Rents remain high in Chicago's Central Business District office sector as demand continues to see a slowdown. In the fourth quarter, the area's negative net absorption reached -768,717 square feet, up more than six-fold from the previous three months, according to the latest market report from Colliers. That brings the entire 2024 figure to a total of -1.77 million square feet.
The biggest issues appear to be happening in East Loop, where net absorption was -331,811 square feet. That marked the seventh straight quarter the submarket remained in the red for that category.
Interestingly, vacancy remained flat at 23.3 percent. That came as 2.5 million square feet of office inventory was reallocated for apartment developments in the future, according to Colliers. Plus, no new supply came in during the fourth quarter after 62,013 square feet was delivered in the previous three months. The availability rate went from 28.9 percent to 28.5 percent.
Recommended For You
As a result, landlords have continued pushing up rental rates. They are up 35 cents from the third quarter at $43.39 per square foot and 71 cents from the same period a year ago.
"Landlords are carefully calibrating their pricing strategies to navigate current vacancy challenges while also attempting to preserve face values," Colliers wrote.
"Owners of high-value, high-class assets continue to lease in this market while the landscape remains littered with less productive assets, emphasizing the growing divide between well-capitalized properties and those struggling to adapt."
In 2024, roughly 720 office lease deals were signed (159 in the fourth quarter), down from the 789 in 2023.
However, it's not all bad news on that front, as "the size of signed new deals over 10,000 square feet grew on average by 3,000 square feet. In addition there has been a significant increase in deals signed this quarter over 30,000 square feet," Colliers said. The two biggest leases in the fourth quarter included Sargent & Lundy signing a relocation and extension deal for 384,347 square feet in Central Loop, and PwC snatching a renewal for less space (282,577 square feet) in West Loop.
While Colliers noted that a slowdown in deliveries is providing some temporary relief to the CBD office sector, absorption isn't expected to flip positive in the short term and said that the best case is a narrowing of the negative category. Also, uncertainties for investment sales remain unclear in the long term.
"In the year ahead, greater clarity is anticipated regarding the strategies and sentiment driving investor activity in the market. The question surrounding the valuation of office assets is no longer whether they will decline, but rather the extent of the decrease," Colliers said.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
