AI Scare Trade Wipes Out Billions From Commercial Real Estate Stocks, Spreads To Office REITs

Commercial real estate stocks tumbled for a second straight day in their sharpest sell-off since the 2008 financial crisis, wiping out tens of billions of dollars in market value as investors rapidly reassessed the industry’s future in the age of artificial intelligence.

Shares of CBRE, the world’s largest commercial real estate brokerage, fell as much as 15% on Thursday, extending a two-day, 26% rout that erased roughly $12B in market value over back-to-back trading sessions. Other major brokerages were also swept up, with JLL plunging as much as 14%, Cushman & Wakefield dropping 13%, and Colliers and Newmark each down 11%.

The sell-off, which began with the brokerages on Wednesday, has now spread to office landlords, pulling down an index of office real estate companies by as much as 6.7%, Bloomberg reported. Major owners, including SL Green, Kilroy Realty Corp., Cousins Properties Inc. and BXP, also sank.

“Concerns about increased use of AI applications translating into reduced demand for office space have been around for some time,” Bloomberg Intelligence analyst Jeffrey Langbaum told Bloomberg. “However, after yesterday’s sell-off in the brokers, we are seeing the fear spill back over to the actual office space providers.”

The speed and scale of the losses have thrust commercial real estate into the center of what analysts have dubbed the latest “AI scare trade,” as investors react to the possibility that advances in automation could reshape office work and the advisory businesses that support it.

The declines reflect a sudden shift in investor sentiment rather than a deterioration in overall brokerage operating performance. 

Brokerage firms have been reporting improving leasing activity and profits in recent quarters. CBRE reported $818M in quarterly profit Thursday, up 15% from a year earlier, and projected continued earnings growth in 2026. The company said demand for leasing and investment services remains strong, particularly in sectors tied to digital infrastructure.

But investors have begun challenging whether advances in AI could eventually reduce the need for some of the labor-intensive services that underpin the industry’s profit margins.

Some investors are seeing early signs that AI is already dramatically altering real estate operations.

CoStar has reportedly already replaced about 500 roles through AI-driven efficiencies and is preparing to launch new AI-powered search tools across its platforms, William Blair analysts said in a January note after meeting with execs from the company.

The analysts said investor concern about “AI disintermediation” — which is the fear that AI could cut out traditional brokers and platforms — had been increasing as the technology advanced within the data giant, though they also said firms with proprietary data and subscription-based business models may be better positioned to withstand disruption.

As Thursday’s sell-off took hold, CBRE CEO Bob Sulentic was delivering the company’s latest earnings and pushed back on the notion that AI posed an existential threat to the brokerage, telling analysts the firm’s business remains anchored in relationships, human judgment, proprietary data and market expertise that automation cannot easily replicate.

Brokerage leads come from “deep knowledge about the occupiers and investors in the marketplace,” not digital prompts, Sulentic said. He argued that CBRE’s scale and information advantage position it to use AI to enhance broker productivity rather than replace it.

“What we’re trying to do is enable our brokers,” Sulentic said.

Sulentic said Thursday that CBRE expects to cut research costs by about 25% using AI while continuing to expand its brokerage workforce and leasing activity.

Investors have increasingly been focusing on whether those efficiency gains could eventually reduce headcount and compress revenue tied to brokerage commissions and advisory services, even if transaction volumes remain stable.

On Wednesday, Keefe, Bruyette & Woods analyst Jade Rahmani said brokerage firms operate “high-fee, labor-intensive business models viewed as potentially vulnerable to AI-driven disruption,” though he cautioned that the market reaction may overstate the immediate impact.

Major brokerages have spent years investing heavily in AI tools designed to automate research, underwriting and portfolio analysis. JLL launched its Falcon platform in 2023, CBRE developed its Ellis assistant to streamline internal workflows, and Cushman & Wakefield introduced its AI+ initiative. Across the industry, firms have increasingly positioned AI as central to improving efficiency and long-term profitability.

JLL CEO Christian Ulbrich warned last year that commercial real estate companies risked falling behind if they moved too slowly to adopt AI. 

“Don’t wait too long,” he said during an appearance on Bisnow’s First Draft Live in October. “The train has left the station, and it is going at Japanese speed levels of train — very, very fast.”