Executive Summary
- The number of new AI requirements increased 27 percent over the trailing 12 months versus twelve months prior, indicating that AI companies are continuing to enter the market.
- Three markets account for nearly two-thirds of active AI demand, with San Francisco in the lead and New York now ahead of Silicon Valley.
- Venture Capital funding, which remains a large driver of demand for this industry segment, remains concentrated with OpenAI and Anthropic accounting for 68 percent of the $325 billion raised through the first half of the year.
AI Companies Are Entering The Market More Frequently
The count of new AI requirements rose 27 percent in the last twelve months versus the twelve months prior, 644 to 820, indicating that new AI tenants are entering the market more often. 12 of the 17 markets tracked by VTS contributed to the total growth in the count of new AI requirements over the same period. The San Francisco East Bay market saw the biggest growth in requirements, up 130 percent, but off a lower base. Washington DC, San Francisco and New York were the main gateway cities driving new AI requirement demand entering the market.
New York Gains Ground In Active Demand
San Francisco, New York and Silicon Valley account for 64 percent of the 16.9 million square feet of active AI demand, and 55 of the 83 active requirements are sized 50,000 square feet or more. The other 14 markets share the remaining 6 million square feet of active demand.
Within the top three markets, New York moved into second place. Its 2.79 million square feet of active AI demand now narrowly exceeds Silicon Valley’s 2.78 million square feet. New York now also has more large AI requirements of at least 50,000 square feet in the market, with 18 compared with Silicon Valley’s 16.
Venture Capital Funding Remains Concentrated
The capital driving AI office demand is highly concentrated, and funding activity slowed last quarter. Two companies, OpenAI and Anthropic, have accounted for 68 percent of the $325 billion raised through the first half of the year. Total U.S. AI funding fell to $112 billion in the second quarter from $213 billion in the first quarter.
