Bradford Allen in its Third Quarter Office Market Report for Downtown Chicago reported that vacancies in Chicago’s central business district slightly rose to 22.5% in the third quarter, up from 22% during second-quarter 2024 and 19.8% at the end of third-quarter 2023.
Bradford Allen also found that gross asking rents across the downtown market averaged $42.85 in the third quarter, up from $42.81 in the second quarter and down from $44.06 year-over-year.
With office utilization still short of 2019 levels, downtown office properties continue to sell at significant discounts, if at all. But these price corrections and the Federal Reserve’s recent decision to cut interest rates by half a percentage point could be signs that the post-COVID office market is nearing a bottom.
“These price adjustments present unique opportunities for investors who have been waiting on the sidelines,” said Neil Bouhan, senior managing director, research and communications, at Bradford Allen. “With the Fed’s rate cut and continued demand for high-quality, well-located assets, we may be approaching a turning point. Investors and tenants alike can benefit from this market recalibration.”
Nine office buildings in downtown Chicago changed hands during the third quarter, including 605 N. Michigan Ave., which sold for $47 million, a 66% discount compared to its 2016 purchase price. While the 1.4 million square feet of total leasing volume in the third quarter lagged the second quarter and year-earlier period, several companies expanded their office footprints, including Medline, which tripled its office presence at the Merchandise Mart by adding 110,000 square feet.
Other highlights include:
- Five of the nine office buildings that sold in the third quarter will be converted to other uses. Four office-to-apartment conversions (two in River North) are planned downtown, while an office building that sold in the Loop will be converted to a data center.
- Fulton Market continues to stand out as a relatively strong downtown submarket, posting the lowest direct vacancy rate (16.6%) as well as positive absorption of 47,255 square feet in the third quarter.
- In the third quarter, 24.6% of office leases were for move-in-ready suites, as compared to 15% in 2019.
Access the full report here.