• AI has touched off a data center development boom that will be largely powered by natural gas.
• Fearful of becoming big polluters, big tech has begun to explore the use of carbon capture.
• The technique of capturing and burying carbon emissions is still unproven and nascent.

Big tech companies like Amazon, Meta, Microsoft, and Google have promised to use renewable or low-carbon energy sources like solar, wind, and nuclear to power a record surge of data center development across the country.

Yet much of the around-the-clock electricity needed for the energy-hungry facilities has been — and will likely continue to be — generated by fossil fuels, including a fleet of new and existing natural gas plants.

To try to meet their environmental goals, these tech companies are considering the emerging business of capturing carbon at an industrial scale before it is released into the atmosphere and funneling it permanently underground.

Exxon Mobil, which recently announced an initiative to power data centers with plants whose carbon emissions it will sequester, has estimated that data centers will account for 20% of the carbon capture and storage market by 2050.

In December, Meta became the first big name in the industry to embrace the tech when the large southern utility Entergy announced that the company had agreed to fund a large carbon capture and storage project in Louisiana. The deal will help Meta offset emissions from a $10 billion data center campus it is planning in the state that will be powered by three new natural gas-fired plants.

Last month, Chevron announced that it would build natural gas plants using carbon capture, citing the soaring demand from data center customers.

The concept of piping carbon emissions underground is not new. Oil and gas extraction companies have pumped compressed, liquid carbon dioxide into wells for decades to help force out more fossil fuels. Using the technique at a scale large enough to begin significantly mitigating climate warming emissions, however, has been considered both enormously costly and complex.

A data center boom, generated by the race to develop and commercialize artificial intelligence, has suddenly brightened the outlook. Leading data center builders include the deepest-pocketed companies in the world. Some of them appear willing to pay the kind of hefty premiums for emission-free electricity that would justify the costs of capture and storage.

"We had an 'aha' moment that it's actually Amazon, Microsoft, Meta that are very interested in these power plants," said Jerry Ashcroft, the CEO of Crescent Midstream, which was selected to design and build the carbon capture system for the Louisiana plant that Meta will help pay for. The project, at the 1-GW Lake Charles power station, will cost around $1 billion to build, Ashcroft said, who noted that a final cost estimate is underway.

Crescent Midstream, meanwhile, is bidding to develop another utility-scale carbon capture system for a new gas plant that Entergy plans to build in Greenville, Mississippi, Ashcroft said. That station will help power a $10 billion data center campus nearby that Amazon announced in early 2024.

The investment firm Carlyle Group acquired a majority stake in Crescent Midstream, a pipeline company, in 2021, and expanded it into the business of capturing, transporting, and sequestering carbon.

Ashcroft says that he anticipates Entergy will pursue at least 10 carbon capture projects across its portfolio in the near term. The Houston-based executive, who has been in the fossil fuel industry for years, said he has been astounded carbon capture's rapid recent advance.

"Going from 2020 to 2025, where now you're actually doing a project, yeah, it's pretty hard to imagine," he said.

Soaring energy demands and few carbon-free solutions

Behind the interest in carbon capture lies an increasingly difficult array of choices in the nation's constrained energy market.

Some forecasts estimate that more than 90 gigawatts of data center demand could be added to the grid nationally by the end of the decade—the equivalent of about nine New York City-size blocks of power.

Data center operators have sought out renewable sources of energy to curtail the enormous potential carbon footprint of all that capacity. Still, green options, including solar and wind, aren't considered reliable or intense enough to readily match the enormous, steady strains that the data facilities place on the grid day and night.

Adding new nuclear power, meanwhile, is even more costly than capture and storage and fraught with labyrinthine regulatory hurdles.

To meet the growing shortage of power, utilities have turned to an old asset in their portfolios: natural gas.

Natural-gas-fired generation capacity in the US has grown to 79 gigawatts, an increase of 19% since 2014, according to the US Energy Information Administration. Even as more solar and wind is connected to the grid, surging energy demand from data centers is expected to drive more natural gas use. In Virginia, Georgia, North Carolina, and South Carolina, for instance, utilities are planning to build a combined total of 20 GW of new natural gas generation, primarily as a result of forecast data center demand.

"If the business model is we have to get the most power, quickest to stay out in front of the AI race as it were, gas must play a role in that," said Erik Belz, the president and chief operating officer of the investment firm Engine No. 1.

Engine No. 1 is partnering with Chevron in its initiative to develop natural gas plants with a total capacity of about 4 GW for energy customers constrained by the power shortage, including data centers. The group also includes the energy equipment manufacturer GE Vernova, which is producing the turbines for the power plants. The venture plans to couple the facilities it builds with renewable energy sources and carbon capture to reduce their emissions. It expects to begin delivering the projects in 2027.

The group is close to announcing its first deal with a data center customer, and that project may seek to harness carbon capture, Belz said.

"This one has the capability to do it," he said.

A web of technical hurdles

Carbon capture and storage come with myriad complications and uncertainties.

About 6% of the exhaust fumes from a modern natural gas plant are composed of carbon dioxide, according to Ashcroft, the Crescent Midstream CEO. Huge absorbers filter that gas out before compressors liquify it. Pipelines transport the carbon to wells where it is pumped thousands of feet below the surface.

The Lake Charles power station, where Crescent Midstream is planning its initial capture and storage project, is located on Louisiana's Gulf Coast, the seat of America's petroleum industry where there is an abundant network of pipelines and wells.

Ashcroft said the company would shove the gas as much as 10,000 feet below ground into saline beds beneath the gulf that lock in petroleum deposits and liquefied gas.

That geology and infrastructure don't exist widely across the US. It's not clear, for instance, whether carbon emissions could be as readily sequestered in northern Virginia, the country's largest data center market. Researchers at Virginia Tech are currently conducting a feasibility study on industrial carbon capture in the region, funded by the US Department of Fossil Energy and Carbon Management.

There are also questions whether the gas, once funneled below the earth will reliably remain there forever or if it could eventually seep out into the atmosphere, negating the whole enterprise and causing environmental harm. A large leak of methane gas from a storage well in California in 2015 is considered the worst greenhouse gas disaster in US history.

There has never been a carbon capture and storage unit operating at a gas-fired power plant in North America at the size that Big Tech would need to capture emissions from an AI data center, said Dennis Wamsted, energy analyst at the Institute for Energy Economics and Financial Analysis, a nonprofit think tank that advocates for clean energy. "That doesn't mean it can't be done," Wamstead noted, "but I would say it's going to be significantly more expensive than anything you've seen in a press release."

Difficult economics

Only about 51 million metric tons of carbon were captured in 2024 out of a total global emissions output of 40 billion metric tons — roughly a tenth of a percentage point, according to Pavel Molchanov, an analyst at Raymond James.

"Carbon capture was a tiny niche," Molchanov said. "Sequestration will need to be available in a wider range of geographies, because guess what, not everybody lives next door to an oil field."

Molchanov said that capture and storage could be expanded by adapting more geologies in areas that might not otherwise accommodate sequestration. Of course, that might also increase costs.

Capture and storage already faces difficult economics.

The parties who sequester the carbon can receive an $85 federal tax credit for every metric ton of carbon captured and stored, which can be monetized in the corporate tax credit market to produce revenue. Ashcroft said that questions have persisted in the capture and storage business whether the credit, which was roughly doubled per metric ton by the Biden administration, was sufficient to justify the steep costs.

"Many people say you need $120 to make this work," he said.

Ashcroft said he had an epiphany when he saw Microsoft's announcement last September that it had reached a deal to revive a decommissioned reactor at the Three Mile Island nuclear station in Pennsylvania to provide it with carbon-free power for its data center operations. Ashcroft said that the hefty electricity premiums Microsoft agreed to as part of that deal were a clear signal that data center operators were "willing to pay more than market for" decarbonized energy, including capture and storage.

If the tax credits alone aren't enough to pay for the Lake Charles sequestration project, the deal will rely on Meta, which has agreed to pay a rider, up to a fixed amount, on its utility bill with Entergy in Louisiana to offset the costs. A spokeswoman for Meta declined to comment.

Molchanov agrees that capture and storage is poised to grow. He projects that the amount of carbon sequestered annually will quadruple by 2030, in part because of data center demand for it.

In its earnings call in late January, Exxon Mobil executives said that their carbon capture and storage operations and a related business producing low-emissions hydrogen with capture and storage technology could generate $2 billion of annual revenue by the end of the decade.

"We've got pretty aggressive growth plans in this space,"Exxon Mobil's CEO Darren Woods said on the call, according to a transcript by The Motley Fool. "But again, all dependent upon customer interest and customers' willingness to engage in long-term contracts."

Betty Jiang, an analyst at Barclays who covers Exxon Mobil said that she believed the company would only trumpet the business of capture and storage if it had received interest from customers.

"We'll stay tuned on exactly what these investments look like," Jiang said. "But I don't think they will be raising their capital in these areas and saying what they're saying about the market opportunities if they are not having the conversation in the background to really give them the confidence that it is indeed an area of growth for Exxon."

• President Trump's move to cut workers and spending could hurt the office market in Washington, DC.
• The capital had been recovering from the pandemic and a decade-long government space contraction.
• That rebound is in question as federal agencies reduce workers and spending cuts hurt nonprofits.

The Washington, DC, office market had been showing signs of recovery from the one-two punch of a decade-long contraction by the federal government and the aftershocks of the pandemic.

Now, the Trump administration's plans to cull the federal workforce and slash government spending have cast uncertainty over that rebound.

The orders could further slim down a federal office portfolio that has already been reduced by millions of square feet in recent years, sapping a major area of demand for the region's office market.

The administration's efforts to halt hundreds of billions of dollars of federal spending, and dismantle the US Agency for International Development, meanwhile, is also likely to have far reaching consequences. The actions, which have and could continue to face legal challenges, would take away or sharply diminish funding for a universe of programs, non-profit groups, and government contractors that, in turn, could impact their ability to lease space.

"It's going to have a huge impact on the market and not a good one, it's just going to be ugly," said John Boland, a Washington, DC-based vice chairman at the real estate services firm Newmark. "I'm glad I'm 67 years old and my career is coming to an end."

Boland said that he personally supported the Trump administration's cost cutting, but also acknowledged the way it's "really spooking people in the marketplace."

He said that nonprofit groups have told him they may need "a third of the space or maybe nothing at all" if they lose government support.

The Washington, DC, office market is coming off of an upswing. Eight million square feet of space was leased in 2024, the highest total in three years, according to the real estate services and brokerage company CBRE. Vacancy declined slightly, to 22.5% in the fourth quarter.

Government leasing was the largest driver of activity, and nonprofits were the third largest behind law firms, according to CBRE.

A federal downsizing could now accelerate

For decades, the federal government grew steadily in the capital region, topping at roughly 57.5 million square feet in 2011, according to Cushman & Wakefield. Since then, efforts under both Republican and Democratic administrations have been ongoing for years to reduce that space.

"What we have seen over the last 15 years is a shedding of real estate on the part of the federal government," said Darian LeBlanc, an executive vice chairman at Cushman & Wakefield who manages its government services group. LeBlanc said that the federal portfolio is now around 43.5 million square feet in size in the DC region — a 24% reduction from the peak.

Many federal workers embraced remote and hybrid work during the pandemic and have continued to work remotely. LeBlanc said that currently, an average of about only 20% of workers were in the office on any given day across most federal agencies. The new administration has roiled federal office employees by ordering them to return to the office full time while offering those who resign payment through September.

"You are most welcome to stay at home and relax or to travel to your dream destination," a frequently asked questions page on the US Office of Personnel Management stated, describing the deferred resignation offer.

President Donald Trump has said he will seek to tear up labor agreements recently struck between labor unions that represent the federal workforce and the Biden administration. Some of those unions have negotiated employment agreements that permit employees to work remotely.

Unions have reacted angrily to the Trump administration's efforts, including the paid resignation offer.

"This maneuver is intended to panic civil servants into accepting what seems like a sweet deal but is probably a scam," Randy Erwin, the president of the National Federation of Federal Employees, a union that represents 110,000 government workers, said in a statement.

Nonprofits could cut space amid cuts

However sweeping Trump's efforts to change the federal government's workforce and office portfolio may be, experts say the impacts will take years to be felt.

"It's important to keep in mind the federal government never does anything rapidly," LeBlanc said. "They never have, and I don't think it's reasonable to think that this is something they will act immediately upon."

Nonprofits, however, which depend heavily on federal financial support could be more quickly affected.

There are more than 29,000 nonprofits that spend $100,000 a year or more on their office occupancy and receive government assistance, according to Open Impact Real Estate, a real estate services and advisory firm that specializes in nonprofit work. A third of them rely on federal dollars for the majority of their budgets, the company said.

The drastic cuts being pursued by the new administration "would be catastrophic" to the nonprofit world, Stephen Powers, a cofounder of Open Impact, said. He noted that the impact would be disproportionately felt in Washington, DC, and New York City, where the nonprofit sector is clustered.

"Clients of mine are not signing leases," Powers said.

Nonprofit groups occupy about 7% of the total office space in the Washington, DC, metropolitan region, and 12% in the city itself.

Some landlords remain optimistic

Not everyone is as gloomy.

Hilary Goldfarb, a senior managing director at the development company Rockefeller Group who leads its Washington, DC, operations, pointed to a flurry of law firm and lobbying leasing in the city that she believes will be robust.

Law firms, which often have in-house lobbying operations in the region, accounted for 20% of the office space taken in the city last year, according to CBRE, making it the second-biggest tenant group by leasing activity level.

Rockefeller Group is in the process of building a roughly 400,000-square-foot office building at 600 Fifth St., with a completion scheduled for the summer of 2026. It preleased about half of the project's space to the law firm Crowell & Moring in 2023 and is marketing the remainder.

"My view is one of optimism, not uncertainty or lack of clarity," Goldfarb said.

And there are some who feel that the government's desire for efficiency will drive federal agencies from antiquated state-owned facilities into privately owned, higher-quality office buildings, giving lift to the overall market.

The largest lease in the capital in 2024, for instance, was a roughly 280,000-square-foot deal by the United States Agency for Global Media, a federal agency that oversees the state-owned broadcasting network Voice of America and provides funding for others, such as Radio Free Europe.

The agency took its space at 1875 Pennsylvania Ave. NW, an office property that was built by developer EastBanc in 2006. The new location allowed USAGM to downsize a previous office in a government-owned space that had spanned roughly 1 million square feet, according to Anthony Lanier, the president and CEO of EastBanc.

"Get people back into the office, improve the quality, dump bad space," Lanier said. "Don't sit around in obsolete buildings."

Asked if he could have gotten the same deal done with the Trump administration, Lanier said: "all I can say is that this transaction would fit the tenor that we are seeing" from the new administration.

• Douglas Elliman is one of the biggest names in real estate, but it has been touched by a scandal.
• Elliman's new CEO, Michael Liebowitz, explained how he'd improve the fortunes of the brokerage.
• An attorney for Howard Lorber, Elliman's former CEO, defended Lorber's tenure.

Michael Liebowitz, the new CEO of the residential brokerage firm Douglas Elliman, describes his relationship with Howard Lorber, the previous chief executive, as close.

Yet in a recent interview in his corner office overlooking Madison Avenue, Liebowitz sought to put some distance between himself and his predecessor, a longtime power player in the luxury brokerage business who left the firm abruptly in October.

"I'm very much an operator, which is a much different thing from Howard," Liebowitz said. "Howard was not an operational person at all."

Liebowitz said Lorber was "more of a front guy," suggesting he was less focused on Douglas Elliman's bottom line than pulling levers in his network of high-net-worth home sellers, buyers, and developers to help arrange deals and win business for the firm.

Liebowitz suggested that he was more interested in minding the company's financial performance.

"I watch the overhead, I watch the expenses," Liebowitz said. "I watch where we're spending money on. I look at return on investment."

Less than three months into his tenure, Liebowitz — a brokerage outsider whose background is in insurance sales — is familiarizing himself with one of the highest-profile players in luxury real estate while trying to steady the company after a moment of tumult.

The firm is a top seller of upscale homes in major markets like New York City and South Florida. Leading brokers at the firm, including Eleonora Srugo and Fredrik Eklund, have starred in popular real-estate-themed reality TV shows. The firm has also been involved in some of the most lucrative home sales of all time, including the hedge fund billionaire Ken Griffin's purchase of a roughly $240 million Manhattan apartment in 2019.

More recently, it has been shaken by a raft of shocking charges against two former star brokers.

Lorber, who became the CEO in 2003, stepped down from his leadership role following an internal investigation in the aftermath of accusations of rape, drugging, and sexual assault against Tal and Oren Alexander, brothers who were top agents at Douglas Elliman for more than a decade.

Bloomberg News reported in November that Lorber disclosed during the investigation that he had consensual relationships with two brokers at the firm.

Revelations of Lorber's conduct and his close relationship with the Alexanders, who have since been arrested on federal criminal sex trafficking charges, bruised Douglas Elliman's reputation.

Two people who worked for Douglas Elliman during Lorber's tenure told Business Insider that there appeared to be a culture where professional boundaries and accountability were blurry. The Alexander brothers are fighting the charges and have denied the accusations against them, which have been brought forward by dozens of women, including some former colleagues at Douglas Elliman.

An attorney for Lorber disputed that characterization of Douglas Elliman's workplace during Lorber's tenure.

"Any suggestion that Mr. Lorber is responsible for a culture that promoted or enabled the kind of sociopathic acts presently alleged against the Alexander brothers is false," the attorney, Marc Kasowitz, said in a statement. Kasowitz also denied that Lorber's relationship with the Alexanders was closer than the connections he had with any other top broker at the firm.

"He did not have a close relationship with them, and his attendance at parties with them or at events they hosted does not evidence such a relationship," he said.

Kasowitz also challenged Liebowitz's description of Lorber's leadership.

"Mr. Liebowitz's suggestion that Mr. Lorber was not a good business manager is contradicted by Douglas Elliman's track record, as reflected in its public filings, of profitable growth over many years with Mr. Lorber as its chairman and CEO," Kasowitz wrote. "Under his leadership, the company became one of the largest residential brokerage companies in the New York metropolitan area, it expanded into new markets across the country, and it achieved remarkable growth and revenues."

After going public three years ago, Douglas Elliman posted annual operating losses in 2022 and 2023 amid weakness in the residential market. In the third quarter of 2024, its most recent financial report, it reported a net loss of almost $27.5 million. The company's stock price has slid by 84% since its public offering. Kasowitz noted that the company's performance had been challenged by higher interest rates and a nationwide dip in residential sales that affected rivals as well.

Lorber attracted criticism from investors over lucrative bonuses and other perks, including payments for a private jet, that seemed out of step with the company's declining fortunes.

The new CEO promised to get the company back on track by "getting our expense structure to where we think it should be" through cost cutting, while also building other service lines to diversify and expand its revenue.

"This brand, look at what was thrown at it," Liebowitz said. "We're still doing new business every single day."

From Staten Island to the top of luxury real estate

Liebowitz grew up in Staten Island and began his career operating property- and casualty-insurance businesses. He was appointed to the Douglas Elliman board after it went public at the end of 2021.

Liebowitz's ascension to CEO has been well received by some investors.

Brad Tirpak, an Aspen-based activist shareholder in Douglas Elliman who led a public campaign last summer that criticized Lorber's compensation and spending, said he was confident that Liebowitz would turn the company around.

He said that he texted Liebowitz shortly after his appointment and that "he responded in 15 minutes" and "offered to have a phone call that night."

Tirpak noted that the new boss purchased about $1.8 million worth of Douglas Elliman stock in November, which a public filing disclosed was sold to him by Lorber.

"He wrote a check — he put his money, his reputation on the line," Tirpak said. "Look, he's going to make some mistakes, and I don't know any CEOs that don't. But I think he's going to look at it and he's going to be trying to build shareholder value."

While Lorber was a beloved figure inside the firm, several brokers interviewed by BI expressed optimism about Liebowitz.

"Howard was very much a hands-on chairman, which I think was really nice," Frances Katzen, a successful New York broker at Douglas Elliman, said.

Liebowitz is "someone who's very smart, who is also very strategic — setting up systems and leadership changes that I think will make a meaningful difference," Katzen added.

Liebowitz said he had spent much of his time so far visiting Douglas Elliman offices across the country.

"I have visited almost the whole company," he said. "I've met thousands of agents."

Fast changes in the C-suite

Liebowitz said he wanted to upend Douglas Elliman's top-down management style and was creating a 15-person "agent board of directors" that would regularly confer with him and management and "be involved in major decision-making on a granular basis within the company."

"We want the agents bought into the things that we're doing," Liebowitz said. "The agents of this company are going to be assisting and helping me run this business."

The new CEO is trying to create broker buy-in at a precarious moment. Some prominent agents, including Tracy Tutor, a top broker who accused Oren Alexander of drugging her at a dinner, have recently exited. An attorney for Oren Alexander didn't respond to a request for a comment.

"I wished her well," Liebowitz said of Tutor's departure. "If I saw Tracy in a restaurant, I'd walk over and say hello."

"I wish Michael the best," Tutor told BI. "Other than that, I have no comment."

Liebowitz insisted that the firm's broker "retention has been great" and that developers were eager to hire the firm to help it sell new projects — a key area of its business.

Already the new CEO has made quick changes in the company's C-suite. In October, Scott Durkin, an executive who oversaw the company's brokerage business, was fired. The following month, David Ballard, its chief technology officer, left. Rumors of dismissals to come have swirled as Liebowitz puts his stamp on the company.

"Listen, the changes that we've made have been positive changes," Liebowitz said.

• Michael Shvo and investors bought the Raleigh Hotel in 2019 as part of a luxury condo development plan.
• Now, the sales firm Newmark is pitching the development.
• Shvo says the effort is to buy out an investor in the luxury project.

The developer Michael Shvo has built a $3 billion collection of trophy real estate in a wager that luxury assets would outperform.

His most ambitious ground-up development project to date, a condo and hotel planned for Miami Beach, is now getting underway, Shvo told Business Insider.

"In the last three months, we've put a hundred million dollars of new money into the deal," he said.

At the oceanfront site, called the Raleigh, Shvo plans a luxury hotel, an exclusive beach club, and a condo tower designed by the star architect Peter Marino.

One of the investors in the development, however, is seeking to pull out, Shvo said, declining to identify that investor.

The commercial real-estate sales and services firm Newmark has been hired to shop the investor's stake. In recent weeks, Newmark has begun to distribute marketing materials to prospective buyers that describe details of the planned development.

Two Miami-based developers who were familiar with the offering said they believed it was a signal that the entire project could come up for sale.

Shvo denied that.

"There's no sale of the Raleigh," he said. "It's a recapitalization of one of the equity partners."

Shvo declined to say how large the partner's ownership interest was or how much it was seeking to recoup in the potential sale.

He said that the project was on strong financial footing and was moving forward.

"We just literally just started major construction on the site," Shvo said.

Newmark was previously hired by Shvo in September to find a buyer for a block of 44 unsold apartments at a recently finished Mandarin Oriental branded condo building that Shvo erected on Wilshire Boulevard in Beverly Hills after a tepid response from condo buyers.

A spokeswoman for Newmark declined to comment.

An appetite for glitzy trophy properties

Shvo, a 52-year-old former luxury residential broker turned developer, made a splash in recent years in the commercial real estate business by acquiring billions of dollars of pricey property assets across the country. The purchases included the Transamerica Pyramid in San Francisco and 711 Fifth Avenue in Manhattan.

An investment group led by Shvo bought three adjacent historic Art Deco hotels, the Raleigh, the Richmond, and the South Seas, along the Miami Beach waterfront in 2019 to amass the current development site. He paid roughly $243 million for the properties.

Shvo planned to renovate and redevelop the sites and tapped Rosewood, an upscale Hong Kong-based hospitality operator, to manage the new hotel and residences.

To help publicize the project, Shvo installed an elaborate temporary garden of lush plantings and fanciful animal sculptures by the late French artists Claude and François-Xavier Lalanne. And he held upscale dinner parties catered by the renowned Italian restaurant Langosteria, which has said it will open its first American outpost at the project.

Despite early buzz and luxury pedigree, preliminary site work had never progressed into full-bore construction.

One hurdle Shvo has appeared to face are pre-sales at the sky-high values he has sought to achieve at the planned condo — a prerequisite to securing a loan large enough to fund construction.

The developer has said publicly that he has secured roughly $250 million of pre-sales at the condo building and had locked more than a dozen of the project's 42 planned apartments into contract.

But financial information being distributed by Newmark and reviewed by Business Insider state that as of December, Shvo had pre-sold 5 apartments totaling $67 million. According to Newmark, the sales were at an average price per square foot of roughly $4,400 — a lofty figure, but still short of the roughly $6,000 that Shvo had boasted the project would achieve.

A person who has access to a recent financial report prepared by the auditing firm Deloitte for Shvo and his partners in the Raleigh said that the document showed that the ownership group has had to pay enormous sums to carry the property for the past five years, including millions of dollars spent on taxes, insurance, and other costs annually.

In 2023, nearly $20 million was paid in interest on the property's current $190 million mortgage alone, which is held by the Miami based lender BH3, according to the person, whose identity is known to Business Insider. The person did not want to be named because the financial information being shared was considered confidential.

That debt on the property was due to expire on January 16, but Shvo and his partners extended it for another six-month term, according to BH3.

• Almost 50 years ago, a young Donald Trump had a career breakthrough redeveloping a NYC hotel.
• Now, developers want to replace the property with the country's most expensive tower.
• The project's builders need almost $5 billion of federal loans to do it.

Donald Trump was a young developer eager to make a name for himself in the Manhattan real estate industry when he struck a career-making deal to redevelop the Commodore Hotel next to Grand Central Terminal into a 1,300-room Grand Hyatt clad in dark glass.

Nearly half a century later, Trump may again have an opportunity to play a role in the site's destiny when he returns to the White House.

New York developers RXR and TF Cornerstone have proposed leveling the property and raising a 1,575-foot-tall office and hotel tower in its place that would cost as much as $6.5 billion to construct. It would be both the tallest skyscraper by roof height ever built in America as well as the most expensive.

Renderings of the mega-tower show how it will dwarf surrounding structures, including the neighboring landmark Chrysler Building and even a new headquarters tower being built nearby for JPMorgan Chase.

As part of the work, the pair have imagined making improvements to portions of the historic neighboring train terminal and the subway station below the site.

To help pay for the immense project — called 175 Park Avenue — the developers are taking an unusual approach at a moment when lenders have remained wary to finance such large-scale office development.

The property was recently included on a list of mostly transportation related projects that are seeking access to federal money earmarked for transit infrastructure development and upgrades.

RXR and TF Cornerstone are planning to apply for as much as $4.84 billion of federal loans to help pay for the tower, according to the document. The developers expect to spend as much as $6.5 billion on the project, a sum that includes about $550 million of accompanying transit improvements they will make as part of the project. The team is listed as having submitted a draft letter of interest in the federal money, a preliminary and non-binding step in applying for the funding.

The federal money is discretionary and administered by the US Department of Transportation, meaning that the incoming Trump administration — and possibly even the president himself — will have decision-making authority over which projects are ultimately awarded.

"I would expect he'd be supportive and excited about it, and obviously at the appropriate time we're going to be reaching out," Scott Rechler, the CEO and chairman of RXR, said, noting that he hadn't yet attempted to discuss the tower project with the president-elect or anyone in his circle. "He understands office buildings better than any president before."

A shortage of capital for office development

Rechler said the project team behind 175 Park Avenue is exploring the federal loans because of lingering dislocations in the lending market that have made it difficult to source financing from private sector lenders.

Banks, life insurance companies, debt funds, and other sources of mortgage debt have pulled away from office financing as a result of concerns about the stresses of higher interest rates on property values and vacancies created by the enduring popularity of hybrid and remote work.

Trey Morsbach, an executive managing director at JLL who co-leads the firm's real estate debt advisory practice, said that multi-billion-dollar office projects are tricky to finance even during favorable leasing and lending conditions, requiring collections of lenders to divide the loan and spread their risk.

One Vanderbilt, a roughly 1,400-foot-tall tower that opened in 2020 on the other side of Grand Central Terminal from 175 Park Avenue, for instance, received a $1.5 billion construction loan from a group of six banks in 2016 in order to proceed.

Morsbach said that lenders were still funding office construction today, in large part because there is a growing belief that newly built, high-end spaces will outperform the broader market. The pool of active financing groups has shrunk, however, challenging deals like 175 Park Avenue that rely on lending consortiums and benefit from market depth.

Lenders "are interested, but just aren't willing to commit the same scale," Morsbach said.

An unused pot of tens of billions of federal dollars

RXR and TF Cornerstone are aiming to tap lending programs called the Transportation Infrastructure Finance and Innovation Act and Railroad Rehabilitation and Improvement Financing. The programs, known by their acronyms Tifia and Rrif, respectively, offer projects access to low-cost financing and long payback periods stretching 35 years or more.

The cost benefits of sourcing a loan at the scale necessary to fund the construction of 175 Park Avenue from the federal government versus the private market would be "absolutely astronomical" for the developers, according to Stijn Van Nieuwerburgh, the Earle W. Kazis and Benjamin Schore Professor of Real Estate at Columbia Business School.

Although the programs are aimed at transit upgrades, they were updated as part of the Infrastructure Investment and Jobs Act in 2021 to allow funding for private development located "within a half mile walking distance of transit — commuter and intercity passenger rail stations," according to a DOT spokeswoman.

Few builders, however, have tapped the money, even though the Rrif program holds about $30 billion of unused funds, in part, because of the tedious qualification process.

To receive the financing, the 175 Park Avenue project must receive an investment grade credit rating from a major ratings agency and pass through a federal environmental review.

"It's extremely cumbersome to access that money," Van Nieuwerburgh said.

There has been optimism in the commercial real estate industry that the Trump administration will be more accommodative of business, including by stripping back regulation.

"Donald Trump comes in, his team cuts through the red tape, navigates through and unleashes a $6 billion project that's going to improve transit, create the biggest building in the Western hemisphere," Rechler said of 175 Park Avenue's potential appeal to the president-elect. "It speaks to a lot of his policies and the administration's approach to wanting to get things done."

Unflattering politics

Rechler, however, was for years closely aligned politically with former New York Governor Andrew Cuomo — a Democrat and nemesis of Trump's during his first term in the White House.

Rechler, who noted he is a registered independent, is hoping that economic development will prevail over politics.

But a person who is in line to become a Trump administration official said that Rechler's past associations may not be lost on the new administration.

"I'm not speaking for Trump, but I would be in utter shock if the transportation department, which must oversee the railroads, if they signed off on that deal," the person said.

• Commercial real estate sales star says data from his 40-year career is key to unlocking the power of AI.
• Bob Knakal has sold $22 billion of property, making him one of America's most successful brokers.
• He says he was fired by property giant JLL in February 2024. Now, he plans a career revival.

Bob Knakal climbed to the top of the commercial real estate sales business by focusing not on billion-dollar Manhattan skyscrapers, but on the tens of thousands of ordinary apartment buildings and land sites across New York City.

Now, the 62-year-old sales executive is adding a new approach by using artificial intelligence.

He says his new sales firm, BKREA, will harness property data and market observations that he has meticulously collected since the mid-1980s and couple it with the blooming powers of AI.

Using the much-heralded technology, Knakal believes he can compete with far larger real estate services companies with only a handful of employees. BKREA presently employs 15 workers and Knakal doesn't imagine getting much larger.

"The extent to which the world is going to change over the next five years is going to blow away what's happened over the last 40," Knakal said. "Realizing that, the first thing I did when I started the new firm – my first hire was an AI guy."

Many commercial real estate firms and professionals have begun to use AI – or have plans to — in order to gather market insights and sort through mountains of data, produce promotional and marketing materials, and help organize and manage client relationships and outreach.

Knakal says he believes his firm can harness the technology more effectively in its niche because the quality and consistency of his data is better than those of rivals.

Although New York City's property records are available to all online, Knakal has gathered reams of proprietary observations over the years, including nuanced information that is often not public. A rental apartment building slated for demolition and redevelopment, for instance, may have had holdout tenants that compromised its value. A vacant land site, meanwhile, may have an access agreement with its neighbor that would allow construction work to proceed more smoothly, enhancing its price tag.

If "you're putting bad data in, you're getting bad data out," Knakal said, adding that he spent three years during the pandemic "personally verifying 2,417 development site sales in the city" to further glean such insights.

"So how do I compete with the big firms?" Knakal asked. "Show me even one of them that's had the same head of research for 10 years."

Tenure at JLL

If Knakal, whose outward demeanor comes across as perpetually sunny, seems slightly irked by some of the big corporate real estate firms that dominate the nation's commercial property sales and services businesses, that's because he is.

Knakal built his career largely outside of that world, founding the small brokerage company Massey Knakal in 1988 with business partner Paul Massey. In subsequent decades, the pair grew the company into one of New York City's largest and most prolific property sales firms. In late 2014, the two men sold the 250-person business to the global commercial real estate company Cushman & Wakefield for $100 million.

Knakal joined Cushman as part of the sale, but left in 2018 for the rival corporate real estate services giant JLL.

Knakal's tenure at JLL came to an end in February 2024 when he was abruptly fired.

Recounting his exit, he said that he had been a guest on CNBC early that month to discuss the property market with the news anchor Brian Sullivan. He was subsequently warned by a person from JLL's marketing department that such media appearances first required company approval. Knakal said he explained to the person that his employment contract offered him "unfettered access to the press."

Shortly after, Knakal was the subject of a weekend profile in The New York Times. On Monday, he said he received a call from a JLL executive requesting an urgent meeting. Knakal sat down with the executive in a conference room in JLL's Manhattan office.

"As soon as I walked into the room, the head of HR walked in," Knakal said. "I knew I was being fired."

Knakal said his dismissal capped off what had been "the dark ages of my career."

"I don't think they appreciated what I brought to the table," he said.

A JLL spokesperson said: "We thank Bob for his contributions to the firm and wish him all the best in his future endeavors."

Massey, who also departed Cushman in 2018 and remains close with Knakal, said that while Knakal was one of the "most upbeat people" he knows, he had become "honest about how he was feeling: he wasn't having as much fun" in the commercial real estate business.

A desire to adapt and compete

BKREA mixes in analogue elements as well. In his new office on West 36th Street is an enormous printed map of Manhattan below 110th Street on the west side and 96th Street on the east to the island's southern tip. Propped across 8 tables, the 24-foot-long, 8-foot-wide printout details 27,649 commercial buildings and development sites in a way that both conveys the immensity of the market but is also more comprehensible to the senses.

Seth Samowitz, a 30-year old data expert who Knakal hired earlier this year to spearhead BKREA's AI efforts, said that he first thought having the giant map in an overwhelmingly digital world was "crazy." He has since come around.

"Honestly, it's the best marketing tool in the entire world," Samowitz said.

Knakal said he has used the map as a key prop in pitching his services to 26 clients so far. "I've gotten 26 exclusives."

Currently, he has been hired to sell about $2 billion of property assets, his largest pipeline in years. Knakal said he has sold 2,342 properties totaling about $22 billion over his career, more than almost any other broker in the country, he believes.

James Nelson, 49, now head of tri-state investment sales at Avison Young, began his career at Massey Knakal in the 1990s. He considers Knakal a mentor, saying that he admires Knakal's hunger to continue to adapt, innovate, and compete.

"Bob talks about what he's going to be doing in 10, 20, 30 years and it's being a broker," Nelson said. "He enjoys the process and the thrill of the hunt."

• Each year, Business Insider highlights Wall Street's rising stars.
• These are up-and-comers in investment banking, trading, and investing.
• All are 35 or younger. Check out our lists over the years.

For the past eight years, Business Insider's finance reporters have tapped their contacts to put together a list of who to watch on Wall Street.

We've received recommendations from bosses, colleagues, recruiters, and financial industry experts to create our annual feature. To be eligible, nominees must be based in the US, 35 or younger, and stand out among their peers. The editors make the final decisions.

Business Insider asked these rising stars from leading firms like Goldman, Blackstone, and Citadel to reflect on their successes, challenges, and best career advice.

2024

Meet our 2024 class

Our most recent set of young professionals reflect the future of finance. A number of them are shaping the trajectory of clean energy and artificial intelligence by financing the infrastructure that will underpin it. Some have seen their focus go from niche to hot asset. Others are influencing how Wall Street interacts with Main Street, using their skills and savvy to create new products and services for ordinary investors or giving employees at portfolio companies ownership stakes.

The rising stars also shared how they unwind and stay grounded in order to stay mentally sharp.

2023

Meet the 2023 class

2023's cohort included traders setting new playbooks for deals and trades and an investor building out burgeoning private markets businesses within the world's largest bank. These influencers also financed some of the biggest deals of the past few years and provided an edge to top investors with complex and innovative products.

They shared the lessons learned from their biggest career mistakes and how their Wall Street wardrobe had evolved from their COVID work-from-home days.

2022

Meet the class of 2022

As Wall Street navigated volatile markets, fewer deals, and plummeting company valuations, we found the players rising up despite the challenges.

One invested in space ventures, and another executed multibillion-dollar trades. Some up-and-comers pushed their teams to the top of industry rankings.

From books on the science of sleep to fantasy football strategy podcasts, here's what these bright leaders were reading and listening to. And here are some of their lessons and advice.

Here are the previous editions of our Wall Street rising stars list:

• 2021
• 2020
• 2019
• 2018
• 2017

• Hurt by higher interest rates, commercial real estate should see a modest rebound in 2025.
• Lingering inflation, however, could complicate the recovery by pushing up long-term interest rates.
• Industrial warehouses, a star of the sector, is poised to stand out in 2025.

The commercial property sector has had a bruising few years as rising interest rates pushed down values, complicated refinancing deals for hundreds of billions of dollars of expiring mortgages, and stymied investment.

In the office market, the situation was even more severe as hundreds of millions of square feet of space across the nation face accelerated obsolescence. Employees have embraced hybrid and remote work as a permanent offshoot of the pandemic, sapping demand for lesser quality space.

In recent months, however, the industry has felt relief from three successive rate cuts by the Federal Reserve that have shaved a percentage point off the fed funds rate — a benchmark for short-term lending rates. More cuts are expected in 2025. Resilient economic growth, meanwhile, has propelled demand for commercial space, including apartments, warehouses, retail stores, and hotel rooms. Some developers have even grown bullish on top-tier office projects as tenants flock to high end space.

In 2025, commercial real estate experts have signaled cautious optimism that the sector's rebound will continue, while also highlighting the challenges that could stymie growth.

Here are three trends for the industry to watch in 2025:

While the Fed has cut rates, relief hasn't arrived for the majority of loans

Of the roughly $4.7 trillion of total outstanding commercial real estate debt, about two-thirds is tied to long-term interest rates benchmarked against the 10-year Treasury yield, according to an estimate by the Mortgage Bankers Association. After dipping in the third quarter, long-term interest rates have jumped back up to the mid-4% range, close to where rates were before the Fed began cutting and far higher than where the 10-year was in recent years. The 10-year Treasury rate dipped below half a percentage point in 2020, its lowest level ever.

In 2025, observers expect long-term rates to hold steady, even if the Fed continues to trim short-term rates.

"The 10-year Treasury yield, that's really driven less now by anticipation of what the Fed might do and more by long-term expectations about economic growth and inflation and federal budget deficits," Jamie Woodwell, the MBA's head of commercial real estate research, said.

That could continue to complicate commercial real estate sales and refinancing deals.

The MBA projects that $570 billion of commercial real estate loans will mature in 2025, with banks holding about 38% of the overall inventory of outstanding debt in the sector.

Tomasz Piskorski a professor of real estate at Columbia Business School, said that 14% of commercial loans overall are tied to distressed assets that are now worth less than their debt and that 43% of commercial real estate loans "may face significant cash flow and refinancing issues." He has warned there could be tens of billions of dollars of potential losses for the banking sector and other lenders.

The real estate services giant CBRE, meanwhile, has forecast a modest 7.5% increase in investment sales activity, predicting about $410 billion of transactions in 2025. More sales would help buyers and sellers discover asset pricing and is considered a positive sign for a market recovery.

Richard Barkham, CBRE's chief economic economist, warned of lingering higher long-term interest rates that could dampen the rebound.

"Over the next four or five years we're likely to get upside shocks in inflation," Barkham said. "That points to an era of interest rates higher for longer."

Incoming Trump administration has generated optimism

Some of President-elect Donald Trump's campaign promises to enact tariffs on foreign goods, pressure the Fed for lower short term interest rates, and deport undocumented immigrants from the labor supply could spur inflation, reigniting problems in the commercial real estate financing market.

Nonetheless, the industry has been largely positive on the incoming administration.

Investors "expect better tax issues, they expect less regulation, they expect some real estate specific stuff like opportunity zones will get a bit of a boost," said Jim Costello, the co-head of real assets research at the data firm MSCI, referencing the opportunity zone program from President Trump's first term in office. Opportunity zones allowed real estate investors the chance to defer and avoid capital gains taxes if they reinvested investment proceeds in property projects in designated zones around the country.

President Trump has also sought to hire real estate executives in his administration, meaning that top officials could have an familiarity with the real estate business and its priorities. Howard Lutnick, a Wall Street billionaire who is also chairman of the large commercial real estate services firm Newmark Group, for instance, has been picked by Trump to lead the Commerce Department.

After a rocky 2024, industrial is still a darling

Industrial warehouse space boomed during the pandemic as American shoppers migrated online, boosting the need for logistics spaces that served e-commerce and also to onshore storage for a disrupted global supply chain.

A record total of roughly a billion square feet of industrial space was absorbed on balance by occupiers in 2022 and 2023, according to Craig Meyer, president of JLL's industrial leasing group in the Americas. That activity was enough to fill a vast pipeline of new space that was being added to the market. In 2022 and 2023, 1.1 billion square feet of new industrial space was delivered, according to JLL — also a record.

In 2024, however, demand could no longer keep pace with surging supply – stalling rental growth and pushing up vacancy.

About 375 million square feet of new space was added to the industrial market in 2024 – the third highest year on record after 2022 and 2023. But only about 111.3 million square feet of space has been absorbed on net, the lowest year of absorption in more than a decade. Vacancy has jumped to 6.8% from 4.9% a year ago. In the second quarter of 2022, vacancy had fallen as low as 3.3%.

Meyer said that the first half of 2024 was the nadir of the dip and expects a resurgent 2025.

"We had a contentious election coming up," Meyer said. "People were uncertain where interest rates were going."

In 2025, Meyer and other experts, including Barkham, CBRE's economist, see a strengthening industrial market as new supply dwindles and demand picks back up.

"The sectors that are big and improving and likely to lead investor interest are multifamily and industrial," Barkham said.

Some 268.9 million square feet of industrial space is presently under construction, according to JLL, the smallest pipeline since 2019. E-commerce, one of the biggest drivers of warehouse demand, continues to grow. According to CBRE, online sales are expected to absorb 30% of consumer spending by the end of the decade, up from 23% today, adding tailwinds to the segment.

• Howard Lutnick opened his wallet and Rolodex to turn Newmark into a commercial real estate success.
• Lutnick now plans to head to Washington to take a position as President Trump's commerce secretary.
• "I'll miss Howard," Newmark CEO Barry Gosin tells Business Insider. "But the day-to-day business runs."

Howard Lutnick, chosen by President-elect Donald Trump to be commerce secretary, has had a winning streak that extends beyond Wall Street and his investment banking firm, Cantor Fitzgerald.

In 2011, the billionaire arranged for his affiliate financial company, BGC Group, to purchase the New York-based commercial real estate services firm Newmark for an undisclosed sum.

In the ensuing years, BGC pumped in capital to buy up talent and acquire smaller rivals, brought Newmark public in 2017, and played a role in its management, with BGC executives taking posts at the firm and Lutnick chairing its board of directors.

The results have turned heads in the ultra-competitive real estate business.

The company, once focused on New York City's office market, is now mentioned alongside global powerhouse rivals like JLL, Cushman & Wakefield, and CBRE.

"Howard helped Barry transform transform Newmark from a regional player to now a global one," said Alexander Goldfarb, an analyst at Piper Sandler who covers Newmark, referencing Barry Gosin, Newmark's CEO.

"It's one of the best positioned real estate players today," Goldfarb added, noting that he has an "overweight" – or buy – rating on Newmark stock.

Now, Lutnick's move to Washington would leave Newmark – along with Cantor and BGC – without one of the architects of its success.

Lutnick has said he will divest his shares in Newmark and BGC, which is also public, and step from his leadership roles at the companies and also Cantor, which is privately owned.

Newmark executives say the firm has the talent and momentum to continue its path without Lutnick in the boardroom.

"I'll miss Howard," Gosin, who is 74, said. "But the day-to-day business runs."

Nonetheless, Lutnick has played a direct hand in the company's rise, observers said, using his Rolodex in corporate America, for instance, to help its executives open doors and win business.

"A lot of big tenant representation assignments, a lot of capital markets stuff came out of BGC and Howard's relationships," a former New York broker at the company told Business Insider. The person did not want to be identified because their past employment agreement with Newmark prevented them from speaking publicly about the company or its executives.

From $60 million to $3.8 billion

Newmark's performance has added to the lore of Lutnick's 40-year career, during which he built BGC and Cantor, where he is also CEO, into major players in the financial industry.

Before the BGC acquisition, Newmark was owned by a handful of the firm's top producing brokers, CEO Gosin, and the Gurals, a New York real estate family that owns a large portfolio of office properties.

BGC paid a little more than $60 million in cash and stock, according to reports at the time – a fraction of its roughly $3.8 billion market capitalization now.

Lutnick "saw a great opportunity to apply scale and professional management to a business and capitalize on a very fragmented industry," said Mark Weiss, a former Newmark broker who left the company in 2016 to head to rival Cushman & Wakefield. "And he did just that."

Lutnick's involvement bankrolled the business. The famously charming executive could also soften Gosin's bluntness.

Scott Panzer, a prominent commercial real estate leasing broker who left Newmark two years before BGC's acquisition for competitor JLL, bumped into Gosin and Lutnick together at the World Economic Forum in Davos, Switzerland, in around 2012.

"Oh my god you're here?" Panzer remembers Gosin telling him. "I think I'm going to have to rethink my membership to this."

"Howard and I both looked at one another, and we both started laughing," Panzer recalled.

Panzer said he is now cordial with Gosin and that he admires the transformation of Newmark that he and Lutnick were able to accomplish.

Gosin would not comment on the incident.

Not everyone is a fan of Howard Lutnick

Early in his tenure at Newmark, Lutnick drew ire from some dealmakers at the company for rejiggering its employment contracts. The new terms required brokers to accept about 10% of their commissions on deals in Newmark stock that would vest over time.

In 2014, Newmark purchased Grubb & Ellis, a commercial real estate services firm, out of bankruptcy. Some brokers from Grubb chose to leave in the merger. One former Grubb broker said that the employment contract he was offered contained onerous provisions, such as a sweeping non-compete restriction should he eventually leave the new company.

"You wouldn't even be able to drive a taxi cab," he said.

While the changes that Lutnick initiated may have ruffled some brokers, they eventually proved prescient, helping to retain talent and yielding profits for those who remained at the firm as Newmark's stock rose.

"Howard was helpful in setting up the business, in giving me the backbone and the foundational knowledge of how to do it differently — how to innovate, how to create a partnership, how to build a business for the long term," Gosin said.

More recently, Lutnick attracted shareholder outrage when he was awarded an enormous $50 million bonus from Newmark in 2021.

"There are some people who will not invest in Newmark because of that," Piper analyst Goldfarb said.

That anger has faded as Lutnick's vision of an ascendant Newmark has come to fruition.

"We are well in the conversation," Gosin said, referring to Newmark's increasing competitiveness in the top tier of the commercial real estate services and brokerage businesses.

David Falk, the president of Newmark's New York region and a leading leasing broker at the company, agreed. He said that Lutnick and Gosin had effectively built up other service lines at the company in ways that impressed clients and helped Falk – and other brokers at the firm – win assignments. The company's deep bench of talent, he said, is a far cry from the past when Newmark lagged major competitors in ancillary areas such as financing, property management, and investment sales.

"I hated the fact that 15 years ago, I would go to a meeting and I was maybe bringing someone I thought could handle an assignment, but I didn't feel great about it," Falk said. "Now we have stars everywhere."