AI Demand Fuels Sunnyvale Office Leasing Surge

CBRE said on May 12 that artificial intelligence investment is accelerating office leasing in the San Francisco Bay Area, with demand clustering in Silicon Valley and particularly in high-quality buildings near talent and transit. The brokerage’s latest Tech Gateway Office Markets report said tech and AI companies leased more than 14 million square feet in San Francisco and Silicon Valley combined in 2025, equal to 55% of total leasing activity in the two markets. Colliers said Sunnyvale led Silicon Valley absorption gains in the first quarter of 2026, driven by large commitments from AI-related tenants. The result is a narrower story than a broad office recovery: even with elevated regional vacancy, landlords with newer, ready-to-occupy space are finding tenants. ### Why is Sunnyvale showing up in this office rebound? Colliers said on April 9 that Sunnyvale led absorption gains in Silicon Valley in the first quarter of 2026, as the broader market posted 436,479 square feet of net absorption for a sixth straight quarter of occupancy growth. The firm said leasing strength came from major technology and AI commitments, including three leases above 200,000 square feet in the quarter. CBRE said Bay Area demand is concentrated in “high-quality, well-located office buildings and innovation clusters,” where access to engineers, venture capital and research institutions shapes leasing decisions. The firm said San Francisco and Silicon Valley have recorded the strongest tech and AI office demand growth among the markets it tracks. (colliers.com) ### What kind of space are tenants taking? CBRE’s report points to premium buildings rather than the market as a whole. The company said AI-driven leasing has been strongest in top-tier space, even as vacancy remains high across many office districts. In Silicon Valley, that has favored buildings that can be occupied quickly and campuses close to existing tech hubs, according to the report and CBRE’s Bay Area release. (cbre.com) Databricks is one example in Sunnyvale. The company said it will move into a new office in Sunnyvale in late 2026, expanding its Bay Area footprint as it hires across functions. Commercial real estate publications reported that lease covers the full 305,000-square-foot building at 200 W. Washington Ave. in downtown Sunnyvale. (cbre.com) ### How big is the AI effect in the Bay Area? CBRE said AI companies have leased about 21 million square feet in San Francisco and Silicon Valley since 2019, a volume it compared with 15 Salesforce Towers. The brokerage also said U.S. tech companies accounted for 16.8% of all office leasing in 2025 and 22.7% in the first quarter of 2026, helped by large AI deals. (databricks.com) The capital behind that expansion is concentrated in the Bay Area. CBRE said U.S.-based AI companies have attracted $578 billion in venture capital since 2020, with roughly 80% going to the San Francisco Bay Area. Colin Yasukochi, executive director of CBRE’s Tech Insights Center, said that shift from experimentation to deployment is translating into office demand in markets with deep tech labor pools. (cbre.com) ### Are other companies making similar South Bay moves? Pinterest signed a long-term lease for a 125,000-square-foot office building at 285 Sobrante Way in Sunnyvale in March, according to industry reports. Those reports said the building sits near the Sunnyvale Caltrain station and that Pinterest was reducing space in Palo Alto as part of the move. (cbre.com) Mountain View has also drawn large AI-related commitments. Colliers cited OpenAI’s 447,000-square-foot lease as one of the transactions that supported Silicon Valley absorption in the first quarter, while multiple real estate publications reported a roughly 439,000- to 450,000-square-foot Mountain View campus lease. (therealdeal.com) ### What should readers watch next? CBRE said more than five million square feet of active tenant demand from tech and AI firms remains in both San Francisco and Silicon Valley. That pipeline suggests the next test for Sunnyvale will be whether newer Class A projects continue to fill while older offices remain under pressure. (colliers.com) Late 2026 is one concrete milestone. Databricks said it expects to move into its new Sunnyvale office then, giving the market another visible measure of whether AI-led leasing is translating into occupied space rather than signed paper. (databricks.com) (cbre.com)