Walk into the right building in Chicago’s West Loop and the lobby hums: coffee bar, concierge, a fitness center that would not look out of place in a boutique hotel. Walk into the wrong one and the vacancy signs do the talking. Same city, same quarter, same market … entirely different reality.
“Trophy towers seeing vacancies below 10% while Class B and C properties are experiencing vacancy rates of 30% or more,” said Jeff Skender, managing director at Cushman & Wakefield’s Chicago office. “Flight to quality continues to be the trend through Q1 2026.”
That gap of more than 20 percentage points between the top of the market and the middle is the defining characteristic of Chicago office in 2026 and the forces driving it show no signs of reversing. CBD direct vacancy reached 27.0% in Q1 2026, a 40-basis-point increase quarter-over-quarter, according to CBRE Research. Suburban direct vacancy climbed to 28.7% over the same period. Those topline figures, however, flatten a more fragmented reality: within both markets, a small tier of well-located, well-amenitized buildings is outperforming the broader numbers by a substantial margin.
Geographically, the West Loop remains the undisputed center of gravity for CBD leasing. Skender said the submarket captured more than 60% of new Class A leasing activity in Q1, a dominance driven by proximity to Ogilvie and Union Station and a concentration of trophy and newer Class A product. CBRE Research data shows West Loop direct vacancy at 22.8% — elevated by historical standards, but well below the CBD average, while the submarket recorded 1.4 million square feet of leasing activity during the quarter.
The lone CBD bright spot in absorption terms was Fulton Market, which posted 221,384 square feet of positive net absorption in Q1, the only downtown submarket to record gains. The delivery of 919 W. Fulton, a 369,008-square-foot building, contributed to that activity and marks the last new office delivery expected in the CBD for the foreseeable future.
On the other end of the spectrum, River North recorded direct vacancy of 34.4%, among the highest in the CBD, while the East Loop sat at 31.8%.
The suburban picture follows similar contours. The O’Hare and North Suburbs submarkets are leading demand, according to both CBRE Research and Steve Degodny, executive vice president of Transwestern’s agency leasing team, who cited O’Hare’s central location and transportation access as structural advantages that have kept the submarket competitive across cycles. That momentum produced concrete results in Q1: Claire’s Essentials LLC signed a 43,214-square-foot new lease at Columbia Centre III in the O’Hare submarket, one of the quarter’s largest suburban transactions.
Downtown leasing is being driven primarily by professional services, law firms, financial services and trading companies, according to Jon Milonas, senior vice president at CBRE. Not all demand is contraction. One of the more counterintuitive dynamics of the current market, he said, is a resurgence in expansions from tenants who misjudged their space needs in the immediate post-pandemic period.
“In 2025 and into 2026 we have seen a surprising resurgence of expansions, often from tenants who ‘over-indexed’ post pandemic by leasing too little space or not carrying enough static vacancy to account for headcount growth or a higher return to office,” Milonas said.
That correction is adding demand at the margins, but it is not reversing the broader structural shift in how tenants approach space. Hybrid work has permanently altered the calculus.
“Tenants aren’t necessarily looking at space needs in terms of one-head to one-seat anymore, given hybrid work models and the success tenants have had finding talent outside of their traditional office hubs during the pandemic,” Skender said.
The result is a market where headcount growth no longer automatically produces proportional footprint growth and where the quality of a building carries more weight in the leasing decision than it did a decade ago. Growing AI and fintech companies are adding incremental demand downtown, according to Milonas, though large requirements from out-of-market tech companies have not returned in meaningful volume.
The landlord response to bifurcation has two tracks: capital investment in amenities and creative deal structures designed to move tenants who might otherwise stay put.
At 200 S. Wacker Drive in the West Loop, Glenstar and a private investor are in the midst of a $25 million redevelopment of the 40-story, 761,775-square-foot Harry Weese-designed tower. The project spans five levels of amenities including a riverfront bar and lounge, river-level golf simulators, a full-floor wellness center with cold plunges and infrared saunas, a 34th-floor conference center accommodating more than 180 people and more than 52,000 square feet of move-in-ready spec suites. Delivery is expected by the end of 2026.
In River North, 300 N. LaSalle, a 60-story, 1.27-million-square-foot tower spanning 200 feet of Chicago River waterfront, offers on-site dining anchored by Chicago Cut Steakhouse, a 24-hour fitness center, riverfront terrace and LEED Platinum certification. Milonas cited both buildings as examples of landlords leaning into what distinguishes their assets rather than competing on rate alone.
New ownership at reset valuations is enabling some of that investment, according to Milonas, who noted that buildings selling at historically low prices are allowing new owners to reinvest in amenities and offer more competitive lease terms, which is generating leasing activity on a building-by-building basis that cuts across traditional submarket lines.
On the deal structure side, Skender described a mechanism his team has used with tenants carrying lease obligations they want to exit early.
“Competing landlords willing to defer the rent commencement of a lease for a relocating tenant which allows our clients to occupy a new space, thereby immediately accomplishing their real estate goals without paying double-rent,” Skender said.
“There are various owner types,” explained Degodny. “Buildings that have been reset — where a new buyer has come in at a lower basis — are generally able to fund higher concessions in a way that distressed properties simply can’t. You work within the framework of the ownership, and creative structures to make it a win-win for both sides are happening.”
That kind of structural flexibility reflects a market in which landlords with the financial capacity to be creative are winning deals that more rigid competitors cannot close.
Underlying all of it is a construction cost environment that has not meaningfully eased. According to CBRE Research cited in Milonas’s commentary, construction commodity pricing remains 57.48% higher than at the start of the pandemic — a reality that is reshaping lease economics. Landlords are pushing for longer lease terms on larger deals to justify high tenant improvement allowances, while tenants are increasingly gravitating toward spec suites to avoid buildout costs.
The supply side offers a measure of relief that will take years to materialize. After 919 W. Fulton’s Q1 delivery, no additional new office projects are under construction in the CBD, according to CBRE Research. That pipeline absence will eventually become a constraint.
“The lack of new construction downtown is creating a bottleneck of Class A space between now and 2030,” Milonas said.
For tenants requiring large, contiguous Class A blocks, the window for options may narrow considerably before new product arrives. Pre-leasing activity well ahead of any 2030 delivery is a likely outcome.
Against that backdrop, Degodny sees reasons for measured confidence. The fundamental demand for office from employers who want their people together and employees who need a reason to show up remains intact. What has changed is the standard a building must meet to capture it.
“I’m optimistic about office,” Degodny said. “Companies want to be in the office. It’s a matter of finding the right space to balance a smaller footprint with a property that provides a compelling amenity package.”
