Manhattan sublease space disappearing thanks to AI firms

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Sublease space, a shadow that loomed over the Manhattan office market since the pandemic, is fast disappearing.

According to JLL, sublease inventory in the second quarter shrank to below 11 million square feet — less than half of its late-2022 peak of 23 million square feet.

Driving the absorption are tech and AI firms, some of which didn’t exist five years ago. In some cases, landlords took back space from tenants they can re-lease at higher rents.

JLL executive managing director Jamie Katcher said the “most notable development” behind second-quarter momentum is, “how quickly the sublease overhang has been absorbed.

“Growth from AI firms, as well as financial services companies and law firms, is driving long-term leasing decisions, while landlords are increasingly pulling back available sublease space to pursue direct deals at substantially higher rents,” he said.

The glut decline came as AI leasing continued to soar. According to JLL, AI firms signed 21 deals totaling 719,200 square feet to date in 2026 — putting the sector on pace to match or exceed last year’s 845,000 square feet.

Among the largest deals to expand into sublease space were AI healthcare platform Tennr, which added 125,000 square feet of former Google space at 345 Hudson St,; Uber, which grew by 86,000 square feet of previously WPP space at 3 World Trade Center; and Bank of Montreal, which added 82,000 square feet in former Roivant Sciences space at 151 W. 43d St..

Also, AI-driven financial advisory platform Datasite took 76,000 sf at 3 Columbus Circle that was previously leased to global marketing and advertising network VML. Datasite will use the new space for its Grata and Blueflame AI units while keeping its offices at 1345 Sixth Ave.