McHenry Market Pulse: Importance of economic diversification: Is retail king of all business? Why office, industrial and other primary employers are equally and in some instances more important to a community than retail!!!!!!!!

I’ve written in the past about a holistic approach to economic development which includes: retail, office, service and industrial/manufacturing businesses, a vibrant downtown, tourism, importance of community events: good schools, open space, recreation, quality of life etc…..a package deal-selling a community….

From my experience working for the City of McHenry, and this is probably true in other communities, a large focus is placed on retail development. Why? I have a couple of thoughts: the City of McHenry’s three main sources of operating revenue are derived from: sales tax, property tax and income tax. Retail businesses generate sales tax whereas non-retail businesses, such as: office, other service-oriented businesses and industrial/manufacturing companies generally do not. Additionally, as I have spoken in the past about retailers and their need to be visible, close to their customer base and often located on major roadways, it’s along these same roadways where many residents and people from out of town drive on therefore the retail businesses are very visible. What are also more visible are the vacant buildings along these roadways many of which were occupied by retailers….

However economic diversification is extremely important. When one sector of the economy struggles another can assist in hedging or sustaining a community’s economic well-being during those tough times…

Retail businesses are certainly important to a community’s economic vitality however equally or arguably more important are service-oriented businesses, office and industrial/manufacturing businesses. Why? Economic development in its purest form is the creation of new wealth. New wealth equates to additional jobs and new money generated for and pumped into the economy….

When people are unemployed or underemployed they cut back on spending and purchase only essential items. When the housing bubble burst retail development came to halt, stores closed... Consumer spending spiraled downward however many manufacturers were able to keep their doors open, some went from three shifts to two but others were not significantly impacted. Why? It depends on what product the company is manufacturing, where their customers are and more so than retail, whose customer base is more local, manufacturing businesses are closely linked and impacted by what occurs in the larger global economy because many have large customer bases in other countries…

According to United States Census Bureau American Community Service it was estimated between 2008-2010 those in the labor force employed in the City of McHenry worked in the following industries (top three employment sectors only listed): Educational Services, Healthcare and Social Services: 18.1%, Manufacturing: 17.8% and Retail Trade: 12.2%; Between 2011-2013 those in the labor force employed in the City of McHenry worked in the following industries (top three employment sectors only listed) : Manufacturing: 17.3%; Educational services, Healthcare and Social Services: 17.3% and Retail Trade: 16.1%...

As you can see, during these two time periods the retail trade sector saw the largest fluctuation in employment (between 2008-2010 and 2011 and 2013), whereas manufacturing and educational services, healthcare and social services experienced less of an impact during those same two time periods.

Depending on which survey you look at between 75%-85% of all new jobs are created by existing companies. Furthermore, for every new industrial/manufacturing job between two and three other jobs are created in the larger economy, whereas for every new retail job less than one other job in the larger economy is created. If one major manufacturer closes its doors it could mean the loss of several hundred quality jobs….

The City of McHenry is extremely fortunate to have more than 100 service-oriented and manufacturing/industrial employers located within its boundaries, including many national and international companies. Where are these companies located? Many are interspersed with retail businesses along major arterials but most are concentrated in one of several businesses parks located throughout the City such as: McHenry Corporate Center, Tonyan Business Park, Inland Business Park, McHenry City Centre, Sherman Hill Industrial Park, Prairie Pointe Business Park, Professional Plaza and Adams Commercial Centre…. These companies employ thousands of people, provide much needed services, jobs and manufacture products we use every day….and are vital to the economic well-being of the City of McHenry!!!!!!

How has manufacturing changed over the past decade and what are some future trends associated with this industry??? What factors do non-retail businesses consider when contemplating whether to stay in a community or relocate???? To be continued…….

Coming in future blog posts:

Does the City of McHenry offer incentives to attract new businesses to the City?
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?
How do brick and mortar businesses remain competitive with on-line businesses?
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” “showrooming”; “pop-up” stores; “placemaking/third places” and “creating an experience”….
Challenges associated with economic development…