- JLL’s Jacob Rowden says office has been expanding for five straight quarters with or without AI, so AI is a meaningful but not primary driver of the recovery.
- AI firms can use almost any well-located office, so no construction is being built just for them, and national inventory has been shrinking, unlike the lab-driven life sciences boom.
- Landlords price startup risk through higher rents, shorter terms, fewer concessions or guarantees, and JLL says layoffs or a spike in sublease space would be the warning signs.
AI tenants aren’t inflating an office bubble, JLL says. In an interview with IREI, research director Jacob Rowden said AI office leasing carries little national bubble risk, since the recovery would look much the same without it.
By his count, the market has been expanding for five consecutive quarters either way.
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Not Another Life Sciences Cycle
Rowden said AI and biotech valuations echo equity-market trends from the early pandemic, but the real estate effects differ. He told IREI that lab building surged from 2020 to 2022, then conditions turned before many projects opened, because labs need specialized power and HVAC. AI firms, by contrast, can work out of nearly any office in a good location.
So no construction is being aimed at AI demand, he said, and office inventory has actually been shrinking nationwide.
Pricing Startup Risk
Landlords can offset the risk of less-established tenants through bigger base rents, shorter terms, tighter concessions or corporate guarantees, Rowden said.
JLL’s Alexander Quinn told IREI that some owners diversify while others deliberately lean into AI. The right call depends on whether the tenant is well-funded or pre-revenue.
On deal structure, Quinn said owners either price up built-out space or shorten terms to limit capital at risk.
Plug-and-Play Wins
Quinn said Bay Area sublease space has fallen sharply, so tenants are hunting for directly available, move-in-ready suites. Rents have climbed to cover the cost of building those out.
He pointed to 575 Market and 211 Main as buildings that invested in that product and leased up.
Zoom Out
The recovery is real but uneven. Trepp’s October data, in our brief on the CMBS delinquency rate, put office at 12.33%, the highest of any property type.
At the strong end, our brief on Vornado’s Q3 leasing reported 30 Manhattan deals totaling 489K SF at a $123 average starting rent.
Why It Matters
Rowden said even a sharp slowdown in AI would not derail office, since AI is a small part of total leasing. That works as a useful stress test for landlords weighing tenant concentration.
The bigger exposure for owners is the credit of each tenant, not the sector label.
IREI framed the question around whether AI could spark another tech-driven real estate cycle. The answer, in JLL’s view, turns on supply: a cycle needs new buildings, and this one is mostly using existing ones.
What’s Next
Continued headcount growth and solid financials at the biggest AI firms would signal staying power, Rowden said. Large layoffs or a jump in sublease availability would be the red flags, and JLL hasn’t seen either yet.
