The Labor Leverage Ratio and the Chicago Office Market’s Next Chapter
Everyone in commercial real estate is still staring at vacancy rates, waiting for a magic signal that office is “back.” But what if they’re looking in the wrong place?
While investors obsess over empty floors and hybrid attendance charts, labor economist Will Goetzmann has been tracking something that might explain what’s actually happening in Chicago’s office market: the Labor Leverage Ratio.
And what it’s showing could mark the early stages of an inflection point, not just nationally, but here in Chicagoland, where one of America’s largest, most complex office ecosystems is quietly starting to rebalance.
What the Labor Leverage Ratio Actually Measures
The concept is deceptively simple. Take the number of people getting hired and compare it to the number quitting or being fired. The ratio that results tells you who has power in the labor market.
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When the ratio sits above 1.0, employees hold the cards. They can quit whenever they want, demand remote work, and ignore return-to-office mandates without fear.
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When it drops below 1.0, employers regain leverage. They can require attendance, enforce culture, and plan for growth with more stability.
During COVID, this ratio shot through the roof. Roughly 65–70% of companies that rolled out return-to-office mandates never enforced them. Employees could walk out the door and find another job instantly. That was peak worker power.
But now, that’s changing.
Goetzmann notes the ratio has fallen back to the same levels we saw six to nine months after the pandemic began, when employers began regaining control. As that ratio has dropped, office occupancy has risen right alongside it.
Correlation isn’t causation, but in commercial real estate, timing often matters more than precision. And the timing here is striking.
What the Leasing Data Shows and Why Chicago Is Lagging the National Curve
New data from CoStar Analytics (Q3 2025) shows that U.S. office leasing volume reached roughly 100–110 million square feet, or 1.2% of total inventory. That’s modest growth but still below the 115 million square feet per quarter seen between 2015 and 2019.
Drill down, though, and a clearer picture emerges:
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Lease sizes are smaller — down 15–20% from pre-pandemic averages.
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Deal counts are higher — transactions are up nearly 10% from 2019.
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Big tenants are staying put — renewals are more common than relocations.
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Growth metros like Charlotte, Dallas-Fort Worth, and Miami are outperforming, thanks to population inflows and strong labor markets.
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Chicago, Los Angeles, Boston, and D.C. remain below pre-COVID leasing volume.
That last line is key. Chicago’s lag isn’t just about remote work, it’s about leverage.
When employees hold the upper hand, firms don’t enforce attendance. When firms don’t enforce attendance, they don’t renew leases at scale. And when leases shrink, landlords cut back on TI packages, capital projects, and rent growth forecasts.
But as the labor leverage ratio slides downward, the very conditions that hurt Chicago’s office market could start to reverse.
The Chicago Story: From Stalled to Stabilizing
For all its challenges, Chicago’s office market isn’t standing still. Leasing volume downtown rose 5% quarter-over-quarter this summer, led by tech-adjacent tenants and professional services firms taking smaller, higher-quality footprints.
The Loop’s Class A towers, from 233 S. Wacker Dr. (Willis Tower) to 155 N. Wacker, are seeing slow but steady absorption, while Class B office buildings are beginning to reposition for smaller users, co-working, and creative office conversion.
Meanwhile, submarkets like Fulton Market and River North remain Chicago’s “proof of concept.” These are the neighborhoods where younger employees actually want to be accessible, amenity-rich, walkable, and increasingly linked to post-pandemic work culture.
The suburban story is evolving too. Submarkets like O’Hare, Oak Brook, and Bannockburn/Lincolnshire are attracting tenants trading downtown commutes for flexible, lower-cost office footprints closer to home.
In many of these areas, employers with distributed workforces are signing 3–5 year deals instead of 10-year commitments, a sign of confidence returning cautiously.
Even adaptive reuse and hybrid work formats are taking shape. The approved office-to-residential conversion at 223 W. Erie St., Chicago, IL 60654 underscores how investors are finding new paths to create value amid a constrained market.
The Generation That Could Flip the Script
Will Goetzmann also teaches undergraduates, sophomores through seniors, and he’s watching something few in CRE are talking about: the next generation actually wants to go to the office.
After spending high school and early college under lockdown, these students crave connection and mentorship. They want the physical workspace experience the older Millennial cohort often takes for granted.
They aren’t demanding “remote-first” jobs. They’re asking where they can learn, grow, and network.
As this generation graduates into Chicago’s workforce over the next 3–5 years, their preferences could accelerate office attendance faster than anyone expects.
Imagine a workforce that wants structure and social energy just as employers regain the leverage to require it. That’s the formula for a genuine recovery.
Vacancy Rates Are the Rearview Mirror
If you’re trying to predict the future of Chicago’s office market, stop staring at vacancy rates. They’re lagging indicators — a reflection of yesterday’s decisions.
Labor metrics, by contrast, point to what’s coming next.
When labor leverage tilts toward employers, attendance rises, leasing activity follows, and rent concessions narrow. It’s already starting to happen.
Just as industrial space exploded post-2020 when e-commerce reshaped supply chains, office space could be next in line for a reversion to the mean, not the old 9-to-5, but a recalibrated, purpose-driven office culture.
What This Means for Chicago’s Office Investors and Brokers
If you’re a commercial real estate agent in Chicago, this shift changes how you advise clients — both tenants and landlords.
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Distressed pricing won’t last forever.
Class A assets trading at 40–50% of replacement cost won’t stay there once leasing stabilizes. The window to acquire quality office product is narrower than it looks. -
Smaller footprints = stronger tenants.
Many Chicago leases today are under 20,000 square feet, but those tenants are locking in higher-quality spaces and longer terms. A building with ten small, creditworthy users may outperform one dependent on a single large tenant. -
Suburban absorption deserves more attention.
North Shore submarkets like Lincolnshire, Vernon Hills, and Deerfield are experiencing consistent office demand from firms seeking proximity to employees without the downtown premium. -
Conversions and creative reuse are real.
Chicago’s zoning flexibility and demand for housing make office conversions an increasingly attractive path to reposition older inventory. These projects can reset values, diversify risk, and keep capital in-market. -
Watch the labor data — not just leasing comps.
When hiring improves and quits decline, that’s when office attendance rebounds. The Labor Leverage Ratio might just be the most underappreciated forward indicator in Chicago CRE.
The Bottom Line
Chicago isn’t out of the woods, but it’s not dead either. The city that invented the skyscraper has a way of reinventing itself every few cycles.
The labor market is slowly rebalancing. Students entering the workforce want in-person interaction. Leasing volumes are inching up. And the city’s adaptive reuse pipeline is quietly bringing new life to obsolete buildings.
For investors and commercial real estate agents, the message is simple:
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The fundamentals of office space are shifting, not disappearing.
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The labor leverage ratio tells us employers are regaining control.
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The next phase of Chicago’s recovery will reward those who read the signs early.
If the pattern holds, the “distress window” for Class A and B office assets may close by mid-2026, and when it does, the market won’t be waiting for lagging indicators like vacancy to confirm it.