November 21, 2025 • 16 mins
Capital is ready — but the map is foggy. This week we break down the policy, rate, and regulatory crosswinds shaping real estate strategy, and why non-financial risks like immigration rules, housing supply constraints, and trade policy now sit beside cost of capital in every underwriting model.
Operators are splitting into three camps:
- Heavy Fog (defensive): preserving liquidity and slowing growth
- Patchy Fog (patient): watching rate signals and picking selective spots
- Clearing Fog (opportunistic): leaning in on timing, distress, and power availability
Where capital is actually going:
- Data centers dominate again as AI shifts the bottleneck from capital to megawatts.
- Senior housing is emerging as critical human infrastructure with boomers hitting 80, supply at record lows, and occupancy trending above 90%.
- Self-storage officially becomes the fifth major asset class, evolving into climate-controlled “utility space” and storage condos.
- Traditional sectors remain mixed: office continues to bifurcate, medical office stays resilient, multifamily tilts toward workforce and SFR, and industrial now battles costs and power constraints.
Demographics are the hidden driver. With 83% of recent U.S. population growth coming from net migration—and 30% of construction workers foreign-born—immigration policy is now a core economic variable. Climate migration reshuffles demand patterns, with both young adults and older movers rediscovering snowbelt markets.
On the operations front: agentic AI and property operating systems are pushing toward “self-driving buildings,” compressing lead-to-lease cycles, boosting conversions, and enabling centralized portfolios with decentralized on-site tech.
Market watch: Dallas–Fort Worth leads, Jersey City benefits from its proximity-cost edge, Brooklyn strengthens around creative office nodes, and Calgary rises alongside Canada’s purpose-built rental surge.
If this helped bring clarity to the fog, share it with a colleague and leave a quick review — it helps more investors navigate what comes next.
Listen
Watch
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:07):
Okay, so let's start with that fog.
It's a great description forthis mix of sticky inflation,
interest rates, and these, well,pretty volatile changes in
policy.
Fiscal, trade, immigration.
Speaker 2 (00:18):
It's everything at once.
Speaker 1 (00:19):
So what are the top concerns inside that fog?
Speaker 2 (00:21):
Well, the cost of capital is still number one.
No surprise there, almost 90%of respondents cited it.
Speaker 1 (00:26):
Right.
Speaker 2 (00:26):
But here's what's changed.
The non-financial risks havejust surged.
When you ask about social andpolitical issues, 59% pointed to
immigration policy, and 51% tohousing costs and availability.
So these policy constraints,things like immigration limits
and tariffs, are seen as directthreats to labor supply and
building costs.
Speaker 1 (00:45):
Almost everyone is worried about higher rates.
Why are we seeing suchdifferent investment strategies?
It seems like firms are makingdecisions based more on their, I
guess, their psychologicaloutlook on the future, not just
the hard data.
Speaker (01:04):
Welcome to the Senior Housing Investors Podcast.
If you are an owner, operator,investor, developer, or buyer of
Senior Housing, you've come tothe right place.
The best way to stay connectedwith us is to sign up for our
weekly newsletter at HavenSenior Investments.com.
This podcast doesn't existwithout you, our community.
(01:27):
Thank you for listening andreach out to us anytime.
Speaker 1 (01:37):
Welcome to the deep dive.
Today we're synthesizing whatis, well, basically the
blueprint for future capitaldeployment.
Speaker 2 (01:45):
And the source for this is the Emerging Trends in
Real Estate 2026 report.
Speaker 1 (01:49):
Exactly.
And this isn't a small sample.
It's based on interviews andsurveys with over 1,750 industry
leaders.
Speaker 2 (01:57):
So you're getting the view from investors,
developers, lenders.
It's about as complete apicture as you can get for the
next few years.
Speaker 1 (02:05):
Aaron Powell Our mission here is really twofold.
First, we need to get a handleon how the industry is dealing
with all this uncertainty.
Trevor Burrus, Jr.
Speaker 2 (02:11):
The economic and the policy stuff.
Yeah.
Speaker 1 (02:13):
Trevor Burrus, Jr.: Although the report calls
navigating the fog.
And second, we have tohighlight these huge shifts in
what people are actually buying,you know, things driven by
tech, demographics, evenmigration.
Speaker 2 (02:23):
Aaron Powell And it's such a critical moment for you
to understand this because thereal estate world just barely
staggered out of the intenserepricing cycle.
Speaker 1 (02:32):
Yeah, interest rate hikes.
Speaker 2 (02:33):
Right.
And now they're facing a wholenew set of risks that aren't
just cyclical.
As one senior expert put it,and I think this captures
attention perfectly, he said, itis a curious time for real
estate with lots of uncertaintyand a desire to do deals.
Today's market does not reflectwhere we are going.
You can just feel that gap.
(02:53):
You know, there's all thiscapital ready to go, but genuine
confusion about what happensnext with policy.
That tension, it defineseverything right now.
Aaron Ross Powell Okay.
Speaker 1 (03:02):
So let's start with that fog.
It's a great description forthis mix of sticky inflation,
interest rates, and these, well,pretty volatile changes in
policy, fiscal, trade,immigration.
Speaker 2 (03:13):
It's everything at once.
Speaker 1 (03:14):
Aaron Powell So what are the top concerns inside that
fog?
Speaker 2 (03:16):
Well the cost of capital is still number one.
No surprise there.
Almost 90% of respondents citedit.
Speaker 1 (03:21):
Right.
Speaker 2 (03:21):
But here's what's changed.
The non-financial risks havejust surged.
When you ask about social andpolitical issues, 59% pointed to
immigration policy.
Aaron Powell.
And 51% to housing costs andavailability.
So these policy constraints,things like immigration limits
and tariffs, are seen as directthreats to labor supply and
building costs.
Speaker 1 (03:41):
Aaron Ross Powell So if almost everyone is worried
about hights, why are we seeingsuch different investment
strategies?
It seems like firms are makingdecisions based more on their, I
guess, their psychologicaloutlook on the future, not just
the hard data.
Speaker 2 (03:54):
Aaron Powell That's a very sharp point.
And that outlook creates threedistinct camps.
First, you've got the heavy fogcrowd.
Okay.
These firms are convinced we'rein for higher for longer
interest rates.
So their strategy is purelydefensive, very selective.
They are not betting on assetvalues going up.
Speaker 1 (04:10):
Aaron Powell No cap rate compression placed.
Speaker 2 (04:12):
Exactly.
They are relying entirely onincome growth from the asset
itself, purely fundamentals.
Speaker 1 (04:18):
Aaron Powell And how does that compare to the second
group?
Speaker 2 (04:19):
Aaron Powell That's the patchy fog camp.
They see all this policyvolatility as a temporary
sideshow.
Speaker 1 (04:25):
Just noise.
Speaker 2 (04:26):
Right.
They're positioning for ratesto eventually fall, so their
main focus right now is justbuilding up liquidity.
They want to be ready topounce.
Speaker 1 (04:32):
Aaron Powell And then, of course, you have the
optimists, the clearing foggroup.
Speaker 2 (04:36):
Aaron Powell They're bullish, they're expecting lower
rates, a better economy, andthey think the policy impacts
will be temporary.
They're ready to buy now.
Speaker 1 (04:44):
Aaron Powell But despite all this fog, the report
shows this amazing optimismabout buying opportunities.
The score for finding value isat a 20-year peak.
Speaker 2 (04:53):
Aaron Powell It is.
Transactions are already up 16%in the first half of 2025, led
by apartments and seniorhousing.
Speaker 1 (05:00):
Aaron Powell And there's this potentially massive
new source of liquidity on thehorizon, right?
We could talk in trillions.
Speaker 2 (05:06):
We could.
That expectation is all tied tothe potential inclusion of
private real estate into definedcontribution or DC retirement
plans.
Speaker 1 (05:14):
For our listeners, that's like your 401k.
Speaker 2 (05:17):
Exactly.
If that happens at scale, itchanges the entire equity game.
And on top of that, debtliquidity is actually pretty
robust, mostly coming fromnon-bank lenders and debt funds.
Speaker 1 (05:26):
Aaron Powell That sounds incredibly bullish, but
there has to be acounterargument, the half-empty
view.
Speaker 2 (05:31):
Oh, there is.
And it's that all thissidelined equity and crucially
reduced foreign investment arestill holding things back.
Canada and Japan, two hugesources of capital, actually
became net sellers of U.S.
real estate in the first halfof 25.
Speaker 1 (05:46):
Aaron Powell And why is that?
Speaker 2 (05:47):
It ties directly back to the policy fog.
There's a quote from a CFO thatjust nails it.
Every international capitalraise discussion we have
revolves around surprising movesout of Washington, D.C., a
persistent headwind to U.S.
inflows.
Speaker 1 (06:01):
So that volatility is just scaring them off.
Speaker 2 (06:03):
It is international capital prizes stability above
all else.
Speaker 1 (06:07):
Aaron Powell Which brings us to the big question:
where is the capital that isbeing deployed actually going?
The report shows this majorstructural change.
Assets that were onceconsidered niche are now
essential.
Speaker 2 (06:19):
And they're dominating the traditional
property types.
Speaker 1 (06:21):
So what's at the very top of the list?
Speaker 2 (06:23):
Data centers.
For the third year in a row,it's not even close.
They're seen as criticalinfrastructure now.
Speaker 1 (06:27):
Aaron Powell And the driver is just AI.
Speaker 2 (06:29):
It's all AI demand, but you have to split it.
There are the AI trainingmodels, which need gigawatts of
power and don't care where theyare.
That's why you see developmentin places like Indiana, Ohio,
Louisiana.
Okay.
Then you have the inferencemodels, which need to be close
to users.
But for both, the mainchallenge isn't money, it's
physical constraints.
Power, water, and gridinterconnection times that can
(06:51):
be two to seven years long.
Speaker 1 (06:53):
Wow.
Speaker 2 (06:54):
It's forcing developers to get creative with
things like behind the mirrorpower generation.
Speaker 1 (06:58):
Okay, so data centers are tech infrastructure.
What about humaninfrastructure?
Let's talk about seniorhousing.
Speaker 2 (07:04):
The demand driver here is completely nonsenclical.
It's a demographic time bomb.
Speaker 1 (07:08):
Explain that.
Speaker 2 (07:09):
The oldest baby boomers turn 80 in 2026.
That is the age that triggers amassive, necessary transition
out of single-family homes formillions of people.
It's a guaranteed wave ofdemand.
Speaker 1 (07:20):
And I'm guessing supply is not keeping up.
Speaker 2 (07:22):
Not even close.
Inventory growth is the lowestit's been since 2006.
That's why occupancy isexpected to push past 90% in
2026.
It's creating all these newproduct types: active adult, 55
plus spam, larger units forhigher needs residents,
unbundled services for themiddle market.
It's a scramble to meet thedemand.
Speaker 1 (07:42):
Well, let's talk about the dark horse here.
Self-storage.
The report actually calls itthe fifth major property type
now.
How did that happen?
Speaker 2 (07:50):
It's because its use has fundamentally changed.
It's not just for movinganymore.
We're talkingclimate-controlled units that
are basically off-site closetsor extensions of your home.
Speaker 1 (07:59):
Like for hobbies or collections.
Speaker 2 (08:00):
Exactly.
And there's this new hybridcalled storage condos.
They're like a thousand or twothousand square foot industrial
flex units.
Affluent people buy them orsmall businesses like
landscapers or HVAC companies.
Rent them out as a local homebase.
Speaker 1 (08:14):
Okay, so a quick look at the traditional sectors.
Office is still at the bottom,but it's improving for the best
of the best assets.
Speaker 2 (08:20):
It is.
And the report makes a keypoint about the unsafe cities
narrative.
It pushes back hard, citing FBIdata showing crime rates are
actually at their lowest since1969.
Speaker 1 (08:30):
That's important context.
Speaker 2 (08:31):
But the real story is the split.
In Houston, for example, newbuildings have a vacancy rate
around 10.8%.
Buildings from before 2015 muchhigher.
30.7%.
A threefold difference.
The only real bright spot inthe whole category is medical
office.
That's a strong buy because ofdemographics and long-term
leases.
Speaker 1 (08:51):
And what about the others?
Multifamily and industrial.
Speaker 2 (08:53):
Multifamily is still a favorite, especially workforce
housing and single-familyrentals.
Affordability is pushing peopleto new markets.
Boise, Lafayette, the SouthCarolina Coast.
And industrial is now kind ofmiddle of the pack.
It's got strong support fromreshoring and e-commerce, but
construction costs and poweravailability are becoming real
constraints.
Speaker 1 (09:14):
Let's pivot to demographics because immigration
policy seems to be a hugefactor in all this.
Speaker 2 (09:18):
Aaron Powell It's fundamental.
Between 2020 and 2024, netinternational migration
accounted for 83% of U.S.
population gains.
Speaker 1 (09:25):
Aaron Powell 83%?
That's massive.
Speaker 2 (09:28):
It is.
And if policy tightens, theCBO, the Congressional Budget
Office Project's potential GDPgrowth will slow to just 1.6% by
2045, all because of a smallerlabor pool.
Speaker 1 (09:39):
Aaron Powell And that labor shortage hits
construction immediately.
30% of construction workersnationally are foreign-born.
Speaker 2 (09:46):
Trevor Burrus Right.
So any restrictions put marketsin the South, the West, the big
Northeast cities at high riskof labor shortages.
Speaker 1 (09:53):
Aaron Powell, which means higher building costs.
Speaker 2 (09:55):
And a slower pace of new housing.
You simply can't solve thehousing crisis if you don't have
the people to build the houses.
Speaker 1 (10:00):
Aaron Powell Now this leads to something fascinating
in the report (10:02):
a shift in domestic migration.
For decades, it's been allabout the Sunbelt.
Speaker 2 (10:08):
And now we're starting to see a reversal, a
flow back to the snowbelt, theMidwest, and Northeast.
Speaker 1 (10:12):
The snowbelt reversal.
That goes against 50 years ofhistory.
What's the driver?
Speaker 2 (10:16):
Aaron Powell It seems to be climate, warmer winters
in the snowbelt, and a bigincrease in extreme heat days in
the Sunbelt.
And it's concentrated in twogroups young adults under 30 and
older adults 60 to 69.
Speaker 1 (10:29):
So what does that mean for a city in the Midwest?
They might not have beenplanning for this kind of
growth.
Speaker 2 (10:35):
It's a huge challenge and an opportunity.
Cities that have been stagnantsuddenly need to think about new
housing, new transit, andSunbelt cities might see demand
slowdown, which makes theirinvestment decisions a lot
harder.
Speaker 1 (10:47):
Aaron Powell Let's touch on student housing.
It feels like that sector is ata turning point.
Speaker 2 (10:52):
Aaron Powell A huge one.
We just hit a peak inenrollment in 2024, partly
thanks to changes in federalstudent aid.
Speaker 1 (10:59):
But what comes next?
Speaker 2 (11:01):
It gets tough.
The number of U.S.
high school graduates starts todecline in 2026.
And on top of that, strictervisa policies are expected to
cut international studentarrivals by about 15%.
Speaker 1 (11:12):
And that's a big deal for some universities.
Speaker 2 (11:14):
Aaron Powell A very big deal.
Especially for the selectiveuniversities in the Northeast
and the West that really rely onthat international tuition.
Speaker 1 (11:20):
Aaron Powell Okay.
The other huge structuraltransformation is, of course,
AI.
It's moving from just anexperiment to actual
implementation.
Speaker 2 (11:27):
Aaron Powell It is.
And while it's more aboutaugmenting jobs and replacing
them, there's a real risk forjunior roles.
As one economist said, AI is asolid replacement for a junior
analyst.
Ouch.
Yeah.
But for you, the listener, it'skey to understand the two types
of AI.
First, there's generative AI orgen AI.
Speaker 1 (11:44):
Chatbots, writing emails, that kind of thing.
Speaker 2 (11:46):
Right.
It handles routine tasks, butthe real game changer is agentic
AI.
Speaker 1 (11:51):
And what does that do?
Speaker 2 (11:52):
It can plan and act on its own.
It runs continuous processeswith minimal human input.
Think predictive maintenance,optimizing a building's energy
use every minute, or evenexecuting trades.
It has agency.
Speaker 1 (12:05):
Aaron Powell, which leads to this idea of a property
operating system.
Speaker 2 (12:09):
Aaron Ross Powell Exactly.
A Prop OS.
Using AI agents and digitaltwins, virtual copies of
buildings to create self-drivingbuildings, they manage
resources and optimize flows allon their own.
Speaker 1 (12:20):
And we're already seeing the results of this.
Speaker 2 (12:21):
We are.
In property management, someagentic AI platforms have cut
lead-to-lease times by 65% andboosted conversion rates by 8%.
Speaker 1 (12:30):
Is that significant?
Speaker 2 (12:31):
It is.
And the data shows that, quote,young renters would rather deal
with a good app than a person.
Speaker 1 (12:36):
The hotel industry is seeing this too.
Personalization, dynamicpricing?
Speaker 2 (12:41):
Massive changes.
In call centers alone, AI hascut abandonment rates by up to
8% and increased reservationconversion by as much as 35%.
Wow.
Even in Canada, firms are usingAI for energy management and
leasing, and it's beingaccelerated by new privacy laws
like Quebec's Law 25.
Speaker 1 (13:00):
So what does this all lead to?
Speaker 2 (13:02):
It leads to what the report calls the centralization
paradox.
Because the AI is handling allthese distributed tasks on site,
a single manager in a backoffice can oversee a vastly
larger portfolio.
Speaker 1 (13:13):
So the tech is decentralized, but the human
oversight becomes morecentralized.
Speaker 2 (13:18):
Precisely.
Speaker 1 (13:18):
So let's pull all of this together
demographics, the AI.
What does it mean for where toinvest?
The report says the focus hasshifted from macro to micro.
Speaker 2 (13:27):
Ultra micro.
The specific asset, thespecific street corner.
But even with that focus,Dallas Fort Worth is still the
number one U.S.
market overall for the secondyear in a row.
It's just so diversified, andit's becoming the country's
second biggest financial market,especially with the new Texas
Stock Exchange coming.
Speaker 1 (13:44):
But the Northeast is gaining momentum.
Speaker 2 (13:46):
A lot of momentum.
Jersey City is number two.
It's a seven-minute ferry rideto NYC at a fraction of the
cost.
And its multifamily vacancy isjust 2.8%, even after a 20%
inventory jump.
Speaker 1 (13:59):
Incredible.
Speaker 2 (13:59):
And Brooklyn is number four.
It's a perfect example of thatmicrofocus.
Office demand is moving awayfrom downtown Brooklyn to
creative spaces like theBrooklyn Navy Yard closer to
where people actually live.
Speaker 1 (14:11):
And we're even seeing a comeback in some tech
markets.
Speaker 2 (14:13):
Aaron Ross Powell, we are.
In San Francisco, the top-tiertrophy office buildings are
doing well.
Vacancy is around 14% for thatbest of the best space.
And it's almost all driven byAI companies taking up over six
million square feet.
Speaker 1 (14:25):
What about the Canadian perspective?
Speaker 2 (14:27):
Calgary is the top market to watch.
But the real story in Canada isthe housing crisis and the
massive decisive pivot topurpose-built rental or PBR.
The sentiment up there reallysums up the global feeling right
now.
It's like real estate right nowis like driving in fog.
Drive too slow and you'll gethit from behind.
Drive too fast and you'll falloff a cliff.
Speaker 1 (14:48):
That is a perfect summary of the risk.
Speaker 2 (14:50):
It is.
And it brings us back to thecore idea.
Institutional investorseverywhere are shifting capital
to assets that haveinfrastructure-like qualities.
Speaker 1 (15:00):
So your best bets for 2026 reflect that.
It's data centers, seniorhousing, self-storage, and
purpose-built rental in Canada.
Speaker 2 (15:08):
All of them combine recession resistance with
structural long-term demand.
Speaker 1 (15:12):
So the main takeaway for you, the listener, is that
success is going to requireextreme granularity and just
uncompromising operationalexcellence.
Speaker 2 (15:20):
All while trying to see through that economic and
policy fog.
Speaker 1 (15:23):
And here's a final thought for you to take away.
So since senior housing andmedical office are becoming
essential infrastructure andtheir operations are incredibly
complex, the next huge realestate opportunity might just be
combining AI-driven operationalefficiency with the
(15:47):
non-cyclical demand of seniorcare.
Speaker 2 (15:49):
Self-driving buildings focused on high acuity
health care.
That is the ultimateintersection of technology and
demographics.
Okay, so let's start with that fog.
It's a great description forthis mix of sticky inflation,
interest rates, and these, well,pretty volatile changes in
policy.
Fiscal, trade, immigration.
Speaker 2 (00:18):
It's everything at once.
Speaker 1 (00:19):
So what are the top concerns inside that fog?
Speaker 2 (00:21):
Well, the cost of capital is still number one.
No surprise there, almost 90%of respondents cited it.
Speaker 1 (00:26):
Right.
Speaker 2 (00:26):
But here's what's changed.
The non-financial risks havejust surged.
When you ask about social andpolitical issues, 59% pointed to
immigration policy, and 51% tohousing costs and availability.
So these policy constraints,things like immigration limits
and tariffs, are seen as directthreats to labor supply and
building costs.
Speaker 1 (00:45):
Almost everyone is worried about higher rates.
Why are we seeing suchdifferent investment strategies?
It seems like firms are makingdecisions based more on their, I
guess, their psychologicaloutlook on the future, not just
the hard data.
Speaker (01:04):
Welcome to the Senior Housing Investors Podcast.
If you are an owner, operator,investor, developer, or buyer of
Senior Housing, you've come tothe right place.
The best way to stay connectedwith us is to sign up for our
weekly newsletter at HavenSenior Investments.com.
This podcast doesn't existwithout you, our community.
(01:27):
Thank you for listening andreach out to us anytime.
Speaker 1 (01:37):
Welcome to the deep dive.
Today we're synthesizing whatis, well, basically the
blueprint for future capitaldeployment.
Speaker 2 (01:45):
And the source for this is the Emerging Trends in
Real Estate 2026 report.
Speaker 1 (01:49):
Exactly.
And this isn't a small sample.
It's based on interviews andsurveys with over 1,750 industry
leaders.
Speaker 2 (01:57):
So you're getting the view from investors,
developers, lenders.
It's about as complete apicture as you can get for the
next few years.
Speaker 1 (02:05):
Aaron Powell Our mission here is really twofold.
First, we need to get a handleon how the industry is dealing
with all this uncertainty.
Trevor Burrus, Jr.
Speaker 2 (02:11):
The economic and the policy stuff.
Yeah.
Speaker 1 (02:13):
Trevor Burrus, Jr.: Although the report calls
navigating the fog.
And second, we have tohighlight these huge shifts in
what people are actually buying,you know, things driven by
tech, demographics, evenmigration.
Speaker 2 (02:23):
Aaron Powell And it's such a critical moment for you
to understand this because thereal estate world just barely
staggered out of the intenserepricing cycle.
Speaker 1 (02:32):
Yeah, interest rate hikes.
Speaker 2 (02:33):
Right.
And now they're facing a wholenew set of risks that aren't
just cyclical.
As one senior expert put it,and I think this captures
attention perfectly, he said, itis a curious time for real
estate with lots of uncertaintyand a desire to do deals.
Today's market does not reflectwhere we are going.
You can just feel that gap.
(02:53):
You know, there's all thiscapital ready to go, but genuine
confusion about what happensnext with policy.
That tension, it defineseverything right now.
Aaron Ross Powell Okay.
Speaker 1 (03:02):
So let's start with that fog.
It's a great description forthis mix of sticky inflation,
interest rates, and these, well,pretty volatile changes in
policy, fiscal, trade,immigration.
Speaker 2 (03:13):
It's everything at once.
Speaker 1 (03:14):
Aaron Powell So what are the top concerns inside that
fog?
Speaker 2 (03:16):
Well the cost of capital is still number one.
No surprise there.
Almost 90% of respondents citedit.
Speaker 1 (03:21):
Right.
Speaker 2 (03:21):
But here's what's changed.
The non-financial risks havejust surged.
When you ask about social andpolitical issues, 59% pointed to
immigration policy.
Aaron Powell.
And 51% to housing costs andavailability.
So these policy constraints,things like immigration limits
and tariffs, are seen as directthreats to labor supply and
building costs.
Speaker 1 (03:41):
Aaron Ross Powell So if almost everyone is worried
about hights, why are we seeingsuch different investment
strategies?
It seems like firms are makingdecisions based more on their, I
guess, their psychologicaloutlook on the future, not just
the hard data.
Speaker 2 (03:54):
Aaron Powell That's a very sharp point.
And that outlook creates threedistinct camps.
First, you've got the heavy fogcrowd.
Okay.
These firms are convinced we'rein for higher for longer
interest rates.
So their strategy is purelydefensive, very selective.
They are not betting on assetvalues going up.
Speaker 1 (04:10):
Aaron Powell No cap rate compression placed.
Speaker 2 (04:12):
Exactly.
They are relying entirely onincome growth from the asset
itself, purely fundamentals.
Speaker 1 (04:18):
Aaron Powell And how does that compare to the second
group?
Speaker 2 (04:19):
Aaron Powell That's the patchy fog camp.
They see all this policyvolatility as a temporary
sideshow.
Speaker 1 (04:25):
Just noise.
Speaker 2 (04:26):
Right.
They're positioning for ratesto eventually fall, so their
main focus right now is justbuilding up liquidity.
They want to be ready topounce.
Speaker 1 (04:32):
Aaron Powell And then, of course, you have the
optimists, the clearing foggroup.
Speaker 2 (04:36):
Aaron Powell They're bullish, they're expecting lower
rates, a better economy, andthey think the policy impacts
will be temporary.
They're ready to buy now.
Speaker 1 (04:44):
Aaron Powell But despite all this fog, the report
shows this amazing optimismabout buying opportunities.
The score for finding value isat a 20-year peak.
Speaker 2 (04:53):
Aaron Powell It is.
Transactions are already up 16%in the first half of 2025, led
by apartments and seniorhousing.
Speaker 1 (05:00):
Aaron Powell And there's this potentially massive
new source of liquidity on thehorizon, right?
We could talk in trillions.
Speaker 2 (05:06):
We could.
That expectation is all tied tothe potential inclusion of
private real estate into definedcontribution or DC retirement
plans.
Speaker 1 (05:14):
For our listeners, that's like your 401k.
Speaker 2 (05:17):
Exactly.
If that happens at scale, itchanges the entire equity game.
And on top of that, debtliquidity is actually pretty
robust, mostly coming fromnon-bank lenders and debt funds.
Speaker 1 (05:26):
Aaron Powell That sounds incredibly bullish, but
there has to be acounterargument, the half-empty
view.
Speaker 2 (05:31):
Oh, there is.
And it's that all thissidelined equity and crucially
reduced foreign investment arestill holding things back.
Canada and Japan, two hugesources of capital, actually
became net sellers of U.S.
real estate in the first halfof 25.
Speaker 1 (05:46):
Aaron Powell And why is that?
Speaker 2 (05:47):
It ties directly back to the policy fog.
There's a quote from a CFO thatjust nails it.
Every international capitalraise discussion we have
revolves around surprising movesout of Washington, D.C., a
persistent headwind to U.S.
inflows.
Speaker 1 (06:01):
So that volatility is just scaring them off.
Speaker 2 (06:03):
It is international capital prizes stability above
all else.
Speaker 1 (06:07):
Aaron Powell Which brings us to the big question:
where is the capital that isbeing deployed actually going?
The report shows this majorstructural change.
Assets that were onceconsidered niche are now
essential.
Speaker 2 (06:19):
And they're dominating the traditional
property types.
Speaker 1 (06:21):
So what's at the very top of the list?
Speaker 2 (06:23):
Data centers.
For the third year in a row,it's not even close.
They're seen as criticalinfrastructure now.
Speaker 1 (06:27):
Aaron Powell And the driver is just AI.
Speaker 2 (06:29):
It's all AI demand, but you have to split it.
There are the AI trainingmodels, which need gigawatts of
power and don't care where theyare.
That's why you see developmentin places like Indiana, Ohio,
Louisiana.
Okay.
Then you have the inferencemodels, which need to be close
to users.
But for both, the mainchallenge isn't money, it's
physical constraints.
Power, water, and gridinterconnection times that can
(06:51):
be two to seven years long.
Speaker 1 (06:53):
Wow.
Speaker 2 (06:54):
It's forcing developers to get creative with
things like behind the mirrorpower generation.
Speaker 1 (06:58):
Okay, so data centers are tech infrastructure.
What about humaninfrastructure?
Let's talk about seniorhousing.
Speaker 2 (07:04):
The demand driver here is completely nonsenclical.
It's a demographic time bomb.
Speaker 1 (07:08):
Explain that.
Speaker 2 (07:09):
The oldest baby boomers turn 80 in 2026.
That is the age that triggers amassive, necessary transition
out of single-family homes formillions of people.
It's a guaranteed wave ofdemand.
Speaker 1 (07:20):
And I'm guessing supply is not keeping up.
Speaker 2 (07:22):
Not even close.
Inventory growth is the lowestit's been since 2006.
That's why occupancy isexpected to push past 90% in
2026.
It's creating all these newproduct types: active adult, 55
plus spam, larger units forhigher needs residents,
unbundled services for themiddle market.
It's a scramble to meet thedemand.
Speaker 1 (07:42):
Well, let's talk about the dark horse here.
Self-storage.
The report actually calls itthe fifth major property type
now.
How did that happen?
Speaker 2 (07:50):
It's because its use has fundamentally changed.
It's not just for movinganymore.
We're talkingclimate-controlled units that
are basically off-site closetsor extensions of your home.
Speaker 1 (07:59):
Like for hobbies or collections.
Speaker 2 (08:00):
Exactly.
And there's this new hybridcalled storage condos.
They're like a thousand or twothousand square foot industrial
flex units.
Affluent people buy them orsmall businesses like
landscapers or HVAC companies.
Rent them out as a local homebase.
Speaker 1 (08:14):
Okay, so a quick look at the traditional sectors.
Office is still at the bottom,but it's improving for the best
of the best assets.
Speaker 2 (08:20):
It is.
And the report makes a keypoint about the unsafe cities
narrative.
It pushes back hard, citing FBIdata showing crime rates are
actually at their lowest since1969.
Speaker 1 (08:30):
That's important context.
Speaker 2 (08:31):
But the real story is the split.
In Houston, for example, newbuildings have a vacancy rate
around 10.8%.
Buildings from before 2015 muchhigher.
30.7%.
A threefold difference.
The only real bright spot inthe whole category is medical
office.
That's a strong buy because ofdemographics and long-term
leases.
Speaker 1 (08:51):
And what about the others?
Multifamily and industrial.
Speaker 2 (08:53):
Multifamily is still a favorite, especially workforce
housing and single-familyrentals.
Affordability is pushing peopleto new markets.
Boise, Lafayette, the SouthCarolina Coast.
And industrial is now kind ofmiddle of the pack.
It's got strong support fromreshoring and e-commerce, but
construction costs and poweravailability are becoming real
constraints.
Speaker 1 (09:14):
Let's pivot to demographics because immigration
policy seems to be a hugefactor in all this.
Speaker 2 (09:18):
Aaron Powell It's fundamental.
Between 2020 and 2024, netinternational migration
accounted for 83% of U.S.
population gains.
Speaker 1 (09:25):
Aaron Powell 83%?
That's massive.
Speaker 2 (09:28):
It is.
And if policy tightens, theCBO, the Congressional Budget
Office Project's potential GDPgrowth will slow to just 1.6% by
2045, all because of a smallerlabor pool.
Speaker 1 (09:39):
Aaron Powell And that labor shortage hits
construction immediately.
30% of construction workersnationally are foreign-born.
Speaker 2 (09:46):
Trevor Burrus Right.
So any restrictions put marketsin the South, the West, the big
Northeast cities at high riskof labor shortages.
Speaker 1 (09:53):
Aaron Powell, which means higher building costs.
Speaker 2 (09:55):
And a slower pace of new housing.
You simply can't solve thehousing crisis if you don't have
the people to build the houses.
Speaker 1 (10:00):
Aaron Powell Now this leads to something fascinating
in the report (10:02):
a shift in domestic migration.
For decades, it's been allabout the Sunbelt.
Speaker 2 (10:08):
And now we're starting to see a reversal, a
flow back to the snowbelt, theMidwest, and Northeast.
Speaker 1 (10:12):
The snowbelt reversal.
That goes against 50 years ofhistory.
What's the driver?
Speaker 2 (10:16):
Aaron Powell It seems to be climate, warmer winters
in the snowbelt, and a bigincrease in extreme heat days in
the Sunbelt.
And it's concentrated in twogroups young adults under 30 and
older adults 60 to 69.
Speaker 1 (10:29):
So what does that mean for a city in the Midwest?
They might not have beenplanning for this kind of
growth.
Speaker 2 (10:35):
It's a huge challenge and an opportunity.
Cities that have been stagnantsuddenly need to think about new
housing, new transit, andSunbelt cities might see demand
slowdown, which makes theirinvestment decisions a lot
harder.
Speaker 1 (10:47):
Aaron Powell Let's touch on student housing.
It feels like that sector is ata turning point.
Speaker 2 (10:52):
Aaron Powell A huge one.
We just hit a peak inenrollment in 2024, partly
thanks to changes in federalstudent aid.
Speaker 1 (10:59):
But what comes next?
Speaker 2 (11:01):
It gets tough.
The number of U.S.
high school graduates starts todecline in 2026.
And on top of that, strictervisa policies are expected to
cut international studentarrivals by about 15%.
Speaker 1 (11:12):
And that's a big deal for some universities.
Speaker 2 (11:14):
Aaron Powell A very big deal.
Especially for the selectiveuniversities in the Northeast
and the West that really rely onthat international tuition.
Speaker 1 (11:20):
Aaron Powell Okay.
The other huge structuraltransformation is, of course,
AI.
It's moving from just anexperiment to actual
implementation.
Speaker 2 (11:27):
Aaron Powell It is.
And while it's more aboutaugmenting jobs and replacing
them, there's a real risk forjunior roles.
As one economist said, AI is asolid replacement for a junior
analyst.
Ouch.
Yeah.
But for you, the listener, it'skey to understand the two types
of AI.
First, there's generative AI orgen AI.
Speaker 1 (11:44):
Chatbots, writing emails, that kind of thing.
Speaker 2 (11:46):
Right.
It handles routine tasks, butthe real game changer is agentic
AI.
Speaker 1 (11:51):
And what does that do?
Speaker 2 (11:52):
It can plan and act on its own.
It runs continuous processeswith minimal human input.
Think predictive maintenance,optimizing a building's energy
use every minute, or evenexecuting trades.
It has agency.
Speaker 1 (12:05):
Aaron Powell, which leads to this idea of a property
operating system.
Speaker 2 (12:09):
Aaron Ross Powell Exactly.
A Prop OS.
Using AI agents and digitaltwins, virtual copies of
buildings to create self-drivingbuildings, they manage
resources and optimize flows allon their own.
Speaker 1 (12:20):
And we're already seeing the results of this.
Speaker 2 (12:21):
We are.
In property management, someagentic AI platforms have cut
lead-to-lease times by 65% andboosted conversion rates by 8%.
Speaker 1 (12:30):
Is that significant?
Speaker 2 (12:31):
It is.
And the data shows that, quote,young renters would rather deal
with a good app than a person.
Speaker 1 (12:36):
The hotel industry is seeing this too.
Personalization, dynamicpricing?
Speaker 2 (12:41):
Massive changes.
In call centers alone, AI hascut abandonment rates by up to
8% and increased reservationconversion by as much as 35%.
Wow.
Even in Canada, firms are usingAI for energy management and
leasing, and it's beingaccelerated by new privacy laws
like Quebec's Law 25.
Speaker 1 (13:00):
So what does this all lead to?
Speaker 2 (13:02):
It leads to what the report calls the centralization
paradox.
Because the AI is handling allthese distributed tasks on site,
a single manager in a backoffice can oversee a vastly
larger portfolio.
Speaker 1 (13:13):
So the tech is decentralized, but the human
oversight becomes morecentralized.
Speaker 2 (13:18):
Precisely.
Speaker 1 (13:18):
So let's pull all of this together
demographics, the AI.
What does it mean for where toinvest?
The report says the focus hasshifted from macro to micro.
Speaker 2 (13:27):
Ultra micro.
The specific asset, thespecific street corner.
But even with that focus,Dallas Fort Worth is still the
number one U.S.
market overall for the secondyear in a row.
It's just so diversified, andit's becoming the country's
second biggest financial market,especially with the new Texas
Stock Exchange coming.
Speaker 1 (13:44):
But the Northeast is gaining momentum.
Speaker 2 (13:46):
A lot of momentum.
Jersey City is number two.
It's a seven-minute ferry rideto NYC at a fraction of the
cost.
And its multifamily vacancy isjust 2.8%, even after a 20%
inventory jump.
Speaker 1 (13:59):
Incredible.
Speaker 2 (13:59):
And Brooklyn is number four.
It's a perfect example of thatmicrofocus.
Office demand is moving awayfrom downtown Brooklyn to
creative spaces like theBrooklyn Navy Yard closer to
where people actually live.
Speaker 1 (14:11):
And we're even seeing a comeback in some tech
markets.
Speaker 2 (14:13):
Aaron Ross Powell, we are.
In San Francisco, the top-tiertrophy office buildings are
doing well.
Vacancy is around 14% for thatbest of the best space.
And it's almost all driven byAI companies taking up over six
million square feet.
Speaker 1 (14:25):
What about the Canadian perspective?
Speaker 2 (14:27):
Calgary is the top market to watch.
But the real story in Canada isthe housing crisis and the
massive decisive pivot topurpose-built rental or PBR.
The sentiment up there reallysums up the global feeling right
now.
It's like real estate right nowis like driving in fog.
Drive too slow and you'll gethit from behind.
Drive too fast and you'll falloff a cliff.
Speaker 1 (14:48):
That is a perfect summary of the risk.
Speaker 2 (14:50):
It is.
And it brings us back to thecore idea.
Institutional investorseverywhere are shifting capital
to assets that haveinfrastructure-like qualities.
Speaker 1 (15:00):
So your best bets for 2026 reflect that.
It's data centers, seniorhousing, self-storage, and
purpose-built rental in Canada.
Speaker 2 (15:08):
All of them combine recession resistance with
structural long-term demand.
Speaker 1 (15:12):
So the main takeaway for you, the listener, is that
success is going to requireextreme granularity and just
uncompromising operationalexcellence.
Speaker 2 (15:20):
All while trying to see through that economic and
policy fog.
Speaker 1 (15:23):
And here's a final thought for you to take away.
So since senior housing andmedical office are becoming
essential infrastructure andtheir operations are incredibly
complex, the next huge realestate opportunity might just be
combining AI-driven operationalefficiency with the
(15:47):
non-cyclical demand of seniorcare.
Speaker 2 (15:49):
Self-driving buildings focused on high acuity
health care.
That is the ultimateintersection of technology and
demographics.
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
Betrayal Weekly
Betrayal Weekly is back for a new season. Every Thursday, Betrayal Weekly shares first-hand accounts of broken trust, shocking deceptions, and the trail of destruction they leave behind. Hosted by Andrea Gunning, this weekly ongoing series digs into real-life stories of betrayal and the aftermath. From stories of double lives to dark discoveries, these are cautionary tales and accounts of resilience against all odds. From the producers of the critically acclaimed Betrayal series, Betrayal Weekly drops new episodes every Thursday. If you would like to share your story, you can reach out to the Betrayal Team by emailing them at betrayalpod@gmail.com and follow us on Instagram at @betrayalpod and @glasspodcasts. Please join our Substack for additional exclusive content, curated book recommendations, and community discussions. Sign up FREE by clicking this link Beyond Betrayal Substack. Join our community dedicated to truth, resilience, and healing. Your voice matters! Be a part of our Betrayal journey on Substack.