AI Adoption
Commercial Electricity Consumption The year-over-year change in trailing 12-month megawatts of U.S. commercial electricity sold as reported by the EIA. Includes electricity used by data centers, office buildings, warehouses, retail properties, hotels, healthcare facilities etc.
The share of U.S. businesses with paid subscriptions to AI tools and the share of Americans reporting at least weekly AI usage both rose rapidly during late 2024 and early 2025 before leveling off during the summer/fall of 2025. This trend warrants continued monitoring to see if the plateau persists. However, while these measures provide valuable insight into the rate of change in AI user counts, it is important to note that they do not capture potential increases in intensity of usage among early AI adopters. Other proxies for AI adoption that may better reflect overall intensity of usage, such as commercial electricity consumption and semiconductor sales have both continued to increase at a rapid pace in recent months.
Positive Signal Gradually Intensifying
Commercial Electricity Consumption
Positive Signal Acclerating
Semiconductor Sales
Share of Businesses with Paid Subscriptions to AI Tools
Share of Americans Reporting Daily or Weekly AI Usage
Neutral Signal/Holding Steady
View our complete AI Impact Barometer
Source: Energy Information Administration
Source: Semiconductor Industry Association
Source: Ramp AI
Source: SurveyMonkey
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Semiconductor Sales WHY IT MATTERS Tracking global semiconductor sales provides an early signal of AI adoption and its downstream impact on commercial real estate. AI systems require enormous computing power, which rely on data centers packed with specialized chips such as GPUs (graphics processing units), TPUs (tensor processing units), and AI accelerators. These chips are essential for training and running large AI models, and their production directly influences how quickly data centers and AI technology/usage can expand. Beyond data centers, AI capabilities are increasingly built into products like vehicles, smartphones, and industrial equipment. Each of these devices now require more complex and numerous chips than before, pushing global semiconductor demand even higher. This trend signals not only the growth of AI but also the need for more energy-intensive facilities, advanced cooling systems, and robust electrical infrastructure, which are all factors that will shape property development, valuation, and investment strategies across the CRE industry.
Share of Businesses with Paid Subscriptions to AI Tools Measures the year-over-year change in the share of U.S. businesses with paid subscriptions to AI products and services. Draws on monthly data collected and reported by Ramp, which uses its corporate card and bill pay platform, drawing from transactions by more than 50,000 U.S. businesses.
Share of Americans Reporting Daily or Weekly AI Usage Measures the quarterly change in the share of Americans self-reporting daily or weekly AI usage. Draws on the U.S.-based sample of a quarterly survey conducted by SurveyMonkey, which includes more than 10,000 adults in the U.S.
Semiconductor Sales Measures the year-over-year change in trailing 12-month semiconductor sales globally in U.S. dollars, adjusted for CPI inflation.
Commercial Electricity Consumption WHY IT MATTERS Tracking commercial electricity consumption offers a view into how quickly artificial intelligence is proliferating across the CRE landscape and transforming infrastructure requirements. Rising energy demand from AI-driven data centers, along with industrial and retail properties’ increasing adoption of robotics and automation for tasks like inventory management, are all accelerating energy intensity. Electricity usage is emerging as a barometer for the scale and pace of AI integration, reflecting both the computing power required to support AI products and the operational technologies reshaping CRE assets. This trend points to evolving infrastructure requirements and signals potential shifts in property value drivers, positioning energy consumption as a growing factor in asset strategy, valuation, and long-term performance.
Share of Business with Paid Subscriptions to AI Tools WHY IT MATTERS Tracking the share of businesses paying for AI tools provides an indicator for how quickly AI is moving from experimentation to operational integration. While this metric does not capture how intensively companies use these tools, it signals commitment because businesses investing in paid subscriptions are more likely to embed AI into core workflows. Broader adoption has significant implications for commercial real estate because it signals a shift in demand toward properties that can support AI-driven operations. Organizations implementing these processes will require upgraded technology infrastructure, which will likely influence development priorities, tenant improvement strategies, and long-term asset valuations across property types. Rising adoption rates point to accelerating demand for properties designed to meet these evolving operational needs.
Share of Americans Reporting Daily or Weekly AI Usage WHY IT MATTERS Tracking the share of Americans who report using AI daily or weekly provides an important signal of how quickly AI is becoming part of everyday life. While this metric does not measure the depth or sophistication of usage, it reflects the pace at which consumers are integrating AI into routine activities, from personal assistants and content creation tools to decision-making apps. Rising adoption among households has broader implications for commercial real estate: as AI becomes embedded in consumer behavior, businesses will accelerate efforts to meet changing expectations, driving demand for office environments that support AI-enabled workflows, retail spaces equipped for personalized experiences, and logistics facilities optimized for automation. Increasing consumer engagement with AI is a leading indicator of shifts in how companies will need to operate and, ultimately, how space is designed and valued.
Economic Growth Engine
Several indicators of AI’s economic growth impact have trended positively in recent months, particularly those that measure business and infrastructure spending. Even when adjusted for inflation, business spending on information processing equipment and software is growing by 16% year-over-year, the fastest pace recorded in more than 15 years. As the buildout of infrastructure needed to support AI proliferation is progressing, construction spending on power and communication infrastructure is holding near the record highs hit in late 2024. Real wages and labor productivity haven’t been accelerating in recent months, but have continued to grow at a healthy pace. These latter indicators are worth monitoring closely moving forward for signs broad based productivity benefits across the U.S. economy as AI adoption increases.
Business Spending on Information Processing Equipment/Software
Construction Spending on Power and Communications Infrastructure
Productivity: Labor Output Per Hour
Real Wage Growth
Source: Bureau of Economic Analysis
Source: Census Bureau
Source: Bureau of Labor Statistics
Source: Federal Reserve, Bureau of Labor Statistics
Business Spending Information Processing Equipment/Software Measures the year-over-year change in private, fixed investment in information processing equipment and software, as reported by the BEA. Figures are expressed in real, 2017 dollars and seasonally adjusted.
Construction Spending on Power and Communication Infrastructure Draws on the U.S. Census Bureau's monthly figures on value of construction put in place for power and communications (including broadband) infrastructure. Measures how far above or below trailing 12-month construction spending is relative to the trailing 36-month average. Figures are adjusted for inflation and expressed in 2024 dollars.
Productivity Labor Output Per Hour Measures the year-over-year change in output per hour of all U.S. employees at nonfarm businesses as reported by the Bureau of Labor Statistics. The higher the output per hour, the more positive the AI impact.
Real Wage Growth Measures the year-over-year change in average U.S. wages as reported by the Atlanta Federal Reserve Wage Tracker, minus the year-over-year rate of CPI inflation.
Business Spending on Information Processing Equipment/Software WHY IT MATTERS Business spending on information processing equipment and software is a broad but powerful indicator of how willing companies are to invest in technology. While this metric is not exclusive to AI, faster growth often reflects rising demand for advanced computing power, cloud infrastructure, and software platforms, all of which are foundational for AI adoption. Increased investment signals confidence in technology-driven productivity/production gains and suggests businesses are preparing for more automated, data-intensive operations. For commercial real estate, this trend points to growing demand for high-spec office environments, data centers, and industrial/retail/multifamily facilities equipped to support next-generation technologies, influencing development priorities and long-term asset valuations.
Construction Spending on Power and Communications Infrastructure WHY IT MATTERS Construction spending on power and communication infrastructure is an indicator of how well the U.S. is preparing for the energy and data demands of advanced technologies like AI. Continued adoption of AI requires robust power generation and transmission systems, as well as high-capacity communications networks such as fiber optics capable of moving massive volumes of data quickly over long distances. Growth in this metric signals not only infrastructure readiness but also opportunities for construction employment and supply chain activity. For commercial real estate, these upgrades underpin the viability of data centers, high-tech industrial facilities, and energy-intensive operations, influencing where future development can occur and how assets are valued.
Productivity: Labor Output Per Hour WHY IT MATTERS Labor output per hour is a key measure of productivity and a critical indicator of whether AI is delivering on its promise of efficiency gains. Perhaps one of AI’s most significant potential contributions to macroeconomic growth lies in enabling workers across industries to access information, perform analysis, and generate content more quickly. If these productivity gains materialize, they would likely appear as sustained above-trend growth in labor output per hour. Such a trend would signal that AI is reshaping cost structures, accelerating economic growth, and influencing corporate strategies, ultimately driving demand for retail/multifamily/office environments optimized for technology-enabled workflows/uses and industrial spaces designed for automation.
Real Wage Growth WHY IT MATTERS Real wage growth is a key indicator of household purchasing power and economic strength. AI’s ability to boost worker productivity (by accelerating access to information, analysis, and content creation, as outlined in the Labor Output per Hour indicator) could translate into above-trend real wage growth if unemployment remains stable. This dynamic would not only fuel consumer spending and overall economic expansion but also influence corporate strategies and location decisions, increasing demand for office and industrial spaces designed for technology-enabled workflows and high-productivity sectors. For multifamily, stronger real wages support household formation and rent growth, particularly in markets attracting high-paying tech-enabled jobs. Retail would benefit from rising purchasing power driving discretionary spending, reinforcing demand for experiential and service-oriented retail formats. This indicator becomes one of the more critical to watch as it can have sweeping positive net impacts across the CRE ecosystem.
Capital Formation and Investment
Most measures of investment into AI-related businesses and infrastructure have been rising at a rapid pace since at least mid-2024, with no signs of slowing in recent months. Over the last four quarters, venture capital investments into generative AI firms totaled $122 billion, up more than 400% from the 12-months prior. Meanwhile, average share prices of Magnificent 7 stocks ended the third quarter up more than 30% y/y. CMBS lending tied to data centers, and capital raising by data center-focused private real estate both continued to surge through late 2025.
Positive Signal Accelerating
Venture Capital Funding to GenAI Companies
Performance of AI Equities
Private Equity Fundraising for Data Center Investment
Data Center ABS Issuance
Source: Pitchbook
Source: Cushman & Wakefield
Source: Prequin
Source: Green Street
Venture Capital Funding to GenAI Companies Measures the year-over-year change in trailing 4-quarter venture capital funding secured by Generative AI firms, as reported by Pitchbook.
Performance of AI Equities Measures the year-over-year change in average (equal weighted) share prices of Nvidia, Meta, Google, Apple, Microsoft, Amazon, and Tesla.
Private Equity Fundraising for Data Center Investment Measures the year-over-year change in the trailing 4-quarter global total (in U.S. dollars) of private real estate fund closings, by data-center-focused funds according to Preqin data.
Data Center ABS Issuance Measures the year-over-year change in the trailing 4-quarter global total (in U.S. dollars) of Asset Backed Security loan issuance collateralized by data center properties, according to Green Street data.
Venture Capital Funding to GenAI Companies WHY IT MATTERS Venture capital funding is a critical lifeline for generative AI firms, enabling innovation and scaling in a rapidly evolving sector. Changes in funding levels provide insight into private investors’ confidence in AI’s growth trajectory and its commercial viability. Rising investment signals strong expectations for continued breakthroughs, which could accelerate adoption across industries and drive demand for office space in tech hubs, specialized R&D facilities, and data infrastructure. Conversely, a slowdown may indicate heightened risk perception, influencing hiring trends, and even demand for flexible office and coworking environments.
Performance of AI Equities WHY IT MATTERS The Magnificent Seven term was coined in 2023 to refer to the seven largest publicly traded U.S.-based companies by market capitalization that went on to drive booming performance in the U.S. stock market in the two years that followed. These firms are global leaders in AI infrastructure, software, product innovation and manufacturing, making their collective share price performance a key barometer of equity capital flowing into AI-related industries. Sustained growth in these equities would signal strong expectations for continued technological breakthroughs, potentially shaping corporate investment strategies, talent clustering, and demand for office space in tech hubs. For industrial, rising AI investment would likely accelerate demand for advanced manufacturing facilities and data centers, particularly in power-secure, fiber-rich locations. For retail, wealth effects from equity gains could boost discretionary spending, supporting experiential and luxury formats in high-income markets. For multifamily, robust tech-sector performance may drive household formation and rent growth in innovation hubs, increasing demand for housing near employment centers and transit.
Private Equity Fundraising for Data Center Investment WHY IT MATTERS Private equity fundraising for data center investment is a leading indicator for how quickly capital may be deployed to expand mission-critical AI infrastructure. Strong fundraising activity would suggest confidence in AI-driven demand for high-capacity, power-secure data centers facilities, potentially accelerating development in key markets. This trend could also influence industrial strategies as data center construction competes for land and energy resources, while also shaping regional economic growth patterns that impact multifamily housing demand near tech clusters and retail performance in markets benefiting from increased employment and spending tied to AI infrastructure buildout.
Data Center ABS Issuance WHY IT MATTERS Data center ABS issuance serves as a forward-looking indicator of debt capital flowing into the development of mission-critical AI infrastructure. Elevated issuance would suggest strong lender confidence and liquidity for projects that enable high-performance computing, potentially accelerating data center construction in power-secure, fiber-rich markets. This trend could reshape industrial strategies as competition for land and energy intensifies, while also influencing regional growth patterns that drive multifamily housing demand near tech clusters and retail performance in markets benefiting from increased employment and spending tied to AI infrastructure buildout.
Net Employment
AI's early-stage impact on net job creation appears mixed, creating areas of growth and also evidence of labor automation. Since 2020, there has been a surge in job postings requiring AI related skills, as businesses increasingly commit to adding trained AI professionals to their payrolls. Counterintuitively, job growth has slowed recently in sectors such as utilities construction, power generation and semiconductor manufacturing that are attracting high levels of capital investment and should be direct beneficiaries of the AI infrastructure buildout. However, much of this recent slowing is likely supply-side driven and ties back to the pullback in immigration. Meanwhile, employment is declining in white-collar sectors now more vulnerable to automation such as call centers, document prep services, and marketing consulting. The unemployment rate for 18–24-year-olds is also 2.4x that of the overall labor force, near the highest that multiple has been in more than 35 years, suggesting that some employers are prioritizing investment in AI services over hiring for entry level roles. While it remains possible that expansions in AI complementary sectors could offset these pressures, current data suggests the emerging picture is one of transition, with AI’s initial impacts on net job creation leaning slightly negative. Firms are investing in AI capabilities, and while most occupations are adapting, labor market effects are unfolding unevenly across sectors and experience levels.
Negative Signal Gradually Intensifying
Employment in Highly Vulnerable Office-Using Sectors
Negative Signal Acclerating
Employment in Vulnerable Blue Collar Sectors
Youth Unemployment Rate Differential
CEO Hiring Plans Relative to Sales Expectations
Source: Business Roundtable CEO Economic Outlook Survey
Job Growth in AI Infrastructure Sectors
Online Job Postings Requiring AI-Related Skills
Source: Lightcast
Employment in Highly Vulnerable Office-Using Sectors Measures the year-over-year percentage growth in aggregate employment across several white collar sectors which all began to show a decisive swing to net negative or slowing job growth around the time of the initial release of ChatGPT in late 2022 and still showed no sign of renewed momentum more than three years later. Sectors include Includes Broadcasting and Content Providers, Business Service Centers, Call Centers, Computers Systems Design Services, Document Preparation Services, Marketing Consulting Services.
Employment in Vulnerable Blue-Collar Sectors Measures the year-over-year percentage growth in aggregate employment across several blue collar sectors which have already undergone significant automation in recent decades or are at risk of automation in the coming decade due to current technological advances underway. Sectors include Manufacturing, Retail Trade, Warehousing and Storage, and General Freight Trucking.
Youth Unemployment Rate Differential Measures the unemployment rate among 18–24-year-olds as a multiple of the overall unemployment rate for U.S. residents of all ages. The higher the differential, the more negative the implied AI impact.
CEO Hiring Plans Relative to Sales Expectations Draws on The Business Roundtable's quarterly survey of more than 150 CEOs. Measures the gap or differential between the survey's index for CEO's six-month outlook for sales expectations versus their six-month outlook for hiring expectations. The greater the gap between sales expectations and hiring expectations, the greater the implied negative impact on AI.
Job Growth in AI Infrastructure Sectors Measures the year-over-year percentage growth in aggregate employment growth in the following sectors: Power Generation and Supply, Utility System Construction, Semiconductor Manufacturing, and Electrical Equipment and Manufacturing.
Online Job Postings Requiring AI Skills Measures the year-over-year absolute change in the number of unique job postings requiring at least one of more than 350 AI-related skills as defined by Lightcast. AI-related skills falls under clusters such as Machine Learning, Generative AI, Robotics, Neural Networks, Virtual Image Recognition, and Natural Language Processing, which are capabilities that enable businesses to innovate and enhance productivity. According to Lightcast as of mid-2025, more than 50% of these postings were outside of IT and computer science, highlighting the broad and growing integration of AI across diverse industries.
Employment in Highly Vulnerable Office-Using Sectors WHY IT MATTERS Employment trends in highly vulnerable office-using sectors have drawn significant media and public attention as a potential early sign of AI-driven disruption. While recent shifts may reflect automation of information-intensive, rule-based tasks (accelerated by advances in Agentic AI and large language models), it is important to recognize that these trends are also shaped by longer-running forces, including hybrid work adjustments, cost optimization, and post-pandemic restructuring. Persistent contraction in these roles could signal structural shifts in labor demand, office demand, and tenant composition, making it critical for investors and occupiers to monitor where automation risk intersects with evolving workplace strategies, particularly in markets where these task-oriented jobs are most concentrated. Strategically, this may require owners and investors to evaluate exposure in these locations and adapt by pursuing opportunities such as adaptive reuse, flexible workspace models, and targeting sectors positioned for growth in an AI-enabled economy.
Employment in Vulnerable Blue-Collar Sectors WHY IT MATTERS Employment trends in vulnerable blue-collar sectors provide an important signal of how automation and AI may reshape labor markets beyond the office sector. Even before recent advances, these industries faced pressure from technologies such as assembly-line robotics, automated checkout systems, and warehouse automation. As machine learning and computer vision enhance autonomous robotics capabilities, further disruption is possible, particularly in manufacturing, logistics, and retail operations. Persistent softness in these roles could influence industrial real estate strategies, as automation drives demand for highly specialized facilities rather than labor-intensive ones. For investors and owners, this means evaluating exposure to traditional manufacturing and distribution assets and considering repositioning toward properties that support automation, such as high-power, high-clearance facilities with advanced connectivity and proximity to major transportation nodes. These shifts may also ripple into housing and retail markets, where regions losing labor-intensive jobs could see slower household formation and spending, while markets attracting advanced manufacturing and robotics clusters may experience stronger multifamily demand and retail performance.
Youth Unemployment Rate Differential WHY IT MATTERS The youth unemployment differential serves as a critical indicator of how early-stage AI adoption may be reshaping entry-level hiring. Lower-skilled, routine positions, often filled by younger workers, are among the most vulnerable to automation as businesses weigh the cost of new hires against investments in AI-driven solutions. The unemployment rate for 18–24-year-olds is currently more than twice that of the overall U.S. population, near the highest levels this multiple or differential has been in at least 45 years, suggesting that the disruptive forces of AI could already be manifesting in this segment of the labor market and bears close watching. At the same time, it’s important to recognize that cyclical factors and macroeconomic uncertainty, including slower growth and cost-containment strategies, may also be contributing to this trend, meaning that this is possibly not purely an AI-driven phenomenon. While this raises concerns about workforce displacement, it also carries potential positive implications for segments or pockets of commercial real estate. Reduced reliance on large pools of entry-level labor could accelerate demand for highly automated industrial facilities, advanced data centers, and office environments designed for AI integration rather than dense staffing. Additionally, prolonged youth unemployment may spur growth in education, training, and reskilling programs, creating opportunities for adaptive reuse of office assets into learning hubs or workforce development centers. Markets that successfully attract these innovation and training ecosystems could see long-term upside in both office and multifamily demand.
CEO Hiring Plans Relative to Sales Expectations WHY IT MATTERS A widening gap or differential between CEO sales expectations and hiring plans can signal a structural shift in workforce strategy. If CEOs anticipate strong revenue growth but tempered hiring, it suggests confidence in demand paired with caution on labor costs, potentially reflecting plans to leverage automation and AI rather than expand headcount. In fairness, this could represent early-stage adoption behavior, where businesses prioritize investments in AI integration and process automation before resuming more aggressive hiring later. For commercial real estate, these dynamics carry both risks and opportunities. Reduced hiring could dampen near-term office absorption. Conversely, increased investment in automation and digital infrastructure may accelerate demand for data centers, advanced industrial facilities, and office environments designed for high-tech collaboration rather than dense staffing.
Job Growth in AI Infrastructure Sectors WHY IT MATTERS Power generation, utility construction, semiconductor manufacturing, and electrical equipment production form the backbone of AI infrastructure and are among the sectors most likely to benefit from AI advancement and adoption. Rising employment in these areas serves as a bellwether for capital investment, signaling accelerating commitments to the physical infrastructure required to scale AI capabilities. Data centers, which are critical to AI, demand massive electricity loads for computation and cooling, along with a steady supply of advanced chips and electrical systems. For commercial real estate, this trend points to growing demand for power-intensive industrial sites, utility-adjacent land, and specialized manufacturing facilities. If employment in AI infrastructure sectors begins to accelerate, it would signal broader labor market shifts. Growth in high-skilled, technical roles tied to power, semiconductor, and utility systems could concentrate wage gains and housing demand in regions hosting these clusters, while markets reliant on entry-level jobs may face slower household formation and retail spending. Over time, increased investment in automation and infrastructure could spur reskilling initiatives, creating opportunities to repurpose underutilized office assets into training centers or innovation hubs. For CRE investors, these potential dynamics underscore the importance of monitoring where AI-related capital flows or investments are emerging and positioning portfolios toward industrial, data center, and innovation-driven markets.
Online Job Postings Requiring AI Skills WHY IT MATTERS Tracking changes in job postings requiring AI skills provides insight into how businesses view AI, whether they are creating new roles tied to adoption or accelerating hiring for positions that integrate these capabilities. The fact that more than half of these postings fall outside traditional IT and computer science underscores how broadly AI is reshaping functions across industries, from marketing and finance to operations and product development. For commercial real estate, rising demand for AI-skilled talent could drive clustering in tech-forward markets, influence office design toward collaborative and innovation-focused spaces, and spur growth in training facilities as companies invest in reskilling.
Data Center Market
Of all property types, the data center market is the clearest beneficiary of the proliferation of AI. With cloud data providers and other firms rapidly expanding their data center network to accommodate growing AI workloads, the U.S. data center vacancy rate has fallen to under 2% in 2025. While new construction is picking up, the pre-commitment rate for data centers under construction is over 85%, meaning there is little sign that new supply is pulling ahead of demand. Meanwhile, institutional investors' continue to increase their allocation to this property type, and appraisals value their data centers at 2.2% cap rates, more than two percentage points below appraised cap rates for the remainder of their portfolios.
Capacity-Based Vacancy Rate
Pre-Commitment Rate of Capacity Under Construction
Diversified Institutional Investors' Data Center Allocation
Institutional Cap Rate Premium
Source: NCREIF
Capacity-Based Vacancy Rate Measures the year-over-year change in the percentage of the U.S. data center stock (by power capacity) than has no active lease or usage by an owner occupant. The lower the vacancy rate the better the AI momentum.
Pre-Commitment Rate of Capacity Under Construction Measures the percentage of the U.S. data center stock under construction (by power capacity) than has preleasing commitments from tenants or commitment to usage by an owner occupant. The higher the pre-commitment rate, the stronger the AI positive momentum.
Diversified Institutional Investors' Data Center Allocation Measures the year-over-year change in data centers' share of the National Council of Real Estate Investment Fiduciaries’ Open-End Diversified Core (NCREIF ODCE) Index’s total asset value.
Institutional Cap Rate Premium Measures the difference between NCREIFs appraisal-based cap rates for data centers vs aggregate cap rates for all other property types.
Capacity-Based Vacancy Rate WHY IT MATTERS Capacity-based vacancy is a critical gauge of whether demand for data center space is keeping pace with new supply. While AI computing power demand is a leading driver of absorption, existing digital infrastructure needs, including things like cloud services, enterprise applications, and streaming, remain foundational forces sustaining data center demand as well and keeping vacancy rates low. A persistently low or declining vacancy rate signals strong momentum behind both AI-driven and broader computing requirements, reinforcing the need for power-intensive facilities in strategic markets. Conversely, rising vacancy would indicate that supply is outpacing demand, potentially cooling development and shifting pricing dynamics.
Pre-Commitment Rate of Capacity Under Construction WHY IT MATTERS With vacancy rates in existing data center stock at historic lows, new construction is critical to meeting both AI-driven and broader digital infrastructure demand. The pre-commitment rate of capacity under construction serves as a leading indicator of market confidence and future absorption. A high pre-commitment rate signals strong tenant demand and suggests that new facilities will be quickly integrated into active use, reinforcing momentum behind AI and cloud adoption. Conversely, a declining rate may indicate that supply is beginning to outpace demand, which could pressure pricing and slow development activity. For CRE investors, tracking this metric helps anticipate shifts in leasing velocity and identify markets where speculative development carries greater risk or opportunity.
Diversified Institutional Investors' Data Center Allocation WHY IT MATTERS The NCREIF ODCE Index is the industry benchmark for diversified, institutional, open-ended commercial real estate funds, making it a key signal of how the largest (institutional) investors allocate capital. A rising share of data centers within the index reflects growing confidence in the sector’s long-term income stability and its role in powering AI and digital infrastructure. Continued increases in this share would suggest that institutional investors are prioritizing exposure to tech-driven assets, potentially influencing pricing, liquidity, and development pipelines. Conversely, a slowdown or reversal could indicate shifting risk perceptions or a pivot toward other property types.
Institutional Cap Rate Premium WHY IT MATTERS The institutional cap rate premium is a key signal of investor sentiment toward data centers relative to other property types. When appraisal-based cap rates for institutionally owned data centers trend significantly below those of other property types, it reflects a bullish outlook on future rent growth and net operating income, as well as confidence in the sector’s resilience and long-term demand drivers like AI and cloud computing. A widening gap or premium suggests heightened competition for data center assets and potential upward pressure on valuations, while a narrowing gap could indicate shifting risk perceptions or moderating growth expectations. For CRE investors, this metric provides an ongoing read on pricing dynamics and portfolio strategies in a sector increasingly tied to digital transformation.
Office
So far, AI’s early-stage impact on the office market has been mixed. AI-driven leasing has helped to stabilize prime office space absorption in tech-employment-heavy U.S. counties, which are also attracting an increasing share of U.S. office investment. However, national office-using employment has declined on net since early 2023 and remained flat in recent months, likely due in part to businesses’ increased focus investment in AI services and slower entry-level hiring. While indicators of tenant demand have improved in recent quarters, strength remains concentrated within the highest quality properties, and vacancy rates for Class B and C properties are still rising. Capital markets signals of AI’s office market impact are also mixed. Diversified institutional investors allocation to the office sector has continued to decline in recent months, albeit at a much slower pace than it did from 2022-2024. However, this has not stopped total office sales volume from rising recently, and cap rate spreads over risk-free treasury rates are holding steady. Overall, there are few indications that investor perceptions of risk to the office market outlook are either ramping up or receding as AI’s economic impact picks up steam.
Office-Using Employment Growth
Class B&C Vacancy Rate
Class A Absorption: Tech R&D/Manufacturing Exposed Counties
Share of U.S. Office Sales: Tech R&D/Manufacturing Exposed Counties
Source: Bureau of Labor Statistics, Moody's
Source: BLS, CoStar
Office Cap Rate Spread Over Risk Free Rate
Source: Federal Reserve, MSCI/Real Capital Analytics
Diversified Institutional Investors' Office Allocation
Office-Using Employment Growth Measures the year-over-year change in aggregate employment for the most office-intensive sectors: Financial Activities, Professional and Businesses Services, and Information.
Class B&C Vacancy Rate Measures the year-over-year change in the U.S. vacancy rate for class B&C office properties.
Class A Absorption Tech R&D/Manufacturing Exposed Counties: Aggregate, trailing 12-month absorption as % of rentable building area (RBA) among office properties rated 4 or 5 stars by CoStar’s building rating system. Only includes properties in the top 10 U.S. counties with the highest concentrations of employment in Tech R&D and Manufacturing-heavy employment sectors, including the following subsectors: Computer Systems Design and Related Services, Scientific R&D Services, Web Search Portals, Libraries, archives, and other information services, Computer and Peripheral equipment manufacturing, Semiconductor and other electronic component manufacturing, Electrical Equipment Manufacturing, Other electrical equipment and component manufacturing. The top 10 counties with high tech R&D and manufacturing concentrations include (in descending order of concentration): Santa Clara, CA; Fairfax, VA; Middlesex, MA; Howard, MD; Durham, NC; San Mateo, CA; Arlington, VA; San Francisco, CA; Boulder, CO and Washington, OR, in descending order of their employment concentration scores.
Share of U.S. Office Sales Tech R&D/Manufacturing Exposed Counties: Measures the year-over-year change in the share of U.S. office sales (by square footage) occuring in the top 10 counties for highest concentrations of employment in Computer Systems Design and Related Services, Scientific R&D Services, Web Search Portals, Libraries, archives, and other information services, Computer and Peripheral equipment manufacturing, Semiconductor and other electronic component manufacturing, Electrical Equipment Manufacturing, Other electrical equipment and component manufacturing. Counties include: Santa Clara, CA Fairfax, VA Middlesex, MA Howard, MD Durham, NC San Mateo, CA Arlington, VA San Francisco, CA Boulder, CO and Washington, OR.
Office Cap Rate Spread Over Risk Free Rate Measures the year-over-year change in the trailing 12-month average spread of U.S. office cap rates (represented by MSCI/Real Capital Analytics' hedonic cap rate series) over the 10-year treasury rate.
Diversified Institutional Investors' Office Allocation Measures the year-over-year change in office properties' share of the market value of the National Council of Real Estate Investment Fiduciaries (NCREIF) Open-End Diversified Core (ODCE) Index portfolio. Excludes life science and medical office properties.
Office-Using Employment Growth WHY IT MATTERS Office-Using Employment Growth remains a critical barometer for overall office demand, which is influenced by multiple forces, not just AI. While advancements in AI technology have introduced efficiencies that may slow growth in certain subsectors of Professional and Business Services (such as Call Centers and Document Preparation Services), they are also creating new roles and reshaping skill requirements, signaling an evolution rather than a decline. Combined with structural trends like hybrid work adoption and corporate strategies to optimize space, these dynamics point to an office market that is adapting to changing business needs rather than disappearing. Monitoring total office-using employment ensures we keep a pulse on sectors that have historically driven office leasing and remain central to long-term demand. C&W’s inclusion of this indicator reflects its importance as a forward-looking measure for office overall, ensuring it stays top of mind within this framework even as broader economic and technological forces shape the office sector’s next chapter.
Class B&C Vacancy Rate WHY IT MATTERS The U.S. office market is increasingly defined by a bifurcation, arguably even a trifurcation, between top-tier, amenity-rich space and lower-quality Class B and C properties. This divide is being amplified by structural shifts in tenant preferences and technological disruption (i.e., this indicator is not a pure AI-impact indicator but rather one that also captures other macro influences on the sector). Recent advancements in AI, which automate rule-based and repetitive tasks, may disproportionately impact lower-skilled, back-office roles often housed in Class B and C space. If aggregate office demand softens, tenants are likely to capitalize on favorable market conditions to upgrade into higher-quality environments, leaving lower-tier assets more vulnerable to rising vacancy. Monitoring Class B and C vacancy rates provides insight into how these dynamics are playing out and whether AI adoption accelerates this flight-to-quality trend. For CRE investors and lenders, this metric is a critical signal for pressure and potential obsolescence risk in secondary assets, while also highlighting opportunities for repositioning or adaptive reuse strategies in markets where demand for top-tier space remains resilient.
Class A Absorption: Tech R&D/Manufacturing Exposed Counties WHY IT MATTERS In counties with high concentrations of tech R&D and advanced manufacturing employment, class A absorption rates may prove a bellwether for the AI boom’s positive influence on office fundamentals. These markets, which are home to specialized talent in sectors like semiconductor manufacturing, scientific research, and computer systems design, are positioned at the forefront of innovation. Strong absorption trends in top-tier properties within these counties would signal that demand for collaborative, high-quality office environments is rising alongside AI-driven growth, reinforcing the value of premium space in tech-centric ecosystems. Conversely, muted absorption could indicate that even innovation hubs are not immune to broader structural shifts in office demand. For CRE investors and occupiers, this metric provides an indicator of where leasing momentum is concentrating, guiding capital allocation and workplace strategy in markets aligned with long-term technology investment.
Share of U.S. Office Sales: Tech R&D/Manufacturing Exposed Counties WHY IT MATTERS The share of U.S. office sales occurring in tech R&D and manufacturing–exposed counties can act as an indicator of investor confidence in markets most closely tied to innovation and AI-driven growth. These counties, which are home to deep concentrations of specialized talent and advanced industries, are potentially positioned to benefit from long-term technology investment and collaborative workspace demand. An increasing share of office transaction volume in these areas would signal that CRE investors are actively reallocating capital toward markets expected to outperform, reinforcing the narrative of a flight to quality and tech-centric ecosystems. Conversely, a declining share could suggest caution or a pivot toward diversification amid broader structural shifts in office demand. For investors and lenders, this metric provides a read on capital flows and competitive positioning in submarkets aligned with future economic drivers.
Office Cap Rate Spread Over Risk Free Rate WHY IT MATTERS The spread between U.S. office cap rates and the 10-year Treasury yield is a critical gauge of perceived risk and return in the office sector. Narrower spreads typically signal investor confidence in income stability and rent growth, while widening spreads reflect heightened uncertainty or risk repricing. If investors conclude that AI adoption and related innovation are supporting office demand, through productivity gains, tech-sector growth, or renewed emphasis on collaborative environments, spreads are likely to hold steady or compress, reinforcing capital flows into well-positioned assets. Conversely, if sentiment shifts toward viewing AI as a net negative for office fundamentals, spreads will likely expand, signaling caution and potential downward pressure on valuations. For CRE stakeholders, this metric provides a read on market sentiment and pricing dynamics, guiding acquisition strategies and portfolio risk management.
Diversified Institutional Investors' Office Allocation WHY IT MATTERS The NCREIF ODCE Index is the industry benchmark for diversified, institutional, open-ended commercial real estate funds, making this metric a strong indicator of institutional sentiment toward office. If investors perceive that AI-driven innovation and related economic trends are supporting office leasing and rent growth, office allocations within ODCE portfolios are likely to stabilize or increase as managers reposition for long-term performance. Conversely, continued declines would suggest persistent caution and reinforce the narrative of structural headwinds that began during the pandemic. For CRE stakeholders, tracking this allocation trend provides insight into capital flows, portfolio strategy, and where institutional confidence is concentrating, which is critical for anticipating liquidity and pricing dynamics in the office sector.
Industrial Distribution
Measures of occupied U.S. warehouse space per worker indicate that warehouse automation has steadily grown in recent years, as distribution tenants increasingly adopt new technology such as AI-enhanced sorting systems, robotic picking arms equipped with deep learning, and monitoring systems augmented by AI models that help detect safety risks or product damage. Despite headwinds from tariffs, newer bulk distribution centers (with the uniquely high levels of power supply needed to accommodate high levels of automation) have garnered rising leasing totals through 2025. Vacancy rates are also holding up best among the largest size cohorts of new distribution centers, for which the economies of scale offered by advanced automation are most financially beneficial.
Occupied U.S. Distribution Space Per Worker
Average Amps/SF Available in Bulk Distribution Centers (Higher in post 2019-built properties)
Leasing in Post 2019-Built Bulk Distribution Centers
Vacancy Rates of Post 2019-Built Distribution Centers
Source: Bureau of Labor Statistics, CoStar
Source: CoStar
Occupied U.S. Distribution Space Per Worker Measures the year-over-year change in occupied U.S. distribution space per worker, which is calculated by dividing total occupied warehouse/distribution space in properties 20,000 SF or larger, by total U.S. employment in the wholesale trade and warehousing and storage sectors. The greater the occupied space per worker, the greater implied or perceived impact that AI is having on warehouse and distribution demand, given the assumption that automation and robotics will drive space demand despite fewer employees needed to operate the space.
Average Amps/SF Available in Bulk Distribution Centers Definition: The average electrical service (as measured in available amps per square foot of property rentable building area) provided to existing U.S. distribution centers.
Leasing in Post 2019-Built Bulk Distribution Centers Measures the trailing four-quarter average quarterly change square feet (SF) leased in U.S. warehouse/distribution properties 100,000 SF or larger, built after 2019.
Vacancy Rates of Post 2019-Built Distribution Centers Measures the year-over-year change in vacancy rates of post 2019 built U.S. warehouse/distribution properties larger than 100,000 SF.
Occupied U.S. Distribution Space Per Worker WHY IT MATTERS Occupied distribution space per worker is a key indicator of operational efficiency and automation trends within the logistics sector. As distribution centers adopt advanced automation and AI-driven inventory management systems, tenants can handle greater throughput with fewer workers, reducing labor costs and optimizing space utilization. An increasing (or higher) ratio may signal accelerating automation and productivity gains, while a declining or lower ratio could indicate slower adoption or increased space requirements tied to e-commerce growth. For CRE investors and occupiers, this metric provides insight into how technology is reshaping demand for industrial space, helping inform investment strategies, facility design, and long-term planning.
Leasing in Post 2019-Built Bulk Distribution Centers WHY IT MATTERS Post-2019 bulk distribution centers were (in general) designed with significantly higher electrical capacity and modern infrastructure, making them uniquely suited for advanced automation and robotics. Leasing activity in these properties serves as a strong indicator for how quickly tenants are adopting technology to drive efficiency and throughput. Rising demand for these newer facilities suggests that automation will reshape site selection priorities and reinforce the value of modern, power-intensive assets. For CRE investors and developers, this metric provides insight into where capital should be deployed to capture future growth and maintain competitiveness in a rapidly evolving logistics landscape.
Vacancy Rates in Post 2019-Built Distribution Centers WHY IT MATTERS Vacancy rates in post-2019 bulk distribution centers serve as a critical indicator for how quickly tenants are gravitating toward facilities equipped for advanced automation and robotics. These newer properties, designed with higher electrical capacity and modern infrastructure, are uniquely positioned to support AI-driven systems and high-throughput operations. Declining vacancy rates would signal strong demand for technologically capable assets, reinforcing the competitive advantage of modern facilities. Conversely, rising vacancies could suggest slower adoption of automation or oversupply risk in certain markets. For investors and developers, this metric provides insight into where leasing momentum, and therefore pricing power, is concentrating, guiding decisions on acquisitions, redevelopment, and speculative development strategies.
Retail
So far, AI’s impact on the retail property market has not tilted firmly positive or negative. Advances in digital marketing algorithms that better match retailers’ products with target consumers risk potentially accelerating the shift to online spending. However, even as the share of retail sales occurring online has continued rising in recent months, foot traffic at goods-oriented brick and mortar retail properties has held steady and traffic at grocery stores has increased. There is also potential for advances in digital marketing to drive more consumers to physical stores. For these reasons, it is key to continue monitoring e-commerce’s share of overall retail spending, while also tracking foot traffic at brick-and-mortar locations for signs either begins to decisively accelerate, decelerate, or diverge. It is also worth monitoring AI’s potential impact on wealth inequality. Over the past several months burgeoning AI stocks have contributed to overall increases in the average real net worth for the 10% of households, creating tailwinds for higher end retailers catering to the wealthiest consumers. Meanwhile, average real net worth of the bottom 90% of households has moved sideways.
Structural Shift to Online Spending
Foot Traffic at Goods-Oriented, Brick and Mortar Retail
Foot Traffic at Experiential/Services Retail (Restaurants, Beauty, Fitness)
Foot Traffic at Grocery Stores
Source: U.S. Census Bureau
Source: PlacerAI
Average Net Worth: Top 10% of Households
Source: Federal Reserve
Average Net Worth: Bottom 90% of Households
Structural Shift to Online Spending Measures the year-over-year change in non-store sales as a percentage of total U.S. retail sales excluding sales at motor vehicle dealerships and gas stations.
Foot Traffic at Goods-Oriented, Brick and Mortar Retail Measures the year-over-year change in total visits to retail stores in the following categories according to Placer.AI: Clothing, Department Stores, Home Improvement, Furniture or Home Furnishings, Superstores, Electronics, Hobby, Gift, and Crafts, Recreational and Sporting Goods.
Foot Traffic at Experiential/Services Retail Measures the year-over-year change in total visits to retail stores in the following categories according to Placer.AI: Restaurant, Fitness, Beauty & Spa.
Foot Traffic at Grocery Stores Measures the year-over-year change in total visits to grocery stores according to Placer.AI
Average Net Worth: Top 10% of Households Measures the year-over-year change in average, real net worth per household of the top 10% of U.S. households by net worth.
Average Net Worth: Bottom 90% of Households Measures the year-over-year change in average, real net worth per household of the bottom 90% of U.S. households by net worth. This metric serves as an indicator of financial health for the majority of consumers, whose spending patterns influence demand across multiple CRE sectors, including neighborhood retail, workforce housing, logistics, and service-oriented properties.
Retail Availability: Tech R&D/Manufacturing Exposed Counties
Retail Availability Tech R&D/Manufacturing Exposed Counties: Measures the year-over-year change in the aggregate retail availability rate of the top 10 U.S. counties with the highest concentration of employment in tech R&D and manufacturing subsectors including: Computer Systems Design and Related Services, Scientific R&D Services, Web Search Portals, Libraries, archives, and other information services, Computer and Peripheral equipment manufacturing, Semiconductor and other electronic component manufacturing, Electrical Equipment Manufacturing, Other electrical equipment and component manufacturing. The top 10 counties with the highest concentration include: Santa Clara, CA; Fairfax, VA; Middlesex, MA; Howard, MD; Durham, NC; San Mateo, CA; Arlington, VA; San Francisco, CA; Boulder, CO; and Washington, OR, in descending order of concentration.
Structural Shift to Online Spending WHY IT MATTERS A renewed acceleration in online spending could reshape CRE demand, potentially supporting logistics growth while continuing to challenge traditional retail footprints. This metric reflects the structural shift toward e-commerce, a trend that has been among the most influential forces in both U.S. retail and industrial markets. Although the pace of transition slowed in late 2024 and early 2025, AI-driven advances in digital marketing, personalization, and predictive analytics may set the stage for renewed momentum by improving conversion rates and customer targeting. For investors and operators, this represents as a signal worth monitoring as technology continues to redefine consumer engagement and could influence where capital flows and development priorities evolve. If this trend gains traction, retail real estate may face renewed pressure on legacy formats, prompting retailers to double down on omni-channel strategies that integrate physical and digital platforms. Stores could increasingly serve as fulfillment hubs and experiential spaces rather than purely transactional locations, requiring investments in inventory visibility, localized merchandising, and flexible layouts. These adjustments would aim to meet rising consumer expectations for convenience and personalization. Yet, how quickly retailers adapt, and how consumers respond, remains to be seen. On the industrial side, demand for modern distribution centers and last-mile facilities could strengthen, particularly near dense population hubs, as retailers seek faster fulfillment capabilities. Mixed-use developments might also incorporate logistics infrastructure to support omnichannel retail models. While these shifts are not guaranteed, they highlight areas where opportunities for evolution exist, both in repositioning retail assets and in capturing growth in industrial portfolios with strong transportation connectivity.
Foot Traffic at Goods-Oriented, Brick and Mortar Retail WHY IT MATTERS Monitoring foot traffic at goods-oriented stores is essential for gauging how AI-driven advances in digital marketing and personalization are shaping consumer behavior. These technologies are expected to improve retailers’ ability to connect products with target audiences, yet whether that translates into more in-store visits, or accelerates a shift toward online engagement, remains uncertain. Foot traffic trends will help clarify this trajectory: if visits stabilize or rise, it signals that brick-and-mortar locations are retaining relevance within omni-channel strategies, reinforcing their potential as experience centers and fulfillment hubs. If traffic declines, it may prompt faster adaptation of store footprints and greater investment in logistics infrastructure, creating opportunities for repositioning and industrial growth. In either scenario, tracking these patterns offers a view into where retail and industrial real estate strategies can evolve to capture emerging demand.
Foot Traffic at Experiential/Services Retail WHY IT MATTERS Monitoring foot traffic at experiential and services-oriented retail can be instructive because these segments may offer pockets of resilience against e-commerce headwinds. While goods-oriented stores could face ongoing pressure from digital channels, locations that deliver experiences, such as dining, fitness, entertainment, and personal services, could maintain relevance and even strengthen their role in omni-channel strategies. If these formats sustain or grow traffic volume, it signals opportunities for landlords and investors to prioritize properties (and tenants) that support experience-driven retail, while underperforming goods-based formats may require more caution or re-tenanting.
Foot Traffic at Grocery Stores WHY IT MATTERS Foot traffic at grocery stores is worth monitoring because it may represent a pocket of resilience against e-commerce headwinds, even as AI-driven advances in digital marketing and personalization continue to shape consumer behavior. While these technologies could accelerate online grocery adoption, physical stores are expected to remain integral for convenience, immediacy, and experiential shopping, factors that may sustain their relevance within omni-channel strategies. If traffic holds steady or grows, it suggests opportunities for landlords and investors to prioritize grocery-anchored centers and mixed-use developments that leverage consistent consumer visits. Conversely, if traffic declines, it could signal a faster pivot toward centralized fulfillment and last-mile logistics, creating demand for industrial assets near population hubs. In either scenario, tracking this metric offers a view into how retail and industrial real estate strategies could evolve, whether by reinforcing grocery’s role as a traffic driver or by capturing growth in logistics infrastructure to support shifting consumer preferences.
Average Net Worth: Top 10% of Households WHY IT MATTERS AI-driven productivity gains and corporate profitability could further amplify equity valuations, strengthening balance sheets of the wealthiest households with the most capital invested in stocks and private equity. Rising wealth among the top 10% of households has the potential to drive future strength among high-end retailers, but also create demand tailwinds for luxury apartments, hotels, and vacation homes. Increased discretionary spending may support premium office environments (that feature engaging Live, Work, Play components such as cultural, arts, shopping amenities) and destination entertainment venues, reinforcing the value of assets that cater to experience and convenience.
Average Net Worth: Bottom 90% of Households WHY IT MATTERS Monitoring the balance sheets of the bottom 90% of households can be instructive because their economic stability underpins broad-based consumer demand. While AI-driven productivity gains may create efficiencies that benefit higher net-worth households, the trajectory for most households will depend on job market fundamentals, income growth and cost-of-living pressures. If net worth among this group strengthens, it could support spending at value-oriented retailers, drive demand for affordable housing, and reinforce traffic to service-based retail and community amenities. Conversely, if wealth growth stalls, it may signal headwinds for discretionary spending and increase pressure on sectors reliant on middle-income consumers. For CRE strategy, this metric offers a view into where resilience or risk may emerge, helping investors calibrate exposure between necessity-driven retail, affordable housing, and formats that cater to cost-conscious households. While outcomes remain uncertain, tracking this trend is essential for positioning portfolios to align with evolving consumer fundamentals.
Retail Availability: Tech R&D/Manufacturing Exposed Counties WHY IT MATTERS Retail availability in tech-heavy counties could be an instructive metric to watch because these markets are positioned to potentially benefit disproportionately from AI-driven innovation and related economic growth. As AI accelerates productivity and spurs investment in research, advanced manufacturing, and supporting ecosystems, counties with deep concentrations of tech talent and infrastructure could see rising incomes and household wealth. This dynamic has the potential to strengthen retail fundamentals by boosting demand for experiential concepts, premium goods, and service-oriented offerings that cater to highly skilled workforces. For CRE, stable or declining availability rates in these areas may signal opportunities to invest in mixed-use developments, lifestyle retail, and amenity-rich environments that complement tech employment hubs. Conversely, if availability rises, it could indicate a need for adaptive reuse strategies or repositioning toward formats aligned with evolving consumer preferences. Monitoring this trend provides a lens into how innovation-driven economies shape retail performance and where investors can capture growth across interconnected sectors, including office, residential, and hospitality, anchored by tech-centric demand.
Multifamily
The early stage of AI adoption appears to have a mixed impact on the multifamily market. Since mid-2024, economic strength in the top 10 U.S. counties for exposure to technology R&D and manufacturing employment have helped these locations outperform the U.S. with tighter occupancy rates and stronger rent growth. Nationally, rent growth among trophy class properties has also been outperforming, as net worth among the wealthiest households continues to rise, driven in part by booming stock market performance led by Magnificent 7. However, so far there are few signs that AI’s proliferation has immensely benefited the apartment market overall, rent growth among both class B and commodity class A buildings has been softening in recent months.
Performance Index: Tech R&D/Manufacturing Exposed Counties
Class A+ Rent Growth Differential
Commodity Class A Rent Growth Differential
Class B Rent Growth Differential
Performance Index Tech R&D/Manufacturing Exposed Counties An index that compares apartment fundamentals, including rent growth, occupancy (RevPAU), between the 10 U.S. counties with the highest exposure to high tech R&D and manufacturing employment against the broader U.S. multifamily market. The top 10 counties with the highest concentration of high tech R&D and manufacturing employment include: Santa Clara, CA; Fairfax, VA; Middlesex, MA; Howard, MD; Durham, NC; San Mateo, CA; Arlington, VA; San Francisco, CA; Boulder, CO; and Washington, OR, in descending order of concentration.
Class A+ Rent Growth Differential Measures the difference in year-over-year rent growth of Class A+ properties and aggregate rent growth of all U.S. multifamily properties.
Commodity Class A Rent Growth Differential Measures the difference in year-over-year rent growth of Class A properties (excluding class A+) and aggregate rent growth of all U.S. multifamily properties.
Class B Rent Growth Differential Measures the difference in year-over-year rent growth of Class B properties and aggregate rent growth of all U.S. multifamily properties.
Performance Index Tech R&D/Manufacturing Exposed Counties WHY IT MATTERS Multifamily performance in tech-heavy counties can serve as an indicator for how AI-driven innovation may translate into localized economic growth and housing demand. As AI accelerates productivity and investment in research and advanced manufacturing, these markets, which are home to some of the nation’s most concentrated tech employment, could experience rising incomes and household formation, supporting rent growth and occupancy, prompting the next wave of multifamily construction. Strong fundamentals in these counties may signal opportunities for developers and investors to prioritize high-quality multifamily projects, mixed-use communities, and amenity-rich housing that caters to skilled workforces. Conversely, if performance lags, it could point to affordability pressures or migration trends that reshape demand toward more cost-effective markets. Monitoring this index provides a lens into where capital deployment and development strategies should focus, whether reinforcing supply in innovation hubs or identifying emerging spillover markets, positioning CRE portfolios to capture growth tied to the next wave of technological advancement.
Class A+ Rent Growth Differential WHY IT MATTERS The rent growth differential for Class A+ properties offers insight into how wealth concentration and lifestyle preferences may shape multifamily demand at the very top of the market. If AI-driven productivity gains and corporate profitability translate into rising net worth for affluent households, ultra-luxury apartments could see outsized performance relative to the broader market. This trend would signal opportunities for developers and investors to focus on high-end amenities, prime urban locations, and mixed-use environments that cater to premium living standards. Conversely, if the differential narrows, it may indicate a shift toward more cost-conscious choices or evolving preferences for flexibility and experience over exclusivity. Monitoring this metric could help investors anticipate where capital should be allocated, whether reinforcing luxury offerings in gateway markets or diversifying into segments with broader affordability appeal, positioning portfolios to capture growth across the multifamily spectrum.
Commodity Class A Rent Growth Differential WHY IT MATTERS The rent growth differential for commodity Class A properties provides insight into how shifting renter preferences and income dynamics may reshape multifamily demand. If AI-driven economic changes amplify wealth concentration, demand could increasingly polarize, favoring ultra-luxury Class A+ units at one end and more affordable Class B/C units at the other. In this scenario, commodity Class A properties may face competitive pressure, particularly in markets where affordability challenges persist. For investors and developers, monitoring this metric could prove helpful in anticipating potential softening in mid-tier demand and in informing strategies such as repositioning assets, enhancing amenities, or exploring conversions to meet affordability needs. Conversely, if the differential remains stable or improves, it may signal resilience in this segment, supporting continued investment in well-located Class A communities.
Class B Rent Growth Differential WHY IT MATTERS The rent growth differential for Class B properties serves as indicator of resilience in the multifamily market. If AI-driven economic shifts widen income inequality and create pressure on middle-income households, demand could increasingly concentrate in more affordable housing options. In this scenario, Class B properties may be better positioned to capture steady occupancy and rent growth as cost-conscious renters seek value without sacrificing quality. For investors, this trend underscores opportunities to prioritize well-located Class B assets, explore targeted renovations to enhance competitiveness, and consider strategies that balance affordability with operational efficiency. Conversely, if the differential narrows, it may signal improving fundamentals for higher-end segments or easing affordability constraints. Monitoring this metric helps CRE stakeholders anticipate where stability and growth are most likely, enabling portfolio strategies that align with evolving renter preferences and economic realities.
