Sunday Summary: Sweet and Loudoun

It’s extremely possible that if Republicans fall in the Senate this week, the sleeper issue with voters will have been data centers.

Like anything in politics, defeat is rarely about a single issue. Open questions like Iran and tariffs and stubbornly high interest rates will all have their fingerprints on the electoral outcome. Still, the issue that wasn’t really on anybody’s political radar 12 months ago — but currently is underwater by 30 percent in recent polls — is data centers.

It’s also the real estate asset class that has been growing most wildly throughout the U.S.

Last year, an estimated $121.91 billion in credit was extended to data centers, according to S&P Global Ratings. From the first quarter of 2025 to the first quarter of 2026, 33 percent more data center inventory was added to the market (as per a report from CBRE earlier this year) but, at the same time, vacancy rates within operating centers have been at all-time lows.

The tightest market of all — coming in at 0.3 percent vacancy as of the beginning of the year — is Northern Virginia, which is the home of Loudoun County, which by itself hosts more data centers than anywhere else in the known universe.

There are some 253 data centers in Loudoun, spanning 49 million square feet and accounting for a quarter of all the data centers in the whole country. (The area’s nickname “Data Center Alley” sounds understatedly quaint.)

Moreover, wealth in data centers has accrued into actual wealth — Loudoun has a median household income of $170,000 a year, making it the richest county in America.

CO visited some of the county’s data centers, spoke to their opponents and advocates, identified some of the players in the space, traced the history of how Loudoun became Data Centerville U.S.A., and tried to figure out how this asset class became so unpopular.

“Some of [the popular distrust] is based on lies,” said Hossein Fateh of CloudHQ, who has been developing data centers since 2000, including in Loudoun, and was our Sit-Down. Critics “talk about water usage. Fifty percent of the data centers we built have zero consumption, because it’s a closed water loop. It’s like the radiator in your car. In Chicago, we have the biggest data center I built, going up with 240 megawatts of IT load. The water usage on the adiabatic system [which uses water evaporation to cool the center] is the same amount as one hole of a golf course per year.”

Of course, if data centers follow a similar trajectory as that of other technologies, they’ll eventually become smaller and more efficient, negating issues like water consumption altogether — and there are already people working on interesting proposals.

Jeff Thramann, for instance, is a neurosurgeon and inventor who started a data center firm called LT350, which intends to put smaller data centers on parking lot roofs!

Thramann looks “at our customers on a co-location model — think of the hyperscalars, the neo clouds, the frontier model labs — they’re all trying to get closer [to users], but their question is: Where can we put these things to be close?” he said. “And we think we have that solution.”

And, while so many data centers can currently be found in Loudoun, it isn’t like there aren’t alternative locations — including south of the border, where a number of hyperscalers are headed.

Querétaro, about a three-hour drive from Mexico City, is experiencing a sudden rush of data center development. (Within Mexico, Querétaro is even more dominant than Loudoun County is in America — about 72 percent of the country’s operational capacity can be found there.)

“There’s a number of large projects going up, but it’s quickly turning into a cloud region for Mexico,” said Cushman & Wakefield’s John McWilliams. Querétaro “has the opportunity to position itself not necessarily just as a major player in Mexico, but within the hemisphere.”

If the posture on data centers completely shifts after Tuesday, at least there’s somewhere for the data center developers to go.

Grades are in

While the politicians wait for their midterm grades, last week saw a flood of Q3 earnings — and the takeaway was mixed.

Vici Properties took a 55.1 percent hit to its funds from operations and $458 million in expected credit losses for the quarter. Most worrying for the REIT is the possible acquisition of Caesars (Vici’s biggest tenant) by Fertitta Entertainment, which could throw all sorts of uncertainty into the terms of Caesars’ leases. That being said, total revenue surpassed expectations.

Blackstone Mortgage Trust suffered a net loss of $327.6 million in income, which is more than four times its second-quarter losses.

“Looking ahead, while we are mindful of potential impacts from elevated rates, we believe we are well positioned,” said BXMT President Austin Peña. (Oh, yeah. Rates are staying where they are, and may go up.) “We have significantly repositioned our portfolio, and our investment channels are more diversified than ever.”

Alexandria Real Estate Equities reported a net loss of $638.5 million (which was more than double last year’s third-quarter losses). That being said, Alexandria is in contract to sell 421 Park Drive in Boston for about $136 million — and, on KKR’s earnings call later in the week, KKR announced it was purchasing a 49 percent stake in Campus Point by Alexandria Megacampus in San Diego.

Most of the rest of the earnings we listened to were pretty good.

While the legal world reels from the unexpected expiration of Weil, Gotshal & Manges, this could seriously redound to landlord BXP’s benefit given that nearly 400,000 square feet of BXP’s General Motors Building just might go on the market.

“The average office rent at 767 Fifth is under $150 per square foot,” said BXP’s president Doug Linde on their earnings call. “There is a vast gap between where the in-place rent is at the General Motors Building and where we believe and perceive the market is.”

BXP also boasted a 4.6 percent bump in reported revenue to $911.4 million, and two Washington, D.C., sales for $155.4 million and $150.3 million.

Newmark saw an even bigger jump — 12.7 percent — bringing its total revenue to $973.2 million, which outgoing CEO Barry Gosin said would put the company on track to have its best year ever. (That’s what we call going out on a high note!)

JLL also reported double-digit revenue growth (12 percent to $7.3 billion), paid off a couple of hundred million dollars in debt, and launched a $500 million share repurchasing program. (Oh,  it wasn’t on the call, but Angela Gentry was promoted to market lead in New York.)

At Invesco, revenue was up 16.5 percent and the company announced $1.5 billion in preferred stock repurchases.

Rexford Industrial Realty sold off about 5.5 million square feet of industrial space for about $1.3 billion, and did about 3.74 million square feet of leasing (a massive uptick from the second quarter’s 2.1 million).

And for the largest senior housing owner in the country — Welltower — profits shot up 24.6 percent and the firm did a dizzying $21 billion in investments so far this year.

Florida breaks a new record

We were all set to crow about Fortune International Group and Château Group’s massive $463 million construction debt package for the St. Regis Residences in Sunny Isles Beach, Fla., which anyone would say is a major deal for the borrowers and the lender (Madison Realty Capital).

But then Fortune International Group, along with Kar Properties this time, broke a Florida record for nabbing the biggest construction loan in the state’s history — $817 million — for the Faena-branded 217-unit condo they’re building at 24 Southwest Fourth Street, courtesy of Adi Chugh’s Tyko Capital.

Extell keeps truckin’

Just when we notice that we haven’t heard from the likes of Gary Barnett in a few weeks, he dazzles everyone with a signature one-two punch.

Last week, he plunked down $24 million to secure 87,000 square feet of air rights for his planned office tower at 570 Fifth Avenue from the Church of St. Mary the Virgin.

And, over in Times Square, Barnett signed Hyatt Hotels’ StandardX to be Extell’s hospitality brand within the 60-story, $1 billion-plus supertall they’re calling the Torch, which is being designed by Oda at 740 Eighth Avenue. StandardX will manage 1,800 rooms in the hotel portion of the mixed-use building.

Rest in peace

Finally, on a tragic note, CO was shocked and heartbroken to learn that Lauren Maturo, vice president of marketing at RXR (and daughter of the company’s President Mike Maturo), was killed in a car accident last weekend at the age of 32.

“Lauren has — and will always have — an indelible place in so many of our hearts,” said RXR’s Whitney Arcaro. “She was not only a gifted colleague but a truly precious person. Her generous spirit, perceptive, sensitive soul and creative zeal brought such warmth and light to everyone in and out of RXR.”

CO worked with Maturo in creating the Commercial Observer Women’s Event, and we interacted with her on countless occasions in securing interviews and coordinating events. We witnessed that spirit, that zeal and that warmth firsthand. She’s in our hearts, too.

Speak to you next week.