The Verdict Is In: For Chicago Law Firms, Only The Elusive Trophy Office Will Do

The court of public opinion on Chicago office space has overwhelmingly ruled that the future is grim, and the prosecution has plenty of evidence thanks to limited new construction, high vacancy rates and stagnation in return to office

But in an office market with few hungry tenants, law firms are gobbling up space, making the case for high-quality trophy office. These companies are taking advantage of a struggling market to rightsize operations and secure the best locations for their long-term needs, a departure from the common doomsday prophecies around Chicago office assets. 

The only question is whether there is enough top-quality product to go around for the city's most loyal office consumers.

“​​Law firms are long-term users of space,” said Jeff Lindenmeyer, principal at Avison Young. “What we usually see is anybody like law firms, that know they're going to need space longer term and will be consistent users of space going forward, they will become opportunistic in markets like this.” 

Chicago law firms make up 16% of total office market leasing by total square footage so far in 2024, according to data from Avison Young. Last year, they made up 23% — the highest share since the Global Financial Crisis, according to the brokerage.

The market downturns that came as a result of the GFC and, more recently, the pandemic caused many tenants to reevaluate their footprints and back away from large, long-term commitments.

But thanks to a favorable tenant environment, law firms have rushed into the void, betting they will need space in the long run and signing leases, Lindenmeyer said.

Yet, with a dearth of new trophy office space under construction, firms are now competing for a shrinking pie of the most desirable space, Lindenmeyer said. Buildings built after 2009 have a 10.5% availability rate, much lower than 27.6% of office buildings constructed before that time, according to data from Avison Young. 

A lack of debt and equity interest in financing new office buildings in the city may mean that the space dilemma isn’t solved any time soon, Lindenmeyer said. Only two major office developments are set to come online next year, 919 W. Fulton St. and the full renovation of 225 W. Randolph St. 

Meanwhile, a just-released Commercial Edge report shows new office construction is falling more sharply in Chicago than in any other peer metro, with just a quarter of the activity as this time last year.

A slowdown in building the kind of premium office space law firms are after is happening across the country. National office deliveries in the second half of 2025 are projected to come in at just a sixth of the 18M SF of office that came online in the last quarter of 2019, according to data from CBRE Econometric Advisors.

But it has fallen off faster in Chicago than other metros, Commercial Edge reported. The city's office construction pipeline shrank to 828K SF as of September, down from 3.4M SF at this point last year.

“Ultimately it's got to be a positive return for the developer,” Lindenmeyer said. “Construction costs have to be at a certain level, and then ultimately, net rates have to be at a certain level. Right now, I think there's a disconnect between those.”

Because a good chunk of Chicago's office tenant base is law firms, there is an even more exaggerated percentage of law firm activity during market downturns than elsewhere in the country, Avison Young Senior Analyst Sean Boyd said. 

And those firms are all targeting a tinier inventory of top-shelf space, with 40% of all Chicago law firm leasing activity since 2021 in trophy buildings. 

“At the same time that all of the lockdowns started happening … a number of really high-quality office buildings were coming to market,” Boyd said. “[That] presented an opportunity for a lot of law firms to rightsize their space … get a better rental rate, but also target the best and newest office products in the market all at one time, which we've seen a lot of law firms do.”  

In the past 12 months alone, Barnes & Thornburg signed a 96K SF lease at One North Wacker, Neal Gerber & Eisenberg inked a 90K SF deal at 225 W. Randolph St., and White & Case agreed to terms on a 65K SF lease at 300 N. LaSalle St. 

National firms in the city are doing larger transactions and making much larger investments in their space, said JLL Executive Vice President Brian Means. Means estimated that on average, law firm build-outs from new construction are exceeding $300 per SF all-in. 

Tenants are mitigating some of the capital costs with longer-term lease commitments and accompanying tenant improvement packages from landlords, but they’re still putting up a substantial amount of personal investment, Means said. 

“The purpose of work for these firms have changed,” Means said. “There's a much larger focus on collaboration, socialization, and making an impact with your clients in person. The spaces are being designed and used differently to have the type of utilization that they hope to see.” 

Law firms are signing leases that allow them to reimagine space. Individual attorney offices are getting smaller, firms are altering their ratios of attorneys to administrative employees and law libraries are less common, Lindenmeyer said. 

But just because law firms are on the prowl for office space doesn’t mean they’ll settle for less than the best. While there is a large amount of vacancy in Class-B and C buildings in the city, a lot of the law industry is already leased in top-shelf space, Boyd said. 

“What we don't see a lot of is choosing to downgrade class, go from an A to a B space, even if there's a more attractive rental rate or concession deal,” Boyd said. “That's a harder sell for a tenant.”    

Whether a dwindling supply of the highest quality office space means more law firms opt to stay put instead of leveling up remains to be seen.

Yet, for developers that can successfully renovate lower-tier Class-A space or higher-tier Class-B space, there are opportunities, Lindenmeyer said. 

“There is potential, assuming no functional obsolescence, to move an A-building to a solid A and retain a tenant, retain some law firms, or attract new ones,” he said.