New York City's commercial real estate market is experiencing a significant surge driven by cash-rich artificial intelligence (AI) startups, even as many of these newly leased offices remain largely empty. According to real estate services firm JLL, AI companies signed leases for over 845,000 square feet in 2025, with leasing activity nearly doubling in the first quarter of the current year. This trend, highlighted by The Wall Street Journal, reveals a paradox where a booming market coexists with numerous vacant desks.
Many AI firms are securing spaces 60% larger than their current employee count, a strategy driven by aggressive growth projections and the desire for prime locations. Blake Anderson, founder of AI-powered mobile-app-development company 10x, leased a 3,000-square-foot SoHo loft for $28,500 a month, initially for just one employee. "Man, are we swinging too high?" Anderson reflected on seeing the numerous empty desks.
The decision to lease oversized offices is often strategic, aiming to secure high-end spaces in desirable downtown Manhattan neighborhoods like SoHo, Flatiron District, and NoMad. Companies seek to establish credibility with clients and attract top talent, even if their current local workforce is minimal. Caitlin Leksana, CEO of Fazeshift, noted, "We had a customer literally ask us if we were in person as part of their diligence process."
Landlords, while wary of dot-com era defaults, are betting on the financial strength and projected growth of these AI startups. They conduct thorough due diligence, scrutinizing balance sheets and business plans, almost as if making an investment. Despite the low initial occupancy, strong demand allows landlords to push for standard 7-to-10-year lease lengths, forcing startups to make long-term real estate commitments based on future needs.
Some companies have successfully grown into their larger spaces, validating this forward-looking approach. For example, AI health startup Adonis leased a 25,000-square-foot office at 3 World Trade Center with only 25 employees and now houses 50-60 of its 85 staffers daily. Co-founder and CEO Akash Magoon stated, "We were basically giving the company a size 12 shoe, and we were size 4 at the time. We figured it would be motivating."
