Manhattan Sublease Space Vanishes as AI Firms Fuel Demand
Absorption of available office space accelerates, driven by tech and AI sector growth.
Sublease space in Manhattan's office market has rapidly diminished, falling to less than 11 million square feet in the second quarter, according to a report by JLL. This represents a significant drop from its peak of 23 million square feet in late 2022.
The absorption is largely attributed to the expansion of technology and artificial intelligence (AI) firms, some of which are relatively new. In some instances, landlords have reclaimed subleased spaces to re-lease them directly at higher rental rates.
Jamie Katcher, executive managing director at JLL, highlighted the swift absorption of the sublease market as a notable development. "Growth from AI firms, as well as financial services companies and law firms, is driving long-term leasing decisions, while landlords are increasingly pulling back available sublease space to pursue direct deals at substantially higher rents," Katcher stated.
The decline in available sublease inventory coincides with continued strong leasing activity from AI companies. JLL data indicates that AI firms have signed 21 deals, totaling 719,200 square feet, year-to-date in 2026. This pace suggests the sector is on track to meet or surpass the 845,000 square feet leased in the previous year.
Several prominent companies have recently expanded their footprint by taking over sublease spaces. AI healthcare platform Tennr secured 125,000 square feet of former Google space at 345 Hudson Street. Uber leased 86,000 square feet of previously occupied WPP space at 3 World Trade Center. The Bank of Montreal also expanded by 82,000 square feet in space formerly leased by Roivant Sciences at 151 West 43rd Street.
Additionally, Datasite, an AI-driven financial advisory platform, acquired 76,000 square feet at 3 Columbus Circle. This space was previously leased to VML, a global marketing and advertising network. Datasite intends to utilize the new area for its Grata and Blueflame AI units, while maintaining its existing offices at 1345 Sixth Avenue.