A surge of new buyers targeting Chicago office buildings is impacting property values and boosting leasing activity, despite vacancy rates remaining near historic highs. Lower prices on quality assets, along with distressed sales and maturing loans, are attracting first-time owners who are renovating older spaces and using creative financing to secure tenants, according to BisNow.
Many of these buyers are family offices and small investment groups able to move quickly, accelerating market shifts. Notable recent transactions include the $27.9 million sale of 2 N. Riverside Plaza and the $5.1 million purchase of 500 N. Michigan Ave., both signaling increased investor interest.
Chicago’s office vacancy hit a record 24.5% in Q3, slightly up from the previous quarter. While vacancy isn’t expected to rise sharply, a significant drop remains unlikely without more tenant growth or new leasing activity.
Some smaller buildings may exit the market through conversions, but broad improvement depends on attracting new or expanding tenants.
Leasing remains steady, with about 614 office leases of 1,000 square feet or more signed so far this year. Financial services firms dominate large leasing deals, often moving to upgraded spaces while consolidating footprint. Major leases include Bain & Co.’s 173,000-square-foot move in the Central Loop and Wolverine’s 83,000-square-foot sublease in the West Loop.
The number of large tenants seeking 25,000 square feet or more is consistent with the last decade’s average, though total space demand is slightly below historical levels. Tenant diversity has increased, with financial services, law firms, and manufacturing firms active, while tech companies remain slower to expand office space.
Overall, the market is stabilizing and trending toward pre-pandemic normalcy. Experts expect continued momentum into next year, fueled by ongoing property sales that open up more upgraded spaces for tenants, encouraging further leasing and tenant upgrades.
