- Tech leased 1.1 million square feet of New York office space in Q3 so far, surpassing legal to become the market’s second-largest leasing sector behind finance.
- AI companies are driving roughly 60% of tech leasing this quarter, competing for space as Manhattan office supply hits its lowest point since 2020.
- Flatiron remains the top tech submarket, while Hudson Square, the Penn District and Downtown are emerging as alternatives for space-constrained tenants.
New York’s tech sector has overtaken legal to become the city’s second-largest office sector, trailing only finance, according to a September JLL report cited by GlobeSt.com. Tech tenants have leased 1.1 million square feet across the metro so far in the third quarter, a pace JLL Managing Director Joe Sipala called one of the “busiest summers” for office leasing the brokerage has seen in some time.
Get Smarter About What Matters in New York
Subscribe to our free newsletter covering the biggest commercial real estate stories across the five boroughs — delivered in just 5 minutes.
AI Takes the Wheel
Sipala attributes much of the surge to artificial intelligence. AI is driving roughly 60% of tech leasing this quarter.
“I think [this] is because of the nature of the demand that we’re seeing from growing AI companies of all sizes, from 5,000 to 100,000 square feet, tied to this fight for supply,” he said.
That scarcity is compounding. Colliers’ August office report found that Manhattan supply has fallen to its lowest level since September 2020.
As a result, AI tenants of every size now compete with established finance and law firms. They are all targeting the same shrinking pool of space.
The Details
Much of the demand traces back to New York’s talent pipeline. A third-quarter 2025 JLL report found that the city’s population of residents with a graduate degree or higher has grown 18% since 2019.
Sipala also said New York remains a top destination for college graduates.
“College graduates have been coming to New York, and it’s been a number one city for college graduates,” he said.
Startups are also poaching talent from larger employers like Amazon and Meta. They are no longer competing only for fresh graduates.
Instead, startups are recruiting workers from firms with large and established city operations.
Flatiron remains the submarket that every tech tenant asks about first, according to Sipala. Madison Square Park and Union Square follow as competitive alternatives.
Their appeal comes largely from their central location. The corridors offer convenient access for workers commuting from Brooklyn and the broader tri-state area.
Zooming Out
Beyond the core Flatiron corridor, Sipala pointed to Hudson Square as another area gaining momentum.
The Hudson Square Properties joint venture owns a 13-building office and retail portfolio there. Sipala described the area as “a real tech campus of buildings.”
He also flagged the Penn District and parts of Downtown Manhattan as emerging options. The World Trade Center area is one example.
These areas could attract tenants priced out of Flatiron or unable to find available space.
The pattern echoes broader momentum in how premium offices are pulling ahead. Tenants continue to compete for the best-located and best-amenitized space.
Why It Matters
Despite the surge, Sipala does not expect tech to hold its new rank for long. He predicts law will reclaim second place.
Finance and law tenants have more visibility into their future space needs, he said. Growth-stage AI companies face more uncertainty.
“I think that will consistently keep law and finance ahead because they have a little more of a gauge on their future versus tech and AI,” he said.
That caution also appears in how AI-adjacent tenants commit to space.
General Atlantic signed a 150,000-square-foot lease at 625 Madison Avenue. The 53-story tower is slated to open in 2029.
Sipala highlighted the deal because tech-oriented firms rarely commit to ground-up developments at that scale.
He said it has also been a while since he saw a tech tenant commit to 150,000 square feet or more for new construction.
The dynamic tracks broader findings on AI office demand. Demand has concentrated in trophy and prime space rather than spreading evenly across the market.
What’s Next
The key question is whether AI and tech firms will keep expanding. Another question is whether they will become more comfortable committing to new developments.
Limited inventory continues to shape how quickly these companies can grow.
Sipala expects tech to remain a competitive force in New York leasing. However, he believes the sector could eventually give its second-place ranking back to law.
For now, New York offers a combination of deep talent, a commanding finance sector, and constrained office supply. Those factors continue to shape how tech and AI tenants compete for space.
The longer-term question is how the sector’s footprint will evolve.
