While an ideal stock market would be one in which activity is fueled by careful analysis and studied responses to market trends, the reality is guesswork, human perception and, sometimes, either overly abundant optimism or outright panic play at least as significant a role.
In the last week, commercial real estate stocks, particularly those with a presence in the Office sector, have taken a drubbing as investor worries about the impacts of artificial intelligence and process automation on the need for workspace have come to a quick head.
As of Feb. 12, CRE stocks were experiencing their biggest selloff since the financial crisis of 2008. CBRE shares dropped up to 15% as part of a two-day, 26% plummet that wiped out nearly $12B in market value for the company. JLL fell by up to 14%. Cushman & Wakefield fell 13%, and both Colliers and Newmark were down 11%.
Landlords were also taking a beating. Bloomberg reported an index of Office CRE companies falling nearly 7%, with individual firms also getting hit.
While the fear of increased AI use cutting demand for office space has been noted for the last few years, Bloomberg Analyst Jeffrey Langbaum said the recent selloff shows the fear increasing and spilling over to actual providers of space.
CRE has been rapidly placed into what analysts are referring to as the “AI scare trade,” showing a sudden shift in investors’ perceptions, even as brokerages are reporting improved profits and leasing performance.
CBRE reported last week its quarterly profit was up by 15% year-over-year, reaching $818M. The company said leasing and investment service demand has remained strong, especially in digital infrastructure-related sectors, and it projects ongoing earnings growth for 2026.
Investors, however, are worried about what is being termed “AI disintermediation,” where AI and automation eliminate human labor-intensive operations and services, such as brokerage and research.
As one example, data giant CoStar has cut roughly 500 roles by expanding its AI-driven efficiencies, and the company plans to roll out AI-backed search tools throughout its platforms, according to analysts who have spoken with company leaders.
Those same analysts said, however, subscription-based operations with proprietary data could have a better chance at managing disruptions in the field.
CBRE leadership has pushed back on the idea of AI posing a long-term threat to the firm, saying automation cannot eliminate the company’s grounding in market expertise, relationship management, individual judgement and proprietary information. They say the firm’s size and its advantage in information management will enable it to use AI as a process enhancement, rather than a replacement.
The company plans to reduce its research costs by around 25% through AI use but will continue expanding its leasing activity and its brokerage staff.
The worry expressed by investors is that these improvements in efficiency could ultimately result in smaller headcounts and revenue loss connected to commissions and advisory service fees, even if there is no decrease in transaction volume.
Analysts have said that while the CRE brokerage model is labor-intensive and may be vulnerable to disruption by AI, the recent market reaction may be an overstatement or overestimation of the immediate impact. (Source)