Limited Supply Sets Stage For Chicago Office, Multifamily Shake-Up

Chicago’s commercial real estate players are entering 2026 with optimism about the city’s prospects, with hopes anchored in leasing trends and a lack of new supply across the office and multifamily sectors.

The start of the year may be defined by tight vacancy rates in multifamily and certain office products, while the back half of 2026 could see opportunities for significant tenant movement in the office sector due to a wave of upcoming lease expiries, panelists said at Bisnow’s Chicago 2026 Market Kickoff.

Buildings with stable ownership willing and able to invest in improvements stand to benefit, Cushman & Wakefield Managing Principal Vicki Noonan said at the event held at the Burnham Otis building Thursday. 

“’25 ended better than we thought it was going to end at the beginning of the year,” Noonan said. “The second half of the year was like, ‘Katy, bar the door,’ on just about every asset class. I think that momentum has pushed into 2026. I think 2026 will be another really strong year.”

Trophy office assets have posted positive absorption each year since 2020 but have experienced declining totals, averaging 48% since 2022, due to low availability, according to an Avison Young office report. Despite low availability in top office stock, Class-A negative absorption has not slowed at the same rate, averaging 1.7M SF every year since 2022.

Top-shelf properties had a total availability rate — covering both direct and sublease availability — of 15.3% by the end of Q4, roughly half of the overall market’s rate. Under 500K SF of trophy space is currently in development. 

Limited top-shelf availability in the foreseeable future could influence leasing dynamics, said Paul Morgan, chief operating officer of work dynamics at JLL.

“That puts real pressure on our stock here,” he said. “We don't have that much availability, and clearly, that's going to tighten the market, I think this year.” 

The biggest limiting factor in the city's ability to attract large corporations is the availability of premium space, Morgan said. While some of the demand may trickle down to older properties because of a lack of alternatives, the dearth of top space is something city CRE players need to keep in mind in the long term, he said. 

Combined with a lack of the most desirable space, lease terms coming up in 2026 could also spur market movement, Morgan said.

“We've got a lot of lease expiries coming up downtown this year,” he said. “The back half of this year is going to really start to see some real tightening of the marketplace.”

Some of the city’s trophy owners are testing the market for top-shelf assets. Blackstone is reportedly weighing a sale of the iconic Willis Tower in the West Loop, and Donald Bren's Irvine Co. is exploring a deal for the 50-story tower at 1 N. Wacker Drive.

Wintrust Financial President and CRE Head Bart Johnson projected that the city would see many more cranes in the sky over the next two years. At some point — possibly in 2027 — he said he thinks the city will see another trophy-quality office building being launched and built. 

Noonan said some of the renovations underway in older buildings across the city to update spaces and add amenities may provide quality space that’s harder to find in the current market. Office owners with the capital to make investments in their buildings will create opportunities for more attractive leasing prospects, she said. 

“The No. 1 for an occupier is, ‘Do I have a landlord that is well capitalized in order to continue to maintain so that, if I move into this building, I'm actually going to get what I bargained for?’” Noonan said. 

The city’s multifamily sector, while posting strong vacancy rates and rent growth, has only a trickle of new development on the way. 

Chicago’s multifamily construction pipeline is one of the slowest in the country, with this year’s deliveries expected to fall below 4,000 units — the lowest since 2012, according to a Marcus & Millichap 2026 forecast. Vacancy projections for the end of 2026 are at 3.8%, about 200 basis points below the area’s long-term average. 

This projection could benefit landlords of multifamily properties and investors who have entered the market. Multifamily rent is expected to increase 0.5%, with the average effective rent reaching $2,300 per month by year-end, according to Marcus & Millichap. 

It could also lead to more institutional investors coming back to the city as they pursue the sector’s strong fundamentals, Inland Mortgage Capital President Art Rendak said. 

“Institutional capital will come back,” Rendak said. “They're smart people. They see the metrics that the supply here is in equilibrium, or probably undersupplied. There's not a lot of multifamily growth here as far as new construction, and I would expect to see more institutional capital flowing into Chicago.” 

Rendak said multifamily properties present the most compelling opportunity in the city with its low vacancy rates, climbing rents and limited new supply currently in the pipeline. 

“There's going to be a lot of new development because of those metrics,” Rendak said. “People aren't dumb. They see the numbers, and they do what capitalists do: They go and invest.”