Just two years ago, losing a major tenant such as Google would have been a serious blow for any landlord. These days, landlords are having an easier time backfilling space, thanks to the explosive boom in demand generated by artificial intelligence companies.
MatX, a startup that designs hardware for large AI models, has signed a full-building lease to backfill space in Mountain View, California, left behind by Waymo, Google's self-driving unit. The roughly 43,500-square-foot deal will give the startup the space it needs to accommodate an ambitious growth trajectory, echoing moves among other companies in the AI sector that are scrambling to bulk up their real estate portfolios.
Since it was founded in 2022 by two former Google engineers, MatX has raised about $130 million and employed about 50 people at the start of the year, a headcount the startup is planning to boost as it aims to compete with chipmaker giants such as Nvidia.
The deal to fill the entirety of the building at 490 East Middlefield Road is not only a boost for Silicon Valley developer Huettig & Schromm, the property's landlord, but also the latest in a procession of deals AI companies have generated that are quickly pushing the broader San Francisco Bay Area office market back to its pre-pandemic levels of activity.
The list of prospective tenants hunting office space in the tech-concentrated region has grown to levels not seen since the days before the 2020 outbreak. Many of those spatial requirements are in the tens of thousands of square feet, demand largely driven by AI companies that are expanding at a rate that requires sequential leases to accommodate their growth spurts. OpenAI and Anthropic, for example, have been responsible for some of the largest deals to be signed in the Bay Area in recent years and show little signs of pulling back on plans to add even more.
Tenants are currently on the hunt for about 9 million square feet of office space in San Francisco, up from 6.5 million earlier this year, according to JLL. And AI companies have signed upward of 85 leases in San Francisco so far this year, according to data from Cushman & Wakefield.
The typical deal has averaged about 16,655 square feet, but the average term is just 31 months, much shorter than the typical office commitment and a sign that many AI startups are unclear on how quickly they'll be growing — and how much more space they'll need to support it.
Recent expansions by others such as Tempus AI, Sigma, Harvey AI and Synthesia underscore the sector's center-stage role in the national office market recovery. In San Francisco alone, AI companies have swelled their collective footprint to more than 5 million square feet over the past couple of years, according to CBRE, and the sector has the potential to stretch beyond 21 million square feet over the next five years.
While much of the industry has established roots in tech-concentrated hubs such as Silicon Valley and San Francisco, that demand and appetite for space has quickly spilled into other major market across the country.
Leasing among tech companies across the United States rose by more than 21% through the first quarter of the year compared with the same period in 2024, according to CBRE data, a spike that accounted for just shy of 8 million square feet worth of deals. That activity represented a roughly 16.5% share of total office leasing volume nationally and builds off the momentum tech companies generated last year when they accounted for about 18% of all U.S. leasing.
By comparison, leasing among tech companies represented a little more than 14% of the total national leasing volume in 2023, according to CBRE.