'A Domino Effect': Why The Rash Of Recent Chicago Office Deals Could Mean More Activity On The Way

A multitude of Chicago office deals have fallen into place in rapid succession over the past several weeks after the sector spent months static.

Private capital is driving sales, and some buyers are emboldened by bargain-bin prices, an uptick in price discovery and the convergence of seller and buyer expectations, office market observers told Bisnow.

Conditions are ripe for more deals to close as the year goes on — though major institutional players may still wait to see how the market progresses before making a move.

“It is a little bit of a domino effect. Like, once one fell, then the next and the next,” said Alissa Adler, senior vice president at Colliers. “You're starting to see people have a little bit more confidence once they have data points to say, ‘OK, I feel pretty good about my bid, or that I'm not overpaying significantly for an asset.’ And I think the more closings we have, the more of that we're going to see.” 

Large-scale office assets, properties that traded for more than $20M, saw a significant uptick in volume in 2024 that carried into the start of this year.

There was $540M in sales transactions in 2024, up from a meager $45M in activity in 2023, but the improved figure was still well below the long-term annual average of $2.6B, according to CBRE data. 

The brokerage projects $750M in transaction volume in 2025, and major properties like 600 W. Chicago Ave. and 200 S. Wacker Drive have already sold just a month into the new year. These properties are largely taking significant price hits, with the 600 W. Chicago property selling for $88.7M, a fraction of the $510M former owner Sterling Bay paid for the property in 2018. 

The biggest factor in deals closing was buyer and seller expectations aligning after they changed rapidly in response to rate hikes, said David Knapp, executive vice president for CBRE’s capital markets team.

As more data is collected, investors will be motivated to execute additional sales, he said. 

“Advisers are better able to give sellers and lenders pretty accurate feedback on what the market looks like because there are enough data points out there for you to make a pretty accurate assumption coming out of the gate,” Knapp said. “That lends itself to more transaction volume, right? Because there aren't surprises that come along.” 

A swath of office deals has closed in recent weeks, but Adler said most have likely been in the works for months on end. She said the process to complete a deal can take at least nine months, which is much longer than in the prepandemic market because it can take significantly longer to find a buyer. 

Adler said she expects there to be a lag before additional deals close while buyers and sellers digest this new wave of information. She said there could be additional movement later in the year, primarily financed with minimal debt. 

“Every deal today takes a ton of time, a ton of work, a ton of hand-holding,” Adler said. “There's basically no debt in the market today. The deals that you see that are trading at the lower numbers generally are all cash. Deals that you see are trading at a little bit higher numbers typically will have a seller that stayed in a lot of times. … For the most part, people are buying deals today where they feel comfortable that they can add value.”

Institutional investors have historically been some of the most active office buyers in the city. But they are still staying on the sidelines in this latest round of transactions, Knapp said.

Even if they don’t have an appetite for Chicago office buildings now, institutional mindsets are shifting selectively in some of the coastal markets. Those investors will return to Chicago eventually, Knapp said, but there has long been an activity lag between Chicago and its coastal peers.

For institutional investors to reenter the market, it may take dips in performance from other strong asset classes in the area, like multifamily and industrial, because those investors prefer lower-risk returns, Adler said.

Private equity players and high net worth family offices that are investing still see Chicago as a bargain compared to the prices buildings trade for on the coasts. But those braver investors might need to hang on for three to four years at minimum before they start to see their risks pay off, Adler said.

“I think that the people buying today are really smart. I think they're going to do really well,” she said. “It's a big leap of faith that they're taking in the office market and in the city … but I think they're going to get rewarded for it. I truly believe that.”

Starting in the fourth quarter, there was a “noticeable uptick” in investor interest in the office market, Knapp said. Coming into 2025, investors are looking to buy more deals than are on the market today, he added. 

The marketing cycle for office properties is evolving as well. Historically, the big launching points for marketing deals were January and post-Labor Day. Now, marketing cycles largely follow loan maturities. 

“Generally speaking, most lenders have their hands full with a different set of loan maturities every month,” Knapp said. “Things are transacting at a more varied pace, and it's largely driven by loan maturities as opposed to the ‘natural marketing’ cycle.”

The large wave of properties coming to market as a result of distress hasn't materialized as expected, Adler said. And there has been no large-scale push from the lending community to take properties back from borrowers.

Lenders remain wary of taking big hits on sales, continuing to prefer working out extensions and other modifications with borrowers, she said. 

“You're going to keep seeing this trickle of properties coming in,” Adler said. “But I don't think there's anything that I see in the immediate future that's going to drive this huge bubble of distress.”