- AI firms leased 1 million square feet of Manhattan office space in Q1 2026 — more than all of 2025 — and now account for 56% of tech-sector leasing in the borough, more than double their 2024 share, per Cushman & Wakefield.
- Anthropic is nearing a deal for 500,000 sq ft at Hudson Square, while Harvey AI is expanding into 185,000 sq ft at a tower overlooking Madison Square Park and OpenAI’s presence in the Puck Building is transforming SoHo into an AI hub.
- Manhattan is on pace for its best leasing year since 2000 — the dot-com peak — raising comparisons to that era, though key differences include today’s AI firms generating real revenue and landlords now scrutinizing business plans and funding more carefully.
- San Francisco remains the larger beneficiary, with AI accounting for 58% of Q1 leasing there; in Manhattan, AI was just 2% of 42 million sq ft leased last year, though that share is rising rapidly.
What Happened?
Manhattan’s office market is on pace for its best leasing year since 2000, with AI firms emerging as a significant new demand driver. In Q1 2026 alone, AI companies leased 1 million square feet — surpassing the total for all of 2025 — and now represent 56% of tech-sector leasing in the borough, up from less than half that share just a year prior. OpenAI’s footprint in the historic Puck Building has helped turn SoHo into a magnet for AI startups. Anthropic is finalizing a 500,000 sq ft deal at Hudson Square. Harvey AI is expanding to 185,000 sq ft at a Midtown tower. The trend echoes the late 1990s, when dot-com companies leased aggressively across Manhattan before the bust — but with key differences that landlords and analysts say make today’s boom more durable.
Why It Matters?
The parallel to the dot-com era is real but imperfect. In Q1 2000, internet startups accounted for 25% of all Manhattan office leasing activity; today AI is still a fraction of total demand. More important, today’s AI companies are generating substantial revenue and have large corporate customers — making them more creditworthy tenants than loss-burning dot-coms of the late ’90s. Landlords burned by the dot-com collapse are now requiring deeper scrutiny of business plans, funding, and revenue. Still, concerns about AI reducing headcount — and office demand — are growing: a recent CoStar survey found 35% of office market participants expect AI to have a slightly negative effect on demand, up from 23% six months ago.
What’s Next?
The AI office buildout is still in early innings in New York — 40 of 51 AI leases signed in Manhattan last year were under 25,000 sq ft, suggesting most firms are still small. The biggest deals, like Anthropic’s potential 500K sq ft and Harvey’s 185K expansion, are the outliers. San Francisco remains the dominant AI real estate market with 58% of Q1 leasing. The broader question hanging over the sector is whether AI’s labor productivity gains — which could reduce headcount at companies across industries — will eventually crimp the office demand that AI firms themselves are currently generating.
Source: The Wall Street Journal
