Sunday Summary: Who’s Funding $1.3 Trillion in Data Center Spending? – Commercial Observer
Pluck your average Commercial Observer journalist off the street, shove them in a van, shine a flashlight in their eyes, and say, “Quick — what’s the biggest story in commercial real estate?” nine reporters out of 10 will answer:
“Data centers.”
At least that’s the case in 2026 after the billions and billions of dollars in investment that have been lavished on the sector.
Actually, make that trillion — with a “t.”
It’s still a sector that’s largely mysterious and unknown (even the vocabulary of the asset class is new!) so CO was excited last week when San Diego-based Atrium, an AI analytics firm, launched an interactive data platform called “Who Finances America’s Data Centers,” which tracks the money behind the $1.3 trillion (and counting) data center bonanza.
What makes Atrium’s platform so fascinating is that it delves into the nitty gritty of individual deals like Coreweave’s $23 billion debt facility from 38 different lenders, and the 24 lenders financing DigitalBridge and IFM’s $20 billion debt facility — but at the same time it examines the breadth of activity of non-bank lenders like PIMCO (which has done $23 billion in originations), or borrowers like Amazon, Microsoft, Google, Meta and Oracle (five firms that alone account for $223 billion in long-term debt and credit facilities).
All this data center activity comes as construction costs have been on the rise. Construction might have slowed down in other sectors, but the explosive growth of data centers has seemingly made up for it, at least according to a recent report from Skanska.
“The market is hot and cold right now — hot and warm may be a better way to say it — so what stands out is that we’re seeing a lot of project activity around data centers, semiconductor, life sciences,” said Skanska’s Tom Park. “There’s really a lot of unprecedented demand in the mechanical, electrical, plumbing and steel space driving up lead times and cost.”
Moreover, the companies that rely on the proliferation of data centers — namely, the AI firms — have been multiplying like mad and migrating beyond the borders of Silicon Valley.
Correction: The Bay Area is not just suffering from urban sprawl — according to a report from CBRE, New York City has surpassed San Francisco for the first time as the biggest tech labor market in North America.
While tech still makes up 10 percent of the total workforce of San Francisco and only 4.2 percent in Gotham, that works out to 375,730 jobs versus 394,300, respectively, given the sizes of these metros.
The proof is in the pudding. We’ve seen the results of this in the office market with AI firms taking some 800,000 square feet of New York office space in the second quarter of 2026, according to Colliers.
Yes, AI is a big reason office is rebounding
For a lot of investors, office was the ex they didn’t want to call again. Things had gone great once, but with things going so well with data centers it was not a relationship they wanted to revive. As recently as the second quarter of 2025, only 4 percent of real estate investors picked office as their most favored bet.
Although that might not be the case anymore!
The recent data from SitusAMC shows that share has nearly tripled to 11 percent. (In the first quarter of 2026 it was even higher: 16 percent.)
“We’ve been seeing over the past year or year and a half the office investment conditions are improving,” said Peter Muoio, head of SitusAMC Insights. “There is renewed interest.”
Some of this explains why real estate investment trust (REIT) second-quarter earnings were a lot more robust than they’ve been in a while.
“Overall, REIT earnings results were surprisingly strong and delivered one of the cleanest reporting periods in recent memory, with unusually broad guidance raises, improving property-level fundamentals, and relatively few outright disappointments,” said a report put out by Hoya Capital last week.
One sees it in the deals that are getting across the finish line. Just last week, Thor Equities made a $218 million play for 1359 Broadway from Empire State Realty Trust at nearly the full asking price, only a month after the property hit the market.
And Lincoln Property Company, Saber-Hightower and Waterfall Asset Management acquired four National Resources properties that included some 4 million square feet — among those a 270-acre business park in East Fishkill, N.Y. — for $450 million. (Two multifamily properties in the New York metro area were also part of the deal.)
Other assets are looking up, too!
Of course, there’s plenty of good news in the other sectors — particularly in retail and multifamily.
In retail we’re seeing a number of bread-and-butter leases in Williamsburg, Brooklyn, like Players Club International (a streetwear brand) taking 1,875 square feet at Yosef Beer’s 17 Kent Avenue, the men’s apparel brand Bylt Basics taking 2,085 square feet at L3 Capital’s 108 North Sixth Street, and Zara taking a whopping 22,060 square feet at L3’s planned development at 184-192 Bedford Avenue.
And Brooklyn isn’t the only hot location. South Florida is doing just fine. A consortium of owners nabbed $125 million in financing to add a mixed-use building to a luxury, open-air mall in the Miami Design District, and two years after buying 736 Collins Avenue Vivienne Westwood filed plans for their new boutique in South Beach.
But, just as we said nine out of 10 CO staffers would probably say data centers is the hottest story in CRE, multifamily would probably get the dissenting vote.
The metropolises need housing. It’s why New York’s Department of Housing Preservation and Development put forward a growth plan for 17,675 new homes in Staten Island. (Let’s hope it goes smoother than the pied-à-terre tax rollout.)
It’s in demand. That’s why there was a 28 percent jump in Los Angeles real estate investment in July — and that was mostly because of housing, according to a report from NAI Capital.
It’s valuable. While we’re not 100 percent sure what Gary Barnett is going to do with this, given his history we’re willing to guess there will be more luxury condos on the way to Midtown thanks to Extell Development’s purchase of 110 East 55th Street from the Parkoff Organization for $65 million.
And the deals are happening, like Artemis Real Estate Partners’ purchase of a 7.2-acre, 204-home assisted living complex in Delray Beach, Fla., called the Arbor at Delray from PGIM Real Estate (the price was at least $140 million).
Plus, the money is available. Starwood Asset Management secured $482.5 million in CMBS financing for a 1,749-unit rental portfolio scattered across 10 states.
But don’t take CO’s word for the state of multifamily. Who better to opine on it than John McCullough, president of the multifamily development group at Kennedy Wilson, who sat down with us for a nice conversation about his career and the sector writ large.
See you next week!
