## Chicago’s Office Market: A 2025 Outlook
Chicago’s office market, still recovering from the pandemic’s impact, shows signs of a potential upswing in 2025. Avison Young, a global commercial real estate firm, has identified Chicago as a market to watch, citing a positive outlook in their recently released report. Their “Office Busyness Index,” measuring activity levels in office spaces, reveals that while Chicago’s offices are currently at 56.6% of their pre-pandemic activity (November 2019 levels), this indicates progress in the city’s recovery. For comparison, Manhattan is at 73%, Los Angeles at 61.9%, and the national average sits at 60.8%. Avison Young principal Jeff Lindenmeyer emphasizes that while Chicago remains in recovery mode, positive momentum is evident.
Employment trends will significantly influence office demand in 2025. A recent report from the Illinois Department of Employment Security shows a state unemployment rate of 5.3%, a 0.6 percentage point increase from the previous year. The Chicago metro area also experienced a rise, from 4% to 5% unemployment. While new office construction is expected to remain stagnant, prime existing buildings are attracting companies seeking new space, resulting in decreased office availability and increased leasing activity, according to Dan Arends, Principal at Colliers. Arends notes a steady growth in leasing activity over recent months.
However, the office vacancy rate continues its upward trend, reaching 23.3% at the end of the third quarter, according to Colliers, slightly higher than the 22.2% reported for the same period in 2024. This increase, common since the pandemic’s shift towards remote and hybrid work, is expected to continue for the next few years as leases expire and companies reassess their space needs. Many companies have already reduced their office footprints, increasing the availability of sublease spaces.
Despite the challenges, real estate firms remain optimistic about Chicago’s potential, particularly in burgeoning submarkets like the West Loop. This area’s appeal to tech companies and businesses seeking young talent is evident in companies such as Vyond and NanoGraf establishing themselves there. Google’s revitalization of the Thompson Center in the Loop is also anticipated to further boost the city’s tech sector, potentially mirroring the positive effect Google had on Fulton Market, according to Lindenmeyer. This positive outlook is underscored by recent activity, such as Adyen’s move to Fulton Market, leasing multiple floors in Sterling Bay’s 333 North Green project. Adyen’s North American President, Davi Strazza, highlights Chicago’s growing status as a hub for innovation and tech talent.
The continued growth in the West Loop is predicted to benefit the larger Central Business District, home to numerous banks, financial firms, and other major tenants. Arends points to the high tenant demand for new space – 102 tenants in October, the highest in three years – as a strong indicator of market activity and positive sentiment. He emphasizes that many tenants are ready to commit to leases, taking advantage of currently favorable market conditions and available deals.