SAN JOSE — A new report shows that AI tech companies helped fuel office leasing activity in Silicon Valley in 2024, raising hope that the fledgling industry could help revive deals to fill empty commercial spaces.
The assessment by Colliers, a commercial real estate firm, could provide a welcome counterpoint to the current sky-high levels of vacant office spaces throughout the Bay Area.
“Artificial Intelligence has become a major driver of tech leasing,” Colliers stated in its new report about the AI sector’s widening effect on deals for office and research buildings.
The report suggests multiple components of the tech industry could help lead the upswing.
“Recent growth and funding in artificial intelligence and machine learning has increasingly driven demand for Silicon Valley commercial real estate,” Colliers stated in its report. For this report, Silicon Valley is defined as Santa Clara County, Menlo Park and Fremont.
Companies involved in the AI and machine learning sectors accounted for more than 50% of the tech industry’s leases in Silicon Valley during 2024, Colliers reported.
In 2023, the machine learning and artificial intelligence sectors represented about 10% of the tech leases, Colliers estimated. From 2019 through 2023, that share never reached even as high as 20%.
“The Silicon Valley market still has significant room for recovery,” Colliers stated, referring to the stubbornly high levels of office vacancies in the South Bay, San Francisco and East Bay markets.
In a further sign of hope, leasing volume jumped 22.9% in 2024, although deal volume was down from the 2022 level, according to Colliers.
Venture capital funding, especially if it’s directed towards the artificial intelligence and machine learning sectors, could spur fledgling tech companies to expand in a big way — and demand more office space — Colliers suggested.
“No other commercial real estate market in the U.S. benefits more from venture capital than Silicon Valley and the greater Bay Area,” Colliers reported. “Growth from AI and other industries is expected to be a major demand driver.”