Energy Paradox

Power and Rent

Data Centers: * BlackRock executed roughly $50 billion in data center activity in one week: $40 billion Aligned Data Centers acquisition and $12 billion Meta El Paso campus debt financing * Meta operates 80/20 JV structure with BlackRock, leasing back compute while BlackRock owns infrastructure * JLL projects nearly 100 GW of new data center capacity added between 2026 and 2030, a 14% CAGR Multifamily: * Q2 2026: first time since fall 2021 that lease-ups outpaced new supply * Cushman & Wakefield: 124,600 units absorbed, fifth-highest quarterly total in 25 years * Trailing 4Q: 362K absorbed vs 358K delivered; first time demand exceeded supply since early 2022 * National vacancy fell to 8.9%, down 35 bps, first time below 9% since 2024 * 41.2% of properties still offering concessions, up 9.9 points YoY * Fort Myers effective rents 11.2% below advertised; Denver 8.2% below * NYC rent-to-income ratio: 70.6% (median income $71K, average one-bedroom $4,186)

Forgotten Sectors

Three contrarian sectors outperforming while everyone chases data centers and industrial: 1. Retail Strip Centers & Senior Housing Green Street Q1 2026: cap rates were frozen across 9 major sectors. Two broke out. Strip centers compressed 15bps, power centers 30-40bps. Senior housing values surged 13% year-over-year, the sharpest rally of any major sector tracked. Demand is strongest in secondary and tertiary markets, not gateway cities. 2. Austin Multifamily 97,000 units delivered since 2020, equal to 40% of total inventory. After three years of declines, Q2 2026 posted +1.3% rent growth, the first increase since fall 2022. Average rent sits at $1,425, only $120 above 2019 levels. Class C properties still down 11.6% year-over-year. The market is finding its floor. 3. San Francisco Office Transamerica Pyramid signed 113,000 square feet in new leases under new ownership since March. AI companies have leased nearly 2 million square feet citywide. San Francisco posted 10.6% annual rent growth in Q2, the strongest in the nation. Flight-to-quality is real. Trophy assets are leasing. Average buildings are still struggling. The macro isn't driving returns. Local supply and demand, tenant quality, and demographics are. The operators winning right now are looking where nobody else is.

The Narrative Is Broken

The housing shortage myth is dead. MBA research shows household formation slowing from 1.13M annually to 802K over the next two decades. Sun Belt markets like Austin are oversupplied. The Northeast and Midwest remain constrained. National home price growth forecast: 1% for 2026, flat for the next two years. Defense tech is the new trophy asset. Anduril just raised $5B at a $61B valuation. Revenue over $2B last year. Government-backed, mission-critical tenants are replacing the old office playbook.  Data centers are printing money but hitting the zoning wall. DataBank raised $1.45B for DFW expansion. Brookfield's Csquare is targeting a $1.35B IPO. But Marietta, Georgia just froze all data center applications for six months after resident pushback. The macro isn't driving this market. Local supply and demand, tenant credit quality, and regulatory friction are. The operators winning right now aren't waiting for the Fed. They're underwriting to the actual dynamics on the ground.

The Macro Mirage

Everyone's waiting for rate cuts to save the market. But new research says the relationship between rates and returns is breaking down. Meanwhile, office vacancy is declining across major U.S. markets. DFW office leasing is up. Trophy offices are outperforming. Supply is shrinking. The comeback is happening while rates are still elevated. Construction costs are also climbing from three directions. Labor shortages, tariffs, and data center demand. If your pro formas are using old numbers, your returns are bleeding out before you break ground. The macro mirage. Everyone stares at the Fed while the real market moves underneath. The smart money is underwriting to fundamentals. Tenant quality. Supply constraints. Actual costs. The operators winning right now stopped waiting for the macro and started moving on the micro.

The Split

Cap rates have officially decoupled from the 10-year Treasury. The old playbook is dead. The market is splitting in two. On one side, trophy net lease assets are compressing hard. McDonald's ground leases in the high 3s to low 4s. Chick-fil-A and Chipotle right behind them. Scarcity of quality expanding tenants is driving the compression, not rate relief. Tractor Supply opened 40 new stores in Q1 2026 alone. When institutional capital, 1031 money, and private equity are all chasing the same limited pool, cap rates compress regardless of where the 10-year sits. On the other side, dollar stores and drugstores are widening. Dollar stores are a supply problem. Drugstores are a business trajectory problem. CVS and Walgreens are actively shrinking footprints. Pharmacy disruption is real. Buyers are discounting credit ratings based on what the next 10 years look like. The move? Stop benchmarking against headline cap rates. The rate environment won't bail you out. Underwrite tenant quality and business trajectory separately. Watch the Q3/Q4 maturity wall for forced sellers. And keep your broker relationships tight. The question isn't where the market is. The question is which side of the split your asset sits on. Sponsor: Rise 48 Equity - Vertically integrated multifamily investing. rise48.com [https://rise48.com/]