Manhattan, once the poster child for the nation’s post-COVID office market malaise, is back and booming.
Crain’s New York Business reports that leasing activity this year in Manhattan has reached 19.6 million square feet. If demand for office space remains at the same level for the rest of the year, the glittering center of New York will be on track to have its best leasing year since 2000. Supply is also at its lowest level since October 2020, and rents are beginning to rise.
The turnaround is partly due to the expansion of companies developing artificial intelligence. According to The Wall Street Journal, large and small AI firms leased 1 million square feet of Manhattan office space in the first quarter of this year alone — which was more than they leased in all of 2025 — and AI firms accounted for 56% of all tech-sector leasing during the quarter.
New York is not alone. Across the country, AI is fueling a property boom in office and industrial space, with massive data centers being built in places such as Abilene, Texas; Mount Pleasant, Wis.; and Holly Ridge, La., to name a few.
The region experiencing the largest AI impact is the San Francisco area. More than 90 AI companies are based in the Bay Area, leasing 13.4% of San Francisco’s occupied office space, according to an Avison Young report.
Deepening discontent
However, despite AI’s potential for spurring economic growth, a public backlash is brewing over the infrastructure, water and power demands that AI data centers place on host communities.
The Seattle Times reports that more than 70 cities and counties across the United States have announced temporary or permanent bans on the construction of data centers. The most recent city to join the list is Seattle, where on June 9 city council members unanimously approved a one-year moratorium on new large data centers so city officials could study the impacts of such projects.
The council decision came after a group of companies proposed building five large data centers in Seattle with a combined maximum power demand of 369 megawatts, which is about one-third of the total electricity used by Seattle on an average day. Local power officials said the increased energy demand would make it difficult to meet the city’s current needs.
Earlier this month, Illinois Gov. JB Pritzker halted new state tax incentives for data centers, while the New York State Legislature became the first in the nation to pass a bill that calls for a statewide one-year moratorium on data centers with a peak energy demand of 20 megawatts or more. The bill is currently on Gov. Kathy Hochul’s desk, and she is reviewing the legislation.
