AI overinvestment is crowding out housing, NY developer says
Massive capital flows into artificial intelligence infrastructure are driving up interest rates and starving residential real estate of funding, according to Scott Rechler, CEO of RXR, a major New York developer.
Rechler's concern reflects growing tension in real estate markets as institutional investors and tech companies compete for capital. The developer argues that money chasing AI data centers and related projects is making it more expensive to finance apartment buildings and other housing.
For government officials focused on housing policy, the claim raises questions about whether federal policy on AI investment is inadvertently affecting housing affordability and supply. Rising interest rates make mortgages and construction financing more expensive, which can slow housing development.
The commercial real estate sector itself faces separate pressures. Overseas lenders, including a major Canadian pension fund and EB-5 visa investors, recently absorbed significant losses at 1 Willoughby Square, Brooklyn's tallest office tower. Property management firm Paramount Group also fell off the list of the largest property managers in the city.
These market shifts suggest the real estate industry is undergoing structural changes driven by both macroeconomic forces and shifts in how capital allocates across sectors.
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