AI Firms Trade Short-Term Office Deals for Long-Term Leases

AI companies are becoming a major source of office demand in San Francisco and Manhattan, and the way they lease space is changing. After years of taking discounted subleases, more are signing direct deals for larger spaces and longer terms, according to a Savills and CompStak report.

AI firms leased 2.9 million square feet in San Francisco during the first half of 2026, exceeding their volume in any previous full year. They accounted for 31.3% of the city's new leasing activity. In Manhattan, AI firms leased 1.7 million square feet in six months — more than they leased in 2024 and 2025 combined — and represented 8.2% of new leasing.

From San Francisco to Manhattan 

The activity is focused in a handful of submarkets where available space has fallen faster than in the broader markets. From the fourth quarter of 2023 through the second quarter of 2026, availability dropped 19.2 percentage points in San Francisco's Mission Bay/Showplace Square and 11.2 points in Manhattan's Park Avenue South. Both declines were roughly twice those of their respective markets, the report said.

Some of the largest AI leases have filled blocks vacated by earlier technology tenants and, in Manhattan, by financial and professional services firms. That supply of discounted, ready-to-occupy space is dwindling.

Subleases represented 44.9% of San Francisco AI leasing volume and 42.3% of Manhattan's from 2020 through 2024. Those shares fell to 23% and 17.5%, respectively, from 2025 through the first half of 2026. Sublease rent discounts also narrowed in both cities.

Class A Properties 

Class A properties captured 62.4% of San Francisco AI leasing volume in the more recent period, up from 57.7% in 2020 through 2024. Manhattan's share rose from 48.6% to 63.7%.

In Manhattan, the average AI lease term increased from 49 months in 2020 to 90.9 months in the first half of 2026. San Francisco's average reached 58.6 months. Starting rents on direct AI leases rose to $93.85 per square foot in Manhattan and $76.17 in San Francisco for deals signed from 2025 through mid-2026.

The report points to hiring as a sign that demand could continue, while cautioning that the connection between job postings and space needs is imperfect. AI job postings rose 216.2% in New York and 116% in San Francisco between August 2025 and August 2026.