First-generation projects hit historic lows

In addition to a shift in project size distribution, our data also reveals a dramatic contraction in first-generation fit-outs, which now account for just 7.0 percent of projects, down from 37.0 percent in 2022. This steep decline underscores a structural shift in the Chicago office market. The disappearance of large trophy blocks has left few opportunities for new premium construction. Even as leasing activity shows signs of recovery, demand is concentrated in smaller footprints, conditions that inherently favor renovation over first-generation fit-outs.

The scarcity of first-generation space is also reshaping tenant strategies. Many occupiers are deferring projects, opting for short-term extensions where existing conditions are largely reused. This approach minimizes capital outlay and defers real estate decision timelines, but it also signals a market that is increasingly reliant on adaptive reuse due to a lack of new development.

For the Chicago market, the implications are clear: until new developments enter the pipeline, premium first-generation projects will remain scarce. Strategic repositioning and amenity upgrades will be critical for assets to compete in the current environment. Looking ahead, we anticipate that the share of first-generation projects will stay below 10.0 percent through 2026.