Chicago’s Office Market is Still in Recovery, Shows Promise for 2025
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 Names Chicago a Market to Watch in 2025
Avison Young, a global commercial real estate firm, named Chicago one of its markets to watch in 2025, in a report released last month. The 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.”
Office Busyness Index
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 on Chicago’s Office Market
Jeff Lindenmeyer, principal at Avison Young’s Chicago office, said those figures indicate “Chicago is still in recovery mode, but is recovering, nonetheless.”
Employment Trends in 2025
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.
Illinois Department of Employment Security
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 and Office Availability
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.
Colliers Principal Dan Arends
“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.
Office Vacancy Rate
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.
Sublease Space and the West Loop
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.
Opportunities in the West Loop
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
Google’s transformation of the Thompson Center in the Loop could also extend the city’s tech surge, Lindenmeyer said.
Adyen’s New Lease
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.
Conclusion
While the Chicago office market is still recovering from the pandemic, there are signs of promise for 2025. With employment trends looking up, new office construction staying stagnant, and office availability down, real estate firms are optimistic about the year ahead.
FAQs
Q: What is Avison Young’s Office Busyness Index?
A: Avison Young’s Office Busyness Index defines “busyness” as the “degree or intensity of activity within an office environment.”
Q: What is the current office vacancy rate in Chicago?
A: According to Colliers, the office vacancy rate in Chicago is 23.3%, slightly up from 22.2% for the same period last year.
Q: What is the forecast for new office construction in 2025?
A: 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.
