Sunday Summary: Show Me the Data Centers!

Ask an expert in commercial real estate why 2025 was a good year, and you’re liable to get a simple answer:

Data centers.

Sure, there were other sources of positive news: Office had a resurgence (at least in New York and San Francisco). Banks finally loosened the purse strings. The survivors of the retail apocalypse began to rebuild. But the promise of artificial intelligence and the attendant boom in data centers has brought out the Jerry Maguire in all of us.

This might best be exemplified on the most recent earnings call for Equinix.

“Equinix delivered its best quarter ever, by far,” said Keith Taylor, the company’s chief financial officer. “The magnitude of our quarterly activity, both across a substantial number of diverse deals, but also with over 3,400 customers, underscores that our strategy is working and meeting the opportunity in front of us.”

Indeed, just in the last quarter the data center owner earned $474 million in gross bookings, which was 42 percent more than it did in the fourth quarter of 2024. Equinix’s gross bookings for all of 2025 totaled $1.6 billion, a jump of 27 percent over the previous year.

And, while Equinix is certainly one of the big boys, they’re hardly the only game in town.

Prologis is the name in data centers, warehouses and logistics — owning 6,000 buildings and 1.3 billion square feet of warehouses with revenue of $8.79 billion last year, up from $8.2 billion in 2024 — and they, too, have been riding the data center wave.

“We’ve been in the data center business for the better part of 25 years, but there has been a much more intentional focus for us over the last five,” said Damon Austin, the recently anointed chief development officer of the company, in Commercial Observer’s cover story last week. “Because it’s a newer business for us and we’re rapidly growing our market share, pipeline, teams and capabilities in this space, it’s taking a disproportionate amount of our team’s capital, time and resources. So, lately, it’s probably been at least half of my time.”

Smart market players saw this data center boom coming years ago.

“This is 2006-2007, and office was very much the sexy product of the day, and it is funny to think about because data centers were a very nominal percentage of what our group [was working] on,” said CBRE’s Kristina Metzger in a profile last week. “Data centers were highly unique in the way that the transactions were structured, and required a deep level of understanding just to understand the basics.”

As she started taking a deeper dive, “There was a lightbulb that went off and I just thought, ‘Wow, we’re going to need a lot of these.’”

But this has also become a political football. Back in December, locals of Port Washington, Wis., launched a campaign to recall Mayor Ted Neitzke from office due to the fact that he was bringing a $15 billion data center developed by OpenAI and Oracle to their town.

“Certainly, there’s an increased political sensitivity and public opposition to data centers that’s kicked up in the last 12 to 18 months, relative to the first year or so after ChatGPT was introduced [in late 2022],” said Daniel Farris, partner at law firm Foley & Lardner. “It traditionally hasn’t been an industry that’s seen this type of opposition.”

Brave new world, Daniel.

In other earnings ….

AI might be kind to some in CRE, but others are not so lucky. Firms like CBRE, Cushman & Wakefield and JLL saw the largest stock sell-off in years because of fears that AI might make real estate marketing services obsolete. (Some of the guests on CO’s virtual AI forum last week seemed to agree.)

Which was too bad because CBRE, for one, had beaten market predictions on its fourth-quarter earnings.

“We’re not selling $2 million condos,” Chairman and CEO Bob Sulentic said on the call. “These are big complex transactions that we’re doing. We don’t get our brokerage leads online somewhere. We get our brokerage leads because of deep knowledge about the occupiers and investors in the marketplace that we serve.”

That sort of seemed par for the course — lots of good news/bad news stories in the most recent batch of earnings.

Vornado Realty Trust saw funds from operations for the fourth quarter slightly the worse for wear from last year ($112.9 million versus $117.1 million) even though revenue for the fourth quarter reached $453.7 million, which was better than the $434.8 million analysts predicted.

Apollo Commercial Real Estate Finance reported a net income loss after just transferring its entire $9 billion CRE loan portfolio to Athene Holding.

At least we’ll always have Blackstone. Blackstone Mortgage Trust reported closing $6.8 billion in new investments last year and boasted net income for the year of $110 million.

Winter is not over

The groundhog saw his shadow on Feb. 2, and the cold is still with us. But winter weather probably did more than just freeze pipes and shut down schools.

According to The National Association of Realtors, the cold might have been responsible for the 8.4 percent decline in U.S. home sales in January from December.

It’s not just the residential sales market that we’re worried about — there are bigger concerns than a slow month.

“New York City’s rent-regulated housing system is approaching a breaking point,” Robert Knakal wrote in a column for CO last week, “not because of a single policy, but because of a compounding mismatch between political decisions, economic reality and simple mathematics.”

New York City Mayor Zohran Mamdani grabbed a shovel and dug out some of the snow after the worst of it last month. “He’s very savvy in communications,” former Jersey City Mayor Steven Fulop, who recently was chosen to lead the Partnership for New York City, said in a Sit-Down with CO. “I think he did a good job in the snowstorm. He’s very conscious of the narrative around him, and that’s what people want to see. They’re very visually oriented, and he recognizes that. I don’t know if shoveling out one person changes the face of the city, but it sends a message that he’s a hands-on guy, and that’s what I think he was looking to convey.“

Of course, the chill is not just in housing. Saks Fifth Avenue announced a major reduction in its store count, though  most major metropolitan areas were spared. (New York City, Los Angeles, Washington, D.C., and South Florida at least caught a break. Saks will remain open in those areas.)

Let’s not even talk about the other form of ICE except to say that the federal immigration enforcement agency is actually… inking a tremendous number of leases? Yup.

Ending on a high note!

Last week wasn’t all doom and gloom — and it wasn’t all AI, either.

Lendlease and Aware Super scored a $450 million refinancing of the Riverie, the two-tower, 790,000-square-foot, 834-unit luxury multifamily project in Greenpoint, Brooklyn, from Ares Management.

Madison Realty Capital and KSL Capital Partners shelled out $371.5 million to Tidal Real Estate Partners for the construction of the 261-key Nashville Edition Hotel & Residences in Downtown Nashville.

But for sheer dollar figures our favorite deal was the deep dive we took into the $800 million, five-year, interest-only loan on Brookfield Properties’ 225 Liberty Street from Citigroup, J.P. Morgan Chase, Bank of Nova Scotia and Wells Fargo.

Oh, and sorry we missed it yesterday, but Happy Love Day… er, Valentine’s Day.

See you next week!