AI Boom Turns New York and San Francisco Into the Strongest Office Markets
Artificial intelligence is reshaping the national office market and is having an especially notable impact in New York and San Francisco. Both markets are experiencing tech expansion that has pushed demand beyond national levels.
Together, New York and San Francisco account for 58% of the primary hiring locations for AI talent, according to a VTS report. San Francisco accounts for 34% of tech hiring and New York accounts for 24%. Silicon Valley and Seattle each account for 8%, and Washington, D.C., accounts for 4% of tech firm hiring.
Tech is part of New York’s diversified industry base that supports resilient office growth, said VTS. The city’s VTS Office Demand Index (VODI) increased 33% year over year in August, outpacing national growth of 30% during the same timeframe, and 39% since 2022 when ChatGPT first hit the market. Tech demand for office space in New York peaked at 18% in August, reflecting a broader expansion of tech hiring as well as the growing importance of the tech industry in a market that is traditionally dominated by finance, insurance, and real estate (FIRE) and professional services companies.
San Francisco, which is home to a dense concentration of tech giants and AI startups, saw its VODI increase 107% year over year in August and 356% since late 2022 when ChatGPT was released. Similar to New York, San Francisco’s share of office demand derived from the tech sector peaked at 59% in August, exceeding levels seen during the pandemic-driven tech boom in 2020.
The national VODI is down half a percent in August on a year-over-year basis but is up 13% since 2022.
“As these two markets command a leading share of primary hiring locations for top tech startups, and with tech's share of office demand hitting post-COVID records in both cities, their leadership is undeniable,” said the report. “Their performance not only significantly outpaces the national average but also solidifies their status as the premier hubs where the AI revolution is creating an immense appetite for commercial real estate.”
Source: GlobeSt/ALM