What CEOs Are Saying - 6.8.25

Are REITs the "ultimate anti-AI asset"?

Most of us experience the world’s mind-boggling new AI tools as digital output beamed straight to our devices.

But there is, of course, a massive physical side of AI: namely, all that real estate required to keep the servers and networking equipment running.

Interestingly, the real estate investment trust (REIT) sector is showing a lot of upside thanks to the AI boom. There are a couple of reasons.

One, REITs specializing in data center space are poised to do well as the need for infrastructure housing surges. The below roundup of CEO takeaways from Nareit’s REITweek investor conference includes the big REITs in this space, all of them riding tailwinds of demand for AI and cloud computing space.

Per Yahoo Finance:

Overall data center vacancy rates for primary markets declined to a record low of 2.8% in the first half of 2024, from 3.3% in the year prior, with nearly 80% of more than 3.87 gigawatts under construction in primary markets preleased, according to CBRE's H1 2024 North America Data Center Trends report released in August.

The other potential upside for REITs is a longer-term growth in the value of all real estate types (including office and residential buildings) as other sectors face massive AI disruption.

Yesterday in Seeking Alpha, Jussi Askola argued that as cyberspace gets upended, meatspace may look increasingly stable.

Askola points to REITs as the “ultimate anti-AI asset” and contends—controversially—that AI developments are actually a threat to most stocks in a way they are not to REITs:

In a world in which most businesses get disrupted, real estate will stand out as the "anti-AI" asset class to preserve and grow wealth.

The world will suddenly see a lot more value in scarce physical assets that remain essential to our society and have a lasting moat in their location (the land) and structure (construction cost).

With that in mind, let’s see what some of the biggest REIT CEOs had to say at Nareit’s REITweek, held June 2–5 in New York.

Prologis (PLD)

San Francisco–based Prologis dominates logistics real estate with 1.3 billion square feet across 20 countries. The company is now pivoting to data centers to capture the aforementioned AI-driven demand.

Presentation Takeaways:

• Turning warehouses into data centers. Prologis is converting logistics properties into data centers, tapping into the AI boom for higher returns. “We’ve had some recent success converting logistics buildings to data centers… 1.4 gigawatts of power that’s secured or under construction, 2 gigawatts right behind it… a 10-gigawatt pipeline,” said Prologis President Dan Letter.

• Leasing thrives despite tariffs. Despite tariff uncertainty slowing decisions, Prologis achieved record leasing in Q4 2024 and Q1 2025, driven by e-commerce and domestic tenants. “In the fourth quarter of last year, we had our all-time highest quarter of signed leasing at 61 million square feet.”

• Helping tenants with more than rent. Prologis said that its Essentials business (a set of non-real estate services designed to support tenants’ operational needs in their warehouses) is strengthening tenant loyalty. “[Essentials] is a really exciting new business that's gaining a lot of momentum,” said Letter.

“This is a real big business for us.” —Prologis President Dan Letter, on data center expansion

Digital Realty Trust (DLR)

Dallas-based Digital Realty, with over 300 data centers in 50 metropolitan areas, is a cornerstone of cloud and AI infrastructure, achieving record bookings in 2024.

Presentation Takeaways:

• Riding AI and cloud waves. Digital Realty’s $1 billion in 2024 bookings reflects strong demand for AI and cloud infrastructure. “We are essentially supporting 3 secular tailwinds of demand: digital transformation, cloud computing and now artificial intelligence… a record of $1 billion of bookings,” said CEO Andrew Power.

• Solving power shortages creatively. Power (here appropriately named) pointed to underinvestment in energy infrastructure in the US as a difficulty, though he says it’s getting better. The poles are going up in many areas, he said, even if the power lines aren’t on them yet. Elsewhere in the world, Digital Realty is backing other solutions. Said Power: “Longer term, in certain places like South Africa, we're investing directly in solar, which will be wheeled to our data centers through the grid.”

• Raising cash to chase AI demand. Digital Realty reduced its debt and secured $6 billion, including a $2 billion fund, to build data centers for booming AI and cloud clients.

“We are essentially supporting 3 secular tailwinds of demand: digital transformation, cloud computing and now artificial intelligence… a record of $1 billion of bookings.” —Digital Realty Trust CEO Andrew Power

Equinix (EQIX)

Redwood City–based Equinix operates 260 data centers across 70+ markets. Its investments in AI infrastructure and global scale position it uniquely within the REIT landscape.

Presentation Takeaways:

• AI efficiency will improve as models get smaller. Steve Madden, Equinix’s VP of Global Segment Marketing, points out that energy efficiency in AI usage should increase as models become more specialized. They will no longer need to take in all the information on the Internet, he points out, but be trained on much smaller data sets. “I know GenAI and LLM and everything was kind of the bombshell massive megawatt deployments, there's actually very few of those. . . . It's not actually going to eventuate that we're going to have 500 or 600 large language models like GPT 4. . . . If anything, it's going to be a portfolio of smaller models that do specific things.”