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- [00:01]
Baillie Gifford Narrator
What is actual investing? We believe that it's a real world task to deliver thoughtful capital deployment. It's not about speculating over the short term. It's about understanding the long term opportunities for companies through technological progress or new business models. So we seek out those exploring big new ideas that will change the world. Then we back them to give those ideas time to flourish. Bailey Gifford Actual Investors Find out more@bailey gifford.com.
- [00:32]
Paul Sweeney
Did my card go through?
- [00:33]
Baillie Gifford Narrator
Oh no.
- [00:34]
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Paul Sweeney
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Paul Sweeney
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Verizon Business Advertiser
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- [00:47]
Norma Linda
There we go.
- [00:48]
Paul Sweeney
Get the Internet you need at the price you want.
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Verizon Business Advertiser
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Paul Sweeney
Select Verizon Business Smartphone plan Savings Terms.
- [01:00]
If a Lenovo computer for your business is on your holiday list, don't shop around, just go directly to the source. Lenovo.com youm'll find exclusive deals on the PCs you want for your business like the ThinkPad X914 Aura Edition and Yoga 7i2 in one. So avoid all that shopping chaos and price comparing and just go directly to the source. Lenovo.com where PCs are up to 50% off. That's Lenovo.com Lenovo Lenovo.
- [01:33]
Bloomberg Audio Studios Podcasts Radio News.
- [01:40]
Brian Eggert
This.
- [01:40]
Paul Sweeney
Is Bloomberg Intelligence with Scarlet Fu and Paul Sweeney. How do you think the Fed is looking at tariffs? The uncertainty of tariffs?
- [01:47]
Norma Linda
Let's take a look at the sectors.
- [01:49]
Helen Koh
And how they perform.
- [01:50]
Paul Sweeney
A lot of investors getting whipsawed every day by news events, breaking market headlines and corporate news from across the globe.
- [01:56]
Norma Linda
Could we see a market market disruption?
- [01:58]
Helen Koh
A market event?
- [01:59]
Paul Sweeney
People just too exuberant out there. You see some so called low quality.
- [02:03]
Norma Linda
Stocks driving this short term rally.
- [02:05]
Lily Meyer
Bloomberg Intelligence with Scarlet Fu and Paul.
- [02:08]
Paul Sweeney
Sweeney on Bloomberg Radio, YouTube and Bloomberg Originals. I'm Paul Sweeney.
- [02:13]
Norma Linda
And I'm Norman Linda, filling in for Scarlet Fu.
- [02:15]
Paul Sweeney
On today's Bloomberg Intelligence show, we dig inside the big business stories impacting Wall street and the global markets.
- [02:21]
Norma Linda
Each and every week we provide in depth research and data on some of the 2000 companies in 130 industries our analysts cover worldwide.
- [02:28]
Paul Sweeney
Today we'll look at why the cloud based software company Salesforce gave a strong outlook for sales in the current quarter.
- [02:33]
Norma Linda
Plus we'll dive into why shares of the aerospace company Airbus plunged and how this might affect the delivery of its newly produced jets.
- [02:40]
Paul Sweeney
But first we Begin with some news in the casino and gaming space.
- [02:44]
Norma Linda
This week, New York Mets owner Steve Cohen won approval to operate a casino next to Citi Fields in Queens.
- [02:49]
Paul Sweeney
It's one of the three projects selected for gambling licenses in New York City. And this was done by the State Gaming Commission's Facility Location Board.
- [02:57]
Norma Linda
Cohen, the hedge fund MotoGul, submitted an $8 billion casino proposal with partner Hard Rock International and was picked alongside genting groups Resorts World and Bally's. These three projects are expected to generate significant revenue and create thousands of jobs.
- [03:11]
Paul Sweeney
For more on all this, guest host Alex Semenova and I were joined by Brian Eggert, Bloomberg Intelligence Senior Gaming and Lodging Analyst. We first asked Brian to talk about what the licenses represent and where we go from here.
- [03:23]
Brian Eggert
So this is a fairly protracted process involving ultimately the selection of three recipients. By the way, the only three left in the running after a few others were eliminated and dropped out. And really it authorized resort casinos for the downstate New York area, mostly New York City. And as it turns out, the three qualified casino applicants, if you will, really are, are in New York City, but outside the borough of Manhattan itself.
- [03:48]
Paul Sweeney
Brian, just looking at your note on these license approvals, you write that they face a narrow path, decent returns on investment. Can you please talk to us a little bit more about that idea?
- [03:59]
Brian Eggert
Sure. So what we assume for these resorts is they will get what I would call a gaming revenue premium, a room rate premium of 10, 20% to other kind of high end urban area resorts such as the Brigada, Atlantic City, Winds Encore in Boston. However, our concern in terms of the return prospects are that development costs are quite high and perhaps some of the targeted non gaming contribution elements might be a bit ambitious. So for that reason when we worked the numbers, we came up with something like a 10% return on investment, which is certainly a bit less than most operators would expect to attain in these regional markets.
- [04:42]
Paul Sweeney
So I'm thinking here, I mean again I'm, I'm just thinking about Steve Cohen's, I was looking at his plans in conjunction with his Citi Field. He obviously he owns the Mets. Citi Field is out there, the National Tennis center is out there. We had the World's Fair situations. There's a ton of opportunity out there. It seems like these are going to be more retail hotel than casino. How do you think the mix of revenue is going to be there?
- [05:08]
Brian Eggert
There certainly is. I think when we work the numbers, we assume that with respect to either food and beverage or retail entertainment revenue, those will be fairly sizable chunks of the Overall revenue pie, probably cumulatively close to half, which is true of many kind of gaming resorts in attractive environments where you get a lot of non gaming revenue. I think the same will be true here. The question is, will it be enough and will the margins, which we take to be about 30%, be sufficient to get a good return. But certainly, you know, the logic of having it next to City Field makes a lot of sense. You know, the other locations, Bally's at a golf course in the Bronx, you know, the resorts rolled in Queens, pretty much expanding an existing facility, all have their merit. The question is will it be enough to get a decent return? But certainly some of these locations have rational prospects.
- [06:03]
Norma Linda
What does this victory for these three.
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Paul Sweeney
Companies mean for their competitors like Sands, mgm, when, where do they go from here?
- [06:11]
Brian Eggert
So to be clear, you know, Sands exited this process back in, in April. Wynn exited in May. It's Hudson Yards project because of community opposition and MGM in October because of the license terms. But bear in mind that they do have other prospects. You know, Wynn is developing a UAE resort of its own. MGM is building in Osaka, Japan. They all can buy back their own stock. So I think they're weighing this particular opportunity relative to other development prospects.
- [06:41]
Paul Sweeney
So we're going to get the licenses by year end when what's the timetable? Have anybody any of these three license winners laid out a timetable for getting a shovel on the ground and maybe even opening the doors?
- [06:53]
Brian Eggert
So I think it'll vary by operator, but the expectation is that these resorts will generally open by 20, 30 or so. It'll take a few years to develop. There is always the possibility of construction challenges, but that's the target. And of course our related concern since you mentioned MGM was mgm, Bally's, Caesars all operate casinos in Atlantic City. And you know, the proximity to Atlantic City of resorts with casino elements at this caliber certainly presents a potential competitive challenge to Atlantic city itself.
- [07:27]
Paul Sweeney
A.C. it's, that's tough. That's, that is tough because I was, you know, on the parkway. Brian, I know you see it too. We have for years, for 20, 30 years we've seen the limousines from New York City going down the parkway to AC that's going to get impacted, isn't Will.
- [07:43]
Brian Eggert
I think, you know, some operators regard it, for example, a hard rock may hold up better than others. But you know, there's always a challenge when you've got this much additional gaming capacity with resort elements opening up in relative close proximity to a, to a key Atlantic City feeder market.
- [08:01]
Norma Linda
Our thanks to Brian Egger Bloomberg Intelligence Senior Gaming and Lodging Analyst we move.
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Paul Sweeney
Now to the retail space.
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Norma Linda
This week the department store chains Macy's posted better than expected results last quarter. However, shares dropped. The company pointed to potential for soft demand from low income shoppers for the current quarter.
- [08:17]
Paul Sweeney
For more, Nora and I were joined by Mary Ross Gilbert Bloomberg Intelligence Senior Equity Analyst Covering retail We first asked.
- [08:24]
Norma Linda
Mary to break down Macy's most recent quarter.
- [08:26]
Mary Ross Gilbert
We saw actually I think great results coming out of Macy's. See but the company put out conservative fourth quarter guidance and that's really what they always do. They seek to beat their numbers. And so that guidance came in very close. You know, at the high end it's right around where analysts are because they already saw strong results come in from other retailers. But we think when we think about it, we think there's upside here. So we really view the results as look Macy's nameplate because of all the changes that they're making. And what that means is they're bringing in more relevant brands that are resonating with their consumer. Not only that, but the stores look brighter. There's really kind of exciting music in the stores. The store associates are more engaged with the customer. We've noticed that on our channel checks, particularly on Black Friday we saw more traffic in the store than we've seen in years past really. So we think that the changes that CEO Tony Spring is making and he's really taking his cues from what he's done at Bloomingdale's, it's resonating, it's working. And so we think this momentum is building and we certainly saw it in the third quarter numbers with comp sales up 2.7% for the go forward stores. And so with that, I mean that's a big improvement sequentially. And so we think that's building, you know, going into the fourth quarter and just with you know, the constant improvement that we're seeing there.
- [09:56]
Norma Linda
So when most people think about the retail space right now, a lot of people think about the transition to E commerce. But it sounds as though from what you're explaining, a lot of people are going there in person. I mean I'm looking at Kohl's, I'm looking at Dillard's. What are they doing in particular that's really attracting customers to come through the doors. Is it also collaborations with celebrities by chance?
- [10:16]
Mary Ross Gilbert
Yes, you, you raised a valid point and it is, it does include collaborations. So for example, they aqua, you know they're under their. Bloomingdale's brand currently has a collab going out with a designer out of Milan. And so yes, these collaborations also even, you know, they'll have some events but all of that is, is certainly drawing in new customers and I think Macy's nameplate could certainly do more on that end. They had their first collab with their on 34th brand this year. But we think we're going to see more next year because if you look at what Dillard's has been doing over the last few years and they have a different business model than Macy's does, they're not really promotional. For example, for Black Friday they just had clearance sales and it was pretty comparable to last year. So that didn't mean that the rest of the merchandise was on sale. Macy's, the, you know, is far more promotional but by doing collaborations, you know, by getting celebrities involved. So for example for the holiday they have Jennifer Hudson that's you know, fronting their campaign for the holiday and they're also engaging with social influencers. So yes, all of that is resonating. We're seeing it with other brands like for example with American Eagle which just tapped Martha Stewart and that's appealing to Gen Z. Oh wow.
- [11:43]
Norma Linda
Yeah, I missed that one.
- [11:45]
Mary Ross Gilbert
Yeah. So these bold campaigns that these brands are doing, Macy's is also getting involved there and they're dipping their, I would say they're dipping their toe in the water. But I think we're going to see that increase, you know, and build as we get into 2026. And when you talk about the digital business because of course you're, you're always hearing, let's say stronger growth on digital. For example, when we looked at Black Friday, you know, over the weekend through Cyber Monday, the sales strength was really led by digital. Digital was up double digits versus you know, low to mid single digits for in store. So I think that's, that's really positive there. But so when we look at Macy's, a third of their sales come from digital. So still in store is very big, but it's also omnichannel. Well the ability to buy online, take back in store or buy online, pick up in store.
- [12:40]
Paul Sweeney
Just real quick, 30 seconds. What's Macy's saying about the consumer out there?
- [12:44]
Mary Ross Gilbert
Yeah, so they're saying that the lower end consumer is really feeling pinched and that's where they're seeing some challenges on some of the price increases on their lower price point items. But the higher middle income in the higher income consumer is resilient and they haven't flashed or batted an eye with higher prices that they took to offset tariffs and they're still buying.
- [13:07]
Paul Sweeney
Our thanks to Mary Ross Gilbert, Bloomberg Intelligence Senior Equity Analyst covering retail Coming.
- [13:12]
Norma Linda
Up, we continue in the retail space and look at earnings from the discount retailer Dollar Tree.
- [13:16]
Paul Sweeney
You're listening to Bloomberg Intelligence on Bloomberg Radio providing in depth research and data on 2000 companies and 130 industries.
- [13:22]
Norma Linda
You can access Bloomberg Intelligence via Bigo on the terminal.
- [13:26]
Paul Sweeney
I'm Norma Linda and I'm Paul Sweeney and this is Bloomberg.
- [13:32]
Baillie Gifford Narrator
What is actual investing? We believe that it's a real world task to deliver thoughtful capital deployment. It's not about speculating over the short term. It's about understanding the long term opportunities for companies through technological progress or new business models. So we seek out those exploring big new ideas that will change the world. Then we back them to give those ideas time to flourish. Baillie Gifford Actual Investors Find out more@baileygifford.com.
- [14:02]
Paul Sweeney
If a Lenovo computer for your business is on your holiday list, don't shop around, just go directly to the source. Lenovo.com, you'll find exclusive deals on the PCs you want for your business like the ThinkPad X914 Aura Edition and and Yoga 7i2 in one. So avoid all that shopping chaos and price comparing and just go directly to the source. Lenovo.com where PCs are up to 50% off. That's Lenovo.com Lenovo Lenovo.
- [14:32]
Baillie Gifford Narrator
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- [15:34]
Lily Meyer
This.
- [15:35]
Paul Sweeney
Is Bloomberg Intelligence with Scarlet Fu and Paul Sweeney on Bloomberg Radio.
- [15:42]
Norma Linda
I'm Paul Sweeney and I'm Norman Linda, filling in for Scarlet Fu.
- [15:44]
Paul Sweeney
We continue in the retail space. This week Dollar Tree reported better than expected profit and raised its full year outlook.
- [15:51]
Norma Linda
It's a sign that the discount retailer is capturing more spending from stretch shoppers. For more on this, Paul and I were joined by Lily Meyer, Bloomberg Retail Reporter.
- [15:58]
Paul Sweeney
We first asked Lilly to break down Dollar Tree's most recent quarter.
- [16:01]
Lily Meyer
Yeah, so Dollar Tree did well this quarter. It met expectations on revenue and same store sales and it raised its profit outlook for the year. I think they really have hit a niche in being able to capture consumers, both lower end consumers who need cheaper goods and then high income consumers who are looking to trade down.
- [16:22]
Norma Linda
So I mean, what do we think about elasticity of the lower end consumer right now? Because I mean if you think about Walmart, I used to think of this as a company that, you know, was a cheaper place to shop. But it seems as though it's appealing to multiple consumer types. But it seems as though Dollar Tree really is a great place for the lower end consumer. Yeah.
- [16:39]
Lily Meyer
And actually recently Dollar Tree has been looking to kind of break into that higher income shopper as well. So it has this pricing strategy. So it has some products that are still cheaper, but then it has some, it's getting more products that are more expensive.
- [16:55]
Paul Sweeney
What, what is Dollar Tree saying about its core consumer out there? Who, who is that core consumer and how are they behaving?
- [17:02]
Lily Meyer
Yeah, so I think it's core consumer is still a lower income shopper. 85% of their products are $2 and under. So they really still have a lot of value. So they're seeing those shoppers continue to go in. But this quarter they saw traffic down and they attributed that to tariff increases.
- [17:19]
Norma Linda
What's the takeaway in terms of the outlook? I mean you talked about tariffs still being a drag here.
- [17:23]
Lily Meyer
Yeah. So tariffs are really dragged this quarter. They said that's going to lessen. So I think this was the quarter where we're really seeing the biggest tariff impact. It'll be really interesting to see what they predict for consumers next year. I'm interested to hear about that. And also what they see for holiday, if they continue to see higher income shoppers trading down for gifts is do.
- [17:44]
Paul Sweeney
Dollar stores, do they see a surge in sales, seasonal surge in sales from holiday sales? Is that, do they see that like, like a department store would?
- [17:52]
Lily Meyer
Yeah. I don't know if it's the same surge but you know they sell a lot of gift wrapping and gift bags and some of those smaller gifts stocking stuff, stuffers. So I think they see a lot of that around the holidays.
- [18:02]
Norma Linda
So what are we seeing in terms of just the broader read on the retail space? This kind of gives us a picture of the lower end consumer. But what are you seeing across the board?
- [18:09]
Lily Meyer
So broadly we're really still seeing consumer spend. So there hasn't been that massive pullback that I think some of us were imagining might happen. We're still seeing consumer spend, but they're really value driven. So they're looking for the best deals they can get. They're trading down when they need to. They're stocking up on essentials.
- [18:27]
Paul Sweeney
How promotional are retailers right now? Because, I mean, I know talking to Poonam Goyal, the retail analyst at Bloomberg Intelligence, he says, you know, the more promotions you see out there, that's going to be that goes right to the margins, the profit margins of some of these retailers. What are we seeing this season?
- [18:43]
Lily Meyer
That's a good question. So this season we've actually seen some retailers pull back on deals to protect their margin. So some companies are doing that as part of a broader strategy and then some are having to do that because of tariffs. So, you know, for Black Friday, typically they'd offer big discounts and some are pulling back or not offering discounts at all.
- [19:01]
Norma Linda
So consumers have still been broadly spending in the retail space. What are they spending on? Is it, you know, are we spending money on essentials right now? Skipping the splurging?
- [19:11]
Lily Meyer
Yeah, yeah, that's exactly it. So Black Friday, we talked to a lot of folks who were saying they're going to just get essentials this Black Friday. So instead of buying, you know, a Le Creuset Dutch oven, they were, we talked to someone who instead was gonna buy like three bags of 40 pound dog food.
- [19:28]
Paul Sweeney
Oh, that sounds cheap.
- [19:29]
Mary Ross Gilbert
Yeah.
- [19:30]
Lily Meyer
So really using, you know, deals to get things that they need for themselves rather than getting that big ticket item they waited for the day.
- [19:37]
Paul Sweeney
What I learned from talking to retail folks is omnichannel retail, which is you use both the online and the bricks and mortar and maybe you look at something online but then you wanna go touch and feel it, or maybe you order it, then you pick it up at the store. Omnichannel. Is that still a thing?
- [19:54]
Norma Linda
Yeah, yeah.
- [19:54]
Lily Meyer
So we, we were out there on Black Friday in some of the stores and you know, while a lot of people have switched their holiday shopping to be online, we still saw a ton of people in stores, especially at stores with really good deals and stores that appealed to young shoppers. So brands like Addicted and Princess Polly that are in malls were really flooded with young people.
- [20:14]
Norma Linda
Our thanks to Lily Meyer, Bloomberg Retail Reporter.
- [20:16]
Paul Sweeney
We move next to quarterly earnings from the cloud based software company Salesforce.
- [20:20]
Norma Linda
This week the company reported third quarter earnings that beat analysts expectations. Salesforce also gave an outlook for revenue in the current quarter that topped Wall street estimates.
- [20:28]
Paul Sweeney
This suggests that the software company is persuading customers to buy its AI tools. For more on this noor night we're joined by Anurag Rana, Bloomberg Intelligence Technology analyst.
- [20:38]
Norma Linda
We first asked Anurag for his take on the most recent earnings report from Salesforce.
- [20:42]
Baillie Gifford Narrator
Yeah, the results did come in, I mean almost in line with how we were looking at it in terms of that the core business is still struggling but when it comes to some of their AI products that are starting to do well, they've gained momentum. But when you look at somebody like a Salesforce, when you have a revenue base of $41 billion, it takes a lot to move the needle. So even though these products are very small and you know, growing triple digits, but they are not, you know, right there in order to take down what is happening on the core business which is a declining seat growth or the, the, the less addition of seats because of macro IT spending and, and that is probably going to be the story at least for the near term.
- [21:23]
Norma Linda
So it seems as though analysts are still generally positive on, in terms of adoption trends when we think about this company though.
- [21:31]
Baillie Gifford Narrator
Yes, absolutely. And that's you know, one of the things we saw really good numbers on both the, the data cloud side of it and also the agent force. But at the stock reaction and finally people have, when you really scrape the numbers and see that their commercial remaining performance obligations, which is the order book for next quarter, which they expect to grow about 13% in constant currency. 4 Percentage of point of that is informatica. So when you strip that out you will see that that particular backlog number goes from 11% this quarter to let's say 9 or 10%. So the core is still declining or the code is still under pressure.
- [22:07]
Paul Sweeney
So the stock down 27% year to date. Anroc does that, does that reflect the fact that it's just it budgets are tight or that AI poses existential threat to certain providers like a Salesforce.
- [22:22]
Baillie Gifford Narrator
I don't think that's the case because it's going to be very difficult for an established Fortune 2000 company to get rid of their core system of record, whether that's an HR sales customer service and just deploy a model in there at least we are not there yet. Maybe five years down the road we may see a scenario like this. But that's not really why Salesforce is struggling. It is basically they are the largest provider of sales automation tool and customer service tool to Fortune 2000 companies. It's those companies that are not hiring at that same rate that they used to because outside of AI and AI infrastructure, everything else is still weak at this point.
- [23:00]
Paul Sweeney
Our thanks to Anuragran, a Bloomberg intelligence technology analyst.
- [23:03]
Norma Linda
We moved to some news in the aerospace sector this week.
- [23:06]
Paul Sweeney
Shares of the aerospace company Airbus plunged after revealed a quality issue on some fuselage panels of its A320 airliner. This came just days after Airbus flagged a software glitch on about 6,000 jets.
- [23:18]
Norma Linda
As a result, Airbus must inspect hundreds of its best selling A320 jets for potential quality flaws in the aircraft's body. And this could risk slowing down delivery of newly produced jets.
- [23:27]
Paul Sweeney
For more on this, guest host Alex Semenova and I were joined by George Ferguson, Bloomberg Intelligence senior aerospace, defense and airlines analyst. We first asked George to talk to us about why it seems Airbus has been able to fly under the radar until just recently.
- [23:41]
George Ferguson
I think they've also had their challenges in the supply chain along the way. Just Boeing's challenges were so much greater that they stole the spotlight, if you will. But I mean look, the aerospace supply chain is a bit thin, right? It doesn't have the same redundancy is like you'd get in an auto supply chain. And so when you just have some little problem at one of your suppliers, you know, it can really interrupt your ability to deliver airplanes. And I think right now what you're seeing is that Airbus already has a really tall order to meet the something like 820 airplane guidance or delivery guidance they've got for this year. We don't think they're going to make it. I think they need need 70 plus a 320s in the last two months of the year. November, December. We think that's pretty hard given they've kind of delivered 55 ish most months of in the last couple, you know, sort of months. And so I think a quality problem here probably really places in doubt their ability to make that guidance and that's going to hurt their profitability for the year.
- [24:48]
Paul Sweeney
George, you mentioned that really ambitious target for 820 aircraft deliveries by the end of this year. How disappointed could investors get if it fails to meet that target on top of the headwinds that this company is already facing?
- [25:02]
George Ferguson
Well, I mean, so I think you're starting to see the disappointment here. Again, I'd be surprised if most investors weren't already concerned that the target was too high. I think Airbus has really put out a bunch of very ambitious build rate targets. I think our latest number in a 320 is that we would be going to something like 75amonth. And that's consistently throughout the entire year, right by the end of 2026, which to us just seems far too high. And I feel like Airbus keeps trying to lead the supplier base by pushing these higher numbers out and trying to pull the supplier base along and then over time lowers some of these expectations. So look, I think anything they miss now isn't going away. It gets pushed into the next year and the next year. And again, I think the bigger challenge here is investors have to ask themselves, are a lot of these Airbus targets for delivery rates, are they just too ambitious and don't we have to sort of knock them down? We build our consensus for what we think the company is going to be able to do.
- [26:07]
Paul Sweeney
Because George, I mean a number like 70 seems really high to me because when we talk about Boeing, it's like, gee, I hope they can get the 40, maybe to 50. Is that, does Boeing typically run that far behind on a production schedule than a Airbus?
- [26:23]
George Ferguson
So I would say that if you would consider normal, the end of the last decade when both were building and Boeing wasn't having the problems with mkas, airbus was up in the, in the higher 60s and boeing was in the higher 50s. And so we have traditionally seen Airbus be able to put out more airplanes than Boeing. I think their supply base may be a little bit more robust and I think they have sort of multiple final assembly areas around, around the world. I think those are some of the reasons, reasons why Airbus can just has the infrastructure to put out more airplanes, more narrow body airplanes per month.
- [27:02]
Paul Sweeney
Our thanks to George Ferguson, Bloomberg Intelligence senior aerospace, defense and airlines analyst.
- [27:06]
Norma Linda
Coming up, we'll take a look at US data center power demand and just how quickly the sector is expanding.
- [27:11]
Paul Sweeney
You're listening to Bloomberg Intelligence on Bloomberg Radio providing in depth research and data on 2000 companies and 130 industries.
- [27:17]
Norma Linda
You can access Bloomberg Intelligence via bigo on the terminal. I'm Norma Linda.
- [27:21]
Paul Sweeney
And I'm Paul. Paul Sweeney and this is Bloomberg.
- [27:28]
Norma Linda
Did you know Tide has been upgraded to provide an even better clean in cold water? Tide is specifically designed to fight any.
- [27:35]
Paul Sweeney
Stain you throw at it, even in cold butter. Yep.
- [27:39]
Helen Koh
Chocolate ice cream.
- [27:40]
Paul Sweeney
Sure thing.
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Norma Linda
Barbecue sauce. Tide's Got you covered.
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Paul Sweeney
You don't need to use warm water. Additionally, tide pods let you confidently fight.
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Norma Linda
Tough stains with new coldzyme technology.
- [27:52]
Paul Sweeney
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- [29:29]
Mary Ross Gilbert
This.
- [29:29]
Paul Sweeney
Is Bloomberg Intelligence with Scarlet Fu and Paul Sweeney on Bloomberg Radio Radio I'm Paul Sweeney.
- [29:37]
Norma Linda
And I'm Norma Linda filling in for Scarlet Fu.
- [29:39]
Paul Sweeney
We move next to the real estate space Nor night we're joined by Jeff Langbaum. This week, Bloomberg Intelligence senior U.S. rEIT.
- [29:45]
Norma Linda
Analyst Jeff discussed research on real estate investment trusts, or REITs, as his outlook for them. In 2026.
- [29:51]
Paul Sweeney
We first asked, we first asked Jeff how REITs have been performing this year.
- [29:55]
Verizon Business Advertiser
They haven't performed well in 2025, that's for sure. I mean basically, you know, kind of flat to slightly down on a, on a, on a aggregate basis but relative to the S and P underperformed significantly and that's going on three years now. Obviously, you know, you had the rising rate cycle that was pretty damaging. You had some difficulties, especially in the office sector. But as we sit here looking ahead to 2026, the fundamental backdrop looks okay. And especially if you get rates falling, if that 10 year yield starts to drop. And you know that has cascading effects, effects on valuations, it has cascading effects on, on cost of capital and really would be a boost for the sector going forward.
- [30:40]
Norma Linda
Where are you seeing to be some bright spots right now in the REIT sector, Jeff?
- [30:46]
Verizon Business Advertiser
Senior housing. That is the way that I didn't look at you, I'm looking at you, Paul. The, I mean that's, that's the clear winner right now. The fundamental backdrop driven by demographics is huge and growing. There's an incredible coming need for housing for the aging baby boomers and you know, there's not nothing being built. So the supply demand dynamics in that space are incredible. And you know, there's a couple of REITs that play in that space. Welltower is the biggest one. They're growing like crazy and the stock is reflecting it.
- [31:30]
Paul Sweeney
All right, so Jeff, what's the, aside from folks, you know, old folks housing, which is, I'm going to say, because you know, I'm there, I'm there, I'm in the demo, what else is working here? What is, is it, is there a replay on all this AI data center stuff?
- [31:48]
Verizon Business Advertiser
So, you know, there's, there's a couple of different ways to answer that. The direct impact of AI on, on REITs is the two big data center REITs, Equinix and Digital Realty, and they are playing in that space right now. It's kind of unclear exactly where they fit. There should be a significant amount of demand for their space, especially for the stuff that they're looking to build, but they have to raise a ton of capital in order to fund that, that, that development, you know, and you see capex numbers coming out from all the hyperscalers that are astronomical. And you know, REITs, you know, investors in REITs don't necessarily love the concept of raising a ton of money to deploy it in kind of risky assets that you need to then go lease up. So the demand should clearly be there. But it's going to be interesting to see how it plays out over the next couple of years as that demand filters through. The other issue with AI though is there is a kind of a concern that AI is going to impact demand for office space. And you know, as companies get more efficient, they need less headcount, they need less office space. Haven't really started to see that play out yet. But it's definitely a sentiment that is out there and is impacting the stocks to a degree. You know, just, just as we got past the whole work from home thing and, and concern over whether offices were ever going to have people back in them, now we have concern that the robots are going to replace the people.
- [33:14]
Norma Linda
So of course we do have the incoming New York City mayor saying that he wants to freeze rents on rent stabilized apartments in New York City. What's the latest in terms of the apartment rate space right now?
- [33:25]
Verizon Business Advertiser
Yeah, I mean, it's unclear exactly what he's going to be able to do on, on, you know, rent stabilization, freezing, capping rents. But the REITs that own, own residential in New York City, names like Avalon Bay Equity Residential, they own stuff that's not subject to those caps. It's largely newer market rate stuff. And so they're not going to be directly impacted. And so, you know, at the end of the day, if there is less news, the net result of, of caps like that is less new stuff get less stuff getting renovated, less stuff getting built. And that just, you know, keeps supply down. And as long as demand stays elevated, then that should flow through to the ability to keep buildings full and keep rents rising to a degree. So I think that in the, in the near term, you know, that that should be, it should be fine for names like, like those that play in the, in the city, you know, it's those that own the kind of the lower tier space that maybe are a little bit more, more exposed.
- [34:25]
Norma Linda
Our thanks to Jeff Langbaum, Bloomberg Intelligence Senior US RE Analyst on Bloomberg Intelligence.
- [34:30]
Paul Sweeney
We often look at research from Bloomberg nef, previously known as New Energy Finance.
- [34:34]
Norma Linda
They have a team at Bloomberg that tracks and analyzes the energy transition from commodities to power, transport, industries, buildings and agriculture sectors. This week we took a look at US Data center power demand and just how quickly that sector is expanding.
- [34:47]
Paul Sweeney
For more on this, guest host Alex Semenova and I were joined by Helen Koh, BNEF head of US Power Markets Research. We first asked Helen if we have the power necessary to power all the data centers we keep hearing about.
- [35:00]
Helen Koh
What we're seeing is quite an unprecedented acceleration of data center demand driven largely by AI and at bnef, what we see and expect is that data center power demand is going to reach roughly 106 gigawatts by 2035.
- [35:18]
Paul Sweeney
Where are we today?
- [35:18]
Helen Koh
Just for example, today we are definitely a lot lower in capacity, so roughly half of that right now. What we also know is that that 106 gigawatts by 2035. That's 36% higher than our outlook just six months ago. So we've increased that forecast quite a lot since these last six months. What we've seen is a flood of early stage projects getting announced which results in a much larger pipeline. And therefore our forecast has also increased quite a to power these data centers. What we know is that there's a lot of new builds of power supply coming online to try to reach this overall power demand.
- [36:02]
Paul Sweeney
Helen, we're obviously in the early innings of this build out of data centers.
- [36:06]
Helen Koh
What signs are you seeing already of.
- [36:08]
Paul Sweeney
Any kind of strains on resources, on electricity?
- [36:12]
Helen Koh
What we know is there are certain regions that are hitting a tipping point in terms of actually being able to power this overall supply. What we know is that Northern Virginia is still the largest kind of market for data center demand based on our forecast. And we are seeing a lot of growing concern in that PJM region. What we project in PJM is that data center capacity is going to hit roughly 31 gigawatts by 2030. And what we do is when we adjust that overall, kind of like what power demand looks like in PJM relative to supply, what we expect is there might be a 9.5 gigawatt shortfall of overall power supply by the end of the decade. If we assume that all of this data center demand is going to come online.
- [37:02]
Paul Sweeney
If all this data center demand comes online, obviously the need for electricity is just or power is just extraordinary. I'm a big fan of nuclear, a small mobile reactor, modular reactor here. There's SMR type things. Talk to us about that. Is that, is that a viable technology solution at some point.
- [37:19]
Helen Koh
So we know that there has been a lot of company announcements around small modular nuclear as well as just nuclear in general. And there has been several different new power purchase agreements around nuclear by major hyperscale companies as well. What we see within BNEF is that in the near term what is likely going to power data center demand is actually going to be gas. And nuclear is a much more longer kind of like long term play in terms of how you power data center demand. But what we expect is that the major ramp up in overall demand is coming over these next three years and gas is likely what's going to meet that overall demand.
- [38:01]
Paul Sweeney
What kind of measures are being taken to limit any kind of potential power.
- [38:08]
Lily Meyer
Outages from this build out?
- [38:10]
Helen Koh
Well, we do see that there's been a lot of different regulations that are evolving real time around data center demand. What we know is that Georgia adopted New rules pushing grid connection costs onto large users like industrial users. Ohio now requires data centers to pay for at least 85% of the energy they request each month, even if it is underutilized. And so policies are kind of being put in place to kind of navigate rising and growing demand.
- [38:41]
Paul Sweeney
Are we building these data centers too quickly? Is there a risk for an overbuild? It just feels like it's too much too fast. But all the projections say we're going to need all that compute.
- [38:53]
Helen Koh
It's a really great question and something as an analyst I think about quite a bit at bnef. What we've done is we've benchmarked our data center forecast relative to a whole bunch of other third party forecasts out there. And what we see is that our forecast is relatively conservative compared to other third parties because our data center forecast does include and analyze some of the additional power constraints as well as like project development timelines of data center development. And what we found is that it roughly takes seven years to develop a data center. And even with that, we're seeing quite a bit of new capacity capacity come online that is a result of just fundamentals around AI demand. Whether that is company announcements of data centers as well as just like the underlying growth and trend around AI.
- [39:49]
Paul Sweeney
I can't help but wonder how are.
- [39:51]
Helen Koh
Data centers addressing sustainability?
- [39:54]
Paul Sweeney
Are they using clean energy? What measures are they taking?
- [39:58]
Helen Koh
A lot of these hyperscalers that are building out data centers do have sustainability goals and clean energy commitments. However, like within this data center's outlook, what we mostly focused on is just what is the additional capacity and activity around data center demand within the United States. And we also did a small analysis on specific markets that are likely going to have constraints in the market around power supply and within ERCOT and pjm, which is our two largest power market regions that that expects high data center demand growth. What we're seeing is that the likelihood of what's going to meet that supply is going to be gas. And so we don't specifically look at sustainability commitments, but what we know is that a lot of what's supplying data centers will be gas in the near term.
- [40:54]
Norma Linda
Our thanks to Helen Coe, BNEF Head of US Power Markets Research.
- [40:58]
Paul Sweeney
That's this week's edition of Bloomberg Intelligence on Bloomberg Radio providing in depth research and data on 2,000 companies and 130 industries.
- [41:05]
Norma Linda
And remember, you can access Bloomberg Intelligence via bigo on the terminal. I'm Norma Linda.
- [41:09]
Paul Sweeney
And I'm Paul Sweeney. Stay with us. Today's top stories and global business headlines are coming up right now.
- [41:17]
If a Lenovo computer for your business is on your holiday list, don't shop around. Just go directly to the source lenovo.com you'll find exclusive deals on the PCs you want for your business, like the ThinkPad X914, Aura Edition and Yoga 7i 2in1. So avoid all that shopping chaos and price comparing and just go directly to the source Lenovo.com where PCs are up to 50% off. That's Lenovo.com Lenovo Lenovo.
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