Chicago’s office market is still recovering from the pandemic, but a recent report expects 2025 to be a more positive year for one of the city’s most crucial real estate sectors.
Avison Young named Chicago one of its markets to watch in 2025, in a report released last month. The global commercial real estate firm tracks the use of office space in the U.S. through its "Office Busyness Index," defining "busyness" as the "degree or intensity of activity within an office environment."
As of November 2024, the index showed offices in Chicago were 56.6% as busy as they were in November 2019. The borough of Manhattan in New York City was at 73% and Los Angeles was at 61.9%. Nationally, offices were 60.8% as busy as they were in November 2019.
Jeff Lindenmeyer, principal at Avison Young's Chicago office, said those figures indicate "Chicago is still in recovery mode, but is recovering, nonetheless."
Real estate firms like Avison Young are also keeping an eye on employment trends in 2025, which can be a strong indicator of office demand — the more people are employed, the more employers may need office space for them.
The Illinois Department of Employment Security reported last week that the state's unemployment rate was 5.3%, a 0.6 percentage point increase from last year. The Chicago metro area also saw its unemployment rate increase from 4% in November 2023 to 5% in November. Nationally, the unemployment rate remained relatively stable at 4.2%, according to the U.S. Bureau of Labor Statistics.
New office construction is predicted to stay stagnant in the new year, as existing, premier office buildings in Chicago continue to be a magnet for companies shopping for new space. But office availability is down — showing heightened demand as some brokers saw higher leasing activity last year.
"There's been some ups and downs, but for the most part, every month, it's kind of steadily grown," said Principal Dan Arends of commercial real estate firm Colliers.
The office vacancy rate in Chicago has been on a steady incline. Colliers put office vacancy at 23.3% at the end of the third quarter. That’s slightly up from the 22.2% vacancy rate for the same period last year.
The rising vacancy rate has been commonplace for years, since the pandemic encouraged remote and hybrid work, Arends said, with vacancy typically rising anywhere from 2% to 3% annually. He said the trend will likely continue for the next couple of years as leases end and companies weigh downsizing.
Many companies have reduced their office footprints since the pandemic, leading to an influx of available sublease space on the office market.
But overall, real estate firms still see an opportunity in Chicago, especially in growing submarkets like the West Loop. The corridor is a growing hub for tech companies and other businesses — like video software maker Vyond and battery producer NanoGraf — looking to attract young talent.
Google’s transformation of the Thompson Center in the Loop could also extend the city’s tech surge, Lindenmeyer said.
"There is increasing interest in segments of the Central Loop," he said in an emailed statement. "Companies are curious whether Google’s presence will cause a revitalization similar to the effect Google had in Fulton Market."
Global fintech company Adyen recently moved to Fulton Market, signing a new lease in November for multiple floors at Sterling Bay’s 333 North Green project, a 19-story building with 553,443 square feet of office and retail.
"Chicago is a growing hot spot for global innovation and tech talent and enhances our ability to serve both local and regional customers," Adyen North American President Davi Strazza said in a statement. "We are thrilled to expand our footprint and deepen our roots in this city.”
As development in the West Loop continues to grow, Arends said the larger Central Business District will fare well. The district is home to lots of banks and financial firms, in addition to other large tenants filling up the city’s office towers.
Arends said as of October, Colliers had 102 tenants in the market for new space — the most it's seen in three years.
"The activity is really good," he said. "I think most tenants know what they want to do now, and they're willing to commit to it. They feel like it's a good time to be committing because the market’s vulnerable and they can get really, really good deals."
