Availability for Class-A office space declined quarter-over-quarter for the first time since Q4 2019, marking a potential turning point for the beleaguered Chicago office market.

And the office rebound isn't going unnoticed by those in the field.

The Class-A availability rate dropped 20 basis points compared to last quarter, the first decline in that stat since before the onset of the pandemic, according to a Q3 Savills office report. Overall office market availability went up just 10 bps compared to Q2, though availability is up 210 bps year-over-year.

A slew of recent large office transactions, like Medline's 161K SF lease renewal and expansion in River North, are indicative of a stabilizing office market, said Cushman & Wakefield Executive Managing Director Jonathan Metzl at Bisnow's Art of Tenant Attraction and Retention event on Tuesday.

The Federal Reserve's interest rate cut last month gave businesses confidence in the direction of the market, he said.

“Clearly, companies feel like our economy is stabilizing,” he said.

The sentiments line up with the numbers. Leasing volume reached 2.2M SF in the third quarter, with 43% of all signed space located in the West Loop, Savills reported. Asking rent in the submarket is about $48.50 per SF, or roughly $4 higher per SF than the overall downtown market.

But while these trends are encouraging, other panelists at Bisnow's event at Arthur on Aberdeen still think there's work to do when it comes to motivating employees to return to the office, which would drive leasing activity even higher.

If the unemployment rate continues to tick up, it could have a positive impact on office assets because employers will gain leverage over their employees to require them back in person, said Madison Rose founder Matt Pistorio at the event at Arthur on Aberdeen.

“The power is slowly shifting back to the CEOs and the decision-makers who want these people back,” Pistorio said. “They've been working on trying to figure out how to get people back to the office before making long-term commitments in terms of how they handle real estate.”

Companies now have a better sense of what the reality of working from home looks like with a few years of experience and are more equipped to make demands, said Lauren Torres, project executive at Skender. Flexible work policies aren't working in many cases, and employers are seeking change, she said.

“I think the funny money is dried up,” said Tony Coglianese, senior vice president at CBRE. “The days of my buddies playing Call of Duty, making hundreds of thousands of dollars a year have kind of gone away.”

Pistorio said that major companies are beginning to switch their stance on hybrid work, pointing to Amazon's decision in September to mandate employees come to the office five days a week starting in 2025. Goldman Sachs was one of the first large companies to call for a five-day return, requiring full-time office attendance starting in 2023.

Those large companies are the slowest to sign long-term deals because their sizable employee counts complicate RTO efforts, Pistorio said. But shifting market conditions could accelerate the timeline, he said.

“Watching the unemployment rate, if that continues to tick up, I think that's when you're going to see a real estate run,” Pistorio said. “I'm predicting a run starting now over the next few years.”