Rising Tide Not Lifting All Boats

AI companies are leasing office space in San Francisco at an accelerating pace. Demand spans the spectrum, from Series A startups to Anthropic, which recently signed a lease for just under 500,000 square feet. Yet the market remains deeply bifurcated. The best buildings are seeing real competition. Commodity assets are not.

This creates an existential question for owners of smaller buildings that lack views, scale, or high-end amenities: how do you stay relevant?

There are two viable paths.

The first is to lean into AI, but with discipline. Owners of commodity buildings should not expect to win mature AI tenants. That ship has sailed. The opportunity lies earlier. Early-stage startups struggle to find space that is move-in ready, flexible, and available on short terms. That segment is underserved. It carries more risk and higher churn, but it also delivers faster velocity and higher revenue per lease. Buildings that solve this problem can remain competitive by embracing flexibility rather than fighting it.

The second path is to zig while the market zags. Ignore AI entirely. Position the building as a refuge for tenants being priced out of a tech-dominated market. This strategy works best for Tier 3 assets with a low cost basis. The advantage is price. By leasing at a meaningful discount, these owners can capture demand from companies shut out of Tier 1 and Tier 2 buildings. The key is focus. Compete on affordability, not amenities you cannot credibly deliver.

The takeaway is simple. AI is not lifting all boats. It is widening the gap. Owners who understand which side of that divide they’re on, and act accordingly, can still differentiate their offering and achieve leasing success.