Suburban Chicago Office Vacancy Holds at 33.1% as Stock Shrinks

A record streak ends because buildings are disappearing

After more than five years of bad news, the office market in suburban Chicago has stopped getting worse. Vacancy held at 33.1% for a second straight quarter. That ends a run of 21 consecutive quarterly all-time highs21. JLL produced the figures, and they show the rate flat through the third quarter of 2026. It is still far above the roughly 24% suburban vacancy recorded before the pandemic23.

The cause matters more than the number. Tenants have not come back in force. The market has simply been shrinking. Total suburban office inventory was close to 100 million square feet in early 2020 and is now below 93 million23. That drop comes from teardowns and repositionings, which take obsolete buildings out of the count altogether22. The photo on Crain's report shows the Meadows Office Center in Addison. Logistics Property recently demolished it to build a warehouse21.

Demand has not turned yet. Net absorption fell by 115,000 square feet in the third quarter, and the 2026 total is negative 203,000 square feet23. That is still a big improvement over the 725,000-square-foot loss the year before23. In plain terms, vacancy has stabilized because the denominator keeps falling, not because occupied space is growing.

How the plateau formed

The quarter-by-quarter path shows how close the race between demolition and downsizing has been. In the first quarter, suburban availability rose to 33.4% from 32.9% at the end of 2025. That happened even though inventory had already dropped to its lowest level since before the Great Recession22. Tenants were still shedding space faster than landlords could retire it. The market had lost 5.2 million square feet of occupied space since the pandemic began22.

The second quarter produced the first dip since 2019, a small move from 33.4% to 33.1%30. The third quarter held that level23. Reports on both quarters credit redevelopment of dead space as a main reason, with some help from better leasing30.

The Chicago data also shows clear winners and losers. Class A absorption was positive by 41,000 square feet in the third quarter, while Class B lost 118,000 square feet23. In the spring, JLL's Andrea Van Gelder said rents at premium suburban buildings had risen $5 to $6 per square foot since mid-pandemic. Tenants competing for the best space have little leverage22. Older properties carrying heavy debt are the ones struggling22.

The national picture is better, but not uniformly

Chicago's suburbs are an extreme case, but the national trend points the same way. Cushman & Wakefield's third-quarter report puts U.S. vacancy at 19.8%, down about 25 to 30 basis points from a year earlier, with net absorption positive for five straight quarters3132. The firm says vacancy peaked at 20.1% in the third quarter of 202532. Sublease availability has dropped for ten consecutive quarters to 89 million square feet, its lowest since late 202032. Sublease space has historically peaked before overall vacancy does32.

The exact level depends on who is measuring. Yardi Matrix put national vacancy at 17.8% in August, down 90 basis points from a year earlier34. Newmark had it at 20.4% in its mid-year overview, up 30 basis points year over year39. These are different methods, not contradictions. Yardi's survey covers buildings of 25,000 square feet or more and leaves out owner-occupied properties33. What matters is that most trackers now show vacancy at or past its peak.

The split by building quality is the same nationwide. Cushman reports that vacancy at top-tier buildings fell 215 basis points over two years, while vacancy in Class B and C buildings kept rising32. In Washington, D.C., trophy vacancy fell to a post-pandemic low of 7.7%, while Class B vacancy rose to 20.4%40. Four more D.C. buildings totaling 692,000 square feet were taken out of inventory in the third quarter40.

The lack of new construction makes the shrinking stock even more important. Just 7.1 million square feet of new office space was delivered in the first three quarters of 2026, about one-fifth of the historical average. Full-year completions are on track to tie the lowest total in more than 30 years32. When almost nothing is being built, every building torn down or converted tightens the market.

Where the old buildings are going

Old offices are becoming apartments, warehouses and data centers, and in the suburbs the warehouse route is often the most practical. In Oak Brook, Inland Real Estate Group agreed to sell its three-building campus to a buyer that plans to demolish it for an Amazon distribution facility22. Outside Boston, developers short on land are tearing down underused offices to build warehouses. One Littleton site now has a 144,000-square-foot Amazon facility57. Developers in Chicago, New Jersey and the Inland Empire are doing the same57.

Apartment conversions get most of the attention. The national office-to-residential pipeline reached 90,300 planned units, up 28% from a year earlier, and offices now make up 47% of adaptive-reuse projects12. In the suburbs, though, conversion is harder than in downtowns. Developers in suburban Philadelphia say suburban office buildings have deep, dark floor plates and windows that don't open, which often makes demolition easier than conversion28. Local zoning and school-enrollment worries also hold back residential plans28. In Minneapolis-St. Paul, demolition accounts for most of the inventory reduction. Since 2020, 54 buildings totaling about 5.1 million square feet have been demolished and 19 have been converted, together removing nearly 5.8% of the region's office stock11.

Data center construction is the newest exit route. The former Thomson Reuters campus in Eagan is being redeveloped partly for warehouse, data center and multifamily uses11. Downtown, the former Cboe headquarters at 400 S. LaSalle is becoming a 33-megawatt data center. Its developer expects rents up to four times the average for downtown Chicago offices54. Most office buildings can't make that switch. A JLL managing director said typical ceilings of about 12 feet fall well short of the 18 feet data centers usually need54. Local resistance is also rising, with moratorium proposals in Chicago and Charlotte5458.

Apartment rents, loans and REITs

The apartment side gives only modest support to the conversion argument. Apartments.com reported annual rent growth of 1.5% in September, even as monthly rents slipped 0.08% to $1,75241. Yardi Matrix measured 0.7% annual growth and the first third-quarter rent gain since 202250. Rents are rising, but slowly, because the recent supply wave is still being absorbed. That limits how much money residential conversions can make.

The lending side is the main caution. Trepp's office CMBS delinquency rate was 12.00% in August, well above the 7.85% rate for all property types4. Wolf Richter, citing Trepp, reported that it rose to 12.2% in September, second only to January's record7. CRED iQ counts loans that have passed maturity while still performing and puts the rate at 13.2%. It also reports that about $39 billion of office CMBS matures over the next 12 months5. Morningstar DBRS's measure is higher still, at 14.87%8. These distressed loans are pushing buildings into the hands of buyers who will tear them down or convert them. In San Francisco, Flynn Properties bought the $350 million loan on 225 Bush Street for about $221 million and then took ownership of the 55%-occupied tower67.

Public office REITs show the same divide between strong and weak portfolios. One-year returns range from about 22% for COPT Defense Properties to roughly -45% for Empire State Realty Trust and -79% for Franklin Street Properties61. Nareit's tracker shows office REIT occupancy at about 88% in the second quarter61.

What it means

The plateau in Chicago's suburbs is real, but it comes from subtraction, not recovery. The market is healing by shrinking. Lenders, cities and owners of Class B buildings will pay much of the cost, while trophy landlords benefit. Vacancy may keep falling if demolitions continue and new construction stays near record lows. The test ahead is whether absorption, still negative in the suburbs, turns positive before the next wave of loan maturities brings another round of distressed sales.