From Rates To Real Assets: Where Capital Goes Next - An AI Deep Dive

Capital is ready — but the map is foggy. This week we break down the policy, rate, and regulatory crosswinds shaping real estate strategy, and why non-financial risks like immigration rules, housing supply constraints, and trade policy now sit beside cost of capital in every underwriting model.

Operators are splitting into three camps:

• Heavy Fog (defensive): preserving liquidity and slowing growth
• Patchy Fog (patient): watching rate signals and picking selective spots
• Clearing Fog (opportunistic): leaning in on timing, distress, and power availability

Where capital is actually going:

• Data centers dominate again as AI shifts the bottleneck from capital to megawatts.
• Senior housing is emerging as critical human infrastructure with boomers hitting 80, supply at record lows, and occupancy trending above 90%.
• Self-storage officially becomes the fifth major asset class, evolving into climate-controlled “utility space” and storage condos.
• Traditional sectors remain mixed: office continues to bifurcate, medical office stays resilient, multifamily tilts toward workforce and SFR, and industrial now battles costs and power constraints.

Demographics are the hidden driver. With 83% of recent U.S. population growth coming from net migration—and 30% of construction workers foreign-born—immigration policy is now a core economic variable. Climate migration reshuffles demand patterns, with both young adults and older movers rediscovering snowbelt markets.

On the operations front: agentic AI and property operating systems are pushing toward “self-driving buildings,” compressing lead-to-lease cycles, boosting conversions, and enabling centralized portfolios with decentralized on-site tech.

Market watch: Dallas–Fort Worth leads, Jersey City benefits from its proximity-cost edge, Brooklyn strengthens around creative office nodes, and Calgary rises alongside Canada’s purpose-built rental surge.

If this helped bring clarity to the fog, share it with a colleague and leave a quick review — it helps more investors navigate what comes next.

Transcript

Speaker 1 0:07

Okay, so let's start with that fog. It's a great description for this mix of sticky inflation, interest rates, and these, well, pretty volatile changes in policy. Fiscal, trade, immigration.

Speaker 2 0:18

It's everything at once.

Top Risks: Cost Of Capital And Policy

Speaker 1 0:19

So what are the top concerns inside that fog?

Speaker 2 0:21

Well, the cost of capital is still number one. No surprise there, almost 90% of respondents cited it.

Speaker 1 0:26

Right.

Speaker 2 0:26

But here's what's changed. The non-financial risks have just surged. When you ask about social and political issues, 59% pointed to immigration policy, and 51% to housing costs and availability. So these policy constraints, things like immigration limits and tariffs, are seen as direct threats to labor supply and building costs.

Speaker 1 0:45

Almost everyone is worried about higher rates. Why are we seeing such different investment strategies? It seems like firms are making decisions based more on their, I guess, their psychological outlook on the future, not just the hard data.

Speaker 1:04

Welcome to the Senior Housing Investors Podcast. If you are an owner, operator, investor, developer, or buyer of Senior Housing, you've come to the right place. The best way to stay connected with us is to sign up for our weekly newsletter at Haven Senior Investments.com. This podcast doesn't exist without you, our community. Thank you for listening and reach out to us anytime.

Speaker 1 1:37

Welcome to the deep dive. Today we're synthesizing what is, well, basically the blueprint for future capital deployment.

Speaker 2 1:45

And the source for this is the Emerging Trends in Real Estate 2026 report.

Speaker 1 1:49

Exactly. And this isn't a small sample. It's based on interviews and surveys with over 1,750 industry leaders.

Speaker 2 1:57

So you're getting the view from investors, developers, lenders. It's about as complete a picture as you can get for the next few years.

Speaker 1 2:05

Aaron Powell Our mission here is really twofold. First, we need to get a handle on how the industry is dealing with all this uncertainty. Trevor Burrus, Jr.

Speaker 2 2:11

The economic and the policy stuff. Yeah.

Speaker 1 2:13

Trevor Burrus, Jr.: Although the report calls navigating the fog. And second, we have to highlight these huge shifts in what people are actually buying, you know, things driven by tech, demographics, even migration.

Speaker 2 2:23

Aaron Powell And it's such a critical moment for you to understand this because the real estate world just barely staggered out of the intense repricing cycle.

Speaker 1 2:32

Yeah, interest rate hikes.

Three Investor Camps In Uncertainty

Speaker 2 2:33

Right. And now they're facing a whole new set of risks that aren't just cyclical. As one senior expert put it, and I think this captures attention perfectly, he said, it is a curious time for real estate with lots of uncertainty and a desire to do deals. Today's market does not reflect where we are going. You can just feel that gap. You know, there's all this capital ready to go, but genuine confusion about what happens next with policy. That tension, it defines everything right now. Aaron Ross Powell Okay.

Speaker 1 3:02

So let's start with that fog. It's a great description for this mix of sticky inflation, interest rates, and these, well, pretty volatile changes in policy, fiscal, trade, immigration.

Speaker 2 3:13

It's everything at once.

Speaker 1 3:14

Aaron Powell So what are the top concerns inside that fog?

Speaker 2 3:16

Well the cost of capital is still number one. No surprise there. Almost 90% of respondents cited it.

Speaker 1 3:21

Right.

Speaker 2 3:21

But here's what's changed. The non-financial risks have just surged. When you ask about social and political issues, 59% pointed to immigration policy. Aaron Powell. And 51% to housing costs and availability. So these policy constraints, things like immigration limits and tariffs, are seen as direct threats to labor supply and building costs.

Speaker 1 3:41

Aaron Ross Powell So if almost everyone is worried about hights, why are we seeing such different investment strategies? It seems like firms are making decisions based more on their, I guess, their psychological outlook on the future, not just the hard data.

Speaker 2 3:54

Aaron Powell That's a very sharp point. And that outlook creates three distinct camps. First, you've got the heavy fog crowd. Okay. These firms are convinced we're in for higher for longer interest rates. So their strategy is purely defensive, very selective. They are not betting on asset values going up.

Speaker 1 4:10

Aaron Powell No cap rate compression placed.

Speaker 2 4:12

Exactly. They are relying entirely on income growth from the asset itself, purely fundamentals.

Speaker 1 4:18

Aaron Powell And how does that compare to the second group?

Speaker 2 4:19

Aaron Powell That's the patchy fog camp. They see all this policy volatility as a temporary sideshow.

Speaker 1 4:25

Just noise.

Speaker 2 4:26

Right. They're positioning for rates to eventually fall, so their main focus right now is just building up liquidity. They want to be ready to pounce.

Speaker 1 4:32

Aaron Powell And then, of course, you have the optimists, the clearing fog group.

Speaker 2 4:36

Aaron Powell They're bullish, they're expecting lower rates, a better economy, and they think the policy impacts will be temporary. They're ready to buy now.

Speaker 1 4:44

Aaron Powell But despite all this fog, the report shows this amazing optimism about buying opportunities. The score for finding value is at a 20-year peak.

Liquidity, DC Plans, And Foreign Pullback

Speaker 2 4:53

Aaron Powell It is. Transactions are already up 16% in the first half of 2025, led by apartments and senior housing.

Speaker 1 5:00

Aaron Powell And there's this potentially massive new source of liquidity on the horizon, right? We could talk in trillions.

Speaker 2 5:06

We could. That expectation is all tied to the potential inclusion of private real estate into defined contribution or DC retirement plans.

Speaker 1 5:14

For our listeners, that's like your 401k.

Speaker 2 5:17

Exactly. If that happens at scale, it changes the entire equity game. And on top of that, debt liquidity is actually pretty robust, mostly coming from non-bank lenders and debt funds.

Speaker 1 5:26

Aaron Powell That sounds incredibly bullish, but there has to be a counterargument, the half-empty view.

Speaker 2 5:31

Oh, there is. And it's that all this sidelined equity and crucially reduced foreign investment are still holding things back. Canada and Japan, two huge sources of capital, actually became net sellers of U.S. real estate in the first half of 25.

Speaker 1 5:46

Aaron Powell And why is that?

Speaker 2 5:47

It ties directly back to the policy fog. There's a quote from a CFO that just nails it. Every international capital raise discussion we have revolves around surprising moves out of Washington, D.C., a persistent headwind to U.S. inflows.

Speaker 1 6:01

So that volatility is just scaring them off.

Speaker 2 6:03

It is international capital prizes stability above all else.

Speaker 1 6:07

Aaron Powell Which brings us to the big question: where is the capital that is being deployed actually going? The report shows this major structural change. Assets that were once considered niche are now essential.

Speaker 2 6:19

And they're dominating the traditional property types.

Speaker 1 6:21

So what's at the very top of the list?

Speaker 2 6:23

Data centers. For the third year in a row, it's not even close. They're seen as critical infrastructure now.

Speaker 1 6:27

Aaron Powell And the driver is just AI.

Speaker 2 6:29

It's all AI demand, but you have to split it. There are the AI training models, which need gigawatts of power and don't care where they are. That's why you see development in places like Indiana, Ohio, Louisiana. Okay. Then you have the inference models, which need to be close to users. But for both, the main challenge isn't money, it's physical constraints. Power, water, and grid interconnection times that can be two to seven years long.

Speaker 1 6:53

Wow.

Speaker 2 6:54

It's forcing developers to get creative with things like behind the mirror power generation.

Speaker 1 6:58

Okay, so data centers are tech infrastructure. What about human infrastructure? Let's talk about senior housing.

Speaker 2 7:04

The demand driver here is completely nonsenclical. It's a demographic time bomb.

Speaker 1 7:08

Explain that.

Speaker 2 7:09

The oldest baby boomers turn 80 in 2026. That is the age that triggers a massive, necessary transition out of single-family homes for millions of people. It's a guaranteed wave of demand.

Speaker 1 7:20

And I'm guessing supply is not keeping up.

Speaker 2 7:22

Not even close. Inventory growth is the lowest it's been since 2006. That's why occupancy is expected to push past 90% in 2026. It's creating all these new product types: active adult, 55 plus spam, larger units for higher needs residents, unbundled services for the middle market. It's a scramble to meet the demand.

Speaker 1 7:42

Well, let's talk about the dark horse here. Self-storage. The report actually calls it the fifth major property type now. How did that happen?

Speaker 2 7:50

It's because its use has fundamentally changed. It's not just for moving anymore. We're talking climate-controlled units that are basically off-site closets or extensions of your home.

Speaker 1 7:59

Like for hobbies or collections.

Speaker 2 8:00

Exactly. And there's this new hybrid called storage condos. They're like a thousand or two thousand square foot industrial flex units. Affluent people buy them or small businesses like landscapers or HVAC companies. Rent them out as a local home base.

Office Split, Multifamily, Industrial Constraints

Speaker 1 8:14

Okay, so a quick look at the traditional sectors. Office is still at the bottom, but it's improving for the best of the best assets.

Speaker 2 8:20

It is. And the report makes a key point about the unsafe cities narrative. It pushes back hard, citing FBI data showing crime rates are actually at their lowest since 1969.

Speaker 1 8:30

That's important context.

Speaker 2 8:31

But the real story is the split. In Houston, for example, new buildings have a vacancy rate around 10.8%. Buildings from before 2015 much higher. 30.7%. A threefold difference. The only real bright spot in the whole category is medical office. That's a strong buy because of demographics and long-term leases.

Speaker 1 8:51

And what about the others? Multifamily and industrial.

Speaker 2 8:53

Multifamily is still a favorite, especially workforce housing and single-family rentals. Affordability is pushing people to new markets. Boise, Lafayette, the South Carolina Coast. And industrial is now kind of middle of the pack. It's got strong support from reshoring and e-commerce, but construction costs and power availability are becoming real constraints.

Speaker 1 9:14

Let's pivot to demographics because immigration policy seems to be a huge factor in all this.

Speaker 2 9:18

Aaron Powell It's fundamental. Between 2020 and 2024, net international migration accounted for 83% of U.S. population gains.

Speaker 1 9:25

Aaron Powell 83%? That's massive.

Speaker 2 9:28

It is. And if policy tightens, the CBO, the Congressional Budget Office Project's potential GDP growth will slow to just 1.6% by 2045, all because of a smaller labor pool.

Speaker 1 9:39

Aaron Powell And that labor shortage hits construction immediately. 30% of construction workers nationally are foreign-born.

Speaker 2 9:46

Trevor Burrus Right. So any restrictions put markets in the South, the West, the big Northeast cities at high risk of labor shortages.

Speaker 1 9:53

Aaron Powell, which means higher building costs.

Speaker 2 9:55

And a slower pace of new housing. You simply can't solve the housing crisis if you don't have the people to build the houses.

Snowbelt Reversal And City Implications

Speaker 1 10:00

Aaron Powell Now this leads to something fascinating in the report: a shift in domestic migration. For decades, it's been all about the Sunbelt.

Speaker 2 10:08

And now we're starting to see a reversal, a flow back to the snowbelt, the Midwest, and Northeast.

Speaker 1 10:12

The snowbelt reversal. That goes against 50 years of history. What's the driver?

Speaker 2 10:16

Aaron Powell It seems to be climate, warmer winters in the snowbelt, and a big increase in extreme heat days in the Sunbelt. And it's concentrated in two groups young adults under 30 and older adults 60 to 69.

Speaker 1 10:29

So what does that mean for a city in the Midwest? They might not have been planning for this kind of growth.

Student Housing Headwinds Ahead

Speaker 2 10:35

It's a huge challenge and an opportunity. Cities that have been stagnant suddenly need to think about new housing, new transit, and Sunbelt cities might see demand slowdown, which makes their investment decisions a lot harder.

Speaker 1 10:47

Aaron Powell Let's touch on student housing. It feels like that sector is at a turning point.

Speaker 2 10:52

Aaron Powell A huge one. We just hit a peak in enrollment in 2024, partly thanks to changes in federal student aid.

Speaker 1 10:59

But what comes next?

Speaker 2 11:01

It gets tough. The number of U.S. high school graduates starts to decline in 2026. And on top of that, stricter visa policies are expected to cut international student arrivals by about 15%.

Speaker 1 11:12

And that's a big deal for some universities.

Speaker 2 11:14

Aaron Powell A very big deal. Especially for the selective universities in the Northeast and the West that really rely on that international tuition.

AI Shift To Agentic Systems And Prop OS

Speaker 1 11:20

Aaron Powell Okay. The other huge structural transformation is, of course, AI. It's moving from just an experiment to actual implementation.

Speaker 2 11:27

Aaron Powell It is. And while it's more about augmenting jobs and replacing them, there's a real risk for junior roles. As one economist said, AI is a solid replacement for a junior analyst. Ouch. Yeah. But for you, the listener, it's key to understand the two types of AI. First, there's generative AI or gen AI.

Speaker 1 11:44

Chatbots, writing emails, that kind of thing.

Speaker 2 11:46

Right. It handles routine tasks, but the real game changer is agentic AI.

Speaker 1 11:51

And what does that do?

Speaker 2 11:52

It can plan and act on its own. It runs continuous processes with minimal human input. Think predictive maintenance, optimizing a building's energy use every minute, or even executing trades. It has agency.

Speaker 1 12:05

Aaron Powell, which leads to this idea of a property operating system.

Centralization Paradox And Market Microfocus

Speaker 2 12:09

Aaron Ross Powell Exactly. A Prop OS. Using AI agents and digital twins, virtual copies of buildings to create self-driving buildings, they manage resources and optimize flows all on their own.

Speaker 1 12:20

And we're already seeing the results of this.

Speaker 2 12:21

We are. In property management, some agentic AI platforms have cut lead-to-lease times by 65% and boosted conversion rates by 8%.

Speaker 1 12:30

Is that significant?

Speaker 2 12:31

It is. And the data shows that, quote, young renters would rather deal with a good app than a person.

Speaker 1 12:36

The hotel industry is seeing this too. Personalization, dynamic pricing?

Speaker 2 12:41

Massive changes. In call centers alone, AI has cut abandonment rates by up to 8% and increased reservation conversion by as much as 35%. Wow. Even in Canada, firms are using AI for energy management and leasing, and it's being accelerated by new privacy laws like Quebec's Law 25.

Speaker 1 13:00

So what does this all lead to?

Speaker 2 13:02

It leads to what the report calls the centralization paradox. Because the AI is handling all these distributed tasks on site, a single manager in a back office can oversee a vastly larger portfolio.

Speaker 1 13:13

So the tech is decentralized, but the human oversight becomes more centralized.

Speaker 2 13:18

Precisely.

Speaker 1 13:18

So let's pull all of this together: the fog, the demographics, the AI. What does it mean for where to invest? The report says the focus has shifted from macro to micro.

U.S. And Canada Markets To Watch

Speaker 2 13:27

Ultra micro. The specific asset, the specific street corner. But even with that focus, Dallas Fort Worth is still the number one U.S. market overall for the second year in a row. It's just so diversified, and it's becoming the country's second biggest financial market, especially with the new Texas Stock Exchange coming.

Speaker 1 13:44

But the Northeast is gaining momentum.

Speaker 2 13:46

A lot of momentum. Jersey City is number two. It's a seven-minute ferry ride to NYC at a fraction of the cost. And its multifamily vacancy is just 2.8%, even after a 20% inventory jump.

Speaker 1 13:59

Incredible.

Speaker 2 13:59

And Brooklyn is number four. It's a perfect example of that microfocus. Office demand is moving away from downtown Brooklyn to creative spaces like the Brooklyn Navy Yard closer to where people actually live.

Speaker 1 14:11

And we're even seeing a comeback in some tech markets.

Speaker 2 14:13

Aaron Ross Powell, we are. In San Francisco, the top-tier trophy office buildings are doing well. Vacancy is around 14% for that best of the best space. And it's almost all driven by AI companies taking up over six million square feet.

Speaker 1 14:25

What about the Canadian perspective?

Speaker 2 14:27

Calgary is the top market to watch. But the real story in Canada is the housing crisis and the massive decisive pivot to purpose-built rental or PBR. The sentiment up there really sums up the global feeling right now. It's like real estate right now is like driving in fog. Drive too slow and you'll get hit from behind. Drive too fast and you'll fall off a cliff.

Speaker 1 14:48

That is a perfect summary of the risk.

Final Playbook: Infra-Like Assets And AI Ops

Speaker 2 14:50

It is. And it brings us back to the core idea. Institutional investors everywhere are shifting capital to assets that have infrastructure-like qualities.

Speaker 1 15:00

So your best bets for 2026 reflect that. It's data centers, senior housing, self-storage, and purpose-built rental in Canada.

Speaker 2 15:08

All of them combine recession resistance with structural long-term demand.

Speaker 1 15:12

So the main takeaway for you, the listener, is that success is going to require extreme granularity and just uncompromising operational excellence.

Speaker 2 15:20

All while trying to see through that economic and policy fog.

Speaker 1 15:23

And here's a final thought for you to take away. So since senior housing and medical office are becoming essential infrastructure and their operations are incredibly complex, the next huge real estate opportunity might just be combining AI-driven operational efficiency with the non-cyclical demand of senior care.

Speaker 2 15:49

Self-driving buildings focused on high acuity health care. That is the ultimate intersection of technology and demographics.