Traders' concerns that broader adoption of artificial intelligence tools could negatively impact office space demand led to a sharp decline in commercial real estate stocks on Thursday. This extended a sector-specific selloff that began on Wednesday. Shares of major commercial real estate services firm CBRE Group Inc dropped 8.8%, bringing its two-day decline to 20% and marking its worst performance since 2020. Jones Lang LaSalle fell 7.6% on Thursday, while Cushman & Wakefield declined 12% and Newmark Group decreased by 4.2%. An index tracking office real estate companies fell 4.2%. Significant decliners within the index included SL Green Realty Corp., Cousins Properties Inc., Kilroy Realty Corp., and BXP Inc.
REITs analyst Jeffrey Langbaum stated, "Concerns about increasing AI applications leading to reduced office demand have been present for some time; this is not a new issue. However, following yesterday's selloff in brokerage stocks, we are seeing these worries spread to actual office space providers." The two consecutive days of declines in real estate stocks represent one of the latest manifestations of what analysts term "AI risk-off trading."
Morningstar analyst Sean Dunlop commented, "Across the broader financial services sector, we are in a 'ready to fire' environment. Given widespread concerns about AI disruption, investors are reacting strongly even to minor earnings disappointments." Investor anxiety about AI disrupting business models intensified following startup Anthropic's release of new tools. This has triggered significant selloffs across multiple market sectors over recent weeks—beginning with software makers, then spreading to private credit firms, insurance companies, wealth management providers, real estate services, and logistics companies.
Jefferies analyst Joe Dickstein noted, "The market is pricing in the potential risk that AI could lead to substantial job losses in positions that heavily utilize office space." Conversely, analysts and investors warned that some of the recent aggressive selling reflects traders' knee-jerk reactions, which may be overestimating the associated risks.