RealEstateNews 6.16.25
Weekly News Roundup
- Data Center Bubble?
- Investor Home Sales Rise
- Phoenix Top Industrial City
Data Center Bubble?
A spending frenzy has created concerns about whether too many data centers are being built. A TD Cowen analyst, Michael Elias, warned of potential “oversupply” in the market as some technology companies, including Microsoft and Foxconn, have stepped away from some leases. Still, there has been a flurry of announcements in just the last two weeks: OpenAI plans to build a massive computing complex in the United Arab Emirates, and the investor Chamath Palihapitiya said he had bought real estate in Arizona and planned to ultimately raise $25 billion to build a data center there.
Joe Tsai, chairman of Alibaba, which views A.I. as core to its business, also said he was starting “to see the beginning of some kind of bubble” in data center construction. Blackstone, on the other hand, says it still sees strong demand from tech companies, which are willing to sign what they describe as airtight leases for 15 to 20 years to rent out data center space. And even as questions about overbuilding have surfaced, Blackstone has reiterated its commitment to building more centers and investing in the power plants needed to run the computers inside them. Well-timed real estate bets are what have vaulted Blackstone past its rivals to make it the world’s largest private equity firm.
But earlier this year, Blackstone’s seemingly invincible bet suddenly looked shaky. In late January, the Chinese firm DeepSeek said it had figured out a way to build A.I. systems using less power and fewer chips, raising the possibility that there may be less need for these large, expensive data centers. The revelation appeared to shatter certain investment ideas about A.I., including the infrastructure bet. Still, within days, Blackstone and its tenants, including Meta and Microsoft, reaffirmed on their quarterly conference calls their need for and commitment to this investment. Last month, though, the data center industry was rattled again. Microsoft said it was pausing the construction of data centers in New Albany, Ohio, where QTS and other operators are building out new centers or have existing ones. Source: New York Times
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Investor Home Sales Rise
Individual homeowners hesitated to list their homes last year due to surging mortgage interest rates—but real estate investors plowed right ahead, pushing the share of homes they sold to an all-time high. In 2024, just under 11% of all homes sold in the U.S. came from real estate investors, the highest share in the data’s history going back to 2001, according to the latest Realtor.com® Investor Report released on Tuesday. The median sale amount for investor properties was about $330,000.
Investor home sales ticked up by 5.2% year over year in 2024, outpacing the increase in investor buyer activity. Overall, 13% of homes purchased in 2024 were snapped up by investor buyers, up only slightly from 12.7% the year before, according to the new report. Investors who own rental properties saw rent prices begin to slip, and they sprang into action to cut their losses.
The list of top states for investor sellers looks similar to the top regions for investor buyers, suggesting that certain markets attract heightened investor activity across the board. The common denominator among these five states, according to economists, is that they are generally affordable but have higher rental prices than the national median. Of all 50 states, Missouri and Oklahoma saw the highest share of investor sellers in 2024, at 16.7% each, up 0.5% and 1.7% from 2023, respectively. Georgia came a close second, with investors making up 15.9% of all home sellers last year, followed by Kansas with 14.3%. Utah rounded out the top five, with investors accounting for 14.3% of all sellers in the state in 2024. Source: Realtor.com
Phoenix Top Industrial Market
In an effort to capture the current trajectory of the industrial sector, we ranked the country’s top industrial markets in Q1 2025 after analyzing them based on key indicators — vacancy rates, development pipelines, rental trends and loan maturities — using commercial real estate data and research from CommercialEdge and Yardi Matrix, as well as analysis of Google search trends.
Here are some of the key highlights: Phoenix was the best-scoring industrial market in Q1 2025 with a total of 67.5 points, still being boosted by its solid ongoing construction compared to other markets. More specifically, Phoenix delivered 8.6 million square feet of space in Q1, over double the amount delivered in second-place Dallas-Fort Worth. These deliveries brought along a 2.2% expansion of industrial inventory in Phoenix, in the context of all other markets in the study recording expansions of under 1%.
Phoenix has 15,748,674 square feet of industrial space — or 3.9% of inventory — currently under construction, placing the market 2nd for this metric. The market saw the 5th-highest increase in average sale price per square foot of industrial real estate compared to last year’s first quarter. Here, the price went from $151 to $163, marking a $12 increase. Phoenix also saw online interest in industrial space growing, with the average monthly search volume for industrial real estate keywords at a state level increasing by roughly 7% over 12 months. Source: AZBigMedia