How is AI changing labour demand?
As with any period of weak economic growth, cautious business sentiment, geopolitical uncertainty and threats of higher inflation stemming from the US/Iran conflict are pushing European office occupiers into cost control mode. Employers are scaling back their short/medium term investments, including entry-level hiring, in order to protect margins. In many cases, recent headcount reductions appear to reflect post-pandemic over-hiring, rather than AI-driven efficiencies. In fact, research from the European Central Bank indicates that companies which invest in AI are 2% more likely to be hiring than those who are not.
New jobs are being created too. Since the inception of ChatGPT in 2022, LinkedIn’s latest global talent report indicates that over 1.3 million AI related jobs have been created from data annotators and AI engineers integrating the technology into companies, to cyber consultants. Looking forward, the World Economic Forum anticipates a net additional 78 million jobs created globally as a result of AI by 2030, with unsurprisingly some of the fastest growth in technology and data.
Impact on workplace
As AI automates some routine tasks, the office becomes more valuable as a place for collaboration, creativity and decision-making. Breakout areas, smaller meeting rooms, and even soundproof pods for AI audio prompts are becoming a more integral part of the workplace. Higher levels of job displacement in the short-medium term will lead to more demand for flex office terms and grow-on space. Physical connectivity will also become more important, supporting demand for CBD locations. With Europe’s development pipeline expected to tighten further in 2027, this could add upward pressure on prime rents.
Generative AI office demand
Unprecedented levels of AI venture capital (VC) fundraising are feeding through into headcount and office demand growth globally. During Q1 2026, for example, San Francisco recorded its strongest quarter of leasing activity since 2014, led by OpenAI, Databricks and Anthropic. Savills analysis suggests that every €1 billion of Generative AI VC raised has translated into roughly 4,000 sq m of additional office demand in the city over a two-year period. Applying this to European AI VC fundraising indicates an additional 230,000 sq m of demand from European-headquartered AI companies by mid-2028. On top of this, US-headquartered AI companies will continue their expansion across Europe, as we have seen with, for example, Databricks signing for 13,000 sq m at the Rock, in Amsterdam, and Anthropic signing for 15,000 sq m at 1 Triton Square, London.
The bottom line
AI is unlikely to change office demand in a linear way. Instead it will reshape which companies take space and how that space is being used. European AI companies will drive a meaningful amount of new office demand, and traditional occupiers will need to become more agile, rethinking workforce structures, required skillsets and workplace strategies. Prime, well-connected office spaces which support collaboration, interaction and higher value work will be the beneficiaries.
