McHenry Market Pulse: Economic Development is dynamic and continually evolving,“…a process not an event????"

· Several weeks ago I attended a seminar which featured several speakers, experts, on various segments of the economy including: industrial, office, residential and retail. One of the presenters made a statement which has resonated with me ever since I left that day: “Economic development is a process not an event…” The reason I think this has remained in my mind is -there is a lot of truth in this statement…

· In today’s world of 24/7 news and information, many seek instant results and economic development is in numerous aspects quite the opposite. Businesses don’t leave or fill vacant buildings overnight. There are many nuances and challenges associated with economic development, site redevelopment or attracting a new tenant to fill a vacant building. I began to think that maybe, however, in this 24/7 world, economic development in some particular cases is more an event than a process. One example I thought of is on-line shopping, with a couple clicks of a mouse people can order almost anything and have the products delivered to their doorstep in (X) number of days…

· At this same seminar the speaker who described economic development as a process used the term “showrooming," which I have seen more references to and read about in greater detail. “Showrooming” refers to people who go to bricks and mortar (traditional I’ll call them) stores to find a product they want to purchase, look at and examine it, however they may not always purchase the product in the store they first saw it. They may seek to purchase the same item or a similar product at another store where it’s cheaper or many will go home and find the product on-line and purchase it.

· I spoke to a prominent developer recently, who has been in the commercial real estate and development business for probably close to 40 years and he reinforced how much on-line shopping is negatively impacting traditional stores. It’s currently not a level playing field, particularly relating to the collection of sales tax…. Efforts have been discussed at-length however and actions proposed to address this issue are being pursued….

· To illustrate another example of how economic development is continually evolving and businesses are adapting to better meet the needs of their customers: exclusive on-line retailers are now seeking to construct brick and mortar stores. Why? My belief is it is related to this concept of “showrooming” and providing a shopping experience however I think there is more… Example: retailers with traditional stores require less warehouse/distribution space (total square footage) than retailers which sell exclusively on-line…

· Traditional retail stores which compete with major on-line retailers are also adapting to remain competitive, how? One example is enhancing customer service through product delivery. Recently I read an article about major retailers offering lower cost shipping and faster delivery. More retailers will seek to offer same day delivery and another is pilot testing delivery in (X) number of hours in certain markets the same day a product is ordered…

· I also read an article several months ago about a store, located in another country, where shoppers purchase virtually-displayed items electronically and when they go to check out the items are already at the register. This is somewhat counterintuitive to shoppers seeking a “retail experience” and “showrooming” but again demonstrates the continual evolution of business and all the dynamics associated with economic development…

· At the conference one of the presenters reiterated rather emphatically: bricks and mortar stores are not going away. Why? People want to look at and actually hold what they are considering purchasing, and many people seek human and social interaction, something an on-line only retailer cannot provide… Additionally, there will always be a certain percentage of people for whatever reason that do not want to purchase items on-line or conversely limit what they do purchase online…

· According to Jones, Lang, LaSalle, Chicago ranked 8th in the world for commercial real estate investment in 2014 ($9.1 billion). According to Colliers International the industrial vacancy rate was 7.7% at the end of 2014, the lowest since 2001. Further, more than 10% of all new leasing can be attributed to e-commerce, more than double from three years ago according to Prologis Research. What does this mean for the City of McHenry?

· We live in a global economy and in the backyard of a preeminent international marketplace called Chicago, which acts as an engine for the entire region including the City of McHenry. As Chicago goes so do surrounding communities: more regional distribution centers; additional larger corporations seeking to locate in a community not just purchase a building or piece of land or employees of those companies in Chicago seeking a place to live, visit, enjoy recreation, events, etc. and more opportunities for retail, service and other businesses to meet this demand….in the City of McHenry...

Please continue to provide feedback, submit questions and comments because economic development is a community-wide effort!!!!!!!

Coming in future blog posts:

What are economic development clusters and value chains?
What are SIC, SOC and NAICS codes and what were/are they used for?
What factors do non-retail businesses consider when thinking about relocating?
What are Class A, B and C spaces?
Franchising? What is it? What companies offer it and what challenges are associated with attracting a retailer which operates exclusively using franchising?
Future trends in economic development: “market segmentation;“ “pop-up” stores; “placemaking/third places” and “creating an experience”….
Challenges associated with economic development…