Downtown Chicago Office Vacancy Dips

Tangible signs of life, not individual data points, are emerging in Downtown Chicago’s office space market.

The downtown office vacancy rate dropped from 28.6 percent to 28 percent, according to Crain’s, who cited CBRE data. While the drop is small in percentage, it’s still the first time in 15 consecutive quarters that the rate has dropped. The overall recovery still has a long way to go to reach pre-pandemic numbers, which were set at 13.8 percent.

Multiple millions of square feet have yet to be reoccupied, and owners are either upgrading their amenities to compete in the trophy office market or flat out redeveloping to mixed-use in order to shed unneeded office space. CBRE senior vice president Tony Coglianese told the outlet that in general, the market is showing signs of recovery.

The individual data points are still a mixed bag, a reduction in square footage from Huron Consulting here, the addition of reported Morningstar advanced negotiations for a lease at the Thompson Center there. The future could be promising, though, as according to the publication, demand from tenants looking for upwards of 25,000 square feet has reached pre-pandemic highs.

The second quarter actually showed a 97,000-square-foot dive in net absorption, but the data shows that some companies had a change of heart on subleasing and chose to occupy their space themselves, which bolstered overall occupancy numbers.

That doesn’t mean there isn’t movement, though. The renovation of the Thompson Center could still give downtown the “Google effect” when the tech firm moves in, and completed conversions into trophy offices could entice more movement.

Buyers that paid pennies on the dollar for massive downtown buildings are also putting renewed effort towards attracting new tenants. Related Midwest is reportedly set to land law firm Sidley Austin as an anchor tenant, and their building at 725 West Randolph Street is set to be completed in 2030. Stripe expanded its lease by upwards of 130,000 square feet. For the first time in around five years, the data points upwards.

— Hunter Cooke