San Francisco Reclaims Lead in Office Demand as Growth Broadens Beyond Tech

-- Q3 report finds national office demand cooling from the prior quarter but holding above year-end 2025 levels as the gap between markets narrowed and Los Angeles posted the strongest annual gain, driven largely by non-tech demand --

NEW YORK--(BUSINESS WIRE)--National office demand slowed in the third quarter but remained above year-end 2025 levels as performance across major markets grew more even and AI demand shifted toward a larger number of smaller requirements, according to the latest VTS Office Demand Index (VODI). The national VODI finished Q3 at 67, down 11 percent from the prior quarter and 7 percent year-over-year. Even with the slowdown, the index remained 3 points above year-end 2025 and posted the second-highest third-quarter reading since 2020, behind only Q3 2025.

Technology remained the most important demand driver in the market, though its shape is changing. Tech demand fell 35 percent from the prior quarter, a decline led by New York, where tech requirements fell by half. Outside of technology, requirement demand rose 4 percent year-over-year, and over the trailing 12 months technology demand increased 25 percent and creative demand 27 percent. AI firms now account for more than half of technology square footage and a third of technology requirements across the 17 markets VTS tracks for AI demand. Over the trailing 12 months, the number of AI requirements increased 24 percent while their combined square footage held roughly flat as more AI companies entered the market with smaller requirements.

“AI is still the most important source of new office demand, but it is entering a more mature phase as a growing number of AI companies come to market with more measured space needs,” said Nick Romito, CEO of VTS. “At the same time, markets like Los Angeles are showing that durable demand can come from a broad mix of industries and that is helping close the gap between the market leaders and the rest of the country.”

The third quarter narrowed the gap between office markets. San Francisco reclaimed the top spot with a VODI of 87, gaining 21 points since year-end 2025, more than any other market. It holds nearly a third of national AI demand, though it remains down 34 percent year-over-year following an exceptionally strong Q3 2025. New York followed closely at 84, up 8 percent year-over-year, as finance demand rose 18 percent year-to-date and the market added more AI square footage over the trailing year than any other. Los Angeles posted the strongest annual VODI growth among tracked markets, rising 19 percent year-over-year as creative, finance, legal and professional services demand each grew more than 30 percent year-to-date. Washington, D.C. rose 11 percent year-over-year as government demand increased 64 percent year-to-date.

Elsewhere, short-term improvements did little to change the annual picture. Seattle recorded the largest quarterly gain of any market, up 59 percent on mid-size and non-tech demand, but remained down 27 percent year-over-year. Boston rose 7 percent from the prior quarter but is down 13 percent year-over-year. Both markets have yet to recover the large-block demand that lifted them in late 2025. Chicago was the weakest market in the index at 33, down 23 percent year-over-year and 18 points below year-end 2025, as legal demand, its largest professional services sector, fell 48 percent year-to-date.

“More AI companies are in the market for office space, even if their combined footprint isn’t growing, and that gives owners more opportunities to compete for those tenants,” said Ryan Masiello, Chief Strategy Officer of VTS. “What’s particularly exciting is that many of these are early-stage, venture-backed businesses. They may be taking relatively small spaces today, but they represent the seeds of future growth as they scale, hire and expand their footprints. At the same time, growing demand from finance, legal, creative and government tenants means the leasing opportunity now extends well beyond AI.”

	National	BOS	CHI	LA	NYC	SF	SEA	DC
Current VODI (September/Q3)	67	47	33	64	84	87	51	49
Quarter-over-Quarter VODI Change (%)	-10.67%	6.82%	3.13%	-9.86%	-16.00%	-8.42%	59.38%	-23.44%
Quarter-over-Quarter VODI Change (pts.)	-8	3	1	-7	-16	-8	19	-15
Year-over-Year VODI Change (%)	-6.94%	-12.96%	-23.26%	18.52%	7.69%	-33.59%	-27.14%	11.36%
Year-over-Year VODI Change (pts.)	-5	-7	-10	10	6	-44	-19	5

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With the VTS Platform, consisting of VTS Lease, VTS Market, VTS Activate, and VTS Data, every stakeholder in real estate is given real-time market information and workflow tools to do their job with unparalleled speed and intelligence. VTS is the global leader, with more than 60% of Class A office space in the U.S., and 13 billion square feet of office, residential, retail, and industrial space is managed through the platform worldwide. VTS is utilized by over 45,000 professionals and over 1.2 million total users each day, including industry-leading customers such as Blackstone, Brookfield Properties, LaSalle Investment Management, Hines, BXP, Oxford Properties, JLL, and CBRE.