Hello Brick Brief readers, 

Happy Monday. In recent news, we’re seeing (more) billion dollar data center deals, retailers compete for prime space, and the hotel sector continuing to soften. 

In the coming week, we are watching for a speech from Fed Chair Jerome Powell, August new and existing home sales data, August PCE inflation figures, the University of Michigan consumer sentiment report, and Q3 earnings from homebuilder KB Home.

🏗️ Data Centers Power Massive AI Buildout
North American data center vacancy dropped to 1.6% in H1 2025 as hyperscale tenants locked in capacity years in advance, fueling a $400B construction boom. Deals like OpenAI’s $300B Oracle cloud contract requiring 4.5 GW of power, its planned $100B in additional server rentals, xAI’s $10B raise, and Oracle’s $20B talks with Meta illustrate the surging demand keeping vacancy at record lows.

🛍️ Retailers Expand as Value Dining Surges
Prime retail space remains in high demand despite tariffs and cautious consumers, with leasing strong across top markets. Budget-conscious diners are trading down to grocery and dollar stores, squeezing QSR margins while casual chains with stronger value propositions like Chili’s and Applebee’s posted solid Q2 traffic and sales gains.

🏨 Hospitality Market Weakens
The U.S. hotel sector is softening as RevPAR fell 1.7% for the week ending Sept. 13 and the top 25 markets slid 3.5% on weak weekday group demand. Developers are pulling back with 32% delaying projects and 24% scaling down as leisure bookings drop 30% and business travel remains 15–17% below prior levels, signaling broad market underperformance.

30Y Mortgage: 6.35% (-2 bps)

10Y Treasury Yield: 4.13% (-2 bps)

WSJ Prime Rate: 7.50%

FTSE NAREIT Index: 768.65 (-0.50%) 

30-day SOFR Average: 4.37%

US August PCE inflation expected to rise to 2.7% – Fed cut rates to 4–4.25% and signaled another October cut as Powell highlights weakening labor market and soft hiring (FT)

Hyperscalers are fueling a $400B data center buildout in 2025 that is straining power grids, reshaping energy demand, and leaving utilities to consolidate through M&A.

Hyperscalers are driving a $400 billion global data center construction boom in 2025 as AI training and cloud computing accelerate. Developers, cloud providers, and major AI firms are locking in power and capacity years before delivery, transforming how digital infrastructure is financed and built.

🧱 North America data center vacancy fell to a record-low 1.6% in the first half of 2025 as hyperscale and AI tenants raced to prelease space. CBRE reports that 74 % of capacity under construction is already committed, pushing lease rates above $200 per kilowatt per month and forcing tenants to secure sites far in advance.

🧱 OpenAI signed a $300 billion cloud contract with Oracle that begins in 2027 and requires 4.5 gigawatts of power, roughly the output of two Hoover Dams. Oracle will supply the computing power while partnering with data center builders such as Crusoe to construct the facilities it will lease and equip with GPUs and networking gear.

🧱 OpenAI also plans to spend about $100 billion over the next five years on additional backup servers, on top of $350 billion already projected for primary server rentals through 2030. This shows how a single AI company can drive extraordinary demand for new data center infrastructure.

🧱 Elon Musk’s xAI raised more than $10 billion in equity at a $200 billion valuation to fund data center infrastructure and model development, with investors including Valor Capital and the Qatar Investment Authority. This adds another powerful competitor for scarce computing capacity.

🧱 Oracle is in talks with Meta for a potential $20 billion multi-year AI cloud deal that would place similar pressure on power and construction timelines if finalized. The negotiations highlight Oracle’s shift into a hyperscale provider role, sourcing and managing vast amounts of computing capacity for leading AI companies.

🧱 The buildout follows a clear chain: data center builders secure land, power, and permits to construct powered shells; cloud providers like Oracle lease those facilities and install servers and networking; end users including OpenAI, xAI, and potentially Meta rent the finished computing capacity to train and deploy their models.

Takeaway: The OpenAI–Oracle contract, OpenAI’s broader server leasing plan, xAI’s fundraising, and Oracle’s discussions with Meta are fueling the AI data center buildout. Builders secure land and power, cloud providers invest in hardware and operations, and AI firms commit to massive multi-year leases, all feeding a $400 billion expansion and keeping vacancy at record lows.

Boston approves downtown rezoning – BPDA OKs plan allowing residential towers up to 700 ft despite resident opposition over shadows and preservation (Bisnow)

Affordable housing faces strong competition from market-rate units – Yardi Matrix finds a third of major metros, including Kansas City, Raleigh, and Dallas, have 50–90% of conventional rents matching affordable levels, diluting program benefits (GlobeSt)

Multifamily demand nears 25-year high – Q2 absorption 116K and H1 216K as construction drops below 500K units, rent growth slows to 1.7% and vacancies decline (GlobeSt)

New U.S. apartment starts climb 15.8% YoY to 403K units in August – Activity slipped 6.7% from July while multifamily permits fell 2.8%, signaling a slower pipeline despite Fed rate cuts (Bisnow)

Developers rethink lease-up strategies – Rental demand divides as high earners stay in core metros and priced-out buyers shift to exurban BTR, driving Sun Belt concessions and market-specific planning (GlobeSt)

Southern California Edison to recover $2B of $5.6B wildfire losses – Settlement covers $1.6B in uninsured claims and $400M in legal costs tied to 2017–2018 fires and mudslides, pending CPUC approval (Reuters)

New York City remains the top U.S. office talent hub – San Francisco Bay Area holds #2 as venture capital rebound fuels hiring (JLL)

Federal government seeks 300 new offices to support ICE hiring surge – GSA targets 12K–19K SF spaces in 18 cities as ICE adds 10,000 jobs and Congress triples its enforcement budget to $29.9B (Bisnow)

Savannah, GA leads U.S. industrial growth – 81% inventory increase with 67.5M SF absorbed, while Omaha, NE posts 2.3% vacancy with 13.7M SF absorbed and Dayton, OH records 4.3% vacancy with 7.1M SF absorbed (Colliers)

Mortgage REITs step up buying of agency mortgage-backed securities – Firms plan $30–50B in net MBS purchases in 2025, fueled by $3.6B in equity raises and attractive spreads as Fed rate cuts loom (Bloomberg)

Elon Musk’s xAI raises over $10B in equity to fund AI infrastructure and model development at $200B valuation – Backers include Valor Capital, Qatar Investment Authority, and Kingdom Holding; Also plans $3.5B in debt for data center expansion (Bloomberg)

OpenAI plans $100B in backup server rentals over next five years – Spending averages $85B annually, on top of $350B already projected for 2025–2030 cloud capacity, as it ramps AI model development (Reuters)

Oracle in talks with Meta for $20B multi-year AI cloud deal – Oracle would supply computing power to train and deploy Meta’s AI models alongside its other cloud providers (Reuters)

Pennsylvania data center boom strains power grid – Over 14 GW of projects drive electricity bills up 16% and could push rates 60% higher in five years, prompting proposed tariffs to shift costs to operators (Bisnow)

Retailers keep expanding in Q2 2025 – Leasing stays strong despite tariff concerns and cautious consumers, underscoring intense demand for prime space (CoStar)

QSR and fast casual traffic weakens – Budget-conscious diners shift to grocery and dollar stores, with Chipotle, Sweetgreen, and CAVA missing tough comps and seeing softer Q2 demand (Placer.ai)

Casual dining surges – Chili’s “3 for Me” and Triple Dipper deals drive Q2 visits, Applebee’s same-store sales +4.9%, Olive Garden +2% with takeout up nearly 20% (Placer.ai)

Insight: Budget-conscious diners are shifting from higher-priced QSR and fast-casual brands that keep raising prices to casual chains offering bigger portions and stronger value deals.

Price-sensitive consumers drive trade-downs – McDonald’s and Taco Bell push sub-$3 promotions as value retailers capture more “share of stomach,” pressuring QSR margins (Placer.ai)

U.S. hotel RevPAR dropped 1.7% for the week ending Sept. 13 – Top 25 markets fell 3.5% on weaker weekday group demand, while New York led gains with 88.2% occupancy (STR)

Hotel development slows – 32% of owners delayed projects and 24% scaled back as demand slumps, with leisure bookings down 30% and business travel off 15–17% (Bisnow)

El-Ad National Properties secures $85M construction loan from Valley National Bank – Funds will build The District in Davie, a $1B mixed-use project with 1,292 apartments and 36K SF of retail in Davie, FL (CommercialObserver)

Peachtree Group provides $55M bridge loan to Nimes Real Estate – Financing recapitalizes the 132-key Hotel Amarano Burbank-Hollywood in Burbank, CA, which Nimes bought from Pebblebrook for $72.9M in 2019 (CommercialObserver)

Rubicon Point Partners buys 203-unit Madelon apartments in San Francisco’s Mission District from JRE Partners for $119.3M – 99% leased property averages $3,812 rent and includes 9K SF of retail (TheRealDeal)

Legacy Residential buys 416-unit Legacy at Coconut Creek apartments in Coconut Creek, FL for $77M – Miami-based firm acquired the garden-style complex from Nuveen Real Estate, financing with a $64.4M Truist Bank loan (TheRealDeal)

Preylock acquires 245K-SF One Esterra Park office in Redmond, WA for $225M – Seven-story building is fully leased to Microsoft on a 15-year term and marks Preylock’s second Redmond purchase this year (TheRealDeal)

Columbia Sussex buys two Denver-area hotels for $133M – Acquires the 370-room Westin Westminster from Wheelock Street Capital for $84.5M and the 302-room Inverness Denver from Silverwest Hotels for $48.5M (TheRealDeal)

Nuveen buys Algonquin Commons shopping center in Algonquin, IL for $100M – Red Mountain Group and F&F Capital sold the redeveloped retail asset after boosting occupancy from 60% to 94% with a $30M renovation (TheRealDeal)

Investment firm Ames Watson acquires teen accessories retailer Claire’s out of bankruptcy for $140M – Plans to keep 800–950 stores open and modernize merchandise and piercing services (CommercialObserver)

Silver Creek buys former Wagner Hotel in Battery Park City, NY from Urban Commons’ bankruptcy estate for $110M – 355K SF, 298-room property to be renovated as a luxury Marriott hotel (CommercialObserver)