updated records are due or alert a CRE owner to when tenant demand has increased. AI can also organize, store and locate documents on demand, so CRE owners can make more informed decisions without taking so much time manually searching for the necessary data.

Financial Planning and Organization

AI has also all but eliminated the need for manual calculating. The technology can process figures quickly through a machine that’s absorbed knowledge from prior financial models and results to generate accurate outputs. For example, investors could use AI tools while calculating net operating income and return on investment so they know what investment factors to consider as the contemplate a deal. Meanwhile, CRE underwriters and lenders can use the tech to predict potential returns on specific contracts.

Commercial real estate is well-poised to take advantage of AI as a vital component in customer service, marketing and analytics, and data management,” Ryle said. “Organizations that embrace the technology wave will likely get a competitive advantage. “Overall, AI tools will enable brokers and stakeholders to streamline processes and focus on what they do best: engage in human relationships and clear a path to generate the highest ROI on commercial investments.”

 

Source:  Connected