Trophy Office Towers Command Soaring Rents in Chicago

Chicago’s office vacancy rate has never been higher, but the market tells two very different stories. Companies hunting for high-rise space in trophy towers are finding competition fierce and rents rising, even as older buildings drown in availability.

Downtown’s overall direct vacancy hit 24.3 percent midway through the year, but much of that space was either outdated or controlled by landlords too tied up with debt to make competitive deals, Crain’s reported citing data from Colliers. Strip the data down to the market’s best properties, and the supply picture changes dramatically: Class A availability is 19 percent, trophy buildings are at 11.4 percent, and on floors above the 25th level, vacancy drops to just 8.4 percent.

That’s what Goldman Ismail Tomaselli Brennan & Baum discovered when the firm went looking for space last year. Partner Andrew Rima expected a tenant’s market with pandemic-era bargains but instead faced a crowded field for well-located, modern offices. The firm ended up taking a floor-and-a-half at 191 North Wacker Drive.

“It was more competitive than the headlines suggested,” Rima told the outlet.

Average gross asking rents across downtown have barely budged since 2020, according to Colliers. At the top end, however, trophy rents have soared 26 percent to nearly $66 per square foot per year. For a small office footprint of 2,000 square feet, that’s a base of $11,000 a month.

Space in the city’s priciest towers — 110 North Wacker Drive, 150 North Riverside Plaza and 444 West Lake Street — is hitting $80 to $90 per foot with taxes and expenses included, brokers say. Meanwhile, tenants at older Class B towers can still strike renewals for less than half that cost.

That split is shaping a stampede. Buildings like 155 and 191 North Wacker Drive and 300 North LaSalle Street have soaked up swaths of vacancy as firms jockey for well-located, modern space that will coax employees back in person. Even renewals are competitive, with multiple tenants circling the same suites, Colliers’ vice chair David Burden told the outlet.

Generous concessions are common among landlords, such as free rent, cash for build-outs and other perks, especially for creditworthy firms willing to sign long leases. That restraint stems partly from lingering uncertainty about shrinking footprints and leasing volumes well below pre-pandemic levels. Many landlords are cutting office space out of the market with an uptick in office-to-residential conversion projects in the works.

Developers are even testing the waters for new towers. Related Midwest, Hines and John Buck are all shopping plans for West Loop high-rises that would require pre-leases at more than $100 per foot to land financing. — Eric Weilbacher