Artificial intelligence investment is creating new demand for data centre assets, while improving leasing conditions and limited new supply are supporting office and retail real estate.
BNN Bloomberg spoke with Ji Zhang, portfolio manager of global real estate at Cohen & Steers, about opportunities across office, data centre and retail properties as investors look for both growth and income in the sector.
Key Takeaways
- AI-related infrastructure spending is creating a long runway for data centre owners and investors as demand for computing capacity continues to expand.
- Premium office properties in major urban markets are benefiting from stronger leasing activity, rising rents and improving occupancy trends.
- The gap between high-quality and lower-quality office assets remains significant, with tenants prioritizing well-located, highly amenitized buildings.
- Retail real estate is experiencing a resurgence as years of limited new supply increase competition for prime shopping centre locations.
- Easing interest-rate volatility and constrained supply across multiple property types are supporting pricing power and asset values.
Read the full transcript below:
LINDSAY: It’s time now for Hot Picks. Today, we are zeroing in on the real estate sector. Certain property types are benefiting from AI infrastructure demand, while others are seeing improving fundamentals as occupancy and rent growth strengthen. Joining us now is Ji Zhang, portfolio manager of global real estate at Cohen & Steers. It’s great to have you join us. Good morning.
JI: Good morning, Lindsay. Good to be here.
LINDSAY: Real estate has been seeing strong performance this year. What’s driving some of the growth we’ve been seeing, do you think?
JI: Well, what we’re seeing today is a combination of great secular growth drivers and what was really a very attractive valuation coming in. With the Fed starting to be quite range-bound in terms of rate expectations, and with greater volatility in the broader environment, real estate has really been a very good safe haven. Investors who came into the year underallocated to real estate have been adding to their real estate exposure.
LINDSAY: Do you think we’re seeing a turning point, particularly for commercial real estate?
JI: I do, and we’re seeing that both in office and retail. Boston Properties is one of those companies where we’re seeing that resurgence and recovery in fundamentals. This is a really interesting case where the market narrative and the reality just aren’t lining up.
It’s a $9-billion company owning a portfolio of high-quality office buildings, and despite the name, it’s not just Boston. You’ve got New York at 25 per cent, San Francisco at 15 per cent, Washington, D.C., at 15 per cent, and smaller exposures to Los Angeles and Seattle.
While Boston is a bit softer, when you’re looking at what’s actually happening in New York and San Francisco, these markets are performing much better than people realize. Of course, there’s this big narrative that AI is going to reduce jobs and kill office demand, and that’s been really weighing on these stocks. At the same time, when you look at what’s happening on the ground, we’re seeing something quite different.
We’re seeing innovation, we’re seeing job growth, and we’re seeing that translating into demand for office space. That’s leading to strong leasing activity. In New York in particular, tight availability for office space is pushing rents higher.
What you’ve got is a public market that is still pricing in a very negative narrative, while at the same time you’re seeing fundamentals that are materially better, and that’s where we see the opportunity.
LINDSAY: Okay, yeah, so Boston Properties is your first Hot Pick for today. I wonder, is there a growing difference between high-quality trophy office space and older office assets?
JI: You’re absolutely right. We’ve been seeing that for a few years now because when you think about employers trying to bring employees back to the office, what they’re really focused on are well-located, highly amenitized buildings that offer a place for employees to collaborate.
That is really important. We have seen a clear divide between the haves and the have-nots within the office sector, where you’re seeing strong pricing power and strong occupancy in the best portfolios.
Even the lower-quality assets are starting to get better because supply is coming off. You are seeing a lot of office-to-residential conversions. We haven’t seen meaningful new office supply, so in places like San Francisco and New York, these markets are getting quite tight. We’re actually seeing a broadening out from trophy assets to Class A assets in locations where we haven’t seen that in many years.
LINDSAY: Interesting. Okay, so next up is Blackstone Digital Infrastructure Trust. How does this play into the AI investment theme?
JI: This is a really interesting one because when people talk about AI infrastructure, most of the focus is on who is building data centres. What’s much less talked about is who is buying those data centres and owning them once they’re built, and that’s what makes Blackstone Digital Infrastructure Trust really compelling.
It’s the first public vehicle of its kind sponsored by Blackstone, which is already one of the largest data centre owners globally. They know what they’re doing, and the strategy is quite differentiated, focusing on acquiring stabilized, mission-critical data centres in primary markets leased to hyperscalers.
The opportunity here is massive. We’re looking at roughly $1 trillion of AI-related capital expenditures and a data centre market that is supporting a multi-hundred-billion-dollar acquisition pipeline.
LINDSAY: It’s so interesting. Continue. Sorry.
JI: Sure. BXDC is essentially sitting in the middle of this ecosystem as a capital provider funding the buildout, and this is a great opportunity.
LINDSAY: Sorry, I was just going to say, when investors usually focus on AI, they look at chipmakers and software companies. Do you think enough people are looking at data centre real estate instead?
JI: I do think people are looking at data centre real estate. They’re also looking at utility companies that are supporting and providing the energy for this infrastructure.
What we do think is that the infrastructure layer is providing not only the secular growth drivers and upside potential, but a name like Blackstone Digital Infrastructure Trust also provides stable and growing income for investors, which is quite compelling.
LINDSAY: Your last pick is RioCan. I wonder what’s attractive about Canadian real estate today.
JI: Canadian real estate, and RioCan in particular, is a great example of how retail real estate has come full circle. We’ve seen it in the U.S., we’ve seen it in Canada and we’ve seen it in Europe.
What we have seen is a real resurgence of retail real estate. About a decade ago, Cohen & Steers — and, of course, our bread and butter is real estate — made the right call that e-commerce was going to massively disrupt bricks-and-mortar retail. A lot of that disruption has already played out.
What’s left today in all of these markets are assets that have become significantly more valuable. We’re seeing a real resurgence in fundamentals that’s leading to sustained pricing power and sustained leasing activity, and that’s exactly where RioCan is positioned.
It’s a portfolio of high-quality shopping centres in Canada, in locations where consumers and retailers actually want to be. Because we haven’t materially added retail supply in years, there’s real competition now for these locations, and that’s pushing rents higher and leading asset values to new highs.
By the way, management and the new CEO, Jonathan Gitlin, have done a fantastic job of cleaning up and simplifying the story and leaning into their core strengths, which we think is critical.
When you put it all together, you have strong retail fundamentals, the right portfolio and management team, and a cleaner story. The stock has already reacted well, but we do think there’s more upside here.
LINDSAY: Just before we wrap up, I wonder what some of the biggest headwinds for the real estate sector are moving forward.
JI: I would say what we have seen over the last few years, and what we will probably continue to see, is some level of volatility around the interest-rate and inflation backdrop.
With that said, if you look at where we have come from and where we are today, that range of outcomes is much narrower than what we saw coming out of COVID.
The reality is asset values have already reset to lower levels, so there’s upside. Interest rates are a lot less volatile than what we have seen over the last few years, and at the same time, supply is coming off pretty dramatically across major asset classes, whether it’s office, retail, apartments or industrial.
We don’t need exceptionally strong demand for landlords to see strong pricing power. I do think that is all very supportive.
LINDSAY: Okay, we’ll leave it there. Ji Zhang, portfolio manager of global real estate at Cohen & Steers. Really appreciate you joining us. Thank you.
JI: Thank you.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| BXP NYSE | N | N | N |
| BXDC NYSE | N | N | N |
| REI-UN TSX | N | N | N |
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This BNN Bloomberg summary and transcript of the June 8, 2026 interview with Ji Zhang are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
