Chicago’s office market continues to face distress-driven pricing with sale prices falling sharply. According to CommercialEdge, through February 2025, office assets traded at an average of $67 per square foot — the second-lowest among major markets, ahead of only the Twin Cities. This reduction has also spurred transactions with sales volume reaching $561 million. That’s already one-third of Chicago’s 2024 total and the second-highest in the nation year-to-date, behind only Manhattan, N.Y.

Two stark examples of these price-cut deals occurred in January: 200 South Wacker Drive, a 41-story tower, sold for $68 million — down nearly 70% from its $214.5 million sale in 2013. At an even steeper discount, 600 W. Chicago Ave. — a former Montgomery Ward catalog building converted into a modern office campus — traded for $88.7 million. Previously, it sold for $510 million in 2018.

While sales reflect distress, Chicago’s leasing market has avoided the sharp vacancy spikes seen in other major markets: The market’s vacancy rate rose just 70 basis points year-over-year to 18.8% in February 2025, which is below the national average of 19.7% (up 180 basis points). Unlike tech-heavy hubs like San Francisco (27.8%, up 380 basis points) or Austin (27.4%, up 530 basis points), Chicago’s modest increase could be attributed to the city’s diverse economy and strong transportation infrastructure, supporting its office sector as it adapts to hybrid work.

With limited new development in the pipeline (just 737,000 square feet under construction, or 0.2% of existing inventory), Chicago is near the bottom of the list for new supply among major metros. The total pipeline, including planned projects, represents just 2% of stock. However, this limited pipeline may provide the market with more room to rebalance before additional space is delivered.

Still, even long-anticipated projects are struggling to move forward. For instance, Lincoln Yards — a $6 billion, mixed-use development along the North Branch of the Chicago River — was originally designed to deliver 14.5 million square feet of office, residential, retail and entertainment space. But, so far, only a 320,000-square-foot life sciences building, which remains unleased, has been completed.

Additionally, developer Sterling Bay recently returned 27 acres of the Lincoln Yards northern site to lender Bank OZK via a deed in lieu of foreclosure after unsuccessful attempts to recapitalize the project in today’s tighter capital environment.