Chicago's office market is experiencing the most dramatic reshuffling in a generation. Downtown vacancy hit 24.7% in mid-2025, the highest level on record, yet The Fulton, a $350 million trophy development in Fulton Market, opened its doors in early 2026 already 60% leased. Google is preparing to bring thousands of employees into the renovated Thompson Center. Six LaSalle Street towers are converting from obsolete office to residential under the city's reinvention initiative. For borrowers seeking office loans in Chicago, this market demands a financing strategy as nuanced as the city itself. The right loan program depends entirely on which Chicago you are buying into: the thriving Fulton Market corridor, the stabilizing Loop, or the transitional corridors where adaptive reuse is creating new value.
Clear House Lending provides office property financing across every Chicago submarket, from bridge loans for distressed Loop acquisitions to SBA loans for owner-occupied medical office in the suburbs. This guide covers the current state of Chicago's office market, loan programs and rates, strategies for every office subtype, and the neighborhood-level dynamics that lenders evaluate when underwriting your deal.
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What Does Chicago's Office Market Look Like Right Now?
Chicago's downtown office market in 2025 is defined by a stark divergence between trophy product and everything else. The overall Central Business District direct vacancy rate reached 24.4% in Q3 2025, a slight improvement from the 24.7% recorded in Q2 but still well above pre-pandemic levels. Availability, which includes space listed for sublease, pushes even higher. This is the practical reality that every borrower and lender confronts.
But that headline number conceals the real story. Trophy and premier Class A buildings in prime locations are performing dramatically better than the market average. Multi-tenant trophy buildings have been the standout performers, capturing the lion's share of positive absorption while commodity product continues to hemorrhage tenants. The Federal Reserve Bank of Chicago published research in 2025 confirming what brokers already knew: buildings with modern amenities, efficient floor plates, and updated common areas carry meaningfully lower vacancy than their outdated peers, regardless of location.
The bifurcation extends to rents. Class A asking rates in the CBD averaged $49.68 per square foot in Q1 2025, while Class B space averaged $40.17 and Class C came in at $29.62. These averages mask an even wider spread at the property level. A recently renovated Fulton Market tower can command north of $55 per square foot while a tired 1970s Loop building might struggle to attract tenants at $25.
For borrowers, the takeaway is unmistakable. Lenders are not making generic "Chicago office" decisions. They are making property-specific, submarket-specific evaluations. Your financing terms will reflect whether your building is positioned to capture tenant demand in the flight to quality or whether it faces the headwinds that have pushed commodity office vacancy above 30% in some corridors.
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How Do Office Loan Options Differ by Building Class?
The building class of your Chicago office property is the single largest determinant of your financing terms. Lenders draw sharp lines between trophy, Class A, B, and C product in this market.
Trophy and Class A Office properties in Chicago remain highly financeable when they carry strong occupancy and creditworthy tenants. These buildings, concentrated in Fulton Market, the West Loop, and the best Loop addresses, can secure conventional commercial mortgages or CMBS loans at 60% to 70% LTV with fixed rates starting around 5.18% for the most qualified borrowers. Loan terms of 5 to 10 years are standard, and lenders compete for well-located, well-leased Class A product. The key underwriting factors are weighted average lease term, tenant credit quality, and building condition.
Class B Office buildings present the most complex financing picture. Renovated Class B product with modern lobbies, good transit access, and competitive amenity packages can still attract lender interest, though at more conservative terms: 55% to 60% LTV, rates 75 to 150 basis points above Class A pricing, and shorter loan terms. Unrenovated Class B buildings with vacancy above 25% will struggle with conventional financing and may need to pursue bridge loan programs that underwrite to a value-add business plan rather than current cash flow.
Class C and Commodity Office buildings face the toughest financing environment in Chicago's recent history. Many traditional lenders have stopped originating loans on commodity office altogether. Borrowers acquiring these properties typically pursue bridge or hard money financing based on a conversion or significant repositioning strategy. The LaSalle Street conversions demonstrate that lenders will fund these projects when the sponsor has a credible plan and relevant experience.
Medical Office stands out as an exception to the general office malaise. Healthcare tenants typically commit to longer leases (7 to 15 years), invest heavily in buildouts, and provide more stable cash flow than general office tenants. Lenders reward these characteristics with better terms, often pricing medical office loans 25 to 50 basis points below comparable general office. Chicago's concentration of major hospital systems, including Northwestern Medicine, Rush University Medical Center, and Advocate Health, drives steady demand for medical office space throughout the metro area.
Life Sciences and Lab Space has emerged as a growth sector in Chicago. The metro area added 1.5 million square feet of new Class A lab inventory since 2020, a 150% increase in multi-tenanted lab space. Fulton Labs, a 725,000 square foot life sciences campus in Fulton Market, anchors this sector. Roughly $350 million in venture capital flowed into Chicago life sciences companies in 2024, up 55% from the prior year. Lenders view purpose-built lab space favorably due to the high cost of tenant buildout (which creates natural lease stickiness) and the sector's growth trajectory.
Coworking and Flex Office has become a permanent feature of the Chicago landscape as companies embrace hybrid work models. Lenders evaluate coworking tenancy based on the operator's credit strength and master lease structure. A WeWork or Industrious lease backed by strong financials is underwritten very differently than a lease with a smaller operator. Buildings where flex space fills otherwise vacant floors can actually strengthen a loan application, provided the operator is creditworthy and the coworking component does not exceed 20% to 25% of total rentable area.
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What Are Current Office Loan Rates in Chicago?
As of early 2026, Chicago office building loan rates span a meaningful range depending on property quality, leverage, and loan structure. The flight-to-quality dynamic in the tenant market is mirrored exactly in the lending market.
For stabilized trophy and Class A office buildings with strong tenancy, conventional commercial mortgage rates start as low as 5.18%. CMBS loans for larger office properties typically price in the 5.50% to 7.00% range depending on leverage, term, and property specifics. Bank loans for relationship borrowers with established portfolios can compete with CMBS pricing on the best deals.
Bridge loans for office repositioning projects in Chicago range from 7.50% to 10.50%, with rates on the higher end for properties requiring significant capital expenditure or carrying elevated vacancy. For more on how bridge loans work for transitional office properties, see our commercial bridge loan guide.
SBA loans remain one of the most attractive options for owner-occupants of smaller office buildings and medical office spaces. SBA 7(a) rates range from 6.50% to 8.00%, while SBA 504 loans offer fixed rates starting around 5.64% through the CDC debenture portion. These programs allow down payments as low as 10%, making office ownership accessible even in Chicago's higher-priced submarkets. For a detailed look at SBA options, read our guide to SBA loans for commercial real estate.
Construction loan rates for office renovation or conversion projects run 7.30% to 8.30%, based on SOFR plus spreads of 2.75% to 3.75%. The LaSalle Street conversion projects have demonstrated that lenders will provide construction financing for well-planned adaptive reuse when city incentives reduce project risk.
Loan-to-value ratios for office properties in the current market typically range from 55% to 70%, with the higher end reserved for trophy assets carrying strong in-place cash flow. This represents a pullback from the 70% to 75% LTV common before the pandemic.
Use our commercial mortgage calculator to estimate monthly payments, or our DSCR calculator to assess whether your property's income supports financing at current rates.
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How Do the Loop, Fulton Market, and River North Compare for Office Investment?
Chicago's major office submarkets operate with distinct dynamics that directly affect your financing options, and lenders evaluate each neighborhood differently.
The Loop remains Chicago's largest concentration of office space and its most challenging market. Vacancy in the Loop and East Loop corridors exceeded 24% in 2025, driven by tenant departures to newer buildings in the West Loop and Fulton Market. However, the Loop is also where the most significant transformation is underway. Google's purchase of the Thompson Center for $105 million and planned occupation by thousands of employees could catalyze the kind of revival that downtown Chicago needs. The city's LaSalle Street Reimagined initiative is converting six major office towers to residential, removing obsolete inventory while adding the residential population that Loop retailers and restaurants need. For investors, the Loop offers deep value if you have the patience and capital to weather the transition. Class A asking rents in the Loop still average in the mid-$40s per square foot, well below Fulton Market, creating an opportunity for investors who can secure properties at today's discounted basis and benefit from the neighborhood's ongoing reinvention.
Fulton Market is the undisputed winner of Chicago's post-pandemic office reshuffling. Once a meatpacking district, it has transformed into the city's premier corporate address. Google's Midwest headquarters at 1K Fulton was the catalyst; McDonald's, Mondelez International, Kimberly-Clark, and Dyson followed. The neighborhood now commands some of the highest commercial real estate values in Chicago. The Fulton, the $350 million, 535,000 square foot development at 919 W. Fulton Street that opened in early 2026, is the only new Class A office building to break ground in Chicago since 2023, and it arrived already 60% leased. The building combines new construction with the conversion of the original Schwinn bicycle factory, offering 350,000 square feet of trophy office and 23,000 square feet of retail. Rents in Fulton Market's best buildings exceed $55 per square foot. Lenders view stabilized Fulton Market office as among the strongest collateral in the Chicago market, and borrowers can expect the most competitive terms available in the metro area.
River North occupies a middle ground between the struggling Loop and thriving Fulton Market. The submarket accounted for 11% of downtown office leasing activity in Q3 2025, and it benefits from a vibrant retail and restaurant scene that appeals to employers seeking amenity-rich locations. Average gross asking rents in River North sit in the low-to-mid $40s per square foot, and recent sales of smaller assets have closed in the low- to mid-$100s per square foot. The 153,611 square foot building at 311 W. Huron added new inventory to the neighborhood, signaling developer confidence in River North's trajectory.
Suburban Chicago offers a different risk profile. Asking rents averaged $22.55 per square foot in Q4 2025, significantly below downtown, with the strongest performance concentrated in Class A suburban campuses along the I-88 and I-90 corridors. Medical office in suburban locations performs particularly well due to proximity to hospital systems and patient accessibility. DSCR-based financing can be especially effective for suburban office acquisitions where strong cash flow offsets location concerns.
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What Is Happening with LaSalle Street Office-to-Residential Conversions?
The LaSalle Street Reimagined initiative represents one of the most ambitious adaptive reuse programs in the country, and it is fundamentally reshaping how lenders and investors think about Chicago's Loop.
Six major office-to-residential conversion projects are moving forward, channeling roughly $900 million in private investment backed by $250 million to $300 million in city incentives including TIF funds, landmark tax credits, and affordable housing subsidies. These projects are removing millions of square feet of obsolete office inventory from the market while adding the residential density that the Loop needs to evolve into a true live-work-play neighborhood.
The projects underway include 79 W. Monroe (the Rector Building), a $64 million conversion of seven floors of vacant office into 117 residential units expected to complete in early 2026. At 30 N. LaSalle, 432,000 square feet of office space across floors three through eighteen is becoming 349 residential units, with 105 set aside as affordable, at a total development cost of $130 million. The landmark Field Building at 135 S. LaSalle is the largest project: a $241 million conversion of 1.3 million square feet into 386 mixed-income apartments, with construction scheduled to begin in spring 2026.
For office investors and lenders, the conversion trend has several important implications. First, the removal of obsolete inventory should help tighten vacancy in the remaining office stock, supporting rents and valuations for properties that remain as office. Second, the city's willingness to provide substantial incentives demonstrates a policy commitment to the Loop's transformation that reduces long-term risk for all downtown investments. Third, borrowers who own commodity office buildings along LaSalle Street or nearby corridors should evaluate whether conversion represents a more attractive exit than continued office operation.
Financing for conversion projects typically involves a staged approach: bridge or acquisition financing for the initial purchase at a discount to the building's former office valuation, construction financing for the renovation at 7.30% to 8.30%, and permanent financing or a sale upon completion and lease-up. The city incentives materially improve project economics and make lenders more comfortable with the development risk.
Contact Clear House Lending if you are evaluating a Chicago office conversion project. Our team can structure financing that accounts for city incentives and the unique underwriting requirements of adaptive reuse.
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How Do Google and McDonald's Headquarters Affect Fulton Market Financing?
The presence of Google and McDonald's headquarters in Fulton Market has had a measurable, lasting impact on commercial real estate values and lending conditions throughout the neighborhood.
When Google established its Midwest headquarters at 1K Fulton in 2015, it triggered a transformation that turned an industrial meatpacking district into Chicago's hottest corporate address. Property values rose 27% across the broader area that includes Fulton Market following Google's arrival. McDonald's relocation of its global headquarters to the neighborhood in 2018 cemented Fulton Market's status as a premier destination for Fortune 500 companies.
Google's $105 million purchase of the Thompson Center in 2022, located at the edge of the Loop, extended the company's footprint and is expected to bring thousands of additional employees to the area. Experts believe the "Google Effect" could help revitalize the struggling Loop corridor adjacent to Fulton Market, creating a bridge between the two submarkets.
For lenders, the concentration of investment-grade corporate tenants in Fulton Market translates directly into lower perceived risk. A building leased to a Fortune 500 tenant on a long-term lease in Fulton Market represents one of the strongest credit profiles in the entire Chicago office market. This means higher leverage (up to 70% LTV), lower rates, and longer loan terms compared to otherwise similar buildings in less established submarkets.
The spillover effect also benefits nearby properties. Buildings within walking distance of Google and McDonald's headquarters can market themselves as part of the Fulton Market ecosystem, attracting tenants who want proximity to these anchor employers. The $350 million Fulton development at 919 W. Fulton Street is a direct beneficiary of this dynamic, opening 60% pre-leased in a market where most new office construction has halted entirely.
The city has reinforced Fulton Market's trajectory with a tax incentive approved in July 2025 for the Fulton Market Landmark, further signaling policy support for the neighborhood's continued growth.
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What Financing Strategies Work Best for Chicago Office Investors?
The right financing strategy for a Chicago office property depends on its location, building class, tenant profile, and your investment timeline.
Stabilized Trophy and Class A Acquisition: For well-leased Class A properties in Fulton Market, the West Loop, or prime Loop locations, a conventional commercial mortgage or CMBS loan at 60% to 65% LTV provides the most favorable rate and longest term. Expect rates in the 5.18% to 6.50% range with 5- to 10-year fixed-rate periods. These loans work best when the weighted average lease term exceeds the loan term, and lenders will scrutinize tenant credit and renewal probability.
Value-Add Repositioning: If you are acquiring a Class B building in the Loop or River North with plans to renovate and re-lease at higher rents, a bridge loan provides the flexibility to execute your business plan. Bridge loans offer 12- to 36-month terms at 7.50% to 10.50%, with the ability to fund capital improvements from loan proceeds. Once the property is stabilized, you can refinance into permanent financing at significantly lower rates.
Office-to-Residential Conversion: This strategy requires a combination of acquisition financing (often bridge or hard money) and construction financing. The LaSalle Street projects demonstrate that city incentives can make conversion economics work. Total development costs in Chicago range from $150 to $350 per square foot depending on building condition and scope of work. Lenders evaluate the project based on projected residential rents rather than current office income.
Medical Office Acquisition: Medical office buildings with long-term healthcare tenants qualify for conventional financing at favorable terms. SBA 504 loans are particularly attractive for physician groups purchasing their own practice space, offering up to 90% financing with fixed rates starting around 5.64%. Chicago's dense network of hospital systems creates steady demand for medical office throughout the metro area.
Owner-Occupied Office: Small and mid-sized businesses purchasing their own office space should consider SBA loan programs. The ability to finance up to 90% of the purchase price with a down payment as low as 10% makes ownership accessible in Chicago's market. Both SBA 7(a) and 504 programs are well-suited for owner-occupied office in the $500,000 to $5 million range.
Life Sciences and Lab Space: Purpose-built lab space and life sciences facilities are attracting favorable financing terms due to the sector's growth trajectory and tenant stickiness. Borrowers developing or acquiring lab space in the Fulton Market corridor can leverage the neighborhood's momentum and the $350 million in recent life sciences venture capital investment to support underwriting.
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What Are Lenders Looking for in Chicago Office Loan Applications?
Underwriting standards for office loans in Chicago have tightened materially since 2022. Borrowers should prepare for thorough scrutiny across multiple dimensions.
Tenant Quality and Lease Structure: Lenders prioritize buildings with creditworthy tenants on long-term leases. A building leased to investment-grade tenants with weighted average lease terms of 7 or more years will receive substantially better terms than one with short-term leases or tenants with uncertain financials. Any tenant representing more than 10% to 15% of building income will face individual credit review.
Submarket and Location: In Chicago's bifurcated market, location matters more than ever. A Fulton Market Class A building will receive fundamentally different treatment than an identical building in a weaker Loop corridor. Lenders track submarket-level vacancy, absorption, and rental trends closely, and they adjust underwriting assumptions accordingly.
Building Quality and Capital Needs: The physical condition of the building directly affects loan terms. Properties requiring significant capital expenditure for deferred maintenance, energy efficiency upgrades, or competitive repositioning will face reduced proceeds or requirements for funded reserves. Chicago's older office stock (much of it built in the 1960s through 1980s) often carries deferred capital needs that lenders must account for.
Debt Service Coverage Ratio: Lenders require a minimum DSCR of 1.25x for most office loans, with many preferring 1.30x to 1.40x given current market uncertainty. At today's rates, strong net operating income is essential. Use our DSCR calculator to test whether your property qualifies before approaching lenders.
Sponsor Experience: Lender appetite for Chicago office loans increases significantly when the sponsor has a demonstrated track record of successful office ownership and management. First-time office investors may face higher rates, lower leverage, or requirements for additional guarantors.
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How Does Chicago's Office Market Compare to Other Major Cities?
Understanding how Chicago stacks up against peer markets helps borrowers and lenders calibrate expectations and identify relative value.
Chicago's downtown office vacancy of 24.4% in Q3 2025 is above the national average of approximately 20% and significantly higher than markets like Miami (14%) and Nashville (16%). However, it is comparable to other large Midwest and coastal cities facing similar post-pandemic headwinds. The key difference in Chicago is the dramatic submarket variation: Fulton Market performs like a Sun Belt growth market while parts of the Loop resemble the most distressed corridors in the country.
On pricing, Chicago offers meaningful value. Class A asking rents of $49.68 per square foot are well below Manhattan ($90 to $125 for trophy), San Francisco ($72 for trophy), and even Boston ($65 for Class A). This discount creates an opportunity for investors who believe in Chicago's economic fundamentals, particularly in the technology, life sciences, and professional services sectors that drive office demand.
Chicago's advantages include a deep and diversified economy (the metro area GDP exceeds $700 billion), a central geographic location, world-class transportation infrastructure (including two major airports and extensive public transit), and a cost of living that helps employers attract and retain talent relative to coastal markets. The city's major universities, including the University of Chicago, Northwestern, and Illinois Tech, feed a steady pipeline of talent into technology and life sciences.
For lenders, Chicago office represents moderate risk with upside potential. The city's aggressive approach to addressing vacancy through the LaSalle Street conversion program, Google's expansion, and ongoing investment in Fulton Market demonstrate a policy and market commitment to the office sector's long-term viability.
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What Role Does the Return-to-Office Trend Play in Chicago?
The return-to-office trend in Chicago is accelerating, and it directly affects both tenant demand and lender confidence in office financing.
Major Chicago employers including JPMorgan Chase, Goldman Sachs, and several large law firms have implemented four- and five-day in-office mandates. The financial services and legal sectors, which collectively represent a significant portion of downtown office tenancy, have been the most aggressive in requiring physical presence. This has driven occupancy in the best downtown buildings meaningfully higher than the pandemic lows.
However, as in every major market, the return-to-office benefit flows overwhelmingly to premium buildings. Tenants who are requiring employees to come back are using the mandate as an opportunity to upgrade their space, moving from older buildings to newer ones with better amenities, air quality, fitness centers, and food and beverage options. This dynamic reinforces the flight to quality that defines the current market.
The practical implication for borrowers is straightforward. Buildings positioned to capture return-to-office demand, those with modern amenities, efficient floor plates, strong transit access, and competitive rents, are the ones that will attract both tenants and favorable financing. Buildings that cannot compete for returning tenants face a more challenging path, though repositioning through renovation can shift a building's competitive position.
Ready to explore financing for your Chicago office property? Contact Clear House Lending to discuss your options with an experienced commercial loan advisor who understands the nuances of the Chicago office market.
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Frequently Asked Questions
What is the minimum down payment for an office building loan in Chicago?
The minimum down payment depends on the loan program and property type. For owner-occupied office buildings, SBA loans allow down payments as low as 10%. Conventional commercial mortgages for investment office properties typically require 30% to 45% down in the current market, with leverage higher for trophy assets and lower for Class B and C buildings. Medical office buildings with long-term healthcare tenants may qualify for leverage closer to 70% LTV.
Can I get financing for a Class B office building in Chicago's Loop?
Yes, but the terms will reflect the additional risk lenders associate with Class B Loop office in the current market. Expect lower leverage (55% to 60% LTV), higher rates (typically 75 to 150 basis points above Class A pricing), and potentially shorter loan terms. If the property requires renovation, a bridge loan may be the most appropriate initial financing vehicle, followed by permanent financing once the building is stabilized at higher rents and occupancy.
How do lenders view the LaSalle Street office-to-residential conversions?
Lenders view the LaSalle Street Reimagined initiative positively for two reasons. First, the removal of obsolete office inventory reduces supply and supports rents for remaining office buildings. Second, the $250 million to $300 million in city incentives demonstrates policy commitment that lowers risk for all downtown investments. For conversion projects specifically, lenders evaluate the sponsor's adaptive reuse experience, the feasibility of the floor plate for residential use, projected residential rents, and the availability of city incentives.
What office loan programs work for medical office buildings in Chicago?
Medical office is one of the strongest segments of the Chicago office market. SBA 504 loans are ideal for physician groups purchasing practice space, offering up to 90% financing with fixed rates starting around 5.64%. Conventional commercial mortgages are available at favorable terms (60% to 70% LTV, rates starting at 5.18%) for investment medical office with long-term healthcare tenants. The key underwriting factors are tenant credit quality, lease duration, and the specialized nature of the buildout, which creates tenant stickiness.
Is Fulton Market still a good investment for office space?
Fulton Market remains Chicago's strongest office submarket. The neighborhood commands the highest rents in the metro area, benefits from Fortune 500 anchor tenants including Google and McDonald's, and continues to attract new development (The Fulton, $350 million, opened 60% pre-leased). Lenders view stabilized Fulton Market office as premium collateral. However, entry prices reflect this strength, so borrowers need to underwrite carefully to ensure acquisition basis supports adequate returns at current cap rates.
How long does it take to close an office building loan in Chicago?
Timelines vary by loan type. CMBS loans for larger office properties typically close in 60 to 90 days. Conventional bank loans close in 45 to 60 days. Bridge loans can close in 14 to 30 days, making them useful for competitive acquisition situations. SBA loans generally require 60 to 90 days due to additional government underwriting requirements. For time-sensitive deals, explore our bridge loan programs designed for rapid execution.
For more on commercial real estate financing in Chicago across all property types, visit our comprehensive Chicago commercial loans guide.
Take the next step in your Chicago office investment. Contact Clear House Lending today for a free consultation and customized rate quote for your office property.