If you look at the Mag Mile, the Riverwalk, or other major downtown tourist destinations, one might think that the problems of downtown retailers had all but evaporated. The stores in those areas couldn’t be busier.
But if you look in the financial district and other areas of the west Loop, another more frightening picture appears. Almost empty stores or “For Rent” signs are the norm.
Why? Because the office workers who kept those stores buzzing are yet to return.
Everything from restaurants that lived off of a strong lunch crowd to fine clothing stores for executives are having extreme difficulties. But this is just one of the components of a much larger difficulty.
The problem is, what will we do with an almost empty downtown?
Our retailer’s problems pale in comparison to the difficulties in downtown real estate. Those problems come in two categories, all caused by remote working.
First is the vacancy rates of downtown office buildings. With employees working remotely, companies aren’t renewing their leases. You could play golf in many downtown office buildings and have no need to yell, “Fore”.
How will building owners pay their mortgages if they can’t lease space? This could lead to even more downtown properties ending up in foreclosure or being taken over by the banks.
Many say the answer is converting those buildings to condos, but herein lies another problem. Most of the people who purchased downtown condos did it because they wanted to live close to work, eliminating a commute. Now that many of them are working remotely, it doesn’t matter where they live.
Given the difficulties that our downtown has with crime, many are leaving for greener pastures. This in turn, is causing the prices of those downtown condos to drop.
What’s the answer? I have no idea. When former Mayor Daley was faced with a similar problem in the early 2000’s, he created the Theater District and beefed up tourism.
But let’s all realize that tourism only gets you so far. Once the weather turns cold, the tourists go back to wherever.
This could be a rather cold winter for our downtown.
Let me leave you with this.
I have a theory that I’d like to suggest. This isn’t even a theory, it’s more of a hypothesis. And I want to be clear that I have no empirical evidence to back it up.
Is the fact that we’re in a recession, but the labor markets remain strong. bothering you as well? This, by definition, runs contrary to reason.
Conventional logic says that when economies recess, businesses sell less goods and services. By definition, that would mean they need less workers to produce those smaller amounts of goods and services.
Traditionally recessions run hand-in-hand with bad labor markets. Normally when in a recession we would see double digit unemployment.
But that isn’t what’s happening this time. Labor statistics released last week showed a further reduction in unemployment as our economy added $528k new jobs in July.
How is this possible? At the risk of forcing the results to create a theory which in science is a big no-no, here’s my idea.
It’s the concept that remote work has, by definition, become less productive. The result would be that less goods and services are being produced with more workers, hence the idea of a strong labor market in a recession
No one will ever convince me that anyone can get as much done sitting in their dining room as their kids yell and scream, not doing their homework, in a bedroom down the hall. Any parent would tell you that if this was happening, they certainly wouldn’t be able to focus on their work and be productive.
But that’s just one scenario. What happens when the doorbell rings unexpectedly, your spouse or significant other is sick in the other room, or the dogs are barking and need to go for a walk.
Economists work in a vacuum. They base their predictions on older ideas, but that isn’t what happens in reality. Economies change. And the concepts that economists use to predict those changes and explain those economies lag behind reality.
One major problem with my theory is the fact that corporate earnings have not taken a major downturn to accommodate any increased expenditures in labor. But we’re also in a period of the worst inflation in forty years.
What if corporate managers and accountants are actually being good at their jobs and accounting for this new increased factor in their price hikes? It is possible that they have already compensated for the lack of productivity in price hikes to maintain former levels of profit.
One thing is certain. Every major recession we’ve had since World War II has in some way been different from the rest. We’ll see. Time will tell.
Our webinar on “How To Get Your Company Through A Bad Economy” is tomorrow, August 9th, 2022, at 2:00 pm (CST). It will cover issues like Inflation, the Difficult Hiring Market, Supply Issues, and Replacing Clients.
This is a hot topic and there are only a few spaces left. You may register by going to the following web address.
We’re all going to get through this. Let’s get through it together.
*Words from our exceptional leadership