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Manhattan’s office market is seeing a notable shift in tenant composition as artificial intelligence firms, once a quiet presence, emerge as one of the fastest-growing sources of demand for space. While they don’t yet match the scale of Big Tech's real estate holdings, AI-focused companies — particularly smaller, well-capitalized startups — are now driving a fresh wave of leasing activity, particularly in Midtown South.

According to Savills, AI companies leased 486,000 square feet of office space in Manhattan during the first nine months of 2025 — already surpassing their total leasing volume in all of 2024 and nearly doubling 2023's total. And that number is likely to grow, with smaller AI companies reportedly seeking another 480,000 square feet of space across the city.

Much of this activity is concentrated in Class A-minus and B-plus properties, where these emerging companies are gravitating toward turnkey spaces in vibrant tech hubs like Midtown South. This growth is being fueled by robust venture capital investment in AI — over $252 billion in U.S. corporate funding in 2024 alone, per Stanford’s Human-Centered AI Institute. Many of these smaller firms are flush with capital, making them attractive to landlords even as they negotiate shorter-term leases with expansion flexibility.

“It's a wonderful addition to our leasing business,” said Christopher Okada, CEO of Okada & Co., which leased 10 small office spaces to AI firms this summer, most around 5,000 square feet or less. Okada noted that nearly all the leases included clauses to allow for future expansion — a reflection of both the cautious approach and ambitious growth plans of these firms.

Larger players are also making moves. Salesforce recently expanded its Manhattan footprint by 71,000 square feet at 3 Bryant Park, and OpenAI signed a 90,000-square-foot lease last fall at the historic Puck Building. Even as some tech firms trim headcount in response to AI automation, their real estate footprints are growing, driven by the need to centralize teams and fuel collaboration.

“They really see office productivity as a driver of their business performance,” said Liz Hart, Newmark’s President of Leasing for North America. “They're using that office space as a tool to achieve those goals.”

The trend is also visible in leasing strategies: about 54% of AI leasing volume went to Class A buildings, while 46% went to Class B, reflecting a continued preference for collaborative, amenity-rich environments without the top-tier pricing of trophy towers.

What distinguishes this AI-led expansion from earlier tech booms is the profile of the companies involved. While Amazon and Salesforce continue to make headlines for massive leases, it’s the growth-stage AI firms, many backed by Silicon Valley or Stanford University roots, that are quietly reshaping the leasing landscape.

These companies may sign for smaller footprints today, but they come with major growth potential. With 41% of tech tenants currently looking to expand their offices, according to Newmark, the market is poised to benefit from long-term commitments from this emerging class of tenants.

In a post-pandemic landscape where office demand remains uneven, the arrival of AI firms as serious occupiers is injecting fresh momentum into New York’s office recovery.

“After being a missing tenant group during the pandemic,” Hart added, “tech companies — especially AI-focused firms — are once again becoming a core component of the NYC office market.”

 

Original article posted on October 2, 2025

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