What we are sharing
Late last year an admired leader shared great advice. 🦉
When an acronym has been weaponized, crack open the acronym to find the actual words that have value and common ground for many people.
My initial response was, I know this, I have learned this lesson before. 📐
During my time on the investor relations team, when meeting with investors, boards, and consultants, the use of specific CRE lingo was damaging.
It left people behind and they tuned out because I was no longer using language that respected their accomplishments (or role on that investor board).
With this awareness, I worked diligently to not use lingo, not use acronyms, and in some cases, to check for understanding.
It worked, there was more engagement during presentations, people asked questions, we opened a dialogue and ... yes, won more pitches!
So, for the last two months, I have been taking active notice of when I do use acronyms and lingo.
While it did not happen that often, it was still more than I would like.
Now, with this rebuilt awareness, I can do better.
Since I am missing the National Multifamily Housing Council's Annual Meeting this week, I tuned into their webinar last week covering the January 2025 Quarterly Survey of Apartment Conditions results.
Two things that struck me:
1. During 2024, the US saw the largest number of new apartments delivered in 50 years.
⚡ This reflects the market conditions (availability of capital and costs for new construction) of two years ago.
⚡ Yes, this is good news for housing supply, and it puts pressure on landlords with decreased rents, lower occupancy, and submarket dislocation, particularly across the Sunbelt.
2. During the quarter, the survey responses for all four indices (Market Tightness, Sales Volume, Equity Financing, and Debt Financing) indicated less favorable market conditions, with three of the indices swinging to the less optimistic side of the breakeven point (50).
⚡ The Debt Financing Index had the largest drop of 45 points (from 77 to 32) after being above or near the breakeven point for four quarters running. This signals that respondents see borrowing conditions worsening. [See: reduced expectations for future interest rate cuts.]
⚡ The Sales Volume Index fell 26 points (from 67 to 41), indicating that sales volumes are decreasing nationally.
⚡ The Equity Financing Index moved down 15 points (to 48 from 63), which indicates less availability of equity. This quarter the index is back to very close to breakeven, where it had been for most of 2024.
⚡ The Market Tightness Index remained below the breakeven point (moving from 37 to 40) indicating a continuation of loosening market conditions. The last survey that saw the Market Tightness Index above the breakeven point was July 2022. [See number 1: increased new supply in the form of the record number of apartments that delivered in 2024, many of which came into the supply pipeline starting in 2022.]
💡 My hypothesis continues to be that multifamily is 18 months behind office in the market cycle. If we agree that office hit bottom and has entered a recovery phase, then multifamily has another year-plus of working through the lease up of the record new deliveries while managing through increased expenses and debt service payments (and covenants).
Consider that the winners in this market cycle will demonstrate both Operational Excellence AND the ability to recapitalize.
Earlier this week, I was reflecting on the success of a large group discussion (that felt like a high-risk situation) at Nexus Con that my stellar co-host, Drew DePriest, and I facilitated.
To set everyone up for success (and address the potential risks), I asked the people in the room to play by Vegas Rules.
❓ What are Vegas Rules for a meeting, you ask.
To create a safe space where people are willing to share honestly and candidly, my Vegas Rules are to ask for consent from everyone in the room that:
🙉 What you hear here, stays here.
🦉 What you learn here, goes with you.
BLUF: Take the lesson, leave the gossip.
Consider how you can use Vegas Rules for your next team discussion, after action report, or business plan session.
As CRE moves through the recovery phase, much of our industry is craving certainty. We are not the only ones looking for certainty.
This week, a "group of major European companies, investors and industry associations published a letter to European Commission leaders, expressing concerns that the upcoming “Omnibus” package coordinating the EU’s key new sustainability reporting and due diligence laws could end up weakening the new rules, ✨ undermining business certainty and investment." ✨
The stated goal for the EU Commission's review is to reduce the burden of reporting and compliance on companies. While that is a valuable goal, the process of the review creates risk and uncertainty for companies.
As 2025 progresses, we will see where that certainty is firming up and where we have more changes to our dynamic system.
ESG Today, Nestlé, Unilever, Mars Warn Against Revisiting EU Sustainability Reporting and Due Diligence Laws, 20 Jan 2025
Premise: the outsized demand for data centers necessary to deliver on the promise (and profits) of AI in an energy constrained environment will drive innovation.
🍓 We are seeing that innovation come to fruition.
One example is a recent report from a cross-discipline group titled "Fast, scalable, clean, and cheap enough. How off-grid solar microgrids can power the AI race."
Check out the report along with a Heatmap interview of two of the authors.
TLDR: This report sheds light on the question of since we are going to be building so many data centers in a resource constrained environment, how can we do it with renewables as a material piece of the solution?
First. What is an off-grid solar microgrid?
"An off-grid solar microgrid is a system with solar panels, batteries, and small [natural] gas generators that can work together to power a data center directly without connecting to the wider electricity system. It can have infinite possible configurations, such as greater or smaller numbers of solar panels, and more or less gas-generated capacity."
Critically, this report considers the differing needs between 'training AI data centers' that compute massive amounts of data to train the AI tool and 'inference data centers' where a trained AI tool incorporates new data to draw a conclusion for an user. Due to different location and energy requirements, notably that training AI data centers do not need to be located next to their customers, those training data centers can be sited where there is abundant land to build PV arrays. Yes, the answer for sites in the US is West Texas. 🥦 🥜
The key findings of the study, as evaluated through four factors (speed, cost, scale, climate), show that there are paths forward to meeting the demand for data centers with off-grid solar microgrids.
⚡Speed: How fast can they be built?
Finding: "Off-grid solar microgrids are categorically faster than new grid interconnections (5+year queues) as well as off-grid co-located gas turbines (3+ year lead times)."
💲 Cost: How much does it cost?
Finding: "Off-grid solar microgrids today are near cost parity with natural gas and cheaper than other clean alternatives. Opportunities for further cost reduction are significant."
↔️ Scale: Are there enough accessible resources (land, water, energy) to meet the demand?
Finding: "Off-grid solar microgrids are enormously scalable, with >1,200 GW of data center potential in the US southwest alone."
🌍 Climate: What are the emissions impact?
Finding: "Between 0.4 billion tons (30 GW new data centers) and 4.1 billion tons (300 GW new data centers) of CO2 emissions could be avoided between now and 2030 if every new AI data center was built using the 90% solar configuration."