Economic Overview
The Chicago Metropolitan Area remained relatively stable through mid-2026 despite a challenging economic environment. The unemployment rate increased by 60 basis points (bps) year-over-year (YOY) to 5.2% in Q2 2026. Chicago's labor pool remained steady YOY, with nonfarm employment at 3.8 million individuals. As of May 2026, most office-using employment sectors reported YOY declines in employment, with only the education and health services and government sectors posting employment gains of 3.0% and 1.2%, respectively.
Supply & Demand: West Loop Dominates New Leasing Activity
Chicago's Central Business District (CBD) recorded 3.2 million square feet (msf) of new leasing activity during the first half of 2026, an increase of 1.7% YOY. Class A leasing totaled 2.1 msf through Q2 2026, accounting for 65.1% of all new leasing activity. The average new lease size increased 38.6% quarter-over-quarter (QOQ) to 12,000 square feet (sf) in Q2 2026, while Class A leases averaged 22,100 sf for the period. New leasing activity in Q2 2026 was concentrated in the West Loop, which captured 70.4% of total volume and a 24.3% YOY increase, with over 1.2 msf leased. Notable lease transactions signed in Q2 2026 include McKinsey's 72,000-sf sublease from Salesforce in River North; Loeb & Loeb's 52,000-sf lease at 151 N. Franklin in the West Loop; and Sidley Austin's 520,000-sf lease at 725 W. Randolph in the West Loop. Sidley Austin's lease was the largest new lease signed since 2021 and will kick off development of the Class A building.
Overall net absorption remained negative for the eleventh consecutive quarter, totaling negative 215,000 sf in Q2 2026. However, Class A space posted 322,000 sf of positive absorption, supported by Sargent & Lundy's occupancy at 77 W. Wacker in the Central Loop. Through mid-2026, Fulton Market and River North remained the only submarkets to record positive absorption, totaling 259,000 sf and 23,000 sf, respectively. Continued negative absorption prompted the overall vacancy rate to increase 10 bps QOQ to 27.2%. However, Class A vacancy decreased 90 bps QOQ to 23.0%. Trophy assets continued to outperform the broader market, with vacancy decreasing 430 bps YOY and 30 bps QOQ to 13.4%, while high rise trophy vacancy remained exceptionally low at 7.3% in Q2 2026. Despite negative absorption and elevated vacancy, strong Class A leasing momentum continued to support demand for premier assets, reinforcing the flight-to-quality trend across Chicago's CBD.
Supply: Construction Pipeline Driven By Preleasing Activity
Following the execution of Sidley Austin's lease this quarter, construction at 725 W. Randolph is expected to begin in Q1 2027, signaling renewed confidence in demand for premier office space. At 550 W. Randolph in the West Loop, bicycle parts manufacturer SRAM acquired the 197,000-sf building in late 2025 and is currently renovating the property with plans to relocate its headquarters from 1000 W. Fulton. SRAM plans to occupy approximately half of the building and lease out the remaining space. Since 2025, two office properties totaling 434,000 sf have been delivered within Chicago's CBD. 910 W. Lake totals 88,000 sf, while 919 W. Fulton totals 346,000 sf; both properties are located in the Fulton Market District.
Supply Pressure: Sublease Availability Continued To Decrease
Sublease availability continued to decline, decreasing 24.3% YOY to 4.0 msf. This represented 8.8% of the CBD's overall available inventory. More than 2.1 msf of sublease space was vacant, with an additional 1.9 msf scheduled to become vacant in the future. The West Loop and Central Loop accounted for the largest share of sublease availability, representing 56.2% of active subleases. The two largest subleases added to the market this quarter were Lessen's 77,000-sf space in the Central Loop and Basis Technologies' 70,000-sf space in the East Loop. As of Q2 2026, available sublease spaces of 25,000 sf or more totaled 2.7 msf, accounting for 66.5% of total sublease inventory. Sublease space in trophy buildings remained limited; of the 22 sublease availabilities over 50,000 sf, only three are in trophy assets. While sublease availability increased significantly following the start of the pandemic, the pace of new sublease additions has slowed in recent years, with overall availability now showing signs of decline.
Pricing: Overall Asking Rents Record Moderate Increase
Overall gross asking rental rates remained stable across most asset classes in Q2 2026, with the overall market average increasing 0.8% QOQ to $43.90 per square foot (psf) from $43.57 psf. Class A asking rents recorded a QOQ increase of 1.8% to $54.06 psf. Class B asking rates increased 0.4% QOQ to $41.30 psf. Class C rates decreased by 0.1% to $30.32 psf. Trophy buildings continued to command premium asking rents in Q2 2026, despite rents declining 2.7% YOY to $57.45 psf. Overall, rent growth was driven by higher pricing in trophy and Class A assets, highlighting continued tenant preference for high-quality space even as market conditions remain uneven.
