A heavy sell-off in tech stocks on Thursday after a heavy Republican loss in Tuesday’s midterm elections sent shockwaves throughout the artificial intelligence industry, but it was too soon to determine whether some commercial real estate properties could also be caught in the political crosshairs, market insiders said.
The technology-dominated Nasdaq stock index fell 5.52 percent Thursday two days after the Democrats. seized control Congress and downballot measures curbed data center development successfully, leaving the fate of many of these projects up in the air. After Thursday’s bloodshed, the Nasdaq fell more than 10 percent from a record high hit on Oct. 6, 2026, before recovering 1.09 percent on Friday.
Suhail Tayyeb, a professor at New York University’s Schack Institute of Real Estate, emphasized that any materials that office owners who have heavy exposure to AI tenants will need time to overcome.
“A sell-off of the stock market does not automatically translate into a weak commercial real estate leasing,” Tayyeb said. “The impact depends on whether the company changes hiring, expansion plans or capital commitments.”
There should be no signs of a slowdown in AI leasing in New York City this week. Ten AI companies toured various office buildings in Midtown South before and after Election Day, according to sources.
AI interests in the Big Apple include SpaceX looking at 300,000 square feet, Palantir exploring leasing 400,000 square feet, and Sierra interested in leasing 250,000 square feet, according to sources. Anthropic is also looking to expand in Manhattan beyond its 465,530-square-foot lease. enter at 330 Hudson Street in April.
Tayyeb noted that the dot-com collapse of 2000 and the technology correction of 2022 both contributed to weaker leasing and increased sublease availability, but that the effect played out over time rather than overnight. He said office landlords should keep track of tenants’ credit conditions, sublease activity and any changes in space requirements. Smaller tech companies, which are more dependent on outside funding, are riskier than established companies with strong cash flows, he said.
Steven Rotter, executive vice chairman at Newmark, said that while smaller boutique buildings in Midtown South with startup AI companies may face some leasing risks and begin subleasing, more established companies will continue to grow their footprints. Rotter said it is important for AI tenants to establish flexibility with leasing requirements to expand or downsize if necessary, and hopes that the property owner will examine the company more when signing a tenant.
“Landlords are going to dive deeper into the financials and the quality of their business,” Rotter said. “You have to know the financial stability of the business and you have to know who your client is, and make sure that they can tell the story well so that the landlord also believes in them.”
In addition to Democratic gains in Congress and in the state governor’s mansion, the midterms also featured 41 ballot measures that sought to limit data centers. All passedexcept for one referendum for a project in North Dakota.
Brendan Wallace, founder and CEO at proptech venture capital firm Fifth Wallsaid the negative sentiment towards the data center on Election Day emphasizes how Silicon Valley has not been made small for why AI can be beneficial for life voters. Wallace said he hopes the overwhelming rejection of data centers from the American electorate can prove to be a catalyst for the AI industry, which he said should increase communication efforts and explain why technology can be positive.
“I believe the U.S. needs to invest in digital infrastructure at scale, and I think that’s a geopolitical prerequisite and an economic prerequisite, and if AI is done right it can increase the pie for everyone,” Wallace said. “But I’m also pragmatic about the fact that anything can be true, but if you can’t tell a good story, you can’t make it happen.”
Wallace noted that 26 gubernatorial candidates in 21 states this year are running on an anti-data center platform, with $173 million spent on mostly negative data center ads in the state. He also pointed out that Ohio voted for 21 data center measures, with outright bans reaching 76 percent of the vote.
Another major hit for data centers came in Texas, which voted out the incumbent Republican Governor Greg Abbott and elected Democrat Gina Hinojosa, who promised to put a moratorium on this project on the first day in office. Before the election, Texas was there projected to overtake Virginia as the No. 1 data center market in the USaccording to a JLL report in April.
Tayyeb said that the demand for computing capacity will not change due to declining technology stocks or other factors, but the AI sector faces headwinds that threaten many data center proposals.
“Continued pressure on valuations and access to capital can affect financing, leasing commitments and development decisions,” Tayyeb said. “You also need to distinguish between hyperscalers that can finance large infrastructure investments through operating cash flow and smaller operators that rely more on external capital.”
Andrew Coen can reach it acoen@commercialobserver.com.