Artificial intelligence (AI) is no longer just a technological advancement—it is a fundamental force reshaping industries at their core. In commercial real estate (CRE), particularly in the office sector, AI is disrupting long-standing assumptions about space demand, usage patterns, and tenant expectations. Recent research from McKinsey, CRE Daily, and GlobeSt clearly signals that the traditional office leasing playbook is changing.
Labor Market Signals Are Becoming Harder to Read
While headline employment numbers may appear stable, underlying labor market dynamics are shifting in complex ways. Factors such as demographic changes, increasing automation, and evolving workforce preferences are making it increasingly difficult to accurately forecast long-term office space needs. The historical correlation between employment growth and office demand is changing, with many roles being redefined or phased out, while new, often more flexible job functions emerge.
Moreover, the nature of growth varies widely across sectors and geographies. Some industries are expanding but with roles that require less traditional office presence. Others are restructuring teams and workflows, leaving many companies uncertain about how much physical space they actually need. These forces create a high degree of ambiguity, complicating CRE teams’ efforts to predict and plan for future leasing trends.
AI’s Disruption Is Already Echoing in the Office Market
AI’s impact on the workforce is profound and accelerating. Automation is reducing demand for routine office-based functions in several industries, while hybrid and remote work models—now widely accepted—continue to suppress office occupancy rates. Consequently, vacancy rates in major markets remain elevated.
Projections estimate that by 2030, up to 92 million jobs worldwide could be displaced by automation, while simultaneously 170 million new jobs may be created. The critical challenge for CRE is not just the number of jobs but their nature—where they are located, the types of roles being filled, and how physical office spaces are configured to support these new workflows. Some organizations foresee expanding headcounts enabled by AI, but with a reduced need for traditional office footprints. Others anticipate leaner, more agile space usage.
The Future of Office: Flexibility Over Footprint
The shift in office demand extends beyond downsizing. It represents a comprehensive redefinition of the office environment. Offices that foster collaboration, leverage advanced technology infrastructure, and accommodate hybrid work schedules will emerge as winners. The value proposition of office space is increasingly tied to experience and adaptability rather than sheer square footage.
Class B and C buildings—often lacking modern amenities and technological capabilities—face heightened risk. Without targeted investments in modernization and repositioning, these properties will struggle to compete against newer, tech-enabled spaces designed for today’s workforce. CRE owners must prioritize delivering flexible, amenity-rich environments that align with the expectations of hybrid employees and technology-driven workflows.
What This Means for CRE Teams
Proactive teams will focus on three critical areas:
- Asset Modernization: Upgrading infrastructure to support advanced technology and flexible work arrangements.
- Space Repositioning: Redesigning layouts to emphasize collaboration zones, shared spaces, and adaptable configurations.
- Demand-Aligned Marketing: Refining outreach to target tenants seeking innovative, hybrid-ready office solutions.
By embracing these strategies, CRE teams can not only mitigate risk but also seize new opportunities presented by AI-driven workforce transformations. The ability to anticipate change and respond decisively will be the defining factor in success as office demand evolves.
