Real Estate Investment Committee: AI, Rates, Supply & Demand

Summary

A panel of real estate leaders discuss how AI is driving demand in commercial real estate, particularly data centers and trophy office space, while residential markets face headwinds from high rates, taxes, and inventory shortages. The guests highlight bifurcation between prime and secondary assets and emphasize selective, income-focused investment strategies. Geopolitical and legislative factors, especially in Europe, also shape opportunities.

• AI leasing in Manhattan surged more in Q1 than all of last year; San Francisco saw record tenant demand.
• 76% of tracked tenants across categories are seeking the same or more space.
• Trophy office in gateway cities continues to outperform and is expected to remain strong.
• European data centers present an outsized opportunity due to lower supply levels and data sovereignty needs.
• Residential market constrained by high mortgage rates (6%+), lack of inventory, and new taxes (e.g., NYC pied-à-terre tax).
• Florida residential already frothy with high demand and low supply; further migration expected.
• Power availability and access to tech talent are key drivers for data center and office demand.
• Investment focus should be on asset-level resilience, income, and selectivity rather than broad sector bets.