Companies are shopping for new offices in downtown Chicago, and many are leasing smaller spaces.
The new pattern is taking shape as more firms finalize their post-pandemic office strategies, frequently deciding to continue allowing workers to skip commutes at least one or two days per week, cutting the overall square footage they need.
The amount of space leased on average at top properties in the West Loop, downtown’s largest and most active submarket, shrank more than 40% in 2023 and 2024 when compared with pre-pandemic deals, according to commercial real estate firm Cresa.
Not every company is shrinking its space, said Allen Rogoway, managing principal at Cresa, but with so many pre-pandemic rental agreements set to expire, he does expect new leasing to accelerate, and for many workers that will mean relocating to smaller offices.
“Companies have finally gotten their legs under them, and are starting to execute deals with conviction,” he said. “They’re now feeling comfortable with developing new workplace standards.”
The average West Loop lease for a Class A building was 30,000 square feet before COVID-19 hit but shrank to about 18,000 square feet in 2023 and 2024, Cresa found.
But smaller offices don’t necessarily mean worse environments, Rogoway said. Employers want offices that make workers eager to come back and are now more likely to seek newer buildings with top-notch amenities, especially those with generous amounts of publicly available outdoor decks and conference spaces.
“Before the pandemic, it felt like when you went into a new space, it looked like all the others, but now companies want supportive work environments that feel a little bit exciting,” he said.
Brewing company Molson Coors decided in 2023 to leave about 160,000 square feet in 250 S. Wacker Drive for an office half that size in the recently completed BMO Tower at 320 S. Canal St. The 1.5 million-square-foot, 52-story tower immediately south of Union Station includes outdoor terraces and a park called The Green. Molson Coors’ employees have their own brewpub and a private outdoor patio.
The greater interest in such Class A buildings has left gaping holes in older properties. The vacancy rate among the West Loop’s Class B buildings has tripled since the pandemic, hitting more than 31%, a historic high, by mid-2024, Cresa found. Class A vacancy is half that, increasing since the pandemic from 10.8% to 15%.
West Loop landlords are doing what they can to help new tenants upgrade their offices. The amounts granted through tenant improvement packages, which can be spent on new furniture and other enhancements, have soared in many cases, increasing to $110 per square foot on average since 2019, a 93% jump, according to Cresa.
Cresa remade its own work environment in 2022, Rogoway said. It leased space in 167 N. Green St., a new 17-story tower in the West Loop’s Fulton Market. Developed by Shapack, the offices resemble a comfortable hotel, and the building includes an amenity penthouse with a basketball court and outdoor terraces.
“It’s a very inviting floor where people can branch out, and we didn’t have that in the past,” he said. “That’s a trend that’s going to continue.”
