What Goldman Sachs Sees That Most Advisors Miss

Follow the money, and you'll find the real story. While headlines obsess over market volatility and political noise, the smart money is quietly repositioning for what's next. McKinsey estimates $5.2 trillion will flow into AI infrastructure by 2030. The Fed is holding rates hostage at 4.25%-4.5%. And your clients' vacation home dreams just got a reality check.

None of this made the front page. All of it affects portfolios. The question isn't whether these shifts matter---it's whether you're positioning clients ahead of the curve or chasing trends after they've already moved markets.

In this issue:

• The $5.2T Server Suburb Surge --- How data centers are creating an entirely new real estate asset class

• The Mortgage Rate Trap --- Why Fed policy isn't translating to lower borrowing costs

• The Recreational Real Estate Reboot --- Tactical approaches for navigating the vacation home market

Let’s dive in!

The $5.2T Server Suburb Surge

Forget everything you know about commercial real estate trends. The AI boom isn't just reshaping technology---it's creating the biggest infrastructure spending spree since the Interstate Highway System.

Goldman Sachs projects 165% growth in data center power demand by 2030. Blackstone just dropped $16 billion on data center operator AirTrunk---the year's biggest real estate deal. Meanwhile, OpenAI's Project Stargate plans to invest up to $500 billion in AI mega data centers. This isn't speculation. This is capital allocation at unprecedented scale.

The power requirements are staggering. Traditional data centers consume about 100 kilowatts per rack. AI-optimized facilities? They're pushing 200-300 kilowatts per rack, with some experimental setups hitting 500 kilowatts. To put that in perspective, a single AI data center now consumes as much electricity as a small city. An estimated $720 billion in grid infrastructure spending will be needed through 2030 just to keep pace.

The geography is shifting fast. "Data Center Alley" in Loudoun County, Virginia now hosts more data centers than anywhere on Earth. But secondary markets are heating up: Columbus, Ohio; Kansas City; San Antonio are all seeing massive investment as hyperscalers hunt for cheaper land and power. The winner? Markets with reliable power grids, available land, and fewer regulatory hurdles.

The ripple effects are massive. Land prices are skyrocketing in emerging AI hubs, creating entire ecosystems around data centers. Housing developments, business parks, and retail districts follow the servers. It's like the Gold Rush, but instead of mining towns, we're building digital cities. Loudoun County has seen employment opportunities surge, attracting thousands of workers in AI engineering, cybersecurity, and infrastructure management.

Here's what advisors need to know: This isn't just creating demand for industrial real estate. It's creating an entirely new asset class with different risk profiles, different tenant relationships, and different capital requirements. Private equity firms with operational capabilities now control 37% of real estate assets under management, up 11 percentage points in a decade. These aren't traditional landlords---they're infrastructure operators managing critical digital backbone.

The investment implications are profound. Nuclear power is emerging as a preferred solution to meet AI's energy demands, with small modular reactors expected to double in 2025. Utilities companies with nuclear exposure are suddenly hot properties. Meanwhile, traditional office REITs are pivoting toward data center development, fundamentally altering their business models.

The clients asking about "tech exposure" in their portfolios might be missing the bigger picture. The real opportunity---and risk---is in the infrastructure that makes AI possible.

The Mortgage Rate Trap

The Fed cut rates three times in late 2024. Mortgage rates? They're sitting at 6.86%---barely budged. Welcome to the new normal, where monetary policy and mortgage markets have officially decoupled.

The math is brutal. Home prices hit $416,900 in Q1 2025, up from $317,100 in 2020. Meanwhile, mortgage rates are double their pandemic lows. Fed officials expect inflation to rise to 3% this year thanks to tariff uncertainty, keeping rate cuts off the table through summer. Economic growth projections have been downgraded from 1.7% to 1.4%, while unemployment could tick up to 4.5%.

The disconnect is deliberate. Fed Chair Powell acknowledged they're "well positioned to wait" before cutting rates, prioritizing inflation control over housing affordability. Bond markets aren't buying the patience---they're pricing in economic slowdown while mortgage lenders factor in credit risk premiums. The 10-year Treasury, which typically drives mortgage rates, has held stubbornly above 4% despite Fed dovishness.

The structural factors run deeper. Mortgage-backed securities face different dynamics than federal funds. Bank balance sheet constraints, regulatory capital requirements, and credit spreads all influence mortgage pricing independent of Fed policy. Add in government debt service costs approaching $1.2 trillion annually, and there's political pressure to keep rates elevated to manage fiscal burdens.

Consumer behavior is adapting. Cash purchases are surging as buyers sidestep financing costs entirely. Others are exploring creative structures---seller financing, assumable mortgages, rate buydowns---anything to avoid today's borrowing costs. Non-QM loans are experiencing a renaissance as traditional financing becomes prohibitive for many buyers.

The advisor opportunity: Clients sitting on 2.5% mortgages are essentially locked in place---65% of homeowners hold rates below 4%. But that creates planning opportunities. HELOCs, strategic cash management, and timing decisions around major purchases all become more critical when traditional financing is prohibitive. The key is helping clients understand that today's "high" rates are actually historically normal---it's the 2020-2021 period that was the aberration.

The Recreational Real Estate Reboot

Vacation season means vacation home conversations. Here's how to navigate them strategically when the market has fundamentally shifted.

Start with the data. Vacation home purchases dropped to a six-year low in 2024---down 33% from pandemic highs. Second homes now make up just 2.6% of all mortgages, the lowest share on record. This isn't a temporary dip. It's a structural shift driven by higher loan fees, insurance costs, and rental market softening. The median vacation home now costs $495,000 compared to $385,000 for primary homes.

But opportunity exists for the right clients. Cape May County, New Jersey topped 2024's luxury vacation markets, with second homes exceeding 150% of primary residences. Florida's Gulf Coast---particularly Gulf and Walton counties---is emerging as the next hot spot, offering oceanfront scarcity without Miami prices. Average vacation home prices range from $740K to over $1.3M depending on location, with mountain markets like Montana's Gallatin County commanding premium pricing due to Yellowstone proximity.

The financing landscape has shifted dramatically. Loan fees for second homes increased in 2022, adding to total acquisition costs. Many lenders now require 25% down minimum for vacation properties, versus 20% for primary residences. Short-term rental market cooling means the investment case has weakened---asking rents aren't growing and occupancy rates have dropped 8% nationally since 2022.

Frame it as portfolio allocation. Instead of "should you buy a vacation home," ask "what percentage of your real estate exposure should be recreational versus primary residence?" This shifts the conversation from emotional to strategic, where you can add value through analysis and planning. Consider factors like cap rates, ownership costs, and tax implications. Cap rates are under downward pressure as home prices climb while rental revenue declines from 2021-2022 peaks.

The tactical analysis framework: Run three scenarios for any vacation property discussion: best case (rates drop to 5%, rental income recovers), base case (current conditions persist), and stress case (rates stay elevated, rental market weakens further). Factor in insurance costs---especially for waterfront properties where premiums have skyrocketed. Include opportunity cost analysis: what else could that capital achieve in current market conditions?

The Buy-Cash, Refi-Later Pivot: For clients considering vacation properties, explore the math on paying cash now and refinancing later versus traditional financing. In today's rate environment, this strategy might actually pencil out---if they have the liquidity and patience. But also stress-test scenarios where rates stay elevated longer than expected. Consider partial strategies: co-ownership platforms, seasonal rentals in existing markets, or REITs focused on vacation property exposure as alternatives to direct ownership.

Ready to position clients ahead of the curve?