Chicagoland's office space saga continues as fresh data reveals that the appetite for downtown digs is still well below pre-pandemic levels. While some cities have seen demand clawing back to the norm established in 2019, The Windy City isn't getting the same breakthrough, a report by VTS found. According to the Chicago Tribune, Chicago's office space demand ended 2023 at a grim 45% of what it used to be, experiencing a steep 10% decline just from the year prior.

New York is packing in finance and banking firms eager to fill high-rises, and Los Angeles isn't far behind, but tech hubs like San Francisco and Seattle are finding their swanky offices still missing many of their workers, with Chicago falling somewhere in the middle. "Being in the middle of the pack is what we expected from Chicago," said Max Saia, vice president of investor research for VTS, as per the Tribune. Notably, New York's office space demand hit a high 75% of its pre-pandemic level, casting a shadow on Chicago's lagging market.

However, it's not all doom and gloom. Lease expansions have flashed some signs of life in the otherwise sluggish market. Employee benefits consulting company OneDigital and law firm Gordon Rees Scully Mansukhani both upsized their Chicago footprints. Yet, on the flip side, major companies are scaling down. This includes the so-called "flight to quality" where outfits opt to downsize yet upgrade to more modern spaces, as highlighted in a Chicago Business article.

And let's talk supply. The overflowing abundance of available office space, with nearly 8.2 million square feet of sublease on the table, hasn't helped landlords' cause. The overall vacancy rate has hopped to a record 23.8%, with downtown's negative net absorption showing that companies vacated more than they occupied, according to CBRE data featured in Chicago Business. With interest rate hikes burdening lenders and borrowers alike, the environment is ripe for more foreclosures and distressed properties.

Still, there's a silver lining for some property owners. A smattering of loan maturity extension agreements emerged in the fourth quarter, signaling a bet on eventual stability and more favorable refinancing conditions as the Fed hints at interest rate cuts. For now, though, it's a waiting game as the city hopes for a rekindled love affair between Chicagoans and their once-bustling office spaces.