Industrial real estate is a side-door way into AI, says Morgan Stanley’s Lauren Hochfelder

August 21, 2026 - 04:47

Morgan Stanley's Lauren Hochfelder, who leads the firm's global real assets division, says investors looking for a less obvious way to bet on artificial intelligence should pay attention to industrial real estate. In a recent appearance on Squawk on the Street, Hochfelder explained that the AI boom is quietly reshaping the demand for warehouses, distribution centers, and data hub facilities in ways that many market participants have not fully priced in.

According to Hochfelder, the conventional view of real estate as a slow-moving, interest-rate-sensitive sector misses the structural shift happening underneath. AI models require massive computing infrastructure, and that infrastructure needs physical space. But beyond the data centers themselves, there is a ripple effect. Companies need storage for servers, cooling equipment, and backup systems. They also need logistics hubs to move hardware and components quickly. That is where industrial real estate comes in as a side door into the AI trade, she said.

Hochfelder also noted that the current real estate market is showing signs of stabilization after a period of volatility driven by higher borrowing costs. While office properties remain under pressure in many cities, industrial assets have held up better because of their ties to e-commerce and now AI-related supply chains. She pointed out that vacancy rates in modern, well-located industrial properties are still relatively tight, and rental growth, while slower than the pandemic peak, remains positive in key markets.

The bigger picture, she argued, is that AI is not just a tech sector story. It is a physical economy story. Power grids, cooling systems, and land availability are becoming constraints on AI expansion, and real estate investors who understand those bottlenecks can find opportunities that are less crowded than buying chip stocks or cloud providers directly. Hochfelder cautioned, however, that not all industrial real estate is created equal. Older buildings with limited ceiling heights or poor access to power infrastructure will not benefit the same way. The winners will be properties that can support high-density uses and are located near energy sources or major transport routes.

For now, she said, the market is still digesting how quickly AI-related demand will translate into leases and construction. But the direction is clear. Industrial real estate is becoming a practical, tangible way to gain exposure to AI without taking on the volatility of tech equities.