Chicago CBD Office Sales in 2Q Focus on Residential Conversions Amid Market Challenges

During the second quarter, four office properties totaling approximately 1.63 million square feet changed ownership within Chicago's central business district, according to Transwestern. Of these, three buildings—comprising 327,033 square feet—are slated for conversion into residential apartments. The fourth property, the 1.3 million-square-foot 311 South Wacker Drive, was acquired by Kohan Retail Investment Group for $45 million. There is potential for this building to be partially transformed into hotel accommodations. These transactions highlight ongoing trends of shrinking office space across the United States. CBRE reports that this year, about 23.3 million square feet of office space are expected to be demolished or repurposed, compared to only 12.7 million square feet scheduled for new delivery. Notably, 76% of the planned conversions involve creating apartment units. In Chicago, the CBD's office inventory has decreased slightly from 158.71 million square feet a year ago to 157.6 million square feet. Despite this reduction—and the recent property sales—the CBD's direct vacancy rate reached a record high of 22.2% last quarter, up from 21.9% a year prior. When factoring in ...