Accountants are threatened by AI. Lawyers are threatened by AI. Most of all, software engineers are threatened by AI. 

But real estate shouldn’t be threatened by AI, right? 

Wrong. 

The chart below, prepared by economist Steve Ratter, is shocking but not surprising. At the beginning of 2025, construction spending on everything but AI data centers fell off a cliff and is still falling.

I have seen the result many times over the last couple years. A developer who once raised $10M with a few phone calls struggles to raise $1M. An ingenious redevelopment project on a mountain in New Hampshire is self-funded and proceeding slowly for lack of investors. Meanwhile, a dime-a-dozen “AI-native law firm” raises $20M without difficulty.

Borrowing costs make the playing field even more uneven. The staggering amount of debt incurred to build data centers, added to ongoing government borrowing and the shock of the war in Iran, has pushed interest rates to their highest levels in 20 years. If you’re investing in AI and expect a 100x return, an extra 200 basis points is nothing. But the same 200 basis points turns a promising real estate project into a bad idea. That asymmetry will probably get worse as the Federal Reserve raises interest rates to fight inflation.

And suppose Anthropic and OpenAI raise $75B each in their IPOs. That equity has to come from somewhere.

If I knew where AI is headed, I wouldn’t be writing this blog. But I do know that markets are correct and that Americans can’t live in data centers. Someday investors will like real estate again.

Questions? Let me know.

Markley S. Roderick
Lex Nova Law
10 East Stow Road, Suite 250, Marlton, NJ 08053
P: 856.382.8402 | E: mroderick@lexnovalaw.com