COVID-19 Impact On Chicago Unknown, But Regional Players Are Already Planning On Long-Term Changes And Eventual Recovery

Thursday’s news that 178,000 Illinois residents filed for unemployment last week, shattering the previous record set just the week before, was a sobering reminder of the scale of the economic challenge facing the region.

World Business Chicago President and CEO Andrea Zopp and McCaffery Interests Senior Managing Director Clayton McCaffery joined Bisnow Thursday for its first Chicago Virtual Deep Dish webinar on navigating a business through these stressful times. Both said we are in the beginning stages of the COVID-19 crisis, and it’s going to take several weeks before its true impact becomes apparent, but industry players are already starting to consider how the world will look in the aftermath.

Zopp said Chicago has one real advantage that will help its overall economy both endure and recover.

“First, one of Chicago’s great strengths is we have an incredibly diverse economy,” she told webinar moderator Mike Demetriou of Baum Realty Group. “Our economy is being impacted, but in a wide variety of ways.”

No one sector makes up more than 14% of the region’s economy, she pointed out, and while restaurants, hotels and tourism have essentially ground to a halt, the healthcare and food industries, along with their distribution supply chains, have kept humming during the economic crunch. That diversity, along with the recently approved $2 trillion federal stimulus and funds allocated by city and state governments, will help soften the blow, but much remains uncertain.

“It’s still too early to tell what the recovery will look like,” she said. 

It will soon be clear that the Fed’s original $2 trillion spending plan won’t fill the economy’s deep hole, and everyone needs to focus now on what they will need from the local, state and federal governments in the months ahead, she added. This could include increased financial support for the unemployed, more loans for small businesses suffering from the lockdown, a delay in tax payments, as well as clearing out red tape when it comes to getting new medical professionals licensed or needed supplies cleared through customs.

The Fed’s decision to lower interest rates will most likely play a small role, according to McCaffery.

“Money was already almost free,” he said. “Lowering the interest rate now is a marginal element.”

No recovery can get started until we see some certainty around rental payments, McCaffery added, as all real estate in the end bases its value on the amount of rent collected.

“That’s where the rubber meets the road,” he said.

Landlords, renters and lenders need to work out arrangements that will steady the market, but state and local governments will also play a role, chiefly by finally bringing surety to the level of future tax bills, he said.

The rent was due Wednesday, and McCaffery said it will take a few days to evaluate how many tenants missed payments. He worries the losses will be significant, and many renters may still have tough days ahead.

“I think we will continue to see more April 1, and we’ll see them until we calm the system down,” he said. 

Zopp cautioned that the crisis, which seemed to hit everyone all at once, is not going to end suddenly. There remains the strong possibility that the COVID-19 disease will peak, wane and return in subsequent waves. That means social distancing and other mitigation efforts will continue for an extended period, if perhaps not as stringently.

“We’re not going to come out of it as we went into it,” she said.

That will change how everyone lives, but it also means possible long-term benefits for the Chicago region. Working from home will become more accepted, which could boost some industries, including the city’s already prolific tech firms. Chicago manufacturers are already pivoting to supporting healthcare companies by providing personal protective gear, and many expect demand for those products will outlast the immediate crisis.

Zopp also offered advice on how everyone could contribute.

“The quickest way we get to a recovery is to follow Mayor [Lori] Lightfoot’s guidelines for social distancing and stay at home,” she said. 

McCaffery also maintains a long-term optimism. He said going through this challenge will give the entire country a renewed appreciation for healthcare infrastructure and public goods such as parks, and creating both will provide an economic boost.

“There is going to be a renewed understanding that we are fragile beings," he said. "The U.S. is going to find an opportunity to rebuild, with vigor, a lot of our healthcare facilities.”