Artificial intelligence is quickly becoming the next major driver of office demand—but its impact is concentrating in a small group of already dominant tech markets, deepening a divide across the U.S. office landscape.
CBRE's latest analysis of a dozen U.S. tech gateway markets, along with five in Canada and Europe, shows tech companies accounted for 23% of leasing activity in these innovation hubs in the first quarter. The report points to AI as a "major growth driver" over the next decade, with the potential to reshape office demand if job creation outpaces displacement.
That growth, however, is far from evenly distributed.
Leasing momentum has clustered in core U.S. gateway markets including Silicon Valley, Manhattan, San Francisco, Boston, and Seattle, which collectively more than doubled their occupied tech space between 2023 and 2025. Austin and Chicago also recorded gains. By 2025, Silicon Valley led with 9.7 million square feet leased by tech firms, followed by Manhattan at 5.6 million and San Francisco at 4.6 million.
Within those markets, AI companies are already driving a significant share of demand. According to CBRE, AI-related tenants accounted for 62% of total tech leasing in San Francisco, 39% in both Silicon Valley and Seattle, and 32% in Manhattan. The concentration reflects both proximity to talent and access to capital, two factors that remain critical in the AI race.
By contrast, leasing activity declined across a secondary group of markets—Washington, D.C., Los Angeles, Atlanta, Denver, and Dallas-Fort Worth—highlighting a growing bifurcation in office performance. While these metros have diverse economies, they have not captured the same level of AI-driven expansion, which is increasingly tied to specialized labor pools and established innovation ecosystems.
Early signs of recovery are emerging in top-tier markets. Net absorption reached 3.3% of total inventory in Manhattan and 3.2% in San Francisco, suggesting that demand is beginning to translate into measurable occupancy gains. CBRE expects tech and AI leasing to continue rising over the next 12 to 18 months.
Capital flows underscore why AI is reshaping office demand so quickly. U.S.-based AI startups raised $578 billion in venture capital between 2020 and the first quarter of 2026, with roughly three-quarters of that funding coming in just the past two years. The San Francisco Bay Area alone captured 80% of that total, reinforcing its dominance as the epicenter of AI development.
Even larger sums are coming from established tech companies. Capital expenditures reached $1.1 trillion between 2021 and 2025, much of it directed toward data centers, chips, and computing infrastructure. That figure is projected to climb to $3.7 trillion by 2031, or about $740 billion annually. CBRE estimates that the combined impact of venture capital and corporate spending will likely surpass every previous tech cycle, including the dot-com era.
For commercial real estate, the implications are nuanced. While AI is clearly boosting demand, much of the spending is flowing into digital infrastructure rather than traditional office space. That dynamic may limit the breadth of office recovery even as it intensifies demand in select urban cores. Markets with deep talent pools, research institutions, and existing tech clusters are best positioned to capture this growth, while others risk falling further behind.
In that sense, AI is not just a new demand driver—it is accelerating a long-standing trend toward concentration in a handful of global gateway markets.
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