Northwest Business Magazine

Business Forecast 2016: Opportunity Mixed With Growing Pains

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The past year brought plenty of good economic news, and small business owners are feeling upbeat. Here, local leaders share thoughts about the challenges and opportunities ahead.

Good things are happening in downtown Geneva, a neighborhood with an abundance of charming locally owned businesses. (Samantha Ryan photo)

Good things are happening in downtown Geneva, a neighborhood with an abundance of charming locally owned businesses. (Samantha Ryan photo)

What a year it’s been. Around our region, the signs of recovery are making their presence known. New construction is happening and long-delayed projects are taking shape. Businesses large and small are growing again, and new businesses are cropping up in long-emptied storefronts.

Looking ahead to 2016, there’s plenty to celebrate, but for those in local economic development offices, there’s also cause for concern. Continued tension in Springfield and scars from the latest recession promise to create uncertainty in the year to come.

The good news: Communities around our region are seeing an uptick in small businesses hiring, new businesses opening and important infrastructure taking shape.

Geneva

Shoppers in Geneva have two major destinations to choose: the downtown business district, with its collection of locally owned businesses, and the Geneva Commons, with its nationally branded stores. Around Geneva, shoppers are opening their wallets.

“We see an increase in optimism and people are spending a little more freely,” says Jean Gaines, president of the Geneva Chamber of Commerce. “We think the numbers are good, and sales tax revenue is up, so that means that people are doing better than they were last year. Sales tax figures are one of the best ways we can get a sense of consumer spending.”

According to the City of Geneva, businesses collected nearly $2.4 million in sales tax revenue between January and October 2015 – about a 6.5 percent increase from the same time last year. The city is projecting holiday sales tax revenue of nearly $636,000.

Despite the signs of growth, Geneva-area business owners are still cautious to celebrate. “I think it’s the same it’s been for the past several years; it’s reserved optimism,” says Gaines. “I think people are concerned they’ve made all the cuts they can make, so now increased business is the only way to grow.”

In part, the financial restraints in Illinois’ state government are creating uncertainty for nonprofits and some small businesses.

“The City is very concerned about any cutbacks at the state level, and we’re all struggling in some way,” says Gaines. “For example, there are grants that the state hasn’t given this year. We know the state needs to get its house in order, so we’re all going to feel that pinch.”

Gaines is also concerned about the impact that Internet shopping has on smaller businesses. Nearly 70 percent of the chamber’s members have five or fewer employees, and nearly a quarter of them are retailers. The lack of Internet sales taxes might make local businesses less competitive on price, so it’s important to focus on competitive advantages, such as quality products and customer service.

“For our retailers, that means that we’re really in the entertainment business, because people come here to make a memory, to have a good time,” says Gaines. “Otherwise, they’ll just buy it online. I think our one-of-a-kind shops are really a draw, and that’s unique, to find things here that you can’t find online.”

At least two big projects are likely to cause short-term headaches but long-term benefits. For one, Union Pacific expects to add a third rail line through downtown at the Metra platform. Construction isn’t expected to begin until 2017 or 2018, but the City of Geneva is already adjusting its parking lots to accommodate the expansion.

Kevin Stahr, a communications coordinator for the City of Geneva, says downtown also stands to benefit from a proposed 220-unit high-end apartment complex near Illinois Route 38 and Seventh Street, on the site of the former Cetron factory.

For now, Gaines is focusing on Geneva’s competitive strengths. “Know your business and provide good quality – that’s what I can recommend,” she says. “Every customer is very important to us, whether they’re a member or a visitor coming to the door.”

Elgin

Business growth is roaring in the Elgin area, where manufacturers are resurgent, unemployment is dropping and the retail vacancy is lower than in some neighboring communities.

“Looking forward to 2016, we are anticipating the most commercial and industrial growth since 2007,” says Bob Malm, director of the Elgin Development Group (EDG), a public-private partnership between the Elgin Area Chamber and the City of Elgin.

Notable announcements this year include Motorola Solutions’ plan to locate a new manufacturing and training center in Elgin, delivering as many as 200 full-time jobs. JIT The Packaging Wholesaler has just relocated its headquarters and distribution center to Elgin, filling about 480,000 square feet of vacant industrial space. Expect more to come.

“We just announced that there’ll be about a million square feet of construction coming on next year, if all of the proposed industrial projects take shape,” says Malm. “These projects have been in the works and look like they will happen. This meets the demand for space we have out here.”

Things are also heating up in the housing market, where Elgin is one of the hottest homebuilding spots in Illinois – for the fourth straight year.

According to a third-quarter report by American METRO/STUDY Corp., about 220 new homes have been built in Elgin so far this year. Only Chicago, Pingree Grove and Naperville have seen more growth in 2015.

Look for more housing downtown, as developers begin restoring the Elgin Tower Building. One of the tallest structures in town, the tower will soon hold several market-rate apartments. When it’s completed late next year, the project will put additional residents in the downtown neighborhood.

Perhaps next year’s greatest challenge in Elgin stems from the stalemate in Illinois’ capitol. Budgetary and cash flow issues are especially hitting nonprofits and other groups that rely on state and federal monies.

“The lack of a budget right now is beginning to really impact our agencies,” says Carol Gieske, president/CEO of the Elgin Area Chamber. “They’re going through whatever cash they might have set aside and are reaching the days where they ask, ‘How much longer can we stay open without the support?’”

The motor fuel tax is also creating headaches for municipalities. Although the state is collecting those funds, nobody’s been distributing them, says Malm, even though the fuel tax is a primary revenue source for many road-related services.

“We have a triple-A bond rating, so we have the wherewithal to survive this,” says Gieske. However, she suspects that not all communities are as well situated.

Despite the budget stalemate, Malm and Gieske expect 2016 to bring continued success for the area’s small businesses. This January, the chamber launches a Small Business Academy to help new and intermediate entrepreneurs through startup challenges. New construction will also help to expand the tax base.

“When you hear that a 159,000 square-foot building is being built, what’s that mean?” says Malm. “Aside from construction costs and materials and sales tax, we can figure that building will be taxed at a little over a dollar a square foot. That means $159,000 is coming in that wasn’t there before.”

Crystal Lake

Downtown is alive with traffic, and storefronts are nearly filled in Crystal Lake. On U.S. Route 14, where there’s more big-box shopping, few spaces remain vacant.

So far this year, the city has welcomed a Fresh Thyme grocery store to an old Dominick’s, an auto repair shop to a vacant lot, and a Burlington Coat Factory to a former Toys ‘R Us. More developments are underway.

“We had Burlington booked within maybe six weeks,” says Mary Margaret Maule, president of the Crystal Lake Chamber of Commerce. “That’s a very short time that the store was unanswered for. The retail perspective in Crystal Lake is very positive.”

So too is the housing market. National builder D.H. Horton is currently planning a development in the west-central part of town that could include about 60 units.

Of the Chamber’s nearly 960 members, about 70 percent employ five or fewer people, and many of those are small retailers or service/professional firms. From what Maule hears, business leaders are once more finding faith in economic growth.

In the short term, Maule is watching new state and federal regulations, including one that affects workers compensation. She’s also helping members stay informed on technology changes, including a recently effected law that requires credit card companies to include microchips on every card. Though the chips promise additional security, they also require merchants to install new card-reading equipment.

Smartphones, too, are forcing retailers to find new ways to interact with potential customers, whether it’s through mobile push alerts and apps or through social media and blogging.

“Particularly in retail, there are a lot of innovative pieces of equipment that you can buy and be able to drive the behavior of your clients and potential clients,” says Maule. “Through it, I can see that you’re close to me, so I can send you a coupon for happy hour or ice cream, or something else that will drive your behavior into an impulse buy.”

As for longer-term strategies, groups around McHenry County are building the workforce of the future.

“In McHenry County overall, the population is getting older, not younger,” says Maule. “As a chamber, our reaction was to create a roundtable of businesses for whom at least 50 percent of their client base is seniors, so these businesses can have a think tank on how best to serve each other.”

Maule suspects the aging population will most impact area manufacturers, which have long discussed the need to replace retiring workers with younger workers who might be less-skilled.

“I think the No. 1 under-spoken challenge to small businesses is this skills gap,” says Maule. “With jobs like high-skilled tool and die makers, or machinists working on factory equipment, we don’t have people coming in at the same rate that they’re retiring. That makes it hard for me, if I’m a manufacturer, to keep my company here, if I can’t keep a workforce.”

High School District 155 is doing its part to reverse the skills gap with a career internship program that launches in January. Modeled on other Chicago-area programs, this experience places 60 students from Crystal Lake’s three high schools in six-week internships.

“We’re matching students with dream jobs in fields they want to pursue,” says Steve Karlblom, program leader and an intern coordinator at Prairie Ridge High School. “This way, they can explore a career field they’re interested in, before they commit a considerable financial investment in it when they get to college.”

St. Charles

Throw up the construction flags in St. Charles, where several long-term projects are finally coming to fruition and several more are just taking shape.

The most visible, so far, is happening downtown on a vacant riverfront property at First and Main streets. The new First Street Development will bring three new buildings, each with about 12,000 square feet of ground-floor retail space and an additional 36,000 square feet upstairs for office and residential space. Locally based ALE Solutions has already committed to expand its business into the development.

“They’re right across the street, and they’ve outgrown the facility,” says Matthew O’Rourke, the city’s economic development division manager. “They find temporary housing for people displaced by natural events.”

O’Rourke’s office has stayed busy this past year, assisting new downtown businesses and supporting a local manufacturer that plans to build a new factory in town. But O’Rourke is still hesitant to declare victory.
“We’re cautiously optimistic, because there are a few big projects that we’re still waiting on, like the redevelopment of Charlestowne Mall,” he says. “There’s not a lot of activity yet, but we think things will get going.”

The Charlestowne Mall has long been a focus for city leadership. This year, crews rearranged the mall’s transportation routes and opened several outlots surrounding the mall. Property management is still working to secure national tenants and plans to open the mall under a new branding in 2016.

“I think the level of vacancy and competing projects in the area have taken some steam away from it,” says O’Rourke. “The outlet mall in Aurora is expanding, and things like that are presenting challenges.”

O’Rourke is also eager to see the transformation of a former office and corporate park on the city’s west side. Current plans for Corporate Reserve, located off Illinois Route 64, call for the addition of 80 single-family homes.

On the east side of town, a new Volkswagen dealer plans to fill the former DuPage Expo center. Across the street, Pheasant Run Resort announced preliminary plans to radically update its property.

“Nothing’s approved yet, but they wanted to possibly develop the whole golf course into residential units and revamp the resort facility,” says O’Rourke. “They might tear down some of the older buildings that are outdated and do some commercial outlots on a corner. It’s going to be a fantastic project when it’s all put together.”

The uncertainty in Springfield is providing some challenges to O’Rourke, but he says the city is doing its best to provide a positive environment for business growth. The economic development office is embracing new technologies that can help to inform area businesses, and it’s begun offering a buildout assistance program for small businesses setting up downtown.

O’Rourke’s office has also paired up with the city’s downtown partnership and its visitors bureau to better promote the downtown’s growing scene for retail, dining and more.

“St. Charles has had a reputation for its nightlife for a while, but we’ve got so many varied restaurants, stores and salons,” says O’Rourke. “There are so many other things to do downtown, and we’re trying to make sure people know that.”

Barrington

This past year has been a time of rapid business growth in the greater Barrington area. The Arboretum of South Barrington, an outdoor luxury mall, is under new management, and new businesses are flocking to the recently completed Barrington Village Center downtown.

Suzanne Corr, director of the Barrington Area Chamber of Commerce, says this year has brought a nearly 20 percent increase in new business openings.

“We’ve had anywhere from two to six new businesses every month,” she says. “I don’t think there’s been a single month this year that we haven’t had a ribbon cutting. That’s not just new businesses – it’s the expansion of businesses, too. It means that someone has not only built a successful business, but they see opportunities to expand and invest even more of their business in our community.”

The newly finished Barrington Village Center on Main Street has already been filled with a Starbucks, an AT&T store, an Egg Harbor Cafe, a men’s salon, and Shakou, an Asian restaurant with a rooftop dining space.

“It’s created a nice urban space,” says Peggy Blanchard, director of economic and community development for the Village of Barrington. “It’s created a safe pedestrian walkway and it gives a sense of place. It anchors the west side of Main Street and its design complements the east side of Main Street.”

About 70 percent of the local Chamber’s members are professional service firms or small businesses, while nearly 20 percent are retailers. Chamber members in the Barringtons, Inverness, Kildeer, Deer Park and Tower Lakes see positive signals.

“Many local businesses are posting job openings,” says Corr. “The ‘Now Hiring’ signs are becoming more common.”

What’s less common is the qualified and motivated applicant that businesses want to hire.

“It’s certainly a topic of discussion, that good workers can be hard to find – and finding young, enthusiastic talent is challenging,” says Corr. “The bigger question that businesses are asking is ‘How do we attract, retain and appeal to millenials?’”

Pointing to a recent study by the U.S. Chamber of Commerce and empirical data, Corr says younger employees are quick to flock to large cities like Chicago but slower to make their way back to suburbs like Barrington.

But some are still finding their way home. Barrington’s chamber recently launched a young professionals networking group due to popular demand.

“It’s great that we have young professionals who want to network, find mentors and share challenges and successes with each other,” says Corr. “They’re often at the cutting edge of fairly new social media trends or technology-oriented strategies that can build businesses.”

The networks they build now are likely to have a long-term positive impact on local businesses.

“While some might stay on their career paths for many years, many of these young people in maybe two to five years might be someplace else,” says Corr. “When they do move on, they’ll be building on all of the relationships and benefits they’ve developed here, and that brings new opportunities for us all.”

Possible threats to business growth include the potential increase of property taxes and the continuing difficult climate for businesses in Illinois. Corr says she’s also heard concerns about increased rail traffic that cuts through downtown Barrington and affects major thoroughfares.

“It does tie up traffic, and that makes it tough to get places,” she says. “It could be a deciding factor in someone going one way or another, and that may influence whether they visit your business.”

Corr expects a good year to come, and anticipates that by late next year, she’ll still sense a strong optimism among the chamber members’ businesses.

“I think we’ll continue to see positive energy and businesses that are igniting change and impacting peoples’ lives.”

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