Recent first-quarter earnings from CBRE, Newmark and JLL told a story the office market has been waiting to hear: business is good again.
All three commercial brokerages reported one of their strongest quarters since the pandemic downturn, fueled in large part by AI companies gobbling up space in New York and San Francisco. Small, well-funded firms are taking big, flashy offices in neighborhoods like NoMad and the Flatiron District, sometimes far larger than their current headcounts justify.
AI startups with fewer than a dozen employees are inking large office leases, often long before they have the teams to fill them, the Wall Street Journal reported. The result is a growing number of offices that sit half-empty most days.
Meanwhile, data center demand is so intense that vacancy rates across North America have plunged toward zero, with companies racing to lock in capacity years in advance. CBRE said leasing in the sector more than tripled from a year ago while JLL reported double-digit growth.
But that’s only part of the equation. Although AI tenants are helping absorb some of the vacancy left by the pandemic, the technology they’re building is making companies more efficient. If AI allows firms to do more with fewer workers, then the long-term demand for office space may not grow the way landlords and brokerages hope.
Tech companies like Meta, Microsoft and Snap have already announced layoffs, citing restructuring tied to rising AI investment, a trend that could eventually show up in office leasing. Consulting firm McKinsey estimates that AI could automate roughly a quarter to a third of work hours by 2030, a shift that could slow hiring growth and reshape how much office space companies need.
But for now, times are flush for AI leasing brokers in New York and San Francisco. Just this week, AI firm Anthropic was reported to be close to locking up the entire 466,000-square-foot office building at 330 Hudson Street.
Who knows what happens when the current growth spurt ends? AI is helping fill offices today, but it may also be changing how much space companies need tomorrow.
What we’re thinking about: I’ve heard some AI companies are arriving at office tours with unconventional demands — think air-quality sensors and on-site kombucha taps. Do you have any quirky AI leasing stories? Send your stories to elizabeth.cryan@therealdeal.com.
A thing we’ve learned: Female parrots can suffer from a chronic egg-laying disease that causes them to lay eggs repeatedly, even without a mate. A 15-year-old parrot named Roxy in Brooklyn Heights was recently rescued and treated for the disease by the Schwarzman Animal Medical Center (named in honor of Blackstone’s Stephen Schwarzman and his wife Christine).
Elsewhere…
— Rising gas prices tied to the war in Iran are adding pressure on consumers, though the hit to the broader economy is being partially cushioned by strong tax refunds and an AI-driven investment surge, Newsday reported. New economic data show inflation accelerating at its fastest pace in nearly three years, but economic growth remained steady and layoffs continued to decline.
— U.S. Transportation Secretary Sean Duffy on Friday filed a notice that he plans to appeal a federal judge’s decision that paved the way for New York City’s controversial congestion pricing, the New York Post reported. The Metropolitan Transportation Authority sued Duffy in 2025 for pulling federal authorization for the program and Manhattan federal Judge Lewis Liman ruled that Duffy’s moves to end the toll were illegal. The appeal aims to overturn that decision.
Closing time
Residential: The most expensive residential sale recorded Friday was $4.4 million for 15 Central Park West, 2B. The Upper West Side condo is 1,065 square feet and last sold in 2016 for $5.3 million. Engel & Volkers has the listing.
Commercial: The most expensive commercial transaction was $8.5 million for 1285 Edward L. Grant Hwy. The Highbridge apartment building covers 27,000 square feet of gross floor area.
New to the Market: The highest price for a residential property hitting the market was $8 million for a townhome at 870 President Street in Park Slope and a co-op at 799 Park Avenue, Unit 19BC/20B in Lenox Hill. The townhome has six bedrooms and three bathrooms. Corcoran’s Jackie Torren and Charlie Pigott have the listing. The co-op is 5,200 square feet. R New York’s Stefani Berkin has the listing.
— Joseph Jungermann