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Market Report

Chicago Office Market Report

2023 Investment Forecast

Downsizing to Quality Bolsters Urban Class A Performance,
While Private Buyers Seek Suburban Locales

Tenants favoring quality over quantity downtown. Following an adaptation to pandemic working environments, hybrid schedules have held as a benchmark for worker expectations. Chicago-area employers facing upcoming lease renewal decisions are increasingly weighing this lightened office usage when evaluating their future space requirements, with some expected to shed space in favor of smaller, higher-end floorplans. This shift is starting to emerge in urban areas like Fulton Market, which closed out last year with considerable Class A vacancy compression. Further pointing to an ongoing change, the average lease size across Chicago proper fell by over 10,000 square feet from its pre-pandemic mean. Although space is continuing to be relinquished on a net basis, weighing on rents, the Class A segment within the city limits is outperforming the Class B and C echelon. Conversely, mid- and low-tier property fundamentals in Chicago suburbs remain in a strong position. Another year of positive net absorption is anticipated here, as segment vacancy holds near the 2019 mark.
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