AI Impact on Real Estate

Artificial intelligence is quickly becoming one of real estate’s most important customers.

It’s leasing offices, fueling data center development and helping drive some of the strongest pockets of demand the industry has seen since the pandemic. At the same time, it’s raising uncomfortable questions about the future of the very jobs that have traditionally powered demand for office, residential and retail space.

In San Francisco and New York, AI companies have emerged as some of the most sought-after office tenants. In San Francisco, they accounted for nearly 40 percent of office leasing activity in the first quarter and now occupy roughly 7 million square feet of space, a figure projected to double by the end of the decade. As availability shrinks in some of the city’s most desirable office districts, landlords are increasingly chasing AI firms in hopes of landing the next breakout success story.

New York is seeing a similar trend. AI tenants represented more than a third of tech-sector office demand in the first quarter, as venture-backed startups raced to secure space and expand headcount.

As expected, it’s speeding things up. Brokers describe deals moving from initial tour to signed lease in a matter of weeks. Founders show up with ambitious growth plans, unconventional workplace expectations and, increasingly, AI-generated opinions about everything from floor plans to lease terms.

The culture accompanying the boom may prove just as consequential as the leasing itself.

Many AI firms are embracing intensive in-office work schedules, including the increasingly discussed “9-9-6” model of working from 9 a.m. to 9 p.m., six days a week. For landlords, that means buildings that are heavily utilized and tenants that place a premium on proximity. In New York, some office-to-residential developers are already targeting workers who would rather live a few blocks from the office than spend valuable time commuting.

Data centers have become one of the industry’s fastest-growing asset classes, particularly in Texas, where billions of dollars of investment continue pouring into new projects. But communities are increasingly pushing back over concerns about power consumption, water usage and strain on local infrastructure.

In Illinois, lawmakers are debating whether the state’s biometric privacy law is making it harder to attract the next generation of AI-related data center investment. Industry groups warn projects could migrate to neighboring states, while opponents argue privacy protections and environmental concerns should take precedence.

Yet even as AI creates demand across multiple property types, it’s also forcing the industry to confront a longer-term, and in some cases, more sinister question: What happens if the technology eventually cuts the number of people needed to do office work?

Some in the industry argue AI will become another productivity tool that creates new categories of work and fuels economic growth. Others believe widespread adoption could slow hiring in office-heavy industries such as finance, law, accounting and consulting, reducing future space needs even if today’s leasing activity remains strong.

A lot of that uncertainty is showing up in residential real estate.

Buyers and sellers are increasingly arriving armed with ChatGPT-generated pricing analyses, market forecasts and negotiating advice. Agents report spending more time correcting flawed assumptions, explaining local market nuances and responding to AI-generated questions that often overlook critical details such as off-market sales, concessions or local regulations.

Ironically, many agents are simultaneously embracing the technology themselves. Across markets such as South Florida, brokers are using AI tools to generate listing descriptions, marketing campaigns, videos and client communications, allowing them to automate routine tasks while focusing more attention on relationships and dealmaking.

That may ultimately be the most revealing lesson from real estate’s early AI era.

The technology is proving remarkably effective at generating information, speeding up workflows and creating new sources of demand, but human judgment, for now, still plays a critical role.

There was plenty of other real estate news this week. We examine if South Florida’s branded condo boom has reached its limit, Compass faces an antitrust investigation and SL Green notches one of the largest office building sales of the year.

NY AG probing Compass over antitrust concerns

Compass spent billions building a residential real estate powerhouse, but now regulators are taking a closer look. The antitrust division of the New York Attorney General’s Office is investigating Compass’ presence in the New York market and has reportedly contacted leaders at several top brokerages seeking information.

Is South Florida’s branded condo boom reaching its limit?

In Miami’s crowded branded condo market, a luxury logo may no longer be enough to close the deal. After a decade of growth, developers and brokers say South Florida’s branded condo sector is becoming saturated, with new projects increasingly competing on execution rather than name recognition alone.

Christie’s International dumps tri-state affiliate

Christie’s International Real Estate has severed ties with its longtime tri-state affiliate, cutting off a network of more than 1,000 agents across New York, New Jersey and Connecticut. The brokerage terminated its franchise agreement with Christie’s International Real Estate Group LLC, the exclusive regional affiliate led by CEO Ilija Pavlović.

SL Green selling Midtown office building for $300M+

SL Green just notched one of Manhattan’s biggest office sales of the year as it pushes ahead with a multibillion-dollar asset disposal plan. The REIT has agreed to sell 10 East 53rd Street, a 390,000-square-foot office tower in Midtown Manhattan, to Meadow Partners for $312 million.

Summer camp empire stopped making payments shortly after $195M raise in Israeli bond market

The owners of Camp Blue Star, Mohawk Day Camp and dozens of other summer camps across the Northeast revealed they defaulted on payments to Israeli bondholders and transferred $34 million to companies they control. Michael and David Shabsels closed a $195 million bond deal in December. They own about 30 American sleepaway and day camps, making them a large player in a fragmented industry.

How top South Side multifamily brokers became owners of $70M in real estate

Before buying prime Chicago real estate, Noah Birk, Aaron Sklar and Dan Gonzalez made their names selling it. As a top-producing investment sales duo for Chicago-based Kiser Group, Birk and Sklar dominated Chicago’s South Side multifamily market, with Gonzalez as the brokerage’s COO.

Behind the Hamptons’ inventory mirage

When Mark Greenwald’s client went hunting for a Hamptons house late last year, all of the available properties missed the mark. So Greenwald got creative. He found a parcel of land in a location that was much closer to his client’s vision. He pitched his clients on a new plan: Buy the land, build the dream house and rent for just one more summer. That maneuvering was part of a playbook that’s becoming more common as buyers and their brokers contend with shrinking inventory in the Hamptons, where listings have been slow to recover from the pandemic-era buying frenzy.

Ulta Beauty inks $400M Times Square lease at Jeff Sutton’s 1551 Broadway

Beauty retailer Ulta Beauty has inked a massive $400 million lease at Jeff Sutton’s marquee Midtown retail property in Times Square, The Real Deal has learned. The Illinois-based cosmetics and skincare retailer will occupy all four floors of the 26,000-square-foot building at 1551 Broadway, owned by Sutton’s Wharton Properties.

New York’s top developers unfazed by trade wars: rankings

Real estate was finally showing signs of stabilizing at the beginning of last year. Then President Donald Trump’s second-term trade policies shook up the market again. The impact of tariffs and higher mortgage rates pushed potential homebuyers to the sidelines and drove rents across the country to record highs.