Data Centers Got the AI Hype—But Office REITs May Get the Rent Hikes

Key Points

• Rising demand for top-tier office buildings and limited new construction are giving landlords of quality properties renewed pricing power.
• SL Green, BXP and Hudson Pacific show improving fundamentals and trade far more cheaply than richly valued data center REITs like Equinix and Digital Realty.
• Investors should focus on high-quality buildings in recovering markets rather than the office sector broadly, since the rebound remains uneven.

Ask most investors about office REITs, and you'll hear some variation on a bear case in three parts that started in 2020. Remote work emptied buildings, then rental income cratered, and then valuations collapsed.

Ask about artificial intelligence in real estate, and the answer is data center REITs. Equinix NASDAQ: EQIX is up about 33% this year. Digital Realty Trust NYSE: DLR has gained 16%.

But new leasing data is telling a different story about office REITs. AI firms are expanding at the same time that employers are tightening attendance policies. Both are competing for the same top-tier buildings.

Supply isn't coming to the rescue. Only 19.7 million square feet of office space is under construction nationwide. That leaves owners of the best buildings with a kind of pricing power they haven't had in years.

This gap between perception and fundamentals opens a window for investors. The market still prices office REITs as a broken sector. The leasing data suggests that the choicest properties in the space are healing.

The Flight to Quality Is Driving Office Rents Higher

Manhattan is leading the rebound. Startups, AI companies and large employers are chasing the same trophy towers. Office visits rose 6% year over year (YOY) in the first half of 2026. New York, Miami, Dallas, and Atlanta are now close to pre-pandemic levels.

The recovery isn't broad, and that matters. Tenants are paying up for newer space with modern layouts, amenities and transit access. Older commodity buildings are still struggling. Some may end up converted or demolished. The question for investors isn't "office or no office." It's which buildings, in which cities. Here are five REITs that can help investors answer that question.

SL Green Offers a Direct Bet on Manhattan’s Office Recovery

SL Green Realty NYSE: SLG owns trophy properties across Manhattan. That puts it at the center of the city's leasing rebound. The company raised its funds from operations (FFO) guidance in July. (FFO is the cash-flow measure REIT investors use instead of earnings.)

Second-quarter results backed that up. SL Green posted a loss of 38 cents per share, well ahead of the 59-cent loss analysts expected. Revenue rose 16.5% year over year. The stock is up about 11% in 2026 and pays a dividend that yields roughly 4.9%.

Wall Street isn't convinced yet. The consensus rating is Hold, with a $57.43 price target implying about 13% upside.

Short interest sits near 16.9% of the float. That's a lot of skepticism priced into a landlord with rising guidance.

BXP Stock Could Benefit as Office Fundamentals Improve

BXP NYSE: BXP is the broader way to play the theme. It owns offices in Boston, New York, Los Angeles, San Francisco, Seattle, and Washington, D.C.

Here, investor perception and the company's fundamentals look far apart.

BXP beat second-quarter estimates, earning 43 cents per share against a 40 cents per share consensus.

Yet the stock is down about 6% this year. Analysts rate it a Moderate Buy with a $75.06 target, about 19% above the current price.

Income investors get paid to wait. BXP recently held its quarterly dividend at 70 cents per share, a yield of about 4.4%. The stock trades at 9x forward earnings.

Hudson Pacific Has Upside, But the Risks Are Higher

Hudson Pacific Properties NYSE: HPP has the most dramatic leasing headline. In June, it signed a 502,000-square-foot lease with San Francisco. It was the city's largest office lease since 2018. Analysts project earnings growth of about 24% next year.

But REIT investors need to read the fine print. Hudson Pacific suspended its dividend in September 2024. For an asset class owned mainly for reliable income, that's a major strike. The stock still pays nothing today.

The balance sheet still shows stress. Hudson Pacific posted a second-quarter loss of $1.62 per share, far wider than expected. It completed a 1-for-7 reverse split in December 2025.

The upside case is real. Shares trade at about 0.24 times book value.

The $15.82 consensus target implies roughly 35% upside. Insiders bought $335,000 in stock over the past three months. But this feels more like a recovery trade, not an income holding.

AI Stocks Are Expensive—Office REITs Look Much Cheaper

Now compare what investors pay for AI exposure. Equinix trades at about 66 times trailing earnings and 27 times forward earnings. It fetches more than 7 times book value. Digital Realty trades at 87 times trailing earnings and 21 times forward.

The office names look like a different asset class and a different opportunity. SL Green, BXP and Hudson Pacific trade between roughly 9 and 11 times forward earnings. SL Green and Hudson Pacific trade below book value. BXP trades at about 1.3 times.

Yield tells the same story. Equinix yields about 2%, and Digital Realty is about 2.7%. SL Green and BXP each pay 4.4% or more.

This doesn't make data centers a bad business. Data-center REITs delivered a 13.75% annualized return over the past decade. But that record is now baked into the price. Investors are paying for a story everyone already knows.

What Investors Should Watch in Office REITs

Office REITs don't need a crowded trade to work; they just need proof. Watch for higher rents on new leases and further FFO guidance increases.

The data-center trade priced in AI years ago. The office trade is only starting to price in the shortage of prime space. That gap may give investors an opportunity. Just be selective. In this recovery, the building matters more than the sector.