REIT - Chip Fabs Data Centers Propping Up Construction

2024-06-20 09:30:00 ET

Summary

• We are two years past the jump in interest rates in the United States, and non-residential construction has not dropped.
• The story is one of great stimulus from both government policy and private sector entrepreneurship.
• U.S. projects will be concentrated in a relatively small number of communities.

Non-residential construction typically drops off after interest rates rise, with a lag of one to two years. But we are two years past the jump in interest rates in the United States, and non-residential construction has not dropped. It has leveled off but shows no sign of a dive. Chip fabs, propelled by government subsidies, and data centers, especially those housing artificial intelligence activities, have propped up the sector. When interest rates fall, other construction will likely be crowded out by continued strength of the fabs and data centers....

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