Chicago Office Market
Following a strong fourth quarter, leasing volume remained solid in the first quarter of 2025. This marked the strongest first quarter of leasing for the CBD in three years. However, despite the increase in leasing activity, reduced lease sizes will keep overall activity below pre-pandemic levels. Leasing in the first quarter of 2019 was more than double that of 2025. Vacancy decreased 30 basis points this quarter as the CBD saw approximately 360,000 SF of positive absorption. Year-to-date, total vacancy has risen by 0.9%. Meanwhile, competition for Trophy Towers and premium view spaces on the top floors has tightened. Demand for top-tier space in the Central Business District is expected to absorb the limited supply, driving trophy rates higher.
Download Chicago CBD Office Market Report 1Q25Chicago Suburban Office Market
Leasing volume increased from last quarter and posted the strongest first quarter in the suburbs since 2020. With 2024 finishing right below the 18-year average, 2025 is on pace to get back to pre-pandemic levels. In early 2025, the suburban Chicago office market experienced a notable 800,000 square feet of positive net absorption. The overall vacancy rate decreased from last quarter to 26.0% but is still up 0.8% from the first quarter of 2024. There were several significant move-ins scheduled for the beginning of this year from leases signed through the last couple of years which largely contributed to the significant positive absorption. We do not expect this to be a trend going forward.
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Chicago Industrial Market
Leasing activity in the Chicago industrial market rose significantly in Q1 2025, increasing 37.4% over the previous quarter. A substantial share of the volume was driven by Uline, which renewed and expanded for a total of 1.6 million square feet across three transactions in the Kenosha submarket. After five consecutive quarters of growth, sublease availability declined in Q1 2025, with 1.6 million square feet removed from the market—a 10.4% contraction. While some of this space was withdrawn or converted to direct listings, more than 600,000 square feet was leased across 17 transactions. Asking rates held steady in the first quarter of 2025, rising marginally by $0.02/SF to $6.48/SF. While asking rents are still up year-over-year, the pace of growth has slowed considerably, driven in part by softer leasing demand in recently delivered Class A facilities, which has also put downward pressure on taking rents.