Another day, another company getting into data centers. 

This time it’s multifamily juggernaut Greystar, which has hired Michael Hoverman away from CIM Group to grow an infrastructure portfolio. 

Beyond data centers, it is looking to invest in clean power, transition fuels, social infrastructure, cell towers, transportation, EV charging and logistics — things it says are necessary for urban living. Greystar has a lot of weight to throw behind this initiative: Its institutional investment management platform has $78B of assets under management, and the company operates $320B of real estate globally. 

It wasn’t long ago that data centers were a niche sector, growing but limited to a few specialists. Now it’s topping the wish lists of basically every institutional investor, with the likes of Blackstone, Starwood and Hines growing their platforms. Prologis is spending $8B building out its data center business.

“The scale of the data center opportunity is immense,” Blackstone Real Estate Global co-Head Nadeem Meghji told Bisnow in March. “It's the single most exciting strategy we have globally today.”

For now, it seems to be a pretty safe play. Vacancy rates are at record lows as data center leasing is doubling year-over-year. Between artificial intelligence and voracious media streaming, demand is booming. 

But there are already whispers of a bubble. Anytime this much money abruptly flows into one thing, overbuilding is bound to follow. (See: life sciences.) The biggest question is if the promise of AI will really be fulfilled. 

— Kayla Carmicheal, Mark F. Bonner, Catie Dixon and Jay Rickey

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On Our Radar

• Kamala Harris proposed raising the corporate tax hike to 28%. This proposal aims to reverse some of the tax cuts implemented under the Trump administration and seeks to generate more revenue to fund various government initiatives. The corporate sector — and especially CRE — is already faced with challenges from inflation and higher-for-longer borrowing costs, so the news produced groans. Meanwhile, Trump has pledged to slash taxes even further if he gets back into the White House. 

• Got the economic blues? You need to consult the “vibe-rarian.” Despite strong economic data during Biden's presidency, Americans' attitudes about the economy remain negative. White House economists' talking points now emphasize empathy, recognizing that consumers still feel financial pain, even as inflation declines. This has created a challenge: balancing good news with the reality of high prices. Officials are consulting a Gen Z “vibe-rarian” staffer to gauge social media sentiment.

• Earning Squawk: Lowe's surpassed earnings expectations in Q2 but cut its full-year sales forecast, citing frailer consumer spending. The home improvement giant said it feels the impact of a cautious consumer base amid persistent economic malaise. CEO Marvin Ellison said shoppers are waiting for interest rate cuts. Join the club.

• It’s National Radio Day. Kayla is a big fan of WZRD Chicago, Northeastern Illinois University's community-based freeform station. Mark is a dedicated listener of Columbia University’s WKCR — particularly the Saturday shows, Footsteps of Reggae and Across 110th Street. Catie enjoys Houston Public Media’s Mixtape, but as long as there’s music playing and no one talking, she’s happy with nearly any station. Jay doesn’t listen to the radio because they don’t play Goose.

• 29 days until interest rate D-Day. CME’s FedWatch tool today shows a 71.5% chance of a 25-basis-point drop and 28.5% chance of a 50-basis-point drop based on interest rate trader activity. The likelihood of a 50-bps drop has been edging up.

This Morning's News

LENDING — Trimont Makes Big Play In Commercial Mortgage Servicing (Trimont): Trimont is set to acquire Wells Fargo's commercial mortgage servicing business, expanding its portfolio with over $600B in managed loans, boosting its influence in the real estate finance sector. The loan amount is equivalent to 11% of the U.S. CRE lending market.

HEALTHCARE — Steward-MPT Clash Intensifies Over Hospital Sales (Bloomberg): Steward Health accuses landlord Medical Properties Trust of obstructing its hospital sales, alleging interference that could derail its financial recovery efforts. Here's what Steward had to say.

INVESTMENT — Evercore Rethinks Ratings For Vornado And Cousins (Seeking Alpha): Evercore ISI upgrades Vornado Realty Trust, citing better performance prospects, while downgrading Cousins Properties due to a less favorable market outlook. A tale of two REITs — get the details.

Today’s Deep Dive: ​​​​Office Landlords Consider Demolitions As Conversion Challenges Mount

The wrecking ball is coming.

So far, developers are prioritizing conversions over demolition to give new life to vacant, lower-tier office buildings. Owners are attempting to hold on until they know more about future demand, as well as future conversion incentives, and conversions are faster and better for the environment. 

So while developers may be telling their buildings, “Don’t you ever say I just walked away, I will always want you,” the industry is edging closer to acknowledging that a whole bunch of buildings just gotta go.

“A pretty high percentage of those buildings won't have a future,” said Peter Bafitis, managing principal at architecture firm RKTB. “[Pre-World War II] buildings lend themselves better to residential, but you’re going to have quite a few of the massive floor plate buildings after World War II. What do you do with them?”

Read the full story here.

INVESTMENT — Cortland Closes Value-Add Fund 50% Above Target (PERE): Cortland has wrapped up its sixth value-add real estate fund, raising $1.7B — 50% above its initial goal. The fund will target U.S. multifamily properties, capitalizing on opportunities for growth and improvement. Learn more about Cortland's fund.

RETAIL — Conn’s Closures Leave Behind A Swath Of Empty Retail (Bisnow): Conn's HomePlus is closing stores across Texas as it goes through Chapter 11 bankruptcy, which will result in millions of square feet of empty retail, industrial and office space throughout the state. It is looking to vacate 83 properties. Learn more about the impact of Conn's store closures.

RETAIL — Kroger Food Fights FTC To Save Merger (Bloomberg): Kroger is taking legal action to counter the FTC's efforts to block its $24.6B merger with Albertsons, arguing that the deal is pro-competitive and beneficial for consumers. The lawsuit is the latest update in the yearslong merger deal.

INDUSTRIAL — Dermody Properties Raises $1B (Dermody Properties): Dermody Properties has secured $1B for its Industrial Fund IV, which will focus on acquiring and developing logistics and e-commerce facilities in key U.S. markets, underscoring the sector's resilience and demand. Here's what you need to know about Dermody's fund.

OFFICE — Private Buyers Are Spending More Money (Bisnow): Office sales are picking back up in Los Angeles, but the buyer profile has changed. Smaller, nontraditional office owners like family offices are the ones signing the deeds these days. Dig into who is and who isn’t buying.

DATA CENTERS — AMD Targets Nvidia's Data Center Dominance (Bisnow): AMD is acquiring prominent data center equipment-maker ZT Systems for $5B to compete more aggressively in the lucrative data center sector. Explore the details of AMD's strategic acquisition.

INVESTMENT — Sterling Bay CEO Sees Major Opportunity (Bloomberg): Sterling Bay CEO Andy Gloor views the property market turmoil as a prime opportunity for investors, citing potential high returns on distressed assets and properties at discounted prices. Listen to the rest of Gloor's remarks.

RETAIL — Circle K To Acquire Giant Eagle’s GetGo Division (CoStar): Alimentation Couche-Tard, the parent company of Circle K, is set to acquire Giant Eagle's GetGo convenience store division, adding approximately 266 locations to its network and expanding its presence in the Midwest. The bid to buy 7-Eleven was just the beginning.

FINANCE — Developers Form Their Own Insurance Company (CO): Faced with rising premiums, New York affordable housing developers have launched their own insurance firm, Milford, to provide coverage tailored to their specific needs and reduce costs. Discover more about the new firm.

OFFICE — Check Out The Renovations Of The Iconic Transamerica Pyramid (Bisnow): Renovations on San Francisco's iconic Transamerica Pyramid are moving forward despite a $600M lawsuit filed by tenants over disruptions caused by construction. Take a tour of the owners’ efforts to modernize and upgrade the landmark building. See photos of the renovations.

POLITICS — 'Kamalanomics' Plan Risks Alienating Wall Street (New York Post): Kamala Harris's economic plan, which includes price controls, is raising concerns among Wall Street donors who fear it could harm business interests, potentially leading to reduced financial support for her campaign. Get Wall Street's take on Kamalanomics.

FINANCE — Empire State Realty Trust Receives NYSE Notice (Seeking Alpha): Empire State Realty Trust has received a notice from the NYSE due to a delay in filing its quarterly report, raising compliance concerns. Learn more about the notice.

RETAIL — Walgreens, CVS Face Challenges (CNBC): Walgreens and CVS are struggling due to declining foot traffic, competition from online pharmacies, and rising labor costs. In response, both companies are focusing on expanding healthcare services and utilizing their retail locations as hubs for broader medical offerings to revive their business. Here's what strategies the two are using to save their pharmacies.

OFFICE — Starwood Looks To Unload Austin Office (TRD): Starwood Capital Group is looking to sell its office portfolio in Austin as the city faces record vacancy rates, signaling a challenging office market in the region. Learn more about the office.

OFFICE — BlackRock Closes In On New Dublin HQ (Bisnow): BlackRock is close to securing a deal for a new headquarters in the Ballsbridge area of Dublin. The global investment giant is eyeing 22K SF in one of Dublin's most prestigious districts, underscoring its commitment to expanding its presence in Ireland, a key financial hub. Learn more about the potential move and its implications for the Dublin office market.

OFFICE — RTO Policies Often Unenforced (Commercial Search): CBRE reports that return-to-office policies are frequently unenforced, with many companies struggling to ensure compliance as hybrid work remains popular among employees. Access the report here.

HOTELS — Luxury Hotels Embrace … Bunk Beds? (BNN Bloomberg): Bunk beds have become the newest amenity in luxury hotels, appealing to travelers seeking unique and versatile accommodation options. Yes, bunk beds.

RETAIL — McDonald's Foot Traffic Is A Key Trend For Next Decade (Yahoo Finance): Analysts predict that McDonald’s foot traffic will be a critical indicator to watch over the next decade, as the fast-food giant adapts to changing consumer behavior and market trends. Catch the analyst's take.

SPORTS — Las Vegas A's Stadium Nearing Final Approval (NBC Bay Area): Las Vegas officials state that the city is close to finalizing approval for the construction of the A's new stadium, signaling progress on the high-profile project. Here's the latest update.

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The First Draft is produced by Director of Newsletters Jay Rickey, Managing Editor Catie Dixon, Editor-in-Chief Mark F. Bonner and Deputy Newsletter Editor Kayla Carmicheal, with an assist from ChatGPT. We’d love your feedback! Email us at firstdraft@bisnow.com.