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In a recent interview, Starwood Capital’s chairman Barry Sternlicht and Fifth Wall co‑founder Brendan Wallace—who first met at a gym—discussed how legacy commercial‑real‑estate (CRE) strategies are pivoting to a tech‑driven world while still drawing on past lessons. Sternlicht, who calls Wallace his mentor, joked that Wallace is his trainer.
**CRE investing**
Sternlicht said a 500‑basis‑point rate hike squeezed cash flow, but rates are now falling. He expects the Fed to lower rates after Jerome Powell’s exit and believes tariff‑driven inflation will persist, especially in Q4 when new inventories arrive.
Wallace noted that the rate surge hit prop‑tech firms hard, many of which were loss‑making and reliant on tech funding. He highlighted the surge in decarbonization investments over the past four years, noting a perceived “hall‑pass” after Trump’s election.
**AI and data centers**
Sternlicht estimates $20 billion is earmarked for data‑center projects, built only after securing leases from hyperscalers such as Amazon, Microsoft, Google, and Oracle. He stresses tenant creditworthiness, especially as Oracle backs ChatGPT—a startup that requires massive capital yet remains unprofitable. He warns that AI will accelerate change faster than the Industrial Revolution, potentially displacing jobs (e.g., a chatbot could replace 15 staff for $36/month).
Wallace points out the complex web of commitments among tech giants and infrastructure providers, questioning who ultimately bears the cost. He suggests that if AI compute needs were translated into U.S. GDP, the figure could exceed 120 %.
**Future bets**
Sternlicht is focusing on Europe, citing lower rates, stimulus, and no tariffs, which make assets cheaper than in the U.S.
Wallace sees New York City as a long‑term value play, arguing that political shifts are temporary and the city’s intrinsic worth will endure.
