Midwest: Tough Times in the Middle
Encompassing the West North Central states and the East North Central states from Ohio to North Dakota, the Midwest is facing a unique set of challenges
Detroit
ECONOMIC OVERVIEW
When it comes to fallout from the current economic downturn, the Midwest is one of the hardest-hit regions in the U.S.
JOB LOSS
While a few states remain relatively unscathed, overall, unemployment rates here soared up to 9.2 percent as of May 1 (versus 5.5 percent a year earlier), according to the Bureau of Labor Statistics.
That jobless rate is second only to the West. In the nation's hardest-hit state, Michigan, there are counties where the unemployment rate "reaches Depression-era levels of 25 percent," reports The New York Times.
NO CONFIDENCE
As unemployment skyrocketed here, the Midwest populace's confidence in the economy plummeted. According to a consumer survey conducted by BIGresearch, over 40 percent of Midwesterners queried in May 2007 felt "confident/very confident" about the chances for a strong economy in the next six months while under 30 percent felt the same way in May 2009.
Chicago
"When we looked at confidence between all four regions, it was lowest in the Midwest," says Pam Goodfellow, a senior analyst at BIGresearch. "They are generally more conservative, but they are also more fearful about losing their jobs and pessimistic about the economy."
She also points out that this region is home to the beleaguered auto industry, which has made the economy here even more difficult.
CONSERVATIVE SPENDING
A direct result of the slide in consumer confidence in this region has been that Midwesterners have become much more conservative with their spending. In the same May 2009 BIGresearch survey, almost 50 percent said they have become more practical and realistic in their purchases in the last six months.
Additionally, almost 60 percent said they focus more on what they need versus what they want.
CPI/GDP
As with other regions, the Consumer Price Index (CPI, the prices paid by urban consumers for a representative basket of goods and services) decreased in the Midwest, but the slide was greater. Bringing a margin of relief for residents, CPI fell by 1.5 percent in April 2009, an amount more than double the decline in all other regions.
The Midwest fared better than most regions in Gross Domestic Product, with states such as Ohio and Illinois showing stronger results than most others across the country.
| OPTICAL FILE |
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| LENS MARKET Midwesterners are buying into premium lens benefits such as clearer, crisper vision with edge-to-edge clarity, wider fields of view, and no lines. • MATERIALS. Strong lens material categories in the Midwest are 1.67—with 57 percent of practices indicating it's their premium lens material of choice—and Trivex, coming in with 16 percent. Poly, however, is substantially less popular with Midwestern practices surveyed than those in other parts of the country. • LENS TREATMENTS. AR ranks as the most popular lens treatment, with 75 percent of practices rating it their lens treatment of choice. That's right in line with the nation's other regions. • PALS. When it comes to progressives, the Midwest out-ranks all the other regions in its preference for PALs (72 percent prefer them to standard multifocals). EDGING STATS If steady-on wins the race, the Midwest may come out ahead when it comes to in-house finishing. While many ECPs don't edge in-house (43 percent), those that do report their in-house output is: • 31%…same as last year • 18%…more than last year • 7%…less than last year FRAME FOCUS According to the Vision Council's Vision Watch, the Midwest Region faced a 9.3 percent drop in unit frame sales from December 2007 to December 2008. "Much of the slowdown in unit frame sales has occurred in the Midwest, which has also experienced a larger share of the general economic decline," says Steve Kodey, director of industry research at The Vision Council. • MATERIALS: Matching the Midwest's practical reputation, metal frames represent 64 percent of frame sales. The Midwest also likes other frame options, 18 percent are rimless styles, but the bolder plastic looks are limited to 16 percent of the market. • PURCHASE PATTERNS: Midwesterners are getting the full update when it comes to renewing prescriptions, as 79 percent opt for new eyewear and only 21 percent refill their old frames with new lenses. • SECOND PAIRS: Sun rules with 69 percent of second-pair purchases, while casual eyewear and clips pull 13 percent each. • PRICING: Nearly half of the Midwest market is revamping its frame pricing as 13 percent expand their product ranges to include higher price points, 9 percent expand to include lower price points, and 15 percent expand to include both. |
RETAIL REAL ESTATE
The Midwest's economic slide has also been realized in its retail real estate market.
VACANCY RATES
Vacancy rates in the Midwest reached 12 percent in the first quarter of 2009, according to Reis, Inc., which provides updated trends and forecasts of rent, vacancy, and inventory in the real estate market.
This rate is significant, especially when compared with the overall U.S. vacancy rate of 9.5 percent for the same period. And, with GM's bankruptcy and imminent closings, that rate is sure to rise.
DIPPING RENTS
In an effort to attract renters, lessors dropped rental rates 0.1 percent to $16.25 per square foot. Still, the prognosis for the near future looks anything but rosy for the Midwest, according to a five-year forecast by Reis. Asking-rent growth is expected to decline again; vacancy rates are expected to spike to almost 15 percent; and inventory growth will slow to 0.7 percent.
Cleveland
METRO MARKETS
There are pockets of retail real estate growth in the Midwest, however, and optical sales for some companies reflect the trend.
CITIES TO WATCH
Specific Midwest metros of interest, Reis says, include the top-ranked first quarter rent growth leaders: Cincinnati, Minneapolis, Columbus, Wichita, and Dayton. On the downside, Reis indicated the metros with the highest vacancy rates as Milwaukee, Omaha, Minneapolis, Chicago, and St. Louis.
Incentives offered by Kalamazoo and Toledo are pulling high-tech companies from Silicon Valley and Boston. In terms of new construction leasing activity, however, Chicago fared much better. It was ranked 14th in the U.S., according to the first quarter 2009 CoStar Retail Report.
FASHION TRENDS
Historically, the Midwest had been the stepchild of the fashion industry with lag times on trends that ranged from a few seasons to a few years. Doneger Group's Paula Correri says today Midwesterners are getting hip to fashion trends at the same time as the rest of the country.
COMFORT QUOTIENT
"In the Midwest, maybe the motto is not ‘fashion first’—they do need to see the trend for a while before they feel comfortable wearing it or modifying it," says Correri.
For example, she points to metallics. "The Midwest consumer isn't someone who wants an all-over metallic bag," she notes. "They will address this trend with trim or a belt, and savvy retailers will take that trend and modify it, depending on their targeted customer base."
OBAMATOWN
Chicago "has become a really fashionable city," says Rita Nakouzi, director of the United States office of Promostyl, a trend forecasting service. The rise to fashion fame is, in part, due to the country's first lady (and Chicagoan), Michelle Obama.
"She is bringing American fashion back into the foreground, especially in the way she mixes high and low style," says Nakouzi. "We're in this period of not just wanting aspiration, but wanting authenticity, and she brings this out."
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