Dive Brief:
- AI companies account for 34% of tech sector space requirements, with three metro areas — San Francisco, Silicon Valley and New York City — providing 63% of the 16.8 million square feet those firms are seeking, according to research by proptech company VTS.
- Tech space demand across the 17 markets the company tracks is up 47% in the 12 months through May 2026, offsetting modest declines in space demand from professional services and double-digit drops in finance and legal, VTS said. For example, in AI-booming San Francisco, legal demand space is down 51%.
- Looking ahead, AI companies in specialized verticals like healthcare, financial services and manufacturing will replace the well-funded early movers like OpenAI and Anthropic in generating the most demand for space, VTS said.
Dive Insight:
In San Francisco, demand from AI firms, particularly big-name companies looking for large growth-capable spaces, has reached 5 million square feet, nearly a third of the national total. Demand in New York, by contrast, is dominated by application-layer AI tenants and AI infrastructure companies serving enterprise customers, reflecting the city’s financial, legal and media base, VTS says in its report.
“Adoption is moving fastest in coding and creative workflows and more slowly in enterprise functions with complex systems and sensitive data, which partly explains why New York’s application-layer AI tenants are scaling differently from San Francisco’s foundation-model labs,” VTS says.
AI implementation and the workforce it requires will drive future space demand, VTS says. Investment firms like Brookfield and Blackstone have begun working with OpenAI to start deploying engineering talent to their portfolio companies, which should help speed up the expansion of and demand for AI labor outside of current markets, the report says.
“The expansion will also reach other large labor markets: Chicago, Los Angeles, and Austin,” VTS says. “Three pressures will push demand outward: AI engineering talent is scarce, San Francisco real estate is expensive, and 25% of active AI demand concentrated in a single submarket will produce the crowding that pushed prior cycles outward.”
Seattle is one beneficiary of AI companies looking elsewhere to secure space: It’s seen a 390% year-over-year increase in AI space demand, VTS says.
