Bradford Allen, a national full-service real estate firm, today released its “Q1/26 Downtown Chicago Office Market Report.” First-quarter metrics reflect a modest start to the year, with a 20% drop in direct leasing from the previous quarter. However, Class A inventory in transit-oriented submarkets experienced robust tenant demand, and investors showed a growing appetite for properties that can be acquired at a fraction of their prior valuations.

The Chicago CBD recorded a 24.8% direct vacancy rate in the first three months of 2026, in line with the prior quarter but more than a percentage point higher than one year earlier. And after turning positive at the end of 2025, direct net absorption was back in the red at negative 297,458 square feet.

Even as valuations declined across the market, office sales during the first quarter commanded some of the highest prices in years. Notable deals included the $132.5 million sale of 401 N. Michigan Ave. — Chicago’s priciest office transaction since 2022 — and the $125 million sale of 161 N. Clark St. Sales velocity also picked up significantly, with more than $320 million in assets trading last quarter compared to $476 million for all of 2025.

Some buyers, however, scooped up properties at steep discounts, demonstrated by Discovery Partners Institute’s $24 million acquisition of 250 S. Wacker Drive (nearly 75% reduced from the building’s 2011 sale price) and the $41 million sale of 175 W. Jackson Blvd. (an 87% discount from its 2018 sale price) to a joint venture of 601W and David Werner Real Estate. Including short sales and foreclosure settlement transactions, all downtown office properties traded for an average price of $89 per square foot.

“There’s a clearer playbook emerging for the downtown office market as more buildings trade hands and new owners reinvest in assets amid a slowdown in ground-up development,” said Neil Bouhan, senior managing director of research at Bradford Allen. “Groups that can buy at the right basis and move quickly on leasing are in a strong position to revitalize key properties and accelerate absorption in the CBD.”

While the Central Loop posted 254,272 square feet of negative net absorption, the West Loop, Fulton Market and River North all saw gains. Mid-sized and smaller tenants still make up a large portion of leasing activity, with over three-quarters of deals for less than 40,000 square feet.

Following its recent acquisition of Kellanova, candy giant Mars Snacking took over the 37,672-square-foot River North space and signed a new 169,816-square-foot lease at 400 N. Aberdeen St. in Fulton Market. In the West Loop, global proprietary trading firm IMC Trading expanded for the second time in four years at Willis Tower, taking another 104,000 square feet and bringing its total footprint to approximately 250,000 square feet.

Quarter to quarter, average direct gross asking rents held steady around $41 per square foot, with River North’s $45.99 topping the market, followed by $45.38 in the West Loop. Accounting for close to one-third of leasing activity, demand remained strong for move-in-ready offices and spec suites, with 1.7 million square feet leased since January.

With the completion of 919 W. Fulton St. in Fulton Market, the CBD’s office pipeline has stalled. New supply is largely coming through renovations, most notably Google’s future 1.2 million-square-foot home at the Thompson Center, where the company will both occupy and potentially lease space to others. Meanwhile, office-to-residential conversions like those announced at 401 W. Ontario St., 212 E. Ohio St. and the Burnham Center at 111 W. Washington St. will reshape Chicago’s office inventory in the coming years.

A full copy of the report can be downloaded here: Q1/26 Downtown Chicago Office Market Report.

About Bradford Allen:

Bradford Allen (BA) is a commercial real estate firm based in the heart of downtown Chicago. Founded in 2003 by Jeff Bernstein and Larry Elbaum as an office brokerage, the firm has grown into a vertically integrated commercial real estate company, offering a full array of services and expertise across multiple U.S. markets to entrepreneurial, corporate and not-for-profit clients, including strategy, marketing and transaction execution for occupiers, investors and owners. For more information, visit bradfordallen.com.

The West Loop accounted for 43% of office leasing activity in the first quarter, according to Bradford Allen’s Q1/26 Downtown Chicago Office Market Report, as much as the Central Loop, River North and Fulton Market combined.