The rising demand for artificial intelligence has fundamentally changed the importance of location in commercial real estate transactions. Markets with sufficient energy access and broadband connections, which can also quickly develop new energy sources, are likely to have an advantage when it comes to attracting investment in commercial real estate. This is according to a new report from the Urban Land Institute (ULI) and Heitman, which was exclusively provided to Commercial Observer.
The ULI-Heitman report predicts that global investment in data centres is expected to reach US$7.6 trillion by 2030, with US$3 trillion directly related to real estate. Other real estate sectors that, according to the report, could benefit from the new real estate economy include pre-permitted, developed land, battery storage properties and industrial facilities.
Energy as a new location factor
Laura Craft, Global Head of Portfolio Sustainability Strategies at Heitman, stated that real estate value has often been considered primarily determined by location. Increasingly, however, access to reliable, deliverable electricity is becoming another critical factor that determines where developments can take place and where capital flows. She noted that in many markets there is demand, but the question is whether the necessary energy for this growth is also available.
Aimee Witteman, Chief Impact Officer at ULI, pointed out that cities such as Pittsburgh and parts of the industrial Midwest will be well-positioned to benefit from the new AI-driven real estate environment. This is due to their existing infrastructure, which includes transmission lines, substations and former industrial sites. Witteman also emphasised that not only the sheer amount of available energy is crucial, but also that markets that intelligently use their existing power grids achieve significant advantages through real estate development.
Some states, such as Texas and New York, for example, promote virtual power plants. Partnerships in the Mid-Atlantic region demonstrate how batteries can free up additional capacity more quickly while simultaneously saving costs. Witteman underscored that reliable and affordable electricity will become a fundamental factor in where developments occur and where capital is invested.
Requirements for future real estate
Ms Craft further explained that in the future, real estate values will be significantly shaped by electricity availability, proximity to users and technological readiness, with AI trends influencing property design. She emphasised that industrial properties will increasingly require more automation and robotics operations over time, necessitating resilient power sources. All commercial real estate classes will require a higher degree of AI integration.
Existing properties with surplus energy or the ability to switch to more on-site technologies that can be used as a potential revenue source will stand out in the market. The industrial sector could also undergo developments to meet growing AI requirements, for example by supporting construction machinery for data centre expansion. Craft concluded that investors in land must consider not only the plot itself but also access to megawatts of power. When investing in properties, in addition to square footage, the building's electricity capacity and its ability to support technology upgrades or enable expansions such as inference or edge hosting are now also important.
