Chicago’s downtown office market starts 2023 on the verge of crisis as total vacancy jumped to 22.5 percent with occupiers downsizing and over 1,000,000 sq. ft. of sublease space coming to market. Over the past several quarters, Class A product has weathered the storm with direct vacancy hovering around 13.0 percent. But competing high quality sublease space has now become a challenge with class A sublease vacancy edging up to 3.1 percent. Class B and C buildings continue to suffer from the “flight-to-quality” with total vacancy ending the quarter at 26.3 percent and 23.7 percent, respectively. Looking ahead, office landlords will feel increased pressure to retain and attract new tenants as lenders tighten their belts in an elevated interest rate environment. Overall leasing activity remains low, so the few tenants that are in the market should benefit from intense landlord competition for their occupancy.