Post-Election Tech Selloff May Hit Properties Linked to AI

Thursday’s massive sell-off of technology stocks following resounding Republican losses in Tuesday’s midterm elections reverberated throughout the artificial intelligence industry, but it is too soon to determine whether a number of commercial real estate properties could also be caught up in the political crosshairs, market insiders said. 

The tech-dominated Nasdaq stock index tumbled 5.52 percent Thursday two days after the Democrats seized control of Congress and downballot measures curbing data center development succeeded, leaving the fate of many of those projects up in the air. Following Thursday’s bloodbath, the Nasdaq was down more than 10 percent from a record high achieved on Oct. 6, 2026, before recovering 1.09 percent on Friday. 

Suhail Tayyeb, a professor at the New York University Schack Institute of Real Estate, stressed that any material hits that may face office owners who have heavy exposure to AI tenants will take time to sort out. 

“A stock market sell-off doesn’t automatically translate into weaker commercial real estate leasing,” Tayyeb said. “The impact depends on whether companies change their hiring, expansion plans or capital commitments.”

There were certainly no signs of any AI leasing slowdown in New York City this week. Ten AI firms toured various office buildings in Midtown South both before and after Election Day, according to a source.  

The AI interest in the Big Apple includes SpaceX looking at 300,000 square feet, Palantir exploring leasing 400,000 square feet, and Sierra interested in leasing 250,000 square feet, according to sources. Anthropic is also looking to expand in Manhattan beyond the 465,530-square-foot lease it signed at 330 Hudson Street in April.  

Tayyeb noted that the 2000 dot-com collapse and the 2022 tech correction both contributed to weaker leasing and increased sublease availability, but those effects played out over time rather than overnight. He said office landlords should be tracking the credit condition of tenants, sublease activity and any changes in space requirements. Smaller tech firms, which tend to depend more on outside funding, are more at risk than established companies with strong cash flows, he added. 

Steven Rotter, executive vice chairman at Newmark, said that while smaller boutique buildings in Midtown South with startup AI firms may face some leasing risks and begin subleasing, more established companies will continue to grow their footprints. Rotter said it is important for AI tenants to establish flexibility with their leasing terms to expand or downsize if needed, and he expects property owners to scrutinize companies more when signing tenants. 

“The landlords are going to take a deeper dive into the financials and the quality of the business,” Rotter said. “You have to understand the financial stability of the business and need to understand who your client is, and make sure they can tell the story well enough that the landlord believes in them too.” 

In addition to Democratic gains in Congress and in states’ governors’ mansions, the midterms also featured 41 ballot measures that sought to put restrictions on data centers. All passed, with the exception of one referendum for a project in North Dakota.

Brendan Wallace, founder and CEO at proptech venture capital firm Fifth Wall, said the negative sentiment toward data centers on Election Day underscores how Silicon Valley has not yet made the case for why AI can be beneficial to voters’ lives. Wallace said he hopes the overwhelming rejection of data centers from the American electorate can prove to be a catalyst for the AI industry, which he said must improve its communication efforts and explain why the technology can be a positive. 

“I believe that the U.S. needs to invest in digital infrastructure to scale, and I think it’s a geopolitical imperative and an economic imperative, and that AI done right can increase the pie for everyone,” Wallace said. “But I’m also a pragmatist around the fact that all that can be true, but if you can’t tell a good story you won’t be able to actualize it.” 

Wallace noted that 26  gubernatorial candidates in 21 states this year ran on anti-data center platforms, with $173 million spent on mostly negative data center ads nationally. He also stressed that Ohio voted down 21 data center measures, with outright bans overwhelmingly passing with up to 76 percent of the vote.

Another major hit to data centers came in Texas, which voted out incumbent Republican Gov. Greg Abbott and elected Democrat Gina Hinojosa, who promised to put a moratorium on these projects on her first day in office. Before the election, Texas was projected to overtake Virginia as the No. 1 data center market in the U.S., according to a JLL report in April. 

Tayyeb said demand for computing capacity won’t change because of declines in tech stocks or other factors, yet the AI sector faces headwinds that threaten many data center proposals.

“Sustained pressure on valuations and access to capital can affect financing, leasing commitments and development decisions,” Tayyeb said. “It’s also worth distinguishing between hyperscalers that can fund substantial infrastructure investments through operating cash flows and smaller operators that rely more heavily on external capital.” 

Andrew Coen can be reached at acoen@commercialobserver.com.