Struggling Cities Face More Pain From AI Boom

Artificial intelligence is likely to transform our world in many ways, but one that hasn’t received much attention is the technology’s looming impact on real estate. As AI becomes an essential component of both business and daily life, the value of places where those who work on AI want to live will rise, provided these locales have reasonable infrastructure. At the same time, the value of lower-tier cities left out of the AI boom will diminish.

One notable feature about artificial intelligence is that it can make many companies smaller. AI can do a lot of the work that previously would have required a large office staff. Not surprisingly, the companies that use AI best are AI companies themselves. Clearview, a facial-recognition company that has had a major impact on the war in Ukraine, has only 35 employees. OpenAI during the time when it developed GPT-4 had fewer than 300 workers. Anthropic, an OpenAI spinoff, has about 200 employees.

The more that companies adopt AI, of course, the more those companies will look like and be run like the AI companies themselves. With fewer workers around, commercial real estate, already reeling from a shift to work from home, will suffer.

That said, in certain places land will become much more valuable, as companies choose to locate near AI centers to access the labor markets for AI researchers, or to learn about AI from the industry’s leading actors. I predict a major real estate comeback for San Francisco and nearby environs, and probably gains for Manhattan as well. Across the Atlantic, parts of southern England and Paris may see much higher prices.