Report: Chicago real estate enters a market reset as office reprices and industrial remains resilient
CHICAGO (May 19, 2026) – Chicago’s commercial real estate market is continuing to reset, with office landlords confronting historic vacancy and asset repricing while industrial fundamentals remain comparatively resilient, according to new market research from Cresa.
Across Chicagoland, office markets are being reshaped by changing occupier demand, higher capital costs, and a growing divide between high-performing assets and obsolete inventory. In some cases, premier buildings are reaching all-time pricing highs while older assets face mounting pressure. At the same time, industrial leasing and absorption remain positive, even as new construction slows and tenants gain leverage in select submarkets.
“Chicago’s commercial real estate story right now is really about separation,” said Eugene Ballantine, Senior Manager of Finance and Research at Cresa. “The highest-quality assets continue to attract demand, while older or less competitive buildings are being forced into a new reality — whether that means repositioning, recapitalization, or a completely different use. That’s true downtown, it’s true in the suburbs, and even industrial is starting to show more nuance beneath the numbers.”
Downtown Chicago: flight-to-quality persists as vacancy hits new highs
Downtown Chicago’s office market continues to reflect a sharp divide between premier assets and the rest of the market.
Overall CBD vacancy climbed to a record 27.5 percent in Q1, with direct vacancy reaching 26.0 percent, while Trophy properties maintained significantly lower vacancy at 16.4 percent. Average asking rents rose to $46.64 per square foot, with Trophy rents reaching all-time highs in the low-to-mid $70s.
Net absorption remained negative at 322,514 square feet, though Fulton Market and the West Loop posted gains, reinforcing continued demand for newer, high-amenity environments.
“There’s a tendency to look at downtown vacancy headlines and assume the market is full of great options, but that misses what’s actually happening on the ground,” said Michael Marrion, Principal at Cresa. “The best buildings are still highly competitive, and tenants need to understand that for higher end, amenity rich properties, rents are up.”
Meanwhile, capital markets pressure continues to reshape the Loop, with 21 downtown office properties — representing 5.9 percent of the market — now considered distressed. Some investors are beginning to transact at discounted valuations, creating opportunities to reposition aging assets for future competitiveness.
“Downtown isn’t standing still; it’s repricing,” Ballantine said. “The market is actively sorting winners from challenged assets. Well-located, high-quality buildings still command attention, but a meaningful portion of the inventory is entering a transition period.”
Chicago suburbs: rising vacancy and repricing accelerate transformation
The suburban office market faces many of the same pressures—but with a different pattern of response.
Suburban vacancy rose to a record 29.4 percent in Q1, surpassing downtown levels, while direct vacancy reached 28.9 percent. Net absorption remained negative at 473,436 square feet.
Unlike downtown, suburban office has not seen significant sublease competition, with sublease vacancy holding at just 0.6 percent. Instead, expiring leases are increasingly converting directly into landlord-controlled vacancy, placing pressure on ownership to re-lease space in a weak demand environment.
“The suburban office market is being reshaped in real time,” said Mark Kolar, Senior Vice President at Cresa. “Companies are using lease events to rethink how much space they actually need, where they need it, and what kind of flexibility their business requires. That creates challenges for landlords, but real opportunities for occupiers that plan ahead.”
Capital strain is also intensifying, with 40 suburban office buildings — 6.2 percent of inventory — now considered distressed. Some investors are already repositioning discounted assets, including conversions to industrial and data center uses.
Industrial: fundamentals remain strong, but tenants gain negotiating leverage
Industrial remains Chicagoland’s healthiest major asset class, though signs of normalization are emerging.
Total industrial vacancy declined slightly to 5.51 percent, with direct vacancy falling to 5.07 percent. Net absorption remained strongly positive at nearly 3.8 million square feet, led by Joliet and the I-55 Corridor. Quarterly leasing volume reached its highest level since Q2 2024.
At the same time, newer speculative inventory remains under pressure, with vacancy in buildings delivered within the past five years reaching 17.5 percent. Construction activity continues to taper as financing and material costs constrain new development, leaving 15.3 million square feet under construction — the lowest pipeline since 2018.
“The Chicago industrial real estate market is at a state of equilibrium,” said Ed Lowenbaum, Executive Managing Principal at Cresa. “Companies are moving for better facilities but only if the real estate costs are competitive. The infill developments built on the pandemic surge are struggling due to their higher basis in land and construction. And higher interest rates are exacerbating the situation of funding tenant improvements.
“The good news is that there are options that tenants have not had in the past few years due to a drop in market velocity and an increase in vacancy.”
About Cresa
With 1,350 employees and 56 offices across North America, and supported by its global alliance with Knight Frank, Cresa is the world's leading commercial real estate advisory firm that exclusively represents occupiers and specializes in the delivery of fully integrated real estate solutions. We think beyond space to find and foster the best environment for every business. Delivered across every industry and supported by world-class technology, Cresa's services include Transaction Management, Project & Development Services, Workplace Solutions, Location Advisory, Portfolio Solutions, Lease Administration, Capital Strategies and Strategic Consulting. For more information, please visit cresa.com.
Media Contact
Glenn LaFollette
773-812-9555
[email protected]
Across Chicagoland, office markets are being reshaped by changing occupier demand, higher capital costs, and a growing divide between high-performing assets and obsolete inventory. In some cases, premier buildings are reaching all-time pricing highs while older assets face mounting pressure. At the same time, industrial leasing and absorption remain positive, even as new construction slows and tenants gain leverage in select submarkets.
“Chicago’s commercial real estate story right now is really about separation,” said Eugene Ballantine, Senior Manager of Finance and Research at Cresa. “The highest-quality assets continue to attract demand, while older or less competitive buildings are being forced into a new reality — whether that means repositioning, recapitalization, or a completely different use. That’s true downtown, it’s true in the suburbs, and even industrial is starting to show more nuance beneath the numbers.”
Downtown Chicago: flight-to-quality persists as vacancy hits new highs
Downtown Chicago’s office market continues to reflect a sharp divide between premier assets and the rest of the market.
Overall CBD vacancy climbed to a record 27.5 percent in Q1, with direct vacancy reaching 26.0 percent, while Trophy properties maintained significantly lower vacancy at 16.4 percent. Average asking rents rose to $46.64 per square foot, with Trophy rents reaching all-time highs in the low-to-mid $70s.
Net absorption remained negative at 322,514 square feet, though Fulton Market and the West Loop posted gains, reinforcing continued demand for newer, high-amenity environments.
“There’s a tendency to look at downtown vacancy headlines and assume the market is full of great options, but that misses what’s actually happening on the ground,” said Michael Marrion, Principal at Cresa. “The best buildings are still highly competitive, and tenants need to understand that for higher end, amenity rich properties, rents are up.”
Meanwhile, capital markets pressure continues to reshape the Loop, with 21 downtown office properties — representing 5.9 percent of the market — now considered distressed. Some investors are beginning to transact at discounted valuations, creating opportunities to reposition aging assets for future competitiveness.
“Downtown isn’t standing still; it’s repricing,” Ballantine said. “The market is actively sorting winners from challenged assets. Well-located, high-quality buildings still command attention, but a meaningful portion of the inventory is entering a transition period.”
Chicago suburbs: rising vacancy and repricing accelerate transformation
The suburban office market faces many of the same pressures—but with a different pattern of response.
Suburban vacancy rose to a record 29.4 percent in Q1, surpassing downtown levels, while direct vacancy reached 28.9 percent. Net absorption remained negative at 473,436 square feet.
Unlike downtown, suburban office has not seen significant sublease competition, with sublease vacancy holding at just 0.6 percent. Instead, expiring leases are increasingly converting directly into landlord-controlled vacancy, placing pressure on ownership to re-lease space in a weak demand environment.
“The suburban office market is being reshaped in real time,” said Mark Kolar, Senior Vice President at Cresa. “Companies are using lease events to rethink how much space they actually need, where they need it, and what kind of flexibility their business requires. That creates challenges for landlords, but real opportunities for occupiers that plan ahead.”
Capital strain is also intensifying, with 40 suburban office buildings — 6.2 percent of inventory — now considered distressed. Some investors are already repositioning discounted assets, including conversions to industrial and data center uses.
Industrial: fundamentals remain strong, but tenants gain negotiating leverage
Industrial remains Chicagoland’s healthiest major asset class, though signs of normalization are emerging.
Total industrial vacancy declined slightly to 5.51 percent, with direct vacancy falling to 5.07 percent. Net absorption remained strongly positive at nearly 3.8 million square feet, led by Joliet and the I-55 Corridor. Quarterly leasing volume reached its highest level since Q2 2024.
At the same time, newer speculative inventory remains under pressure, with vacancy in buildings delivered within the past five years reaching 17.5 percent. Construction activity continues to taper as financing and material costs constrain new development, leaving 15.3 million square feet under construction — the lowest pipeline since 2018.
“The Chicago industrial real estate market is at a state of equilibrium,” said Ed Lowenbaum, Executive Managing Principal at Cresa. “Companies are moving for better facilities but only if the real estate costs are competitive. The infill developments built on the pandemic surge are struggling due to their higher basis in land and construction. And higher interest rates are exacerbating the situation of funding tenant improvements.
“The good news is that there are options that tenants have not had in the past few years due to a drop in market velocity and an increase in vacancy.”
About Cresa
With 1,350 employees and 56 offices across North America, and supported by its global alliance with Knight Frank, Cresa is the world's leading commercial real estate advisory firm that exclusively represents occupiers and specializes in the delivery of fully integrated real estate solutions. We think beyond space to find and foster the best environment for every business. Delivered across every industry and supported by world-class technology, Cresa's services include Transaction Management, Project & Development Services, Workplace Solutions, Location Advisory, Portfolio Solutions, Lease Administration, Capital Strategies and Strategic Consulting. For more information, please visit cresa.com.
Media Contact
Glenn LaFollette
773-812-9555
[email protected]