AI tenants keep touring Midtown South after Nasdaq's 5.52% fall

Ten AI firms toured Midtown South office buildings before and after Election Day this week, with no signs of an AI leasing slowdown in New York City, Commercial Observer reported.

The Nasdaq fell 5.52% on Thursday, two days after Democrats won control of Congress, leaving the index more than 10% below its Oct. 6, 2026 record. It recovered 1.09% on Friday, Commercial Observer reported. Downballot measures curbing data center development also passed. Market participants said it is too soon to tell whether individual properties will be affected.

For allocators and landlords underwriting Manhattan office space, the selloff moves the diligence question from the building to the tenant. Landlords should watch tenant credit, sublease activity and changes in space requirements, Suhail Tayyeb, a professor at New York University's Schack Institute of Real Estate, told Commercial Observer. Any material hit to owners with heavy AI-tenant exposure will take time to sort out, he said.

SpaceX is looking at 300,000 square feet in Manhattan, Palantir is exploring a 400,000-square-foot lease and Sierra is interested in 250,000 square feet, according to sources cited by Commercial Observer.

Anthropic is looking to expand beyond the 465,530 square feet it leased at 330 Hudson Street in April.

"A stock market sell-off doesn't automatically translate into weaker commercial real estate leasing," Tayyeb said. "The impact depends on whether companies change their hiring, expansion plans or capital commitments." He said the 2000 dot-com collapse and the 2022 tech correction both contributed to weaker leasing and higher sublease availability, but those effects played out over time rather than overnight. Smaller tech firms, which tend to rely more on outside funding, carry more risk than established companies with strong cash flows, he said.

Steven Rotter, executive vice chairman at Newmark, said smaller boutique buildings in Midtown South with startup AI firms may face leasing risk and begin subleasing. More established companies keep growing, he said. AI tenants benefit from flexibility in lease terms to expand or downsize, he added. "The landlords are going to take a deeper dive into the financials and the quality of the business," Rotter said.