AI Disruption Fears Rattle Commercial Real Estate Stocks

The U.S. office vacancy rate hit a historic high of 20.5 percent in the fourth quarter of 2025, a recent report shows.

People work in an office development, in this file photo. Oli Scarff/Getty Images

News Analysis

Artificial intelligence-related concerns that triggered a sell-off in enterprise software stocks the previous week extended to commercial real estate shares last week, contributing to a broad decline reminiscent of sector losses during the 2008–2009 Great Recession following the subprime crisis.

Despite a modest rebound on Feb. 13, share prices of CBRE Group (CBRE), one of the largest commercial real estate services firms, fell by 17 percent for the week. Cushman & Wakefield (CWK) share prices dropped by 21 percent, while Newmark Group (NMRK) share prices declined by 13 percent.

The pullback in both software and commercial real estate stocks reflects what some investors describe as a new phase in the AI trade, with attention shifting from the technology’s growth potential to its possible disruptive effects.

The link between AI’s disruptive potential and the decline in enterprise software shares appears more direct. Claude, a large language model and chatbot developed by Anthropic, has the potential to turn enterprise software into a “commodity,” reducing the need for expensive subscriptions to software-as-a-service platforms.

AI Disruption

However, the connection between AI adoption and commercial real estate is less clear.

“Investors are dumping the service-based stocks because they are afraid these services can get replaced by AI, as AI improves and gets more powerful,” Caleb Reits of City Lights Home Buyers, an investor in Grand Rapids, Michigan, told The Epoch Times.

“Most commercial real estate service firms make a profit, not only on transactions but also on workflow advisory. The services are often required for large teams. Think of things like property management, evaluation and comparison, models, due diligence reports, and company evaluation memos.”

At the same time, AI-driven efficiency gains could reduce the need for office workers in service firms, lowering demand for commercial office space.

Reduced office demand could push vacancy rates higher. Vacancy rates have been rising for more than two decades as remote work increasingly replaces traditional office work. According to a recent Cushman & Wakefield report, the overall vacancy rate in the United States stood at a historic high of 20.5 percent in the fourth quarter of 2025.

Elevated vacancy rates have already pressured industry profit margins. CBRE’s gross margin fell to less than 20 percent in 2025 from the upper 40 percent range in 2011.

Cushman & Wakefield’s margins have been more volatile over the same period but have generally remained between 15 percent and 20 percent.

Some industry participants caution that fears of a collapse in commercial real estate demand may be overstated.

“The rise of AI is impacting all industries right now, and the commercial real estate ... services are no different,“ Adam Craig, CEO of GoDocs, told The Epoch Times. ”The idea that AI will disrupt the traditional brokerage and advisory business model isn’t illogical, but I do think it is unlikely. It is going to be a long time before people trust pure AI models with financial transactions.”

He said productivity gains, countertrends, and incentives offered by cities may eventually benefit the industry.

“While the rise of AI may mean less demand for office space, there are countertrends, such as increased onshoring and a return to the office that will help balance demand,“ Craig said. ”Add in that many cities are offering incentives to convert office to much-needed multi-family units, and I think you will see a healthy [commercial real estate] market over the next several years.”

Competition for Financing

Another challenge for commercial real estate tied to AI expansion is competition for financing.

Data center developers—including Oracle, Meta, and Alphabet—have announced plans to invest hundreds of billions of dollars, largely financed through corporate debt markets.

Increased borrowing demand could lift corporate bond yields, raising the cost of capital for debt-heavy commercial real estate firms. CBRE carries nearly $10 billion in total debt, equal to about 103 percent of equity. Cushman & Wakefield has $3.11 billion in debt, or roughly 159 percent of equity. Newmark’s total debt stands at $2.66 billion, or approximately 163 percent of equity.

Reits said that it remains unclear whether AI alone drove the recent sell-off but that he casts a wary eye on the office inventory.

“A lot of speculations out there, it was 100 percent AI, or maybe it was 100 percent politics, or maybe it was because office distress is at an all-time high,” he said.

“I don’t think anyone knows the exact recipe for the economic dish we have in front of us. But I do believe AI is the catalyst, while the current distress in office inventory is the gasoline creating a bigger fire. We will have to pay close attention to see how this turns out.”