Chicago Commercial Office Space for Rent

Q4 2025

Chicago Commercial Real Estate Market Report

Focus: Q4 2025 Market Trends

Executive Summary

The Chicago commercial real estate (CRE) market in late 2025 is defined by a distinct divergence in performance across asset classes [5]. The Office sector continues to struggle with high vacancy and negative absorption, though high-quality "trophy" assets in the Fulton Market and Central Loop remain resilient [1, 5]. Industrial fundamentals have stabilized after a period of cooling, with vacancy holding steady near 5.3% as demand catches up to supply [2]. Retail faces headwinds from big-box closures but shows strength in neighborhood corridors and experiential concepts [3]. Multifamily remains the market's strongest performer, driven by limited new supply and sustained rent growth [4, 5].

TenantBase Proprietary Data [6] highlights the distribution of active tenant demand over the last 90 days:

  • Retail/Storefront dominated market activity with 64.74% of all searches [6].
  • Warehouse was the second most active sector at 29.48% [6].
  • Office accounted for 6.99% of total search volume [6].

Office Market

Market Overview Chicago's office market remains in a challenging correction phase, characterized by a flight to quality that leaves older Class B and C assets with significant vacancy exposure [1].

  • Vacancy & Availability: The overall vacancy rate saw no substantial improvement in Q3 2025, with sublease availability inching back up to 13.8 million SF—more than double the long-term average [1].
  • Net Absorption: The Central Business District (CBD) recorded approximately 400,000 SF of negative net absorption in Q3 2025, offsetting gains from earlier in the year [1].
  • Rental Rates: Average asking rents held flat at roughly $42.85 per SF in the CBD [1]. However, the spread between asking and taking rents indicates that landlords are offering significant concessions to secure tenants for modern spaces [1].
  • Market Drivers: Leasing volume for the year has reached 79% of 2024's total, with direct deals accounting for two-thirds of activity as tenants prioritize long-term stability over sublease flexibility [1].

TenantBase Activity [6]

  • Demand Share: Office accounted for 6.99% of total search volume [6].
  • Lease Term Preference: Demand is heavily concentrated in short-term flexibility [6]:
    • Less than one year: 39.47% of deals [6].
    • 3-5 Years: 23.68% of deals [6].
    • 2-3 Years: 21.05% of deals [6].
  • Size Requirements: Tenants seeking shorter commitments prefer significantly smaller spaces. The average lower SF required for a Less than one year term is 917 SF, compared to 2,000 SF for a 3-5 Years term [6].

Industrial & Warehouse Market

Market Overview The Chicago industrial sector has entered a balanced phase, with leasing activity rebounding and vacancy stabilizing as the construction pipeline moderates [2].

  • Vacancy & Rent: The overall vacancy rate improved to 5.3% in Q3 2025, driven by tighter conditions in smaller building segments [2]. Average asking rates dipped slightly to $8.52 per SF, marking the first quarterly decline in two years [2].
  • Demand & Supply: Leasing activity surged to 7.9 million SF in Q3, a 43.6% increase year-over-year [2]. This robust demand is helping to absorb the wave of new supply delivered over the past 24 months [2, 5].
  • Construction: Starts have slowed, contributing to a more balanced supply-demand dynamic than is forecast for the broader national market [5].

TenantBase Activity [6]

  • Demand Share: Warehouse accounted for 29.48% of total search volume [6].
  • Lease Term Preference: Demand is strongest for short-to-mid-term leases [6]:
    • 1-2 Years: 37.66% of deals [6].
    • 2-3 Years: 22.08% of deals [6].
    • 3-5 Years: 22.08% of deals [6].
  • Size Requirements: The average lower SF required for a 3-5 Years term is 4,808 SF, while the 5+ Years term average requirement jumps to 7,250 SF [6].

Retail Market

Market Overview Chicago's retail market is adjusting to slower leasing velocity and rising availability, though neighborhood centers and suburban submarkets like Schaumburg continue to outperform [3].

  • Vacancy & Availability: The market-wide availability rate climbed to 5.6%, exceeding the national average, as store closures outpaced new openings [3].
  • Net Absorption: Leasing volume dropped 17% year-over-year, with move-outs exceeding move-ins by 1.2 million SF over the last 12 months [3].
  • Rental Rates: Despite softer demand, average asking rents rose 1.7% to $21.94 per SF, supported by a lack of new retail construction [3].
  • Construction: The development pipeline remains extremely limited, with inventory declining slightly over the past year, which preserves pricing power for existing high-quality centers [3].

TenantBase Activity [6]

  • Demand Share: Retail/Storefront activity dominated with 64.74% of all search volume [6].
  • Lease Term Preference: Retail tenants show a balanced preference across all terms [6]:
    • 3-5 Years: 27.27% of deals [6].
    • 5+ Years: 23.30% of deals [6].
    • 2-3 Years: 22.73% of deals [6].
  • Top Locations: Tenant interest is highest in the city core and key western suburbs [6]:
    • Chicago (City): 68 deals [6].
    • Central Loop / East Loop: 22 deals [6].
    • Naperville: 14 deals [6].

Multifamily Market

Market Overview Multifamily remains Chicago's most stable asset class, with the market maintaining the lowest incoming supply among major U.S. metros [4, 5].

  • Vacancy & Occupancy: Occupancy remains high as demand continues to outpace limited new deliveries [4].
  • Rents: Rents increased by 0.9% year-to-date in 2025, marking the highest rate of growth since 2022 [4].
  • Construction: New construction starts have declined by nearly 50% year-over-year, which is expected to drive further rent growth and tighter vacancy through 2026 [4].
  • Investment: 60% of active capital is targeting multifamily assets, reinforcing investor confidence in the sector's long-term fundamentals [4].

2026 Outlook

Looking ahead to 2026, the Chicago market is positioned for gradual stabilization and targeted growth.

  • Office Recovery: High-quality "trophy" availability will continue to shrink, potentially restarting the construction pipeline for premier sites by late 2026 [5].
  • Industrial Balance: Construction starts will grow at a tempered pace, maintaining a healthy balance between supply and demand [5].
  • Retail Repositioning: Michigan Avenue owners will continue repositioning large vacancies with a focus on experiential retail, while neighborhood corridors remain steady [5].
  • Multifamily Strength: With the lowest supply pipeline of any major market, Chicago is poised for elevated rent growth well into 2026 [5].

Sources

  1. Newmark: Chicago Real Estate Market Reports | Q3 2025
  2. CBRE: Chicago Industrial Figures Q3 2025
  3. Matthews: Chicago, IL Retail Market Report Q3 2025
  4. Avison Young: US Multifamily Market Report | Q3 2025
  5. CBRE: Chicago 2025 U.S. Real Estate Market Outlook Midyear Review
  6. TenantBase Proprietary Market Data (Chicago - Last 90 Days)

Information in this report is aggregated from various third-party sources and synthesized using artificial intelligence and other research tools. While we believe these sources to be reliable, we cannot guarantee the absolute accuracy or completeness of the data. This report is intended for informational purposes to provide market insight and should be independently verified prior to any use in a real estate transaction or legal commitment.