AI concerns spread, commercial real estate stocks continue to plunge, tumbling 20% in two days.

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The commercial real estate sector continued to suffer heavy losses on Thursday, as investors worry that the widespread use of artificial intelligence tools will weaken demand for office space. This round of sell-off started in a small market sector on Wednesday and is now spreading more broadly.

On Thursday, CBRE Group fell another 8.8%, with a two-day cumulative drop of 20%, marking its worst performance since 2020. Other major commercial real estate companies were also hit hard: Jones Lang LaSalle dropped 7.6%, and Cushman & Wakefield plunged 12%.

The index tracking office building real estate companies declined by 4.2% on Thursday. Major falling stocks in the index included SL Green Realty, Cousins Properties, Kilroy Realty, and BXP. Bloomberg Intelligence analyst Jeffrey Langbaum commented:

People have long worried that the increase in AI applications will reduce demand for office space—this is nothing new. However, after yesterday’s wave of broker sell-offs, we are now seeing panic spread to actual office space providers.

Path of AI Panic Spread

Investor concerns about AI disrupting business models intensified notably after startup Anthropic launched a new tool, causing sharp sell-offs in several stock market sectors over the past few weeks. It began with software makers and then spread to private credit companies, insurance companies, wealth management institutions, real estate services companies, and logistics firms.

Jefferies analyst Joe Dickstein said the market is digesting expectations that AI may lead to large-scale losses of office jobs.

Sean Dunlop from Morningstar pointed out that the financial services sector is currently in a chaotic "ready, fire, aim" situation. Due to widespread concerns about AI disruption, investors are reacting sharply even to slight earnings misses.

Analysts and investors warn that some of the recent intense sell-offs reflect knee-jerk reactions from traders, which may overestimate the actual risk. This indicates that the market is still in the digestion phase in the face of AI shocks, investor sentiment is fluctuating, and a rational framework for assessing the long-term impact of AI has yet to take shape.

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