California Investors on Pause Are Set To Recycle Capital
Investors in California and throughout the US are taking a cautious approach, pausing to reassess the market environment, which is beginning to re-engage from policy-driven volatility, according to Mark Fitzgerald, managing director and head of research at Affinius Capital.
In some cases, this has exacerbated the pent-up transaction demand that has been building over the past few years, aiming to recycle capital.
“However, as clarity returns, there are near-term opportunities to those who can reposition the capital stack creatively,” Fitzgerald told GlobeSt.com.
For one, interest in data centers remains high. The four largest hyperscalers – AWS, Alphabet, Microsoft, and Meta – spent a record $218 billion building out their digital infrastructure in 2024.
“Based on Q2 earnings calls, it is going to double to $400 billion in 2025,” Fitzgerald said, citing recent construction plans in California and elsewhere.
The transformation of data centers from a niche asset to critical digital infrastructure mirrors the rise of industrial real estate in the 2010s.
Generative AI is fueling data center development, which is accelerating at a historic pace, with 11,000 MW currently under construction—93% of which is already pre-leased, according to Fitzgerald.
“These are not speculative builds; they are tailored solutions for the largest and most creditworthy companies in the world, built to power the next generation of cloud and AI platforms," he explained.
Regarding the recent volatile markets, shaped by geopolitical tensions and shifting monetary and trade policies, Fitzgerald said that Affinius believes much of the disruption is temporary.
“Structural tailwinds, including demographic growth, supply constraints, and the reconfiguration of global supply chains, are laying the groundwork for strong performance in the years ahead.”
The industrial sector is navigating a period of near-term recalibration, but the broader trajectory remains favorable, particularly for high-quality, modern logistics assets, he added.
“Tenant requirements are becoming increasingly sophisticated, placing a premium on buildings that offer scale, functionality, and compliance with evolving ESG standards,” according to Fitzgerald.
“As leasing decisions become more discerning, well-located Class A facilities are capturing a disproportionate share of demand, while older stock faces an increasing risk of obsolescence.”
Source: GlobeSt/ALM