How COVID Changed Chicago Business


Hotels in the Chicago area are also recovering more slowly than the rest of the country. Revenue per available room, a key metric that considers both occupancy and room rates, was down 40% last year from 2019, when it was just 17 % lower nationally, according to hotel data and analytics firm STR.

The pandemic has dealt a devastating blow to many retail owners who were already struggling before March 2020. A well-established online shopping trend accelerated as consumers hunkered down at home. Retail bankruptcies and store closures have surged, pushing malls like Lincolnwood Town Center and Louis Joliet Mall into default.

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

But the rise of e-commerce is one of the main reasons the industrial real estate market is on fire. E-commerce companies, retailers and logistics companies are gobbling up warehousing space as they reorganize their supply chains, pushing the local industrial vacancy rate down to 5.44%, near its lowest historic 5.39% in 2000, according to Colliers.

“In 37 years, it’s as good as it’s gotten,” 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 gripped by supply chain disruptions due to the pandemic, businesses are carrying more inventory these days to protect themselves, and they need more space to store it, Clewlow said. An increase in domestic manufacturing could also boost the market.

The local apartment market should also continue to grow. While that makes landlords happy, it’s bad news for tenants, who can expect big rent increases in 2022.

Danny Ecker and Alby Gallun

packaged food

The pandemic has been a steroid for Chicago’s food giants as consumer eating habits continue to shift.

School, office and restaurant closures pushed people towards packaged food, and sales surged at Mondelez, Kraft Heinz and Conagra early in the pandemic. Consumers have been craving nostalgic brands since childhood, like Oreos and Kraft Macaroni & Cheese, and companies have won new customers.

But all was not sunny. Keeping up with demand has been a challenge amid COVID outbreaks in factories, and ongoing supply chain issues are burdening food processors with shortages of items like cream cheese. The tight labor market has also been a battle, as has inflation.

Oreo maker Mondelez raised US prices 6% to 7% in January and expects them to rise. Similarly, Kraft Heinz executives said they could drive prices up again, following a fall increase. Conagra warned in January that it expected headline inflation to reach 14% this year. Cake mix maker Duncan Hines raised prices several times in 2021.

Through it all, however, sales for Chicago’s packaged food behemoths have been strong. Mondelez net sales in 2021 increased 11% over 2019, Kraft Heinz increased 4.3% and Conagra increased 17.3%.

“Retail brands have been able to really entrench themselves and show their value to their retail partners and end consumers,” says Erin Lash, director of consumer equity research at financial services firm Morningstar. . “Big brands had the resources to a greater extent than small (businesses) and private labels to meet the outsized demand that is surfacing.”

Ally Marotti


The pandemic has taught manufacturers a painful lesson about the downsides of lean management and reducing supply chain costs.

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

“There’s a shift in mentality,” says Mark Denzler, CEO of the Illinois Manufacturers’ Association. “Before, it was just in time. Now that’s just in case. Companies are diversifying their supplies and sometimes taking them home. They learn the need to keep raw materials and finished products close at hand.

At the start of the pandemic, manufacturing employment in Illinois fell by 48,000 jobs to a low of 532,400, according to the Bureau of Labor Statistics. Companies idled their factories assuming demand would disappear, then ramped up to find their supplies were sitting on a ship off Long Beach, California.

Many manufacturers had never bothered to learn that there were levels beyond their immediate supplier.

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

When profit expectations aren’t met because container costs have increased or the right chips aren’t available, it gets the C suite’s attention very quickly, Pacula adds. With interrupted supplies, companies have often missed their revenue targets. More nimble companies that have found alternative supply could raise prices, maintain profits, and emerge from the COVID downturn faster.

Illinois manufacturing employment rebounded, but was still 20,000 jobs below pre-pandemic levels at the end of 2021. This contrasts with neighboring states of Indiana and Wisconsin, where manufacturing employment has exceeded pre-pandemic levels, according to BLS data. Production in Illinois and across the country increased, thanks to greater automation. Small and medium-sized businesses avoid the high cost of capital by leasing robots, says Denzler.

Some public companies took a hit in 2020 but rebounded last year. Last year, Illinois Tool Works reported a 15% gain in revenue and a 28% increase in profits after declines in the previous year. Tenneco recovered from a loss in 2020 and grew revenue by 17%.

Manufacturers will become more aware of their end-to-end sources, says Pacula, adding, “They’ll make sure they have redundancy and resiliency. This is the only way to compensate for the probability of disturbance.

Judith Crown


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