Chicago CBD office market report

Q4 2023

The Chicago CBD office market faced continued challenges in Q4, marked by a significant decline in leasing volume and a shift towards mid-size leases, while large leases became less common. Uncertainty in the leasing market, combined with rising interest rates, hindered capital markets activity. Sales transactions that did occur often saw notable declines in valuation, reflecting a cautious and challenging environment for real estate transactions.

6.9 msf

Total leasing volume in 2023

Slow but consistent recovery in activity over the past three years halted in 2023 as annual leasing volume fell 17% from 2022. Q4 2023 saw the second lowest quarterly leasing volume in the past ten years (only behind Q4 2020).

67%

% of total transaction volume from leases between 25k-100k sf

As tenants continue to rethink space needs, mid-size leases have become more commonplace. Leases between 25-100k sf represented 67% of total leasing volume in 2023. This has grown from only 39% in 2019. Alternatively, large leases have become less common. The percentage of total transaction volume coming from leases over 100k sf (22% in 2023) is half of the pre-pandemic average of 46%.

-60%

Average decline in 2023 office sale prices

Uncertainty in the leasing market paired with rising interest rates stalled capital markets activity throughout 2023. Owners of a few large assets, such as Aon Center, 1 S Wacker and Accenture Tower, were able to extend or refinance their loans.

But of the few sales transactions that did occur this year, most came with significant valuation declines. Whether through opportunistic buyers or foreclosure procedures, the five largest office sales this year saw an average decline in valuation of 60% from their previous sale prices, all of which occurred in the past ten years.

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