San Francisco’s AI Leasing Leads National Office Demand in Q1: Report

National office demand reached its highest level since before the pandemic in the first quarter of 2026, according to a new report, with artificial intelligence companies leading the leasing charge.

Software company VTS’s office demand index, which predicts office demand by the size and nature of new tenants entering the market, rose by 18 percent nationally over the fourth quarter of 2025, and annually by 13 percent.

San Francisco took the index’s top spot after several quarters of booming leasing activity, with a 70 percent quarter-over-quarter rise in new office interest. Leasing in the city reached 3.8 million square feet in the first quarter of 2026, according to Savills data, marking its strangest leasing quarter since 2014. VTS previously predicted that San Francisco would see office leasing activity totaling 12.8 million square feet in 2026. 

Lease expansions by growing AI companies dominated the city’s largest deals in the first quarter, led by a 420,000-square-foot lease by Anthropic and a 154,350-square-foot deal by cloud platform Together AI. 

“I don’t think we’ve ever seen the pace of growth come at this velocity,” Ryan Masiello, co-founder and chief revenue officer of VTS, told Commercial Observer. 

Despite being bumped to second place in VTS’s demand index, New York City still reaped the rewards of rising tech employment in the AI sector. AI firms in New York City leased 415,000 square feet in New York the first quarter of 2026, according to JLL, or double the amount of space taken up throughout all of 2025. AI companies’ size requirements are growing, too, with lease sizes averaging 34,500 square feet, a 108 percent rise from 16,600 square feet just one year ago. 

San Francisco and New York City’s legal and financial sectors, both necessary to the industry’s expansion, are also benefiting from the surge. Los Angeles also charted positive office uptake, largely fueled by the creative sector.

“You’re seeing this massive boom from AI, and it’s the services companies around them, financial services and legal services, that then benefit from that growth,” Masiello said.

It’s only a matter of time, he said, before outer office markets like Boston, Chicago and Washington, D.C., also reap the benefits.

“We’re starting to see a real resurgence of tech, but within that, the majority of that growth is coming from AI,” Masiello said. “I think if you look at past cycles, things tend to happen first in New York and San Francisco, and then they tend to bleed into other markets.”

Emily Davis can be reached at edavis@commercialobserver.com.