Suburban Chicago Office Market Sinks to Another Record Low

Suburban Chicago’s office market outlook has likely never been gloomier.

The region’s suburban office market saw an uptick in empty space over the last 12 months, continuing a four-year trend of rising vacancies to a new record high The office vacancy rate across Chicago’s suburbs hit a record high of 32 percent at the close of 2024.

That marked a rise from 30.2 percent the year before and a significant increase from the 22.1 percent observed at the start of the pandemic, Crain’s reported, citing data from JLL.

During 2024 alone, more than 1.1 million square feet of office space was vacated across the suburbs. This brings the total vacant office space in the area to more than 4.5 million square feet since the pandemic began.

The ripple effects of this surge are particularly evident in the mounting financial struggles faced by many landlords. Elevated interest rates, combined with declining demand for office space, have left property owners grappling with the challenge of maturing debt. For many, this has led to foreclosures, creating further instability in the market.

As properties change hands, some landlords are reluctant to invest in necessary upgrades or offer tenant-friendly leasing concessions due to uncertainty about the future of their buildings.

Andrea Van Gelder, JLL’s international director, noted that while some businesses are starting to return to the office, the demand for office space is still sluggish.

Many companies that downsized their office footprint during the pandemic are not rushing to expand just yet, though a few have begun adding back square footage to accommodate employees returning to in-person work.

A hint of optimism has come from small signs of recovery, but the bigger challenge remains as large companies continue to drastically downsize their office space, such as Aon’s recent move from 200,000 square feet in Lincolnshire to just 37,000 square feet in Bannockburn.

Despite these struggles, some investors see opportunity in the market. In November, a joint venture between Chicago-based developers R2 and JDI Realty purchased a 1 million-square-foot office complex in Libertyville for $35 million, betting that the market will stabilize as companies seek higher-quality spaces in the future.

— Andrew Terrell