West Loop Office Vacancy Hits 25%, Developers Pivot to Residential as Remote Work Reshapes Chicago Real Estate

The cranes that once seemed to sprout from every corner of the West Loop have largely disappeared. The neighborhood that was Chicago’s hottest office market just five years ago—home to Google’s Midwest headquarters, McDonald’s global home base, and a parade of tech companies and creative agencies—is now grappling with a vacancy rate that has climbed to 25 percent, the highest in the city.

The shift reflects a broader reckoning playing out in downtowns across America, as remote and hybrid work arrangements that emerged during the pandemic have proven remarkably durable. But in the West Loop, where so much development was predicated on ever-increasing demand for hip, amenity-rich office space, the adjustment has been particularly jarring.

“We went from zero vacancy to significant vacancy in the span of three years,” said John Murphy, executive vice president at CBRE’s Chicago office. “The market is fundamentally different than it was in 2019. Anyone who thinks we’re going back to the way things were is kidding themselves.”

From Boom to Bust

The West Loop’s transformation from industrial backwater to corporate destination was one of Chicago’s great urban success stories. Beginning in the early 2000s, developers converted aging warehouses and meatpacking facilities into trendy office spaces, attracting companies drawn to the area’s gritty aesthetic and proximity to the Loop.

The arrival of Google in 2015, followed by McDonald’s relocation of its headquarters from suburban Oak Brook in 2018, cemented the neighborhood’s status as Chicago’s answer to San Francisco’s SOMA or New York’s Meatpacking District. Office rents soared, reaching $50 per square foot or more for premium space—comparable to the most expensive buildings in the traditional Central Business District.

Then came the pandemic.

Tech companies that had championed the West Loop’s collaborative workspaces discovered that software engineers could code just as effectively from their living rooms. Law firms and financial services companies found that their professionals didn’t need to commute five days a week. Even as the pandemic faded, the return to office remained stubbornly partial.

“The dirty secret is that a lot of workers didn’t want to come back full-time, and a lot of employers decided not to force the issue,” said Joseph Parrish, director of the Great Cities Institute at UIC. “The result is a structural shift in how office space gets used.”

The Numbers

According to data from real estate analytics firm CoStar, the West Loop’s office vacancy rate stood at 24.8 percent in the third quarter of 2025, up from 8.2 percent in late 2019. The neighborhood now has approximately 2.4 million square feet of empty office space—enough to fill the entire Willis Tower.

The spike has hit all segments of the market, though older buildings and those lacking modern amenities have fared worst. Class A buildings—the newest and most desirable properties—maintain healthier occupancy, but even they have seen vacancy rates climb to levels that would have been unthinkable five years ago.

Rents have declined accordingly. Average asking rents in the West Loop have fallen approximately 15 percent from their 2019 peak, and landlords are offering concessions—free rent periods, generous tenant improvement allowances—that further erode effective revenues.

“Landlords are competing fiercely for a shrinking pool of tenants,” said Marisa Schulz, a broker with Cushman & Wakefield. “If you’re a tenant with good credit looking for space right now, you have enormous leverage.”

The Residential Pivot

Facing the prospect of prolonged vacancy, some property owners are taking a drastic step: converting office buildings into apartments.

At least three major conversion projects are currently in the planning or early construction phases in the West Loop. The most ambitious is the proposed transformation of 600 W. Chicago Avenue, a 420,000-square-foot office building that developer CA Ventures plans to convert into 400 residential units.

“The numbers just don’t work for office anymore,” said Tom Scott, CA Ventures’ chief investment officer. “But there’s still strong demand for housing in this neighborhood. The conversion makes sense.”

Office-to-residential conversions are notoriously complex and expensive, often requiring wholesale reconfiguration of floor plates, mechanical systems, and building cores. Not every building is a suitable candidate, and the economics only pencil out when land values are high enough to justify the investment.

The West Loop, with its desirable location, abundant restaurants and nightlife, and proximity to transit, checks those boxes. The neighborhood has also become one of Chicago’s most in-demand residential markets, with apartment rents among the highest in the city.

“If I can convert an underperforming office building into 400 apartments that each rent for $2,500 a month, that’s a much better return than collecting rent from a half-empty office property,” Scott explained.

Winners and Losers

The shakeout in West Loop office market is creating clear winners and losers among property owners.

Buildings that have invested in top-tier amenities—fitness centers, rooftop decks, high-end food halls—continue to attract tenants, particularly among companies seeking to lure workers back to the office. Google’s Fulton Market headquarters, which features a 2-acre rooftop park and an array of employee perks, reportedly has no trouble filling its space.

“The flight to quality is real,” Murphy said. “The best buildings are doing fine. It’s the B and C buildings that are really struggling.”

Among the hardest hit are owners of older properties that were renovated for office use in the early years of the West Loop boom. Many of these buildings lack the ceiling heights, floor plates, and mechanical systems that modern tenants demand. Without significant additional investment, they may struggle to compete.

Some of these properties may ultimately be torn down entirely, replaced by new residential or mixed-use developments. Zoning changes approved by the City Council earlier this year make such redevelopments easier, allowing by-right residential construction in areas that were previously designated for commercial use only.

What It Means for Chicago

The West Loop’s struggles are a microcosm of challenges facing cities nationwide as the post-pandemic economy takes shape. Chicago’s overall office vacancy rate stood at 21.4 percent in the third quarter, according to CBRE—lower than San Francisco (32 percent) but higher than New York (17 percent) and significantly above pre-pandemic norms.

City officials have sought to address the issue through incentive programs aimed at encouraging office-to-residential conversions. Mayor Johnson’s administration has proposed a $100 million fund to support such projects, though the plan faces an uncertain path through the City Council.

“We can’t wish the old economy back into existence,” said Erin Harkey, commissioner of the Department of Planning and Development. “The question is how we adapt—how we create neighborhoods that are vibrant and sustainable in a world where people work differently than they used to.”

For the West Loop, that adaptation is already underway. The neighborhood’s restaurant scene remains robust, its streets busy with residents, and its appeal as a place to live undiminished. Whether it can recapture its status as a premier office destination—or whether it will evolve into something different—remains to be seen.

“The West Loop isn’t dying—it’s changing,” Parrish said. “That’s uncomfortable for some people, but it’s also an opportunity. The neighborhoods that figure out how to adapt are the ones that will thrive in the next economy.”