Data Centers Losing Top Spots, San Francisco Jumps 40 Places: 9 Takeaways From ULI’s 2027 Outlook

Less than half of commercial real estate professionals today rate their own business conditions as “good to excellent.”

Two years ago, 65% did.

The industry has never been more ready for a deal, though. The investment barometer in ULI and PwC’s Emerging Trends in Real Estate 2027, released Tuesday, reached the highest reading in the history of the survey. But the report suggests some of that appetite reflects funding deadlines that are pushing money out the door — not just confidence.

Futures traders widely expect the Fed to keep rates on hold Wednesday, following September’s quarter-point hike, the first since 2023. The 10-year Treasury yield hit 5.3% in late September, capping its biggest quarterly jump since 1994.

“Why real estate when I can earn 5 percent risk free?” the president of one development firm told the researchers of his report, who examined and interviewed nearly 1,500 industry professionals across the US and Canada.

The report found that the industry has stopped waiting for relief. The yield should now come from more income and run better buildings, not from falling closing rates and lower debt. And limited partners increasingly judge managers on actual cash returns rather than projected internal rates of return.

However, the owners have one tailwind – US construction since for most types of property has fallen to or below the level needed to replace the aging stock, the gap report said favors existing buildings.

Here are nine takeaways from the 162-page report.

1. AI Redraws the Office Map

San Francisco jumped from 45th to fifth in the top market rankings for investment and development prospects, rising only to surpass Knoxville, Tennessee, and the rebound has accelerated. Leasing through the third quarter reached 12.1M SF, up 49% from a year earlier, Bisnow reported. Office vacancies fell 6.6 percentage points to 27.7%, and CBRE said the city is on pace for a record net absorption.

Nationally, the outlook for office investment improved for the fourth year in a row, and downtown office delivered the largest survey gains of any subsector.

The report makes Seattle a possible sequel. The market fell from 22 to 38, but entered the best new office leasing until September since 2019, with requests related to artificial intelligence up to nine times, a trajectory that echoes San Francisco.

2. Data Center Missing Top Point

After three straight years at No.

The request remains intact. Vacancies are less than 2%, and North American leasing in the first half of 2026 is above all of 2025 by almost 40%, according to research Datacenter Hawk cited in the report.

Getting the project approved is another matter. Local opposition blocked or delayed nearly $68B of projects in the second quarter, according to Data Center Watch. New York Governor Kathy Hochul in July ordered a one-year moratorium on large data centers, halting the $10B development.

Power prices feeding the backlash. Prices in PJM, the largest grid in the US, will increase by more than 60%, adding market monitor attributes to data centers, and 45.3% of respondents to the ULI and PwC survey named power and grid constraints as the top disruption.

3. Manhattan pull away

Manhattan rose from ninth to seventh in the market to watch, extending its rise from 42nd in 2022. The borough is on pace for the busiest leasing year since 2000, and class-A asking rent is a record $85.45 per SF, Colliers data shows. In September, hedge fund Castle Hook Partners set a city record, agreeing to pay $375 per SF for a two-story penthouse above Related’s planned 625 Madison Ave.

The rest of the area is another story. Brooklyn fell from fourth to 28th, Jersey City from second to eighth and the survey “NYC Other” category from 17th to 33rd.

The report doesn’t explain Brooklyn’s slide, but the apartment market is in flux. The number of multifamily deals there rose 12.7% in the third quarter, while dollar volume fell 12.8%, according to Ariel Property Advisors. Rent Guide Council June vote to freeze rent in about 1 million stable apartments take effect October 1, and landlords have been sued to block.

4. Chips And Defense Minting New Winners

Dallas-Fort Worth ranked first for the third year in a row, followed by Nashville, Miami, Raleigh-Durham and San Francisco. The South and Southeast markets claim six of the top 10 spots, though the authors say the story is shifting from migration to diversification.

The biggest climbers have certain industrial machines. Knoxville moved up 46 spots to 20th in defense technology and affordability. Columbus jumped from 38th to 19th, anchored by an estimated $28B semiconductor campus, and now ranks third nationally as a data center market, the report notes.

Cincinnati gained 27 spots and Boise 25, and Raleigh-Durham, up seven spots, added a manufacturing base to the life sciences identity.

5. Las Vegas Falls 50 places

No market fell more than Las Vegas, which dropped from 28 to 78.

The slide marks the city’s worst year for tourism since records began in 1970, outside of the pandemic. Visits are down 7.5% in 2025, about 3.1 million fewer visitors, according to data from the Las Vegas Convention and Visitors Authority. Skift attributed the decline to fewer Canadian visitors and a reduction in airline capacity, and the report showed net domestic migration to metros has cooled dramatically.

Boston dropped from 15th to 27th after development approvals fell by about half by 2025, which the report attributed to relocation regulations and high construction costs. Austin, which fell to 30 last year, recovered to just 21 as it worked through higher supply.

6. Sadness Is In The Capital Pile

The difficulties in this cycle are more situational than systemic, the report found. Buildings leased and rent paid are canceled with the effect that they can no longer be used in the current rates and vintage funds 2017-2020 that have expired.

The apartment took brunt. Those buying at sub-4% cap rates with floating rate debt are already priced at 300 to 400 basis points. Apartment prices fell nearly 5% in the year to August, while prices were broadly flat, and about 8% of multifamily CMBS loans were delinquent in August, Bisnow reported, citing MSCI and Trepp. the founder of Northwind Group Ran Eliasaf said in Bisnow finance events expect more default syndicator after landing September.

Lenders say their patience is running out, and some warn of a day of reckoning if rates continue to rise. With $875B of commercial mortgages maturing this year, the ULI report says silent foreclosures and negotiated recapitalizations have outpaced what the deal data captures.

7. Everyone Is Using AI, But Few Can Prove It Pays

Respondents ranked artificial intelligence as the most disruptive force in the industry until 2029, ahead of construction costs and power constraints. Almost two-thirds say they actively use it, and most report productivity gains.

The payoff is uneven. An extended economy hotel operator told researchers that staff with no coding background built about 80% of the custom operating tools that outside vendors provided for $400K, at a discount.

But a survey by software firm Dealpath of 103 institutional real estate professionals, published as a highlight of the report, found that 97% have built AI into their investment process, while only 19% say they have made more accurate decisions, and 94% check their work most or all of the time.

8. Senior Home and Medical Office Lead

Strong fundamentals support senior medical homes and offices to share the highest investment rankings among established subsectors.

Healthcare REIT Welltower said Monday that same-store NOI in its senior housing operating portfolio increased 21% in the third quarter with 320 basis points of resident growth. Companies have closed or agreed to invest $21B this year.

New supplies are scarce. Senior housing units under construction fell in the first quarter to levels last seen in 2012, according to NIC MAP.

Medical office occupancy is over 92%, and transaction volume is nearly doubling every year, according to the report.

9. Infrastructure Overcomes Every Property Type

For the first time, the survey rates four categories of infrastructure: energy and renewables, transportation, digital infrastructure beyond data centers, and water and utility systems. All four scored higher for investment prospects than any other established property type.

Nearly a quarter of real estate investors surveyed by Knight Frank have or expect to have infrastructure exposure by the end of the year.

The interviewee cautioned that these assets require operational expertise that most real estate companies lack. For broad-based managers, the report says, the opportunity set to 2027 is the biggest in years.