Chicago's Loop Faces Uneven Recovery
Chicago's Loop is experiencing a "tale of two work lunches" as its recovery remains bifurcated. While landmark properties like Willis Tower see bustling activity, many other blocks have noticeably lower weekday foot traffic, underscoring how hybrid work is reshaping demand for office and adjacent retail space.
The chasm between office building classes in Chicago is stark: downtown Class A vacancy sits around 21.5%, while Class B buildings are at a much higher 32.3%. This flight-to-quality has pushed rents for top-tier "trophy" buildings up 26% since early 2020, while average rents across the rest of downtown have remained virtually flat. Distress in the older office stock is creating opportunities for investors, with some buildings trading at massive discounts. For instance, 190 S. LaSalle was purchased for $55 million, a steep drop from its $230 million sale price in 2019. Similarly, 125 S. Wacker sold for $51.5 million after previously trading for $145 million in 2017. In response to high vacancy, the city is backing office-to-residential conversions through the "LaSalle Street Reimagined" initiative. Projects like the $241 million redevelopment of 135 S. LaSalle into 386 apartments and the planned conversion of 208 S. LaSalle are set to bring thousands of new residents and repurpose millions of square feet of underutilized space. While the office market recalibrates, Chicago's multifamily sector shows significant resilience, outperforming other property types with $2.8 billion in investment activity in 2023. The city's apartment occupancy rate hit 95.5% in the third quarter of 2024, surpassing the national average, with rents projected to grow 3.2% to 4.5%. The broader Midwest multifamily market remains attractive to investors due to its stability and yield. In the first quarter of 2024, the Midwest had the highest average cap rate of any U.S. region at 6.0%. This compares favorably to the national multifamily average of 5.7% in late 2025. For those looking to invest in publicly traded real estate, numerous REITs are active across Chicago's market, with portfolios in downtown office towers, luxury apartments, and industrial warehouses. This provides a liquid alternative to direct property ownership for investors learning the market. Aspiring real estate professionals should note that Chicago investment firms are frequently hiring for roles like Analyst and Associate. Job postings consistently emphasize skills in financial modeling, market research, and asset management, often requiring a degree in real estate, finance, or a related field.
