AI Will Impact Your Real Estate Portfolio

Everyone's talking about AI disrupting work.

But it's also reshaping the buildings you invest in.

When I saw Alexandria Real Estate's (ARE) stock fall since ChatGPT launched, I got curious. The comments in a recent Seeking Alpha article blamed AI for impacting life sciences REITs* like ARE.

Here's what I found out...

I'm not an expert in life science assets at all, but ran some queries via Perplexity's Labs function, wondering how this could translate to other asset classes.

Key findings:

1️⃣ Space Shift: AI is transforming lab layouts from 60% wet lab to 40% dry lab/computational space, with 15% dedicated to data centers.

2️⃣ Power Surge: AI workloads require 10x higher power density (40-60 kW vs 10-20 kW per rack) and mandatory liquid cooling systems.

3️⃣ Hub Dominance: Boston/Cambridge and SF Bay Area capture 70% of AI/ML biopharma funding, with LA, Seattle, and Research Triangle emerging as secondary markets.

4️⃣ Premium Properties: "AI-Ready" facilities earn 15-25% rental premiums, while older buildings face considerable retrofit costs or stranded asset risk.

5️⃣ Market Paradox: Despite strong AI-driven demand, life sciences REITs like ARE have underperformed the S&P 500 by around 70% since 2022 due to interest rate headwinds, not fundamentals.

So more of an interest rate impact?

Well, the structural impact was more dramatic than I had expected. We're not just talking about minor upgrades: this is a complete reimagining of how these buildings work (if Perplexity is accurate here).

If life sciences facilities need this level of transformation, what about

▶️ Offices full of AI workers?
▶️ Data-hungry financial firms running their own systems?
▶️ Manufacturing facilities integrating AI and automation capabilities?

The massive structural shifts towards computational space show what our industry needs to be ready for across all asset classes. And plan accordingly.

Looking at your portfolio right now:

How many of your properties could handle 10x power density?

How many are in the wrong locations entirely?

Let me know in the comments.

Source: Perplexity AI

Note: AI findings can be inaccurate. No financial advise!

*Note for non Real Estate people: REITs = listed real estate companies that own, operate, or finances income-generating real estate and sell shares to raise capital to do so.

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