JLL sees minimal AI office bubble risk as tenants fill existing space

AI companies are largely absorbing existing office space rather than driving new construction, a distinction JLL researchers say keeps the risk of a technology-driven bubble low as the U.S. office market recovers.

“At the moment, there is minimal concern nationally that the office market is experiencing a technology-driven bubble,” Jacob Rowden, research director at JLL, said in a Nov. 5 interview with IREI. Alexander Quinn, executive director of Northwest California research at JLL, joined Rowden in the interview. Remove AI leasing from the past several years, Rowden said, and the office recovery would not change.

For allocators holding office exposure, the risk shifts from the construction pipeline to the lease. Landlords still have to evaluate tenant creditworthiness, lease structure and a tenant's long-term space requirements, the researchers said — the terms that decide whether AI demand behaves like durable occupancy or a short stay.

JLL contrasts the AI build-out with life sciences, where demand for specialized lab space funded construction that ran ahead of demand. Because AI tenants are mostly taking space that already exists, that difference could help limit oversupply risk, the firm says.

The next test is the lease roll: whether the AI tenants expanding now renew the same footprint when their terms expire.