AI firms drive Manhattan office leasing to a 25-year high
Manhattan’s office rental market is having its strongest year since 2000, when the dot-com boom was at its peak, as AI companies pour into the city, the Wall Street Journal reported. Cushman & Wakefield said AI firms leased 1 million square feet of Manhattan office space in the first quarter alone, already more than they leased in all of 2025.
The sector still accounts for a relatively small share of the overall market, but deals involving AI companies are growing quickly. Anthropic, which is preparing for a long-anticipated public offering, will lease 500,000 square feet in Hudson Square. The legal AI startup Harvey doubled its space to 185,000 square feet in an office building overlooking Madison Square Park. OpenAI, a longer-term tenant in the historic Puck Building, has also helped attract more AI companies to Soho, according to industry experts.
Many of these startups are signing leases of five years or longer, and some are renting far more space than they currently occupy. John Zhao, CEO of the health AI startup Blossom, said, “New York is the preferred destination now for startups,” after signing a 5,000-square-foot lease this year. The largest AI lease so far this year belongs to EliseAI, a property-management company, which is taking 109,000 square feet near Grand Central Terminal.
San Francisco remains the main hub for most AI companies, accounting for 58% of first-quarter leasing activity, led by Anthropic’s roughly 400,000 square feet, according to CBRE. In New York, the industry is still early-stage, with most firms young and small, and JLL said 40 of the 51 AI leases signed in Manhattan last year were for spaces under 25,000 square feet. Even so, firms such as Adonis, a health AI startup, have expanded rapidly after initially taking 25,000 square feet at the World Trade Center and later tripling to 85 employees.
Most AI tenants are clustering in Midtown South, which also drew tech companies during the dot-com era, but rising occupancy and rents are pushing some to Downtown and Midtown. The expansion also reflects the push to bring workers back to offices, where shared space is seen as fostering innovation and protecting secrecy. At the same time, a recent CoStar survey of 156 companies and office owners found 35% believe broader AI adoption will reduce office demand, up from 23% six months earlier. Unlike the early-2000s tech surge, however, some leading AI firms already generate revenue and count established corporations among their customers. Landlords, meanwhile, have become more careful in reviewing business plans, funding rounds and revenue growth, and JLL’s Melanie O’Brien said, “They’ve learned to ask the right questions.”
