From AI to Absorption: Office Demand, AI Talent Concentrations, and What it Means for Data Centers

Artificial Intelligence Sector Key Takeaways

AI Companies

Demand for Office Space

AI Talent

• AI Tenant Demand highest in SF Bay Area (2.5 msf). • Most active demand in Silicon Valley. • Austin is the market with the 2nd highest tenant demand, but it is largely concentrated with a single, large tenant requirement.

• AI talent demand is high with 5,550 unique job postings each month on average in the U.S. • California is a powerhouse for AI-related talent. Three California cities are in the top 10 MSA’s for AI talent. • AI-related degree conferrals in the U.S. have nearly tripled since 2010.

• California has the highest concentration of AI firms in the U.S., most of which are in the San Francisco Bay Area. • Spending for AI in horizontal and vertical applications is expected to increase 123% from 2022-2025. • VC funding for AI peaked in 2021 but remained level in 2023 while overall VC funding fell 38%. Horizontal platforms have been the most resilient.

Data Centers

Demographics

Future Trends

• The semiconductor market is expected to see significant growth through 2030. • Spending on data center systems, infrastructure and public cloud services is rising. • Electricity costs vary greatly across states and impact large language model (LLM) training costs. • Rack densities and cooling requirements are rising due to AI.

• Emerging AI markets have seen significantly higher percentage based growth in AI-related employment and degree conferrals than established markets. • Recent college degree holders are moving on a net basis to more affordable metros in the Sunbelt, though there remains an inbound movement to high-priced markets.

• Renewable energy production varies across states. Texas produces the most. • Data center site selection is multifaceted and considers energy, climate, water, regulations, waste and community impact.

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