AI Impact on Gateway Cities

How AI Businesses are Driving Tenant Demand

Key Takeaways

The Bay Area Remains the Global Center of Gravity for AI 
With 3,666 AI/ML companies headquartered across the region and Bay Area firms capturing 81% of global AI venture capital funding in Q1 2026, the Bay Area continues to lead the global AI ecosystem. AI leasing activity remained strong across San Francisco, Silicon Valley, and San Mateo County in Q1 2026, with leasing volume in just one quarter already surpassing 60% of the total 2025 volume across the three markets combined. 

New York City Is Surging
AI leasing in Manhattan reached 1.03 million square feet in Q1 2026, already surpassing all of 2025, supported by dense enterprise demand and a deep talent pool that continues to attract applied AI firms. AI's share of technology-sector leasing climbed from 20.9% in 2024 to 55.9% in Q1 2026, signaling that AI is increasingly underpinning leasing activity within the sector. 

London Is Europe's AI Capital 
AI businesses accounted for 12% of Central London leasing volumes in Q1 2026, up from just 1% in prior years, with momentum continuing into Q2 through more deals, under offers and active requirements in the market. London raised $6.2 billion in AI/ML funding in Q1 2026 alone, more than all of 2025, and saw AI/ML job postings grow 125% in the past 12 months. 

AI Tenants Are Reshaping Office Demand 
Across all three markets, AI occupiers generally favor direct leases and in-office work cultures with employees on-site four to five days per week. Space preferences vary by company, however, with some prioritizing flexibility and value and others seeking out Class A space as a tool for attracting and retaining talent. That range of demand is a positive signal for urban office markets at multiple price points.