Chicago Office Market Shifts Focus to Small Assets as Buildings Under 20K SF Outperform

While national office sales grew 35% in 2025 and Chicago recorded 37 transactions of buildings over 20K SF, the market remains in a period of fundamental readjustment. NAI Hiffman executive vice president Adam Johnson notes that large, institutional-grade office spaces are facing significant challenges, including higher vacancy rates and intense pressure to offer aggressive tenant concessions. In contrast, smaller office buildings—particularly those under 20K SF—are demonstrating greater stability and lower vacancy rates of 10% as they often cater to local tenants with more predictable operational needs.

Investment logic in the sector is shifting as owners grapple with rising construction costs that have not been matched by equivalent growth in rental rates. According to Johnson, this environment necessitates a reset of property valuations and a focus on operational flexibility, such as the use of spec suites. As the market matures, investors are cautioned to avoid over-leveraging on large, anchor-tenant-dependent assets and instead focus on aligning with local market comparables and user-driven demand to maintain stable returns.