T
he US office leasing market has seen a significant boost from the tech industry, with AI companies playing a key role in this growth. According to CBRE's Tech-30 report, tech companies now account for 18% of U.S. office leasing activity, up from 14.2% last year and surpassing Finance & Insurance (16.5%) and Professional & Business Services (15.7%). This marks a comeback for the tech industry after layoffs in 2023 and a slowdown in venture capital funding.

    In Canada, tech companies occupied 15.2% of office leasing activity in the first three quarters of this year, up from 10.3% last year. However, they still trail Professional & Business Services (18.5%) and Finance & Insurance (16.8%).

    AI-related firms are contributing to the industry's growth, with AI startups leasing over 10 million square feet since 2019 in top venture capital markets such as San Francisco, Silicon Valley, Boston, Los Angeles/Orange County, and Manhattan.

    Despite challenges from hybrid work, layoffs, and inflation, the tech sector's cumulative leased square footage this year leads all others. Key tech submarkets like University City in Philadelphia, Nashville's central business district, and North Loop in Minneapolis have achieved positive net absorption, driven by newer, higher-end office buildings with a 10.1% rent premium.

    Sublease space offered by office tenants remains high at 162 million square feet, but has decreased from its peak last year. Tech companies account for 27% of this sublease space, up from 12% in 2019. This presents challenges for office investors, creating competition that can lower tenant rates and reduce income as leases expire.

    The pace of recovery for tech markets will depend on each location's tech talent, presence of AI companies, and local office-attendance policies. Employment and office market indicators signal momentum for tech and its growth driver, AI.