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How COVID changed Chicago business

Chicago-area hotels are recovering more slowly than the rest of the nation, too. Revenue per available room, a key metric that accounts for both occupancy and room rates, was down 40% last year compared with 2019, while it was just 17% lower nationally, according to hospitality data and analytics firm STR.

The pandemic dealt a devastating blow to many retail landlords that were already struggling before March 2020. An online shopping trend that was well underway accelerated when consumers hunkered down at home. Retail bankruptcies and store closings jumped, pushing malls like the Lincolnwood Town Center and Louis Joliet Mall into default.

With demand for retail space expected to shrink further, mall owners are adapting, spending big sums to add apartments and other uses to their properties. And the pandemic has made clear that North Michigan Avenue, the city’s biggest shopping district, needs to reinvent itself. About a quarter of all Magnificent Mile retail space is vacant today, up from 15% in 2019, according to Cushman & Wakefield.

But the rise of e-commerce is a big reason the industrial real estate market is on fire. E-commerce companies, retailers and logistics firms are gobbling up warehouse space as they retool their supply chains, pushing the local industrial vacancy rate down to 5.44%, close to its all-time low of 5.39% in 2000, according to Colliers.

“In my 37 years, this is as good as it’s been,” says Jim Clewlow, chief investment officer of CenterPoint Properties, an Oak Brook-based industrial developer.

He expects the good times to continue for at least a few more years. After being caught by supply-chain disruptions due to the pandemic, companies are carrying more inventory these days to protect themselves, and they need more space to store it, Clewlow said. A rise in domestic manufacturing could boost the market, too.

The local apartment market should keep on rising, too. While that will make landlords happy, it’s bad news for renters who can expect some hefty rent hikes in 2022.

Danny Ecker and Alby Gallun

Packaged foods

The pandemic has been a steroid for Chicago’s food giants, as consumers’ eating habits continue to evolve.

School, office and restaurant closures drove people toward packaged foods, and sales surged at Mondelez, Kraft Heinz and Conagra in the early days of the pandemic. Consumers craved nostalgic brands from childhood, like Oreos and Kraft Macaroni & Cheese, and the companies gained new customers.

But it hasn’t been all sunshine. Meeting demand has been a challenge amid COVID outbreaks at factories, and lingering supply chain problems are burdening food processors with shortages of items like cream cheese. The tight labor market has been a battle, too, as has inflation.

Oreo maker Mondelez hiked US prices 6% to 7% in January and expects to take them higher. Similarly, Kraft Heinz executives said they might push prices up again, after an increase in the fall. Conagra warned in January that it expected gross inflation to hit 14% this year. The maker of Duncan Hines cake mix raised prices multiple times in 2021.

Through it all, however, sales at Chicago’s packaged-foods behemoths have been strong. Mondelez’s 2021 net revenue was up 11% over 2019, Kraft Heinz’ was up 4.3% and Conagra’s was up 17.3%.

“Retail brands were able to really re-entrench themselves and show their value to their retail partners and end consumers,” says Erin Lash, director of consumer sector equity research at financial services firm Morningstar. “Leading brands had the resources to a greater extent than smaller (companies) and private labels to meet the outsize demand that is surfacing.”

Ally Marotti


The pandemic taught manufacturers a painful lesson about the downside of running lean and squeezing costs out of the supply chain.

COVID-induced supply chain disruptions are still reverberating through the economy, and Russia’s invasion of Ukraine has only underscored the volatility of commodity markets.

“There’s a shift in mentality,” says Illinois Manufacturers’ Association CEO Mark Denzler. “Before it was just in time. Now it’s just in case.” Companies are diversifying their sourcing and sometimes bringing it back home. They’re learning the necessity of keeping raw materials and finished goods on hand.

At the start of the pandemic, manufacturing employment in Illinois plunged from 48,000 jobs to a low of 532,400, according to the Bureau of Labor Statistics. Companies idled plants with the assumption that demand would vanish, and then ramped up only to discover their supplies were sitting on a ship off Long Beach, Calif.

Many manufacturers had never bothered to learn that there were tiers beyond their immediate suppliers.

“Maybe you ordered a compressor from a Chinese supplier, but you didn’t know they buy their nuts and bolts elsewhere,” says Brian Pacula, a director at the consultancy West Monroe Partners. “Now you can’t get your compressor because the supplier can’t get the bolts.”

When earnings expectations are missed because container costs have gone up or the right chips aren’t available, that gets the attention of the C-suite very quickly, Pacula adds. With supplies disrupted, companies often missed revenue targets. More nimble companies that found alternative sourcing could raise prices, maintain earnings and emerge from the COVID dip faster.

Illinois manufacturing employment has rebounded but was still 20,000 jobs below pre-pandemic levels at the end of 2021. That’s in contrast to neighboring states Indiana and Wisconsin, where manufacturing employment has surpassed pre-pandemic levels, BLS data shows. Output in Illinois and nationwide has grown, thanks to more automation. Small and midsize companies avoid the high capital cost by renting robots, says Denzler.

Some public companies took hits in 2020 but rebounded last year. Illinois Tool Works last year posted a 15% revenue gain and 28% increase in earnings after declines the year before. Tenneco recovered from a 2020 loss and grew revenue 17%.

Manufacturers will become more cognizant of their end-to-end sources, Pacula says, adding, “They’ll make sure they have redundancy and resiliency. That’s the only way to compensate for the probability of disruption.”

Judith Crown

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