Chicago Notches Record Office Vacancy Again

Google it and you’ll still get the latest version of the sad state of affairs for downtown Chicago’s office market, which has notched another record high for vacancies of 25.8 percent at the halfway point of 2024.

The tech giant has touched off hopes in the heart of the city, where it recently began work on a renovation of the 1.2 million-square-foot Thompson Center as a Midwest headquarters in the Loop. The project has already drawn related deals such as real estate software company Lessen taking 77,000 square feet on nearby LaSalle Street, Crain’s reported.

The Lessen lease also proved emblematic of a tough trend line for the office sector, though — the company scaled back its space from 114,000 square feet it previously leased at Prudential Plaza.

Lessen is among a number of large office tenants to downsize as Chicago’s corporate sector drags along on getting workers back to offices, with the cutbacks on space indicating the work-from-home trend is hardening downtown as well as in the suburbs. Insurance giant Aon recently indicated it plans to trim about 600,000 square feet of office space in the northern suburbs.

The downtown vacancy rate is up from a previous record of 25.1 percent for the first quarter, according to CBRE. It is the13th record over 15 quarters since the onset of the pandemic.

The result over the past year has been negative net absorption of 1.9 million square feet in the downtown market — a drop in demand that comes as many landlords face increased operating costs owing to higher interest rates. There was 472,000 square feet in net absorption in the most recent quarter, according to CBRE, indicating a fairly steady pace of decline.

The pain does not spread over the market evenly, with Class A buildings struggling a bit less. CBRE showed an 18 percent vacancy rate for top-tier properties, up from 16.1 percent a year ago.