RealEstateNews 1.6.25
Weekly News Roundup
- 2025 Real Estate Trends
- Multifamily Atop a Costco
- Data Centers Distorting Atlanta Real Estate
2025 Real Estate Trends
While the CRE outlook remains speculative, that hasn’t stopped those who monitor the industry from advancing a wide-ranging assortment of forecasts for the next 12 months. The office market is likely to find stability in the year ahead, with improvement coming late in 2025, CBRE reports. A construction slowdown and occupier sentiment shifting toward expansion should spell a 5% increase in overall office leasing volume in 2025. CBRE sees prime office space – meaning each market’s best buildings – in shorter supply, leading to prime-office vacancy reaching pre-Covid thresholds of 8.2% by 2027.
CRE watchers wonder if surging demand for warehouses will be followed by interest in other types of industrial properties. It’s not just investment in data centers driven by the growth of AI. Cold storage facilities, EV battery plants and quantum computing campuses will also likely draw increasing consideration, despite challenges each faces. Though more employers are mandating their employees return to office, a smarter approach would be making the workplace more appealing, says Ariel Sumry, LEED green associate and interior project designer for Perkins&Will’s Dallas studio. Custom space that amplifies the emotional and psychological benefits of face-to-face connection nurtures community and fosters collaboration unachievable in the virtual realm.
A lack of new retail construction over the past several years, sending the national availability rate under 5%, will likely spark asking rent hikes in 2025, CBRE reports. Retailers will likely seek to lock in longer-term leases on favorable locations. Demand should grow for industrial buildings near, or with access to, the border of U.S. and Mexico, given changes in trade policy, CBRE states. The company predicts demand for distribution facilities along the north-south corridors of I-29 and I-35. Markets particularly affected should be San Antonio, Austin, Dallas-Fort Worth, Oklahoma City, Kansas City, Des Moines and Minneapolis, CBRE reports. Source: Forbes
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Multifamily Atop a Costco
A real-estate developer in Los Angeles is testing a new blueprint for affordable housing: stack apartments on top of a Costco. Thrive Living is planning to begin construction in early 2025 on an 800-unit affordable-housing complex with the megaretailer on the ground floor in the Baldwin Village neighborhood of South Los Angeles. The project, which includes a rooftop pool and fitness center, would have 184 apartments for low-income households.
The Baldwin Village location would give Costco access to a densely populated urban market as well as an automatic customer base in the apartments upstairs. Many residents might join the tens of millions of Costco members who pay fees to shop there. Target and Whole Foods have anchored apartment buildings to gain access to urban populations. Costco has been exploring different urban strategies for more than two decades and today owns dozens of downtown stores.
The Los Angeles development is a novel approach for Costco, which likes to own, not rent, its stores. At 185,000 square feet, the store would be just over the average size for the company. Thrive plans to have two levels of underground parking. Construction is expected to finish in 2027. To build the apartments faster, Thrive plans to use off-site modular construction. Private businesses and elected officials throughout the U.S. have been looking for solutions to the affordable-housing crisis. Source: Wall Street Journal
Data Centers Distorting Atlanta Real Estate
Data-center construction is growing faster in Atlanta than in just about any other major city. Measured by power capacity, it was up 76% in the metro area during the first half of 2024 compared with the same period a year prior, according to real-estate firm CBRE. Across the Southeast’s biggest metropolitan area, demand for data center real estate threatens to crowd out others. An artificial intelligence race among the world’s largest tech companies—the so-called “hyperscalers”—is driving a land rush for ever-larger computing facilities with plentiful power.
Meta, Alphabet’s Google, Microsoft and Elon Musk’s X all operate Atlanta area data centers, or are planning new ones. X secured a $10 million local tax break for an expansion this year. These firms and many other tech companies and property investors are attracted by the city’s cheap electricity, state tax incentives and existing fiber-optic infrastructure. Data-center expansion has also been a boon to some office owners, who have filled empty floors by leasing to these companies.
But Atlanta lawmakers say that rapid growth comes at a price. Unchecked data facility construction would make it harder for the city to address its housing shortage, which totals some 100,000 units in the greater metro, according to one 2022 estimate. Data centers are still finding new markets that welcome them. Amazon Web Services said earlier this year it would invest $10 billion in new data centers near Jackson, Miss., and Microsoft debuted plans recently for three data centers around New Albany, Ohio. Source: Wall Street Journal