Crain's Chicago Business

REAL ESTATE: A country house in more ways than one. PAGE 23

Warning signs are flashing for Chicago’s economy in 2023

Businesses worry that in ation and rising interest rates will trigger a recession.

Demand is already slowing in some sectors. I BY

Big-picture economic data paint an increasingly glum outlook, with retail sales sagging, factory output slowing and economists predicting GDP will atline nationally. Forecasts for Illinois are even gloomier, with Moody’s Analytics forecasting gross metropolitan product will dip 0.4%.

Signals are blinking red in some sectors, with rising prices dampening sales at stores and restaurants and higher interest rates driving many buyers from the housing market. But orders are holding up for many manufacturers and packaged foods companies.

Chicago’s highest-paid athletes

Northwestern’s new president has taken on a tough assignment

BY BRANDON DUPRÉ

As it steers toward a postpandemic future, Northwestern University faces a set of challenges that would be familiar to the president of any prestigious academic institution in the nation. But Northwestern’s new

chief, Michael Schill, has a few unique problems on his hands— and how well he deals with them will largely depend on his ability to navigate changes that could fundamentally alter the academic landscape.

“One of the great things about Northwestern is it has increased

its stature tremendously in recent years,” said Schill, who comes to the role with seven years of experience as president of the University of Oregon and, before that, as dean of two top law schools—the University of

GREG HINZ

This year promises to be even wilder in politics. PAGE 2

10 stories that will set the tone for Chicago business in 2023. PAGE 3

JOE CAHILL

RECESSION FEARS WEIGH HEAVILY on Chicago businesses contemplating their prospects in 2023.

CRAIN’S STAFF

Michael Schill has his work cut out for him as the Evanston-based institution steers its way through some unusually choppy waters

2023 promises to be even wilder in politics

After a monumental 2022— the midterm elections, SAFE-T Act controversy, the onset of a brawling mayoral race, living with COVID, et al.—it’s hard to imagine that 2023 could top it. Well, buckle your seat belts, folks, because all signs are the new annum will be anything but boring in the world of politics and government.

Here are some of the things that will impact your life.

In Spring eld, now a wholly owned subsidiary of the Democratic Party, it’s only a question of when lawmakers will move to ban assault weapons and limit gun magazine sizes, make it easier for out-of-state women to come to Illinois for abortions, and probably draft a proposed amendment to the state constitution to guarantee abortion rights.

More fascinating, though, is what’s been happening on the business side of things, where potential Democratic presidential

hopeful J.B. Pritzker lately has been embellishing his pro-business bona des, for instance moving to pay o the entire de cit in the state’s unemployment trust fund.

Pritzker has more work to do and knows it, since the state’s job growth still is on the low side compared to other states. So keep a very close eye on whether he gets that proposed “deal closing” fund of up to $1 billion he wants through a liberal General Assembly, and whether that and other incentives will be enough to get Stellantis to invest a ton in converting its Belvidere plant to produce electric vehicles. is one really, really counts.

Nationally, the race for president already has begun—and in fact began even before the midterms. President Joe Biden now seems inclined to run again, but if he changes his mind, a ton of folks with Illinois connections are interested, including Pritzker and a former Chicago business consultant named Pete Buttigieg, now U.S. secretary of

transportation.

Even more interesting is what’s occurring on the Republican side.

Donald Trump now is in as much political trouble as he’s ever been, beset not only by prosecutors and congressional probes but major gures in his own party who are beginning to say what’s been clear for a while: Much as they love him in rural America (including Illinois), he’s toxic in the burbs. It’s far too early to write Trump o . But if it becomes clear that, say, Florida Gov. Ron DeSantis is going to be the GOP nominee, Illinois Republicans nally may have a leader who can help them stanch the bleeding. And pressure on Biden to consider retiring may increase, since Trump likely is the easiest Republican for Biden to beat.

Last, but by no means least, you won’t have to keep an eye on the struggle for City Hall, because it will bigfoot its way into almost every aspect of life in the metropolitan area. is augurs to be the most sig-

GREG HINZ ON POLITICS

ni cant mayoral election since the Daleys passed the family business to a new generation, with the city’s post-COVID economic future very much in the balance.

Most of the attention will go to the mayor’s race. ere, a Lori Lightfoot who has some accomplishments such as increased inner-city investment also has a tendency to make unneeded enemies and is burdened by a crime wave she (and, to be fair, other mayors) just hasn’t been able to control. With no giant killer among the eld of challengers, Chicago business is uncertain what do. at means anything is possible. How about an April runo between Willie Wilson and Paul Vallas? Could happen. Or Jesus “Chuy” Garcia vs. Lightfoot?

Equally meaningful are races for the City Council, which has taken a big turn toward the populist left in recent years and soon could go further. A city income tax or a “LaSalle Street” tax on nancial transactions? Or a much-expanded real estate transfer tax that would hit owners of three- ats and “rich” North Side condo owners in the guise of coming up with funds to subsidize development of more a ordable housing? Some other hot subjects: Will the Bally’s casino glide through or hit bumps with the Illinois Gaming Board? How will local government cope with the end of big federal COVID-relief checks? Will the new downtown NASCAR race be the asco some expect?

Like I said, quite a year ahead.

After spending big, Cubs pin their hopes on ... hope

Never cared much for the Mets, but Jacob deGrom leaving them for the middling Texas Rangers makes little sense to me.

en again, no one ever o ered me (or even Skip Bayless) $37 million a year to write columns.

Sometimes, a team at-out money-whips a guy: ve years, $185 million for a pitcher whose de ning characteristic is an inability to stay healthy, New York‘s ever-active hype machine notwithstanding.  Not to be outdone, the Mets lavished $86 million over two years on Justin Verlander, who’s coming o a Cy Young Award season at age 39.

Texas took a similar plunge a year earlier, luring Corey Seager from the regal Dodgers organization he’d grown up in for $325 million over 10 years. e move led to an eight-win improvement (60 to 68) and a leap from fth to fourth in the A.L. West standings, ahead of only the Oakland A’s, who were tanking.

Meanwhile, Verlander got pretty much what the economy-minded Cubs ponied up for their big freeagent acquisitions, both of whom come with risk attached.

Cody Bellinger (one year, $17.5 million) would have commanded twice that were he coming o his MVP season of 2019. It could be injuries, it could be an imperceptible slowing of one of baseball’s biggest, longest swings, but Bellinger has been an ordinary player the last three years, his decline eerily similar to that of Milwaukee’s Christian Yelich, who preceded him as MVP by a year.

CORRECTIONS

Jameson Taillon matched his career high in wins (14) and pitched his second-most innings (177.1) in 2022. At 31, he’s another disabled list habitué, but so acute is the need for starting pitching that four years and $68 million is pretty much the standard rate for a road-tested model.

Amid a growing belief that second base is probably Nico Hoerner’s best position, the Cubs were believed to be an entry in the shortstop derby that sent Trea Turner from the Dodgers to Philly, Xander Bogaerts from Boston to San Diego and Carlos Correa from Minnesota to San Francisco. Dansby Swanson is still out there; he’s a tough guy and a winning player, but he’s the fourthplace nisher in that eld, though not exactly out of the money.

And should Swanson bypass Chicago, it’s hard to see where the Cubs have improved themselves if the calculus is Bellinger and Taillon in and Willson Contreras out. Contreras, see, stayed in the division and is joining its strongest team, one with a pronounced need for a catcher now that Yadier Molina is nally moving on.

Catchers who can hit are an exalted species, and Contreras can hit. It’s fair to say he has been the Cubs’ best player since 2021, when all those simultaneously expiring contracts were o oaded and ignited another scorched-earth rebuild. Contreras stuck around, his limitations obscured by his stature as the last remnant of the championship era among the everyday players.

He won’t be, and won’t have to be, the best player in a St. Louis

 In the Dec. 19 “Equity” feature, “Career readiness programs score wins for job seekers and employers,” the name of the Citadel and Citadel Securities Externship, the students for whom it’s available, the students for whom the Summer Academy is available, and the relationship between Citadel and Citadel Securities and Thrive Scholars were misstated.

 In the Dec. 19 “Forum” op-ed, “Woodlawn reinvestments are a model for preserving a ordable housing,” a street name in the location of the Butler Apartments was misstated.

lineup that features MVP Paul Goldschmidt, Nolan Arrenado and a bunch of youngsters ready to break through with typical Cardinals self-assurance. Did the Cubs get better by helping their chief rival get stronger?

Contrast their approach with the Giants’. Aging, fading and uninteresting, they knew they had to get better if they’re to compete in the same division as the Dodgers and Padres, and they were excoriated in the Bay Area for “failing” to sign Aaron Judge, as if his Northern California roots had given them some sort of an edge.

He did visit San Francisco,

although the smart money all along said the Yankees had to resign Judge after the monster year he put together.

ey did, so the Giants regrouped and added a serviceable everyday out elder (Mitch Haniger) and a stu -heavy mid-rotation starter (Ross Stripling). Not a bad Plan B.  e Cubs’ plan is based on hope. Maybe Bellinger gets healthy,

rediscovers his game and brings authentic star power to Wrigley Field. Maybe Taillon wins 20. Maybe one of the kids on whom they’re counting becomes a breakout star. Maybe not.

Crain’s contributor Dan McGrath is president of Leo High School in Chicago and a former Chicago Tribune sports editor.

JOHN R. BOEHM

Landlords with debt coming due will feel more pressure

After enduring a big jump in interest rates, some local landlords are facing a tough task: How to pay o mortgages that come due over the next year?

Many won’t be able to borrow as much as they could before, creating a nancing gap that will be hard to bridge. Some will dip into their own pockets to re nance their debt or just raise the money by selling their buildings. Others won’t bother doing either. ey’ll just default and walk away.

“At some point, guys may say this is too heavy a lift,” says Manus Clancy, senior managing director at Trepp, a New York-based

Lunch business in the Loop hasn’t recovered from COVID

BY ALLY MAROTTI

Soul & Smoke co-owner Heather Bublick never thought that on the eve of 2023, she’d still be debating whether she should keep her barbecue restaurants open for lunch.

Yet here she is, the pandemic almost three years on, holding her breath. At all Soul & Smoke locations—in Evanston, Avondale and Fulton Market— lunch remains slow.

“It’s insane. I feel like every day I’m still in the pandemic and everyone around me has moved

on,” she said. “It’s like we’re still in panic mode.”

From fast-casual to sit-down, the lunch business at downtown restaurants has not recovered from the pandemic. Operators are constantly calculating if staying open for lunch is worth it, and the math doesn’t look great. Chicago’s o ce occupancy rate was at 51% of 2019 levels in September, the latest data available from the Chicago Loop Alliance.

at’s the best it’s been since COVID-19 sent o ce workers home. But for many restaurant operators, it’s not enough to sus-

tain lunchtime operations. Restaurants, already dealing with higher operating costs from in ation, are feeling the pressure. Loop fast-casual spots such as Hannah’s Bretzel have closed locations permanently. Some restaurants have seen catering pick up in a way that balances the losses, but others must nd places to make cuts. ey are raising prices to o set the lack of volume, shrinking menu options to cut expenses or simply cutting hours. And, for some,

JOE CAHILL ON BUSINESS

Chicago’s biggest business stories in 2023

Here are 10 Chicago business stories to watch:

 In ation and recession. No business story will be bigger than these twin economic terrors. In the next few months, we’ll start to get strong indications of whether a succession of interest rate hikes by the Federal Reserve has tamed the worst in ation in four decades, and whether they’ve triggered a recession in the process. Everything from job markets to home prices and corporate pro ts hinges on the answers.

 Walgreens transformation. Walgreens leaders bet the company’s future on turning a massive drugstore chain into a full- edged health care provider with doctors’ o ces in stores. It’s a multibilliondollar gamble on a corporate metamorphosis that has never been tried before. Early signs of success or failure will start to appear as CEO Roz Brewer accelerates the transition this year.

 AbbVie. e drugmaker’s longtime growth engine becomes an albatross this year. Humira, the top-selling drug in the world, will face generic competitors in the U.S. for the rst time. AbbVie used aggressive patent litigation to delay this reckoning for years. But several generic versions will hit the market this year, and analysts expect Humira sales to plummet. So far, AbbVie’s new drugs aren’t growing fast enough to ll the gap. Unless that changes, investors could desert AbbVie shares, potentially leading to pressure for a sale or breakup of the company.

 Grocery merger. We’ll get a pretty good sense this year as to whether the biggest supermarket merger ever proposed will happen. Federal antitrust regulators are scrutinizing Kroger’s $25 billion deal to acquire Albertsons, which owns Chicago’s Jewel stores. If the deal goes forward, Jewel would get the latest in a string of new owners. And antitrust clearance may come at the price of divestitures of local Jewel and Mariano’s stores.

 Downtown. Many ideas have been put forward to lift Chicago’s Loop and Michigan Avenue out of their COVID-induced funk. Proposals range from a pedestrian bridge linking Boul Mich and Oak Street Beach to converting half-empty o ce towers on LaSalle Street into apartment buildings. Decisions will have to be made on these proposals in coming months, with the future of Chicago’s key business districts at stake.

 Crime. Any downtown revival requires e ective action to reduce

both crime and perceptions of crime in the area. Many worry that the state’s recently enacted SAFE-T Act criminal justice reforms will do the opposite. Such fears focus on the act’s elimination of cash bail, which took e ect on Jan. 1. e impact of that provision will soon become clear.

 Mayoral election. is year’s mayoral election may be the most consequential for business since Richard M. Daley took o ce in 1989. Daley cultivated a spirit of collaboration between City Hall and business leaders, which helped bring more companies and jobs downtown. We need more of that spirit now that Chicago is losing corporate headquarters again. Unfortunately, it’s scarce among this year’s candidates. Incumbent Lori Lightfoot hasn’t formed a kitchen cabinet of business honchos like Daley and Rahm Emanuel had, and most of her challengers cater to unions and the progressive left.

 Chicago casino. If Bally’s gets its way, casino gambling will come to the city in 2023. e winner of Chicago’s rst casino license wants to start operations this year at a temporary facility in the Medinah Temple o Michigan Avenue while building its permanent home on the Chicago River. Action at Medinah will answer key questions about demand for downtown gambling and its e ect on business at other casinos in the Chicago area.

 Work-from-home. Remote-work policies will round into something close to nal form at many companies. After three years of pandemic-induced experimentation, employers have the information they need to set longer-term rules for how often and when they want workers in the o ce. ose decisions will ripple through the local economy, a ecting everything from o ce demand to public transit ridership and home prices.

 Corruption trials. A pair of high-pro le criminal trials set for this year will throw a spotlight on the seamier side of Chicago business. Former Commonwealth Edison CEO Anne Pramaggiore and onetime ComEd lobbyists Michael McClain, John Hooker and Jay Doherty go on trial March 6 on charges of bribing Michael Madigan. ( e former Illinois House speaker also faces charges, but his trial date hasn’t been set.) Longtime Chicago alderman Edward Burke also goes to trial Nov. 6, on charges he used his position to extort business for his law rm. All have pleaded not guilty.

“IT’S JUST GOING TO FORCE A LOT OF BORROWERS TO MAKE A DECISION OVER THE NEXT 12 MONTHS.”

David Hendrickson, senior managing director in the Chicago o ce of Walker & Dunlop

Investors can’t borrow as much money as they could before due to rising interest rates. Expect more loan defaults and property sales as a result. I BY ALBY GALLUN

The search is on to fill an affordable housing gap

BY DENNIS RODKIN

Hoping to spark a new wave of housing construction on empty lots, city o cials and an architecture group have launched a competition to nd new designs that can be built a ordably and in large numbers.

Bungalows, two- ats and three- ats “de ned their eras,” said Eleanor Esser Gorski, CEO of the Chicago Architecture Center. is design competition is looking for “a new century’s version of that, looking at both a ordability and sustainability.”

e architecture group and Chicago’s Planning & Development and Housing departments are

create the rooftops that support nearby commercial corridors, especially where Invest South/ West is underway,” Maurice Cox, commissioner of planning and development for the city, said in emailed comments.

GROWING COMMUNITIES

Some of the projects that Come Home generates could be built on sites in Auburn Gresham, Englewood, Woodlawn and other Invest South/West target areas, the competition’s website says.

In 2019, a di erent contest sought to nd the bungalow of the 21st century. A di erence with this latest contest, Gorski said, is “that we’re looking at critical mass, building 10 or 20 all together instead of scattered throughout Woodlawn.”

set yet for how much it should cost to build the designs, although that will be a key factor in getting them built. ose gures should be available in the rst few months of 2023, she said.

“ e goal is to reduce sales prices for working-class buyers by reducing the costs of construction through innovative home designs” and other strategies, Cox said. Among the strategies are “clustered development sites to enhance economies of scale, land write-downs, and other city incentives like City Lots for Working Families” and application of the city’s a ordable housing requirements ordinance.

e emphasis is on multiunit buildings, in part because ownership of a two- or three- at is a long-established route to building household wealth in Chicago.

partnering on Come Home. It’s essentially a residential complement to Mayor Lori Lightfoot’s Invest South/West program, whose mission is to revitalize disinvested commercial corridors in the city.

“New two- and three- ats and other walk-up buildings will

In its rst phase, the Come Home program is calling for quali ed architects to register for the contest by Jan. 9. Later they’ll submit designs, and after another phase of evaluating developers, the program will pair architects with developers, and sometime after that speci c designs will result.

Gorski said no target has been

Like the city’s November announcement of an expedited way to sell o thousands of vacant lots it owns, this competition is part of an all-out e ort to “grow these communities inclusively,” Cox said.

e resulting designs should not only “be more a ordable for buyers,” Cox said, “but also for emerging local developers to build. e program will help strengthen the capacity of minority developers already working in the South and

RESIDENT INPUT

An important component of the design competition, Gorski said, will be collecting ideas from the communities where homes would be built. “What are they looking for and what do they think it would take to get people to come back to these neighborhoods,” Gorski said.

Reed Krolo , dean of the College of Architecture at the Illinois Institute of Technology, is a member of the jury that will select architects. He said community voices will help “tell us how do they want houses built to respond

to the concerns that people have in their communities today.”

As an example, he speculated the architects might learn that residents in neighborhoods plagued by violence might “want to bring back front porches, so you have more eyes on the street.”

Beyond building new homes on the Invest South/West sites, the contest should result in a sort of “pattern book,” both Krolo and Cox said. It would contain a set of designs from which someone who wants to build new housing on a city lot could select the ones best suited to their needs. Ideally it would include costs and materials lists.

A third round of layoffs hits Interfirst Mortgage

Dmitry Godin’s rebooted Rosemont-based operation, launched in 2020, has scaled down as fast as it scaled up. But he says the rm is in a good position now.

BY STEVE DANIELS

Rosemont-based home lender Inter rst Mortgage is laying o 75 workers next month, capping o a 13-month period in which the rm has let go close to 500 employees.

For a company launched a little over two years ago, that might seem like the end is near. But majority owner and CEO Dmitry Godin says it’s a reaction to conditions the mortgage industry hasn’t seen in 40 years. Far from shutting down, Inter rst is well positioned for what will be a changed business once home buying and selling resumes in earnest, he says in an interview.

“Right now, this market is frozen,” he says.

Left in Rosemont after the third round of layo s will be about 65 people, many of whom have worked with Godin for years. Cash ow from servicing fees Inter rst is generating from existing loans will be su cient to keep the rm going at this size, he says.

Godin, 43, has spent the past two years building a technology

platform designed to handle the mortgage lending process completely online for home purchasers and re nancers. Branded as Zero Mortgage, the product was rolled out in September—just as the housing market was grinding to a near-halt due to dramatically rising interest rates.

He’s not worried. e platform is designed to o er home loans cheaper than rivals who do it the traditional way, depending on an army of loan o cers and processors to shepherd borrowers through the process.

“I think we’re going to be in an environment that most of the people in the industry haven’t seen,” he says. “It’s going to fundamentally transform the industry.”

LOW-COST ALTERNATIVE

Key to that transformation are interest rates that Godin believes will remain elevated well above where they’ve been since the financial crisis of 2008. Homebuyers will be far more rate-sensitive than they’ve been while financing costs were historically low. A low-cost, online alternative—designed to appeal

to younger consumers who are comfortable dealing over the internet—will thrive in that setting, he thinks.

It’s not that homebuyers won’t be relying on real estate agents, friends and relatives for suggestions on where to get a loan, Godin says. It’s that they’ll also go online to see if they can find cheaper offers. That’s where Zero Mortgage will show up.

“You’re going to talk to Uncle Bob, but you’re also going to check,” he says.

Interfirst is hardly alone in the mortgage industry for cutting staff. Banking giants like Wells Fargo and JPMorgan Chase have done the same as volumes have fallen.

For Godin, though, the cutbacks have been particularly deep. He’s cut about 85% of his staff. With refinancing making up the vast bulk of Interfirst’s business while it was readying its technology, the drop-off has been more pronounced than for well-established home lenders with more volume coming from home purchases.

The Ukrainian immigrant,

who moved to the U.S. at age 9 and grew up in Skokie, can afford to wait for things to improve. Godin made a fortune with a previous iteration of Interfirst, growing with a different sales model to become the nation’s 15th-largest mortgage lender by volume in 2012. But Godin closed the company’s doors in 2017, concluding then that his company—selling through in -

dependent loan agents around the country—wasn’t making the kind of loans he was comfortable with.

He’d paid his vendors and creditors. He just ended it.

Coming back in 2020, he scaled up quickly. But the dramatic rate hikes of 2022 forced him to scale back just as fast.

“We have a good group we can scale (back) up around,” he says.

West Side communities they love.”

Bungalows and two- ats de ned a ordable housing in Chicago’s earlier eras.

City o cials want to nd the modern equivalent.

The competition will focus on multiunit buildings, in part because ownership of a two- or threeat is a long-established route to building household wealth in Chicago.

“THE GOAL IS TO REDUCE SALES PRICES FOR WORKING-CLASS BUYERS BY REDUCING THE COSTS OF CONSTRUCTION.”

Maurice Cox, city commissioner of planning and development

Dmitry Godin

BILLY FREEMAN/UNSPLASH

GERALD FARINAS/WIKIMEDIA COMMONS

Rewards app company inks West Loop office lease

Fetch joins the list of companies ocking to the newest and most recently updated o ce buildings downtown

BY DANNY ECKER

A mobile app company that gives shoppers incentives for taking photos of their receipts is expanding its Chicago o ce and moving to a newly built West Loop building as it bulks up its local headcount.

Fetch has signed a lease for more than 21,000 square feet on the top three oors of 609 W. Randolph St., a 15-story o ce building completed last year, the company con rmed. Fetch, which is based in Madison, Wis., but has its largest o ce in Chicago, will relocate its 226 local employees to the building from roughly 14,000 square feet it subleases today at 300 S. Riverside.

e deal aligns with the trend of downtown o ce tenants ocking to new and recently updated buildings since the start of the COVID-19 pandemic, a movement mainly driven by companies looking for ways to entice workers to show up to the o ce rather than work from home. While overall vacancy at downtown o ce buildings stands at a record high, the share of available space at top-tier, or Class A, buildings dropped to 14.7% at the end of the third quarter from 17% at the same time in 2021, according to data from brokerage CBRE.

e lease with Fetch—recently rebranded from Fetch Rewards— is a key win for New York-based Vista Property Group, which developed the 100,000-square-foot building on speculation, or with-

out any tenants signed. ough the building’s small footprint made that a relatively low-stakes gamble, Vista was betting it could lure tenants despite a broad trend of companies embracing the rise of remote work and shedding o ce space. Landing Fetch has helped validate that thesis, combined with a handful of other recent small deals that have brought the building’s occupancy to 63%, according to a statement from CBRE, which oversees the property’s leasing.

ACCESSIBILITY

Fetch Chief People O cer Rachel Olchowka said the company needed more space as its local team has grown during the pandemic, though it leaves in-o ce time requirements up to leaders of its various departments rather than mandating it for all employees.

“We know some critical mass of folks work better and create better, stronger relationships when they come in,” Olchowka said. “We want to make people want to be there, and as we were looking for o ce space, (that) was a huge piece.”

Olchowka said the company exclusively looked in the trendy Fulton Market District when it began its new o ce search before deciding the neighborhood’s distance from Union Station and Ogilvie Transportation Center would be a problem for its sta , many of whom commute to the train stations.

e company determined its square footage requirement as-

609 W. Randolph St.

suming most people would be in the o ce two days per week, “and we thought we’d comfortably t in that space, even with the headcount growth we were projecting over the next three years,” Olchowka said, though she did not provide details of the company’s hiring plans. e company has 32 Chicago-based job openings listed on its website.

EXPANSION

Fetch has grown its total headcount to 834 workers today from just 112 at the beginning of 2020, according to a spokeswoman, and its Chicago workforce has grown to 226 from 42 over that

span. Fetch also has o ces in Birmingham, Ala. and New York, among other locations nationwide.

e company announced in April it had raised $240 million in equity and debt to fuel its continued expansion. Fetch said at the time it had 13 million active users who had submitted more than 2 billion receipts and earned more than $340 million in rewards points.

Major consumer products companies pay Fetch to o er targeted incentives to customers who join its program, and for access to data.

A Vista spokesman did not provide a comment on the Fetch

lease. With its leasing momentum at 609 W. Randolph, the developer is seeking city approval for another 15-story o ce building one block west at 640 W. Randolph St.

Vista has also been among the most active investors in Fulton Market over the past couple of years. e rm is now pursuing plans to develop three residential buildings on North Morgan Street in the neighborhood that could include almost 1,600 apartments.

CBRE brokers Tony Coglianese and Brad Serot negotiated the lease on behalf of Fetch. CBRE’s Jason Houze oversees leasing at 609 W. Randolph St.

Cité legal drama ends as new owner acquires restaurant

BY ALBY GALLUN

A Chicago real estate investor has taken over the high-end restaurant atop Lake Point Tower, outbidding a local restaurateur in a bankruptcy auction for the 70th-floor space.

A venture led by Jiazhao “Frank” Chen acquired Cité, a now-closed restaurant that had been tied up in a threeyear court battle by its longtime owner, Evangeline Gouletas, and its bank. Chen plans to open a fine-dining restaurant in the space under a different name, said his broker, Sharon Wong of Century 21 Realty Associates.

The Chen venture prevailed in an August bankruptcy auction for the restaurant, edging out another bidder that had planned to reopen Cité and retain its employees and longtime chef Oscar Ornelas. But Wong offered few specifics about

Chen’s plans, saying she wasn’t sure what kind of cuisine the restaurant would feature.

“They’re trying out some dishes,” she said.

FINANCIAL TROUBLES

Chen, who runs his business out of a property in Chinatown, did not respond to requests for comment. Cook County property records show he owns and has owned properties in and around Chinatown and Bridgeport.

Whatever his new restaurant serves, it will draw customers with its breathtaking views of Lake Michigan and the Chicago skyline—some of the best in the city. The restaurant occupies the top floor of Lake Point Tower, a high-rise at 505 N. Lake Shore Drive that the Gouletas family converted from apartments to condominiums in the late 1980s.

Evangeline Gouletas retained

ownership of the Cité space, but the property has run into financial trouble at least twice in the past decade. She faced a $5.7 million foreclosure suit on the property in 2012 but found a way to hang onto the restaurant.

Then, in 2019, Republic Bank of Chicago filed a foreclosure suit against the restaurant. A Gouletas venture blocked the lender from completing its foreclosure by filing for Chapter 11 bankruptcy protection last December.

AUCTION PROCESS

Last spring, a bankruptcy judge approved a proposal to hire Highland Park-based Hilco Real Estate to sell the circular, 5,200-square-foot penthouse restaurant space and about 2,400 square feet of commercial space on the building’s second floor, along with fixtures and furniture. By summer, a ven -

ture led by Al Lotfi, the owner of a chain of suburban Mexican restaurants, had agreed to buy the property for $4.15 million, with plans to reopen Cité.

But properties sold in bankruptcy also have to go through a formal auction process open to other investors. In an August auction, Chen’s venture offered $4.68 million for the restaurant

and commercial space, according to documents filed in U.S. Bankruptcy Court in Chicago. Judge Janet Baer approved the sale, which closed in November.

Republic Bank received $3.65 million from the sale—all the money it said it was owed—but the transaction did not generate enough cash to pay off all of Cité’s creditors.

A new name and new menu are coming to the Lake Point Tower penthouse space with one of the best views of the lake and Chicago skyline

A Chicago real estate investor has taken over the high-end restaurant atop Lake Point Tower

Employers turn to apprenticeships for tech talent

United, Allstate, JPMorgan Chase, Blue Cross Blue Shield, and others are teaming up with P33 and DPI to tackle two problems that have long plagued the tech industry

BY JOHN PLETZ

Ten of Chicago’s largest employers—including United Airlines, JPMorgan Chase and Allstate—are teaming up to make better use of apprenticeships to tackle two problems that have long plagued the tech industry: a shortage of talent and inequality of opportunity.

Apprenticeships are one of the oldest workforce solutions, but they’re under-utilized in tech, according to new research by P33, a corporate and civic group focused on growing Chicago’s tech industry.

tech rms Kin + Carta, Slalom, Protiviti and Microsoft, as well as trading rm Optiver.

RESKILLING WORKERS

The first apprentices are expected to begin the program in the fall. It’s part of a broader job-training effort by Good Jobs Chicago, which won an $18.5 million grant from the U.S. Department of Commerce to focus on reskilling workers to fill jobs at a time when employers can’t find enough talent.

nontraditional training programs, such as I.C. Stars. Even in Illinois, which is one of the nation’s highest producers of computer science graduates, the demand far outstrips supply.

“There’s a mindset change that needs to occur,” says Brad Henderson, CEO of P33. “Four-year degrees are important, and we need to keep pushing on that. But it still leaves a gap. Part of that is we haven’t got companies hungry enough to invest enough for the pathway to work.”

P33 is teaming up with the University of Illinois’ Discovery Partners Institute, which recently launched a one-year software apprenticeship program. And they’ve enlisted United, JPMorgan Chase, Accenture, TransUnion, Allstate, Blue Cross Blue Shield;

P33 estimates there are 161,000 unfilled tech jobs in the Chicago area, despite mounting layoffs at some companies. Such opportunities are seen as a way to give workers, especially those in poorer communities, a shot at jobs with high pay and benefits. Black and Latino workers make up an estimated 14% of the local tech workforce.

Employers have to rethink hiring practices, such as requiring fouryear college degrees for entry-level jobs, instead looking to community colleges, boot camps and other

The companies involved haven’t made specific hiring commitments yet. But United and Accenture have used apprenticeships successfully for several years.

Since 2016, Accenture has had more than 2,000 apprentices in 40 cities. After a year of working at the company, they’re eligible to be hired full time. Apprentices accounted for more than 20% of its entry-level hires in the U.S. last year. Accenture is a member of the Chicago Apprentice Network, which involves a number of nontech companies.

United, meanwhile, has steadily hired entry-level tech workers

through partnerships with I.C. Stars and Year Up, training programs that focus on workers that have been left out of the traditional talent pipeline.

MEETING DEMAND

e airline, which has about 1,500 digital technology workers, has hired entry-level employees for data analyst, cybersecurity, software engineering and other jobs for several years. e airline typically has about 50 interns from universities and 20 to 30 apprentices a year. e apprentices spend about six months on the job before they’re

eligible for permanent roles.

United declined to provide speci c hiring details, but Grant Milstead, vice president of digital technology, says apprentices are in high demand. “Our assignment leaders are ghting over the talent.”

He said there simply aren’t enough existing workers in the traditional tech pipeline to meet the demand, and employers must rethink what skills are needed for di erent roles. “If you’ve got to have 10 years’ experience or a traditional college degree, that’s not a winning equation,” he says.

Law Firm.

Jaffe has become Taft Detroit, effective Dec. 31, 2022.

APPRENTICESHIPS ARE ONE OF THE OLDEST WORKFORCE SOLUTIONS, BUT THEY’RE UNDER-UTILIZED IN TECH.

Local sports figures’ big real estate deals in 2022

Bulls, Bears, Cubs, White Sox, Blackhawks: Team players, coaches and executives all made trades in the real estate arena last year

BY DENNIS RODKIN

Call it our version of the sports section: As athletes, coaches and team executives buy and sell real estate, Crain’s is all over the playby-play.

Let’s roll the tape to look back over the biggest deals of 2022.

In January, a builder tore down a longtime eyesore just outside Flossmoor, the abandoned and often vandalized mansion that former NBA player Ken Norman lost in foreclosure in 2015.

Triple Stanley Cup-winning Blackhawk Duncan Keith sold his ve-bedroom house on Melrose Avenue in Lakeview in February for $1.725 million. at was a loss of about $50,000 from what he paid when it was newly built in 2008. After playing 16 seasons for Chicago, Keith moved to the Edmonton Oilers for his last season. He retired in July.

Retired Cubs pitcher Jon Lester had been trying for more than a year to get his former home in Graceland West sold before he split the property in May, o ering the house and the side lot as two separate pieces. Lester and his wife, Farrah, wanted $3.85 million for the ve-bedroom house and $1.15 million for the extra-wide side lot next door on Berteau Avenue. As it turned out, the split wasn’t necessary, as the Lesters sold both pieces in September to a single buyer, for a total of $3.5 million. at’s about 32% less than the $5.15 million the Lesters spent acquiring the properties.

Also in May, former Blackhawks player and commentator Steve Konroyd and his wife, Juli, put their 12,000-square-foot house in Hinsdale up for sale at a little under $4 million.  e home, on Park Avenue, is still on the market, now priced just below $3.75 million.

Former Cleveland MLB player Mike Napoli, now the Cubs’ rst base coach, paid $2.8 million for a house on Greenview Avenue in Lakeview in May.

MULTIPLE PURCHASES

In June, Jed Hoyer, president of baseball operations for the Cubs, and his wife, Merrill, made the rst of two purchases in Winnetka. ey ultimately paid a combined total of nearly $5.7 million for the two, which are next to each other on Old Green Bay Road. In July, the Hoyers sold their former home, on Hermitage Avenue in Ravenswood, for a little more than $3.52 million.

Sean Marshall, who was a Cubs relief pitcher for ve seasons, and his wife, Sarah, sold their house on Kilbourn Avenue in Lincolnwood in July. e home, which has an indoor pool, sold for slightly above $2.18 million, a record for the near north suburb.

A 19th-century house on North State Parkway in the Gold Coast, formerly rented by Dwyane Wade when he was playing for the Bulls in the late 2010s,

sold for $5.26 million.

After 25 months on the market, an Old Town condo owned by shortstop Alexei Ramirez sold for $725,000 in August. at’s about 13% below the $835,000 Ramirez paid for the four-bedroom unit on Eugenie Street in 2011, when he was four years into his eight seasons playing for the White Sox. After the Sox, Ramirez played for the San Diego Padres, the Tampa Bay Rays and the Diablos Rojos del Mexico before retiring in 2021.

Brandon Bollig, whose three seasons with the Blackhawks included the 2013 Stanley Cup win, and his wife, Dannah, put their River North condo on the market in August. e asking price was $1.2 million for the threebedroom unit in an Illinois Street loft building. It’s still on the market, with the price reduced to just below $1.1 million.

Ex-Bears coach Matt Nagy and his wife, Stacey, sold their sixbedroom Lake Blu mansion for $4.45 million in September. at’s about 75% of the $5.95 million they were asking for it when it came on the market in May. e Nagys had done an extensive overhaul of the home after buying it for $2.75 million in 2018. Matt Nagy was red from the Bears in January.

Also in September, eo Epstein, former president of the Cubs, and his wife, Marie, put their house on Greenview Avenue in Lakeview on the market at $3.6 million. e six-bedroom, 7,000-square-footer quickly landed a potential buyer, but that contract soon fell apart and the home came back on the market. It’s still for sale, the price unchanged.

12

ULTRA-LUXURY

Khalil Mack, whom the Bears traded to the Los Angeles Chargers in March, sold his Gold Coast condo in September for $6.9 million. He made about 0.7% pro t in the deal, having bought the half- oor unit at the ultra-luxury No. 9 Walton in 2021 for $6.85 million.

Nazr Mohammed, a Chicago native whose 18 seasons in the NBA included three with the Bulls, put a West Town condo on the market in October. Mohammed and his wife, Mandi, bought the Fry Street four-bedroom in 2018, after he retired from playing. Nazr Mohammed is now general manager of the Oklahoma City Blue, the minor league a liate of the Oklahoma City under. e condo has not yet sold and the price remains unchanged at $1.2 million.

Yu Darvish, former Cubs pitcher now with the San Diego Padres, is asking $5.75 million for his former home on the lakefront in Evanston. With his wife, Seiko, Darvish listed the ve-bedroom house on a little over half an acre in October.

In December, the heirs of the late Jerry Vainisi, who was the Bears’ general manager when they won the Super Bowl in 1986, put his Lake Shore Drive condominium on the market. e asking price is $1.1 million for the three-bedroom, 2,200-square-foot condo with a 60foot span of windows facing Lake Michigan.

Ex-Cub Sean Marshall sold this Lincolnwood house.

VHT

CRAIN’S LIST: Chicago’s highest-paid athletes. PAGE

Ex-Blackhawks player and commentator Steve Konroyd’s Hinsdale house is still on the market.

Ex-Cub Jon Lester sold this Berteau Avenue house and the lot next to it in September.

The abandoned suburban mansion of former NBA player Ken Norman was torn down in January.

Former Cubs President Theo Epstein’s Lakeview home is still on the market.

Cubs coach Mike Napoli’s Lakeview home.

The Winnetka home of Cubs exec Jed Hoyer. COMPASS

AMY KENT, VILLAGE OF FLOSSMOOR

HAS

RESHORING

CRAIN’S:

MAUTHORS

SAM BADGER

President Chicago Chapter, Society of Industrial and Of ce REALTORS®

Senior Vice President – CBRE

Sam.badger@cbre.com 847-310-2099

SAM BADGER is the 2022 president of the Chicago Chapter of the Society of Industrial and Of ce REALTORS®. As a senior vice president at CBRE he specializes in the representation of industrial occupiers, property owners, investors and developers.

JOHN CASSIDY: Intel’s $20 billion investment in a new cutting-edge chip manufacturing campus in Ohio is one of the country’s most prominent reshoring stories. e massive undertaking will create 7,000 construction jobs across a 1,000-acre site and help meet the surging demand for advanced semiconductors. e impacts will be felt not only across Ohio as thousands of employees, partners and suppliers ascend, but also across the broader U.S. semiconductor ecosystem.

However, in the Chicago area, we haven’t had that same headline-driving mass reshoring project. But that doesn’t mean reshoring isn’t happening here. e steadily increasing demand for mid-sized manufacturing buildings indicates a rising tide as manufacturers show bullishness for Chicago’s central location, transportation infrastructure and (relatively) cheaper costs when compared to the coasts.

Gummy bear maker HARIBO, for example, recently opened its rstever North American manufacturing facility, located just over the state line in Pleasant Prairie, Wisconsin. at project produced about 400 regional jobs. And the new claim to fame for Elgin? is Northwest suburb of Chicago is now home to the second-largest corrugated box manufacturing facility in North America since Atlantic Packaging built a 460,000-square-foot plant there.

CRAIN’S:

JOHN CASSIDY

Secretary Chicago Chapter, Society of Industrial and Of ce REALTORS®

Principal – Lee & Associates of Illinois, LLC

jcassidy@lee-associates.com 312-371-0098

JOHN CASSIDY is the 2022 secretary of the Chicago Chapter of the Society of Industrial and Of ce REALTORS®. As a principal at Lee & Associates, he represents local and national clients in their industrial land and facilities needs.

CASSIDY: Today’s industrial buildings must support automation and evolving digital manufacturing technologies like 3D printing and robotics. is makes power capacity and dependability– and associated cost– an important consideration in site selection. More parking is needed because regardless of automation, manufacturing requires a larger labor force than warehousing.

Manufacturers are grappling with talent shortages and a need to ll new types of jobs – for example, data scientists that help optimize industrial processes. So, companies are using high-end nishes coupled with gyms, co ee bars, and collaboration areas – once unheard-of amenities for industrial facilities – to attract that talent.

CRAIN’S: What hurdles are affecting the reshoring effort in Chicago?

REACHED CHICAGO?

SAM BADGER: 1) Lack of buildings. Overall, Chicago’s industrial market has dipped to a historic low of 2.5% according to CBRE’s ird Quarter 2022 Chicago Industrial Market Report. ere has been a huge uptick in manufacturers wanting to own versus lease their own facilities, but not enough inventory available to satiate that demand.

Typically, manufacturing companies are interested in customized buildto-suit facilities. But it’s important to know that you’ll potentially need 18 months, at minimum, to build it. In a time-sensitive industry – something like plastic injection molding or pharmaceuticals – building to suit may not even be an option. And transitioning to a pre-built facility may not give you the power, parking or automation you need. ere is simply too large a capital investment required to make a vanilla warehouse work for advanced manufacturing operations.

2) Economy is shaky and construction costs are high. Uncertainty in the debt markets, rising interest rates, the potential for a recession, and construction costs are causing developers to hold back on new projects. Even if you’ve got the

time to build your own facility, it will come at a premium.

3) Labor is precious and pricy. When manufacturers started o shoring years ago to save on labor and production costs, the result was a sharp decline in attendance at vocational and trade schools, causing a severe shortage in skilled labor positions like construction and manufacturing.

According to a study by Deloitte and the Manufacturing Institute, the manufacturing skills gap in the U.S. could result in 2.1 million un lled jobs by 2030 at a potential cost of $1 trillion in 2030 alone.

CRAIN’S: Where do manufacturers go from here?

BADGER: It took the perfect storm of a pandemic, global supply chain catastrophe, natural disasters and geopolitical concerns to alert the C-Suite to a real crisis. But there is an opportunity for manufacturing companies to be more nimble and less beholden to certain global in uences.

Chicago has all the makings of a strong reshoring market, a er all, it has a centuries-old reputation as a manufacturing town. It’s home to a

robust ecosystem of suppliers, one of the hardest factors to control or create from scratch in a re-shoring decision. And there are many resources to help companies connect from the Illinois Manufacturers’ Association to IMEC.

As far as labor is concerned, nding and training the next wave of skilled workers is going to take time and money. Luckily, some institutions like e College of Lake County (CLC) are addressing demand by o ering programs for advanced manufacturing-based careers. CLC recently purchased a former big box retail store and repurposed it into its Advanced Technology Center to provide the latest in cutting-edge instruction.

To make a smart real estate decision, it’s important to engage an advisor early. Understanding debt availability, construction and materials pricing, energy costs, the potential for government incentives, owning versus leasing, and the composition of surrounding labor pools will ensure you’re positioned for success.

And in a world where many people stand to gain from reshoring e orts, your success helps feed the broader community’s success, too.

What types of companies are bringing more manufacturing to Chicago?

What do manufacturers want (and need) in their facilities?

e road ahead looks mighty bumpy

As the calendar ips from one year to the next, it’s customary to take stock and to plan ahead. ough the yardsticks we typically use have been bent to the breaking point by COVID, it’s becoming a bit easier to understand what the new normal will look like in 2023—and the picture that’s forming contains glimmers of hope as well as some reason for real concern.

After nearly three years in a global pandemic, time has a way of blurring to the point where, some days, it can be di cult to remember what life was like pre-COVID. Nevertheless, 2022 allowed us to begin to reclaim aspects of business and personal life that fell away in the lockdown days before vaccines helped the world to reopen again. More Chicagoans are returning to the o ce on a tentative basis: Crain’s weekly tracker of return-too ce levels shows o ce workers are coming downtown nowadays at a rate of about 48.5% of pre-pandemic levels, up from just 13.8% in December 2021.

But as welcome a sight as those ofce-dwellers may be, a downtown containing only half of the workforce that once reported to the o ce each day is still a challenging environment for building owners, retailers, restaurateurs and folks in the business of moving people around, like cabbies and even public transit agency execs. As Crain’s Ally Marotti reports, downtown restaurant operators are questioning when—or even if—the lunch business will ever fully bounce back.

Meanwhile, Crain’s Greg Hinz has shed light on the scal cli that looms just ahead for the Regional Transportation Authority: a budget shortfall of $730 million a year by 2026, as ridership is expected to remain depressed in the new world of hybrid work. And Crain’s real estate reporters Alby Gallun and Danny Ecker have spent much of 2022 chronicling the mounting pain on o ce landlords, a cohort whose prospects don’t appear much brighter in 2023 as rising interest rates promise to intensify the wave of mortgage defaults that have already rippled through the Loop.

Crain’s is publishing a sector-by-sector

economic outlook for 2023, and troubling signs abound:

 Rising prices are dampening sales at stores and restaurants, while higher interest rates are driving many buyers from the housing market.

 With recession fears looming, many companies are playing it cautious, delaying major expansions or hiring campaigns, even as many employers struggle to ll open positions.

 In health care, hospitals expect more pain in 2023 as labor shortages persist and budgets keep shrinking.

 Local tech companies are also bracing for a slow year, after 2022 brought an end to the bull market that peaked during the pandemic. Following a trend that’s played out even at some of the nation’s biggest tech giants, Chicago companies in the tech space laid o more than 2,500 employees in 2022, according to Crain’s data, and the horizon still looks chilly for tech employment looking ahead into 2023.

 In aviation, the industry’s hopes for a full recovery have hit turbulence as interest rates rise and in ation bites into pro ts. Pent-up leisure travel demand lifted airlines such as United

back to pro tability last summer, but lagging business travel was slower to rebound than expected. With a recession on the radar and execs accustomed to connecting via Zoom, business travel isn’t likely to come roaring back anytime soon.

 e Federal Reserve’s battle to squelch ination by raising interest rates, meanwhile, is taking its toll on the banking and nance industry.

All that said, there are some glimmers of cautious optimism to be found in the data. Manufacturers and consumer packaged goods companies, for instance, tell Crain’s that orders are holding up and, particularly in the food business, double-digit price increases have resulted in only single-digit volume declines for some brands. More broadly, the unemployment rate remains at historically low levels, a boon for job-seekers.

Even so, those who are old enough to remember the Fed’s last big in ation- ghting campaign in the early 1980s likely also remember the devastating impact those moves had on the economy, and on manufacturers in

particular. So there’s real reason to be minding costs and staving o unnecessary spending until the picture gets clearer.

Despite those headwinds, Chicago executives interviewed for Crain’s Small Business Outlook 2023, a survey conducted in late October, sounded guardedly upbeat about the path ahead for their respective businesses. Half of these leaders expect their revenues to rise in the year ahead, while 27% expect revenues to stay the same and 24% expect to experience declines. For those forecasting growth, they see opportunities in cultivating new customers and markets as well as improving existing customer relationships. Godspeed to them, each and every one.

Unless you, dear reader, are a member of the Federal Reserve board, there’s likely precious little you can do to control what happens next in Chicago’s economy—or the nation’s, for that matter. But other public policy makers do have some say in how things unfold in the next 12 months—none more so than Illinois Gov. J.B. Pritzker, who along with his fellow Democrats at the Statehouse must do all they can to create better conditions for business at this crucial crossroads. Holding on to Illinois’ automotive manufacturing clusters—the Stellantis plant at Belvidere and the massive Ford assembly campus on the city’s Far South Side—must be Priority No. 1 for the Pritzker administration. Second to that, but just by a fraction, is the need to up the state’s game when it comes to capturing new investment in the next-generation electric vehicle and battery business. Too many opportunities have slipped through our ngers as vehicle and battery makers have bypassed Illinois for more hospitable spots in Michigan, Indiana, Ohio and beyond.

Similarly, the hard work of cleaning up the city and state’s balance sheets will do much to improve our competitiveness in the race for investments of all kinds—not just automotive manufacturing. And, as always, public safety is a crucial, bottom-line lifestyle issue for employers who are already here and those who are on the hunt for expansion. Illinois can’t a ord to let 2023 be a repeat of 2022 on that front.

Canada immigration model could bene t Chicago

In a recent editorial, e Washington Post urged the U.S. to adopt Canada’s merit-based immigration approach, in which applicants are given preference based on the quali cations Canada wants. e idea is sensible, which is why it’ll go nowhere as things stand—it’s a rational solution to an irrational problem. Nonetheless, we have much to learn from Canada. A little-known part of its immigration system offers a way to resolve the impasse here and would have huge bene ts for Chicago.

What’s maddening about immigration reform is that few people who have knowledge of immigrants oppose it. During the

most serious recent attempt in 2014, a bill was approved in the Senate with bipartisan support but went nowhere in the House, then controlled by the GOP. House opposition, one commentator said, had less to do with the merits than with nativist sentiment among Tea Party types concerned about losing “their” country to foreigners.

Election results since then suggest little has changed:  Of the four states on the border with Mexico, where Donald Trump famously promised to build a wall, three—California, Arizona and New Mexico—went for Biden in 2020.





Of the seven states with the most illegal immigrants—California, Texas, Florida, New York, New Jersey, Illinois and Georgia— ve voted blue in 2020. Of the 13 states where the percentage of immigrants is above the national average, Biden won 11.

Conversely, the states Trump carried by the most lopsided margins had fewer immigrants, legal or illegal, than the national average.

 In short, judging by their presidential choices, opposition to immigration is strongest among those having the least experience with immigrants. But there’s a feature of the Canadian immigration model that may sway even the xenophobes—and it’s one that Illinois and Chicago leaders should promote.

Think of it as a modern version of states’ rights. Texas Gov. Greg Abbott and Florida Gov. Ron DeSantis, with their grandstanding shipments of illegal immigrants to Chicago, New York and elsewhere, have implicitly endorsed the idea. Canada calls it the provincial nominee program. A better name might be directed immigration.

e concept is simple: Immigrants are sent to parts of the country asking for them. In Canada, requests are made by provinces. In the U.S., they’d undoubtedly be made by states.

Provinces work with the Canadian federal government to set criteria for the immigrants they want. Ontario, for example, favors applicants with job o ers, college degrees, speci ed work skills, pro ciency in English or French and so on. In Alberta,

ISTOCK

Ed Zotti is a veteran Chicago journalist, author and consultant.

WTTW NEWS

you get points for showing serious intent to run a farm.

Such a program would be handy in Illinois. Whether downstate would welcome immigrant farmers, I can’t say. But people with job offers, college degrees and indemand skills? Sure. Most would head for metro Chicago, where the jobs are. Many would likely settle in the city.

Eligibility needn’t be limited to college grads. Preference might be given to applicants with job offers from businesses with labor shortages—in the hospitality industry, say.

Increasing immigration is critically important to Chicago. The city has been dependent on people moving here from elsewhere throughout its history, but never more so than now. Over the past three

CRAIN’S

decades, its population has seesawed multiple times, depending on whether newcomers outnumbered those headed for the door:

Veebha Mehta Chief marketing officer G.D. Crain Jr. Founder (1885-1973) Mrs. G.D. Crain Jr. Chairman (1911-1996)

For subscription information and delivery concerns please email customerservice@ chicagobusiness.com or call 877-812-1590 (in the U.S. and Canada) or 313-446-0450 (all other locations).



In the 1990s, Chicago saw an influx of 210,000 Hispanics, mostly from Mexico, temporarily ending a 40-year decline in population.

benefit from immigrants in many roles. Directed immigration would let them choose which ones. The idea would be to supplement, not supplant, existing U.S. immigration programs, which favor family ties. Canada expects provincial nominees to account for just under a quarter of all immigrants.

want immigrants and think it’s a good idea to send them to Chicago and other places that do. Directed immigration would call that bluff.



The gain turned into a loss in the 2000s, due to the departure of 181,000 Black people, with the overall population falling to the lowest level since 1910.



The population trend reversed yet again in the 2010s, owing to an increase of 203,000 college graduates, an estimated 90% of whom weren’t city natives. Granted, most came from elsewhere in the U.S., but nearly 20% were foreign-born.

 Illinois and other Rust Belt states would

Canada’s pro-immigration policies have been a big success for Canadian cities, especially Toronto, which has become one of the fastest-growing cities in North America. Toronto’s population, now roughly the same as Chicago’s, is expected to surpass 4 million by 2046.

The beauty of directed immigration is that it would be difficult to oppose without sounding like a knucklehead. Governors Abbott and DeSantis evidently don’t

And what governor could oppose a plan letting them choose who gets in? Texas has a booming technology industry that would surely relish a chance to import international talent. Likewise, Florida has welcomed lots of foreigners. Why would it object to having a say in who they are?

Directed immigration doesn’t solve the problem of illegal entry. A reform deal would surely include stricter border controls. But it would rationalize U.S. immigration policy, offer aspiring immigrants a clear path and provide a vital stream of newcomers for cities like Chicago. It’s worth a serious look.

These are Chicago’s highest-paid athletes

Eleven new faces appear on our list this year, including, for the rst time, a player from the Chicago Fire

BY SOPHIE RODGERS

Crain’s list of Chicago’s highest-paid athletes is back for another season with 11 new faces in the lineup.

e White Sox have eight athletes on Crain’s roster; the Bulls have seven; the Cubs, Bears and Blackhawks have three apiece; and the Fire made its debut with one player. e list is ranked by 2022 total income, comprising base salary plus estimated marketing incomes from industry experts.

No. 1 on the list—and far ahead of the rest—is Bulls shooting guard Zach LaVine. His $37.1 million salary for the 2022-23 season is only part of the picture. e 27-year-old NBA veteran has evolved into an endorsement magnet. Crain’s estimates LaVine earned about $9 million ocourt from his deals with New Balance, Mountain Dew, CarMax and Klarna, just to name a few.

ree Bulls teammates join him in our top ve: DeMar DeRozan at No. 2, Lonzo Ball at No. 4 and Nikola Vucevic at No. 5. DeRozan clinched last year’s No. 1 spot on our list but has been unseated by LaVine. In ating these stars’ salaries is the NBA’s lucrative media rights agreement worth $2.6 billion per year through 2024—a number that is reportedly on track to double with the league’s next deal.

Crain’s estimates that, like LaVine, DeRozan and Ball also earned generous marketing incomes in 2022. ese three players maintain a large social-media presence, especially Ball, who touts 15.4 million Instagram followers. Ball has been in the spotlight for years thanks to his boisterous father, LaVar Ball, and their family’s reality TV series, “Ball in the Family.” Despite Ball’s large income, he has not played in a game since last January after he tore his meniscus.

While the Bulls’ four highest-paid players have been in the city for a few years now, and were featured in last year’s edition, 11 new names on the Chicago sports scene also made the list.

e most notable new name is Xherdan

Shaqiri, a Swiss mid elder for the Chicago Fire—and the rst Fire player to make our top 25. Coming in at No. 17, Shaqiri made a guaranteed salary of $8.15 million in 2022. Boosting Shaqiri’s fortunes is his lucrative three-year deal with Joe Mansueto’s franchise that made him the highest-paid player in Major League Soccer, according to data from the MLS Players Association. After buying the team in 2019, Mansueto announced the Fire would return to Solider Field during the 2020 season, which was upended by the COVID-19 pandemic.

“ e team was looking to make a splash on the player personnel front heading into the start of the 2022 season,” said Brian Quarles, chief creative o cer at sports marketing agency rEvolution. “( ey were) hoping that the signing would create buzz in the market, translate to winning on the eld and ultimately help sell tickets.”

Shaqiri is well known among global soccer fans, as he’s played for top clubs like Bayern Munich, Liverpool and Inter Milan. “Time will ultimately tell if the Shaqiri signing was a success or not,” Quarles said, “but as the team missed the playo s once again in 2022, it’s fair to say the initial results of the Shaqiri signing have not created the desired e ect.”

But Quarles expects to see more Fire players on future Crain’s lists. “ e Fire still lack recognizable star power,” he said. “So I would expect them to continue to pursue the type of player that has the potential to be on future lists of the most marketable athletes in Chicago.”

Another new face on Crain’s list, at No. 16, is Blackhawks defenseman Seth Jones.

e 28-year-old beat out teammates Patrick Kane and Jonathan Toews, who tied for No. 22. e list, which has historically had few Blackhawks players, highlights the growing disparity between NHL contracts and those of other leagues. Eightyear contracts signed by Kane and Toews were heavily front-loaded, allowing other Chicago athletes to pass them by on this year’s list.

e highest-ranking new name on

Crain’s roster, coming in at No. 3, is Cubs starting pitcher Marcus Stroman. e North Siders signed a three-year, $71 million deal with Stroman at the end of 2021, earning him $25 million this past season. With only 530,000 Instagram followers, Stroman does not have nearly as large a social-media following as the NBA players on the list. Crain’s estimates the 31-year-old North Sider made $400,000 from marketing deals in 2022.

While the Cubs have only three players on our ranking, the White Sox have more than double that.

“Chicago is very much a baseball town. And when both teams are competitive, it’s great for Chicago and MLB. But in the current landscape, the White Sox are the hotter team,” said Dan Lobring, senior vice president of marketing at rEvolution. “ e Sox nished rst in their division in 2021 and made it to the (division series) before losing to the Astros. So I would say the White Sox are more in win-now mode, which re ects their investment in their current players and overall roster.”

However, the White Sox’s investments in their win-now mode have not been good—they weren’t even close to making the playo s this year in a weak division, enraging the team’s fans.

e city’s most popular franchise, the Bears, also has only three athletes on Crain’s list—and all three rank below the top 10. e team’s most marketable player, quarterback Justin Fields, did not make our top 25, though he lined up a slew of deals with brands including Progressive, Bose, Lowe’s, Chipotle, Wonderful Pistachios and C4 Energy. Fields made last year’s list, thanks to an $11.1 million signing bonus. But even athletes who fall below the top 10 do just ne. On average, the top 25 athletes on Crain’s list earned a total income of $14.5 million in 2022. By comparison, athletes on Crain’s rst list published in 2016 earned an average income of $12.6 million for the 2015-16 season. Despite the $335 million in combined salary for this edition’s highest-paid athletes, 2022 was a disappointing year for all of Chicago’s major pro teams.

ZACH LAVINE

Shooting guard, Bulls

Last year’s rank: 2 Age: 27

2022 total income: $46.1 million

2022 salary (plus bonuses): $37.1 million

Contract (year started): $215.2 million; 5 years (2017)

Estimated marketing income: $9 million

Affiliated brands: New Balance, Mountain Dew, CarMax, Cherrish, Klarna, Midwest Express Clinic

The two-time All-Star left Bulls fans waiting with bated breath after he completed his four-year, $78 million contract last season. To Chicago’s relief, LaVine agreed to a five-year, $215 million max contract extension, making him the highest-paid Bulls player by millions. Having ranked No. 2 on last year’s list with a total income of $27 million, the 27-year-old continues to boost his fortune off-court. After LaVine’s four-year, $35 million shoe deal with Adidas expired in 2021, the NBA star signed a multiyear contract with New Balance.

Ranked by 2022 total income

CHICAGO BULLS

Chicago Fire FC’s

Xherdan Shaqiri ALAMY

DEMAR DEROZAN

Small forward, Bulls

Last year’s rank: 1 Age: 33

2022 total income: $31.8 million

2022 salary (plus bonuses): $27.3 million

Contract (year started): $81.9 million; 3 years (2021)

Estimated marketing income: $4.5 million

Affiliated brands: Gatorade, Nike, Spalding, Klipsch Audio

After the Bulls picked up DeRozan from the San Antonio Spurs in 2021, the five-time All-Star clinched last year’s No. 1 spot on Crain’s list with a total income of $30 million. Despite the two-time All-NBA player’s exciting performance in this season’s opener (his 37 points were the most scored in a Bulls season opener since Michael Jordan), the team has struggled so far this season.

MARCUS STROMAN

Pitcher, Cubs

Last year’s rank: Not rated Age: 31

2022 total income: $25.4 million

2022 salary (plus bonuses): $25 million

Contract (year started): $71 million; 3 years (2022)

Estimated marketing income: $400,000

Affiliated brands: Shugo, Therabody Stroman is new to Crain’s list since signing with the Cubs in December 2021 after two seasons with the New York Mets. With a base salary of $25 million in 2022, Stroman earned nearly double what Kyle Hendricks (the second-highest-paid Cubs player) made this past season, thanks to a three-year, $71 million contract. The MLB veteran has earned about $65.5 million from nine seasons in the league, according to Spotrac. Off the field, the 31-year-old announced plans last year to debut his own brand of footwear, dubbed Shugo, after previously sporting Jordan Brand and Adidas cleats.

LONZO BALL

Point guard, Bulls

Last year’s rank: 5 Age: 25

2022 total income: $23 million

2022 salary (plus bonuses): $19.5 million

Contract (year started): $85 million; 4 years (2021)

Estimated marketing income: $3.5 million

Affiliated brands: C4 Energy, Foot Locker, Uber, Heir App

Despite making Crain’s top 5 this year with a total income of $23 million, Ball has not played a game since last January after he tore his meniscus. The NBA star underwent knee surgery (for a third time) in late September and is still recovering. But he stays busy off-court with marketing deals for Foot Locker, C4 Energy and ads for the movie “Bullet Train.” Ball maintains his presence in the sports and pop culture spotlight, thanks in part to being a member of one of the most popular NBA families, bolstered by his father, LaVar. Ball made his own name at UCLA, strengthened it in the pros, and has helped lead the Bulls after joining through a sign-and-trade deal with the New Orleans Pelicans.

NIKOLA VUCEVIC

Center, Bulls

Last year’s rank: 3 Age: 32

2022 total income: $22.5 million

2022 salary (plus bonuses): $22 million

Contract (year started): $100 million; 4 years (2020)

Estimated marketing income: $500,000

Affiliated brands: Nike

The Bulls acquired this two-time All-Star in a March 2021 deal with the Orlando Magic. Vucevic leads the Bulls in rebounds this year but has fallen on the list to No. 5 from last year’s No. 3. He earned $26 million in the 2020-21 season, $24 million last season and $22 million this season. Since the Montenegrin NBA veteran maintains a low profile off-court, Crain’s estimates he earns significantly less than his teammates in marketing income.

CHICAGO BULLS

CHICAGO BULLS

CRAIN’S LIST CHICAGO’S HIGHEST-PAID ATHLETES

Ranked by 2022 total income

LANCE LYNN

Pitcher,

White Sox

Last year’s rank: 22 Age: 35

2022 total income: $18.7 million

2022 salary (plus bonuses): $18.5 million

Contract (year started): $38 million; 2 years (2021)

Estimated marketing income: $150,000

Affiliated brands: Nike

The two-time All-Star saw the biggest increase in total income from last year’s list. Lynn bumped his way up from No. 22 (having earned $8.3 million) to No. 6, thanks to a two-year, $38 million contract extension. The 35-year-old pitcher debuted with the White Sox last year, when he made his second career All-Star team and finished third in voting for the American League Cy Young Award. Lynn started the 2022 season on the injured list after undergoing knee surgery to repair a torn tendon. The South Sider maintains a low profile off-field, though he’s affiliated with Nike.

YASMANI GRANDAL

Catcher, White Sox

Last year’s rank: 7

Age: 34

2022 total income: $18.4 million

2022 salary (plus bonuses): $18.3 million

Contract (year started): $73 million; 4 years (2020)

Estimated marketing income: $140,0001

Affiliated brands: BM Authentics, Franklin, New Balance, Topps

The veteran White Sox catcher keeps his No. 7 ranking from last year, when he was the highest-paid player among the South Siders. Now the second-highest-paid Sox player, Grandal is bringing home the same amount in 2022: $18.4 million. However, the bulk of that total comes from his base salary. The two-time All-Star isn’t active in marketing, and mainly has partnerships with baseball apparel-focused brands New Balance and Franklin. The 34-year-old also has a multimillion-dollar equity stake in Force3 Pro Gear and is an investor in Perfect Game Holdings.

YOAN MONCADA

Third baseman, White Sox

Last year’s rank: Not rated

Age: 27

2022 total income: $14.1 million

2022 salary (plus bonuses): $14 million

Contract (year started): $70 million; 5 years (2017)

Estimated marketing income: $140,000

Affiliated brands: Nike

The 27-year-old third baseman is new to Crain’s list after six seasons with the White Sox. Entering his seventh season with the South Siders, Moncada has broken into Crain’s top 10 with $14.1 million in total income. The MLB veteran has made $23.7 million during his White Sox tenure, according to Spotrac, and is heading into his fourth year of a five-year contract extension he signed in 2020. Moncada maintains a low profile off-field, but he’s affiliated with Nike.

KYLE HENDRICKS

Pitcher, Cubs

Last year’s rank: 13 Age: 33

2022 total income: $14.1 million

2022 salary (plus bonuses): $14 million

Contract (year started): $55.5 million; 4 years (2014)

Estimated marketing income: $100,0001

Affiliated brands: Fanatics, Rawlings, New Balance

The veteran North Sider is the last remaining Cubs player from the 2016 World Series championship team. Heading into his 10th season with the club, he has finally broken into the top 10 on our list. Nicknamed “The Professor,” the 33-year-old pitcher earned a bachelor’s degree in economics from Dartmouth College in 2013. He went on to make his MLB debut the following year. Hendricks has earned more than $46 million from his nine seasons with the Cubs, according to Spotrac, and is heading into the fifth and final year of his contract.

CHICAGO CUBS

Last

NR SEIYA SUZUKI Out elder, Cubs 28 $12.6 million $12 million$85 million; 5 years (2022) $550,0001 Leaf Trading Cards, Panini, Oakley, Meiji

17

21

ALEX CARUSO Shooting guard, Bulls 28 $11.5 million $9 million $37 million; 4 years (2021) $2.5 million1 Anta, TravisMathew, Manscaped, Tonal, Carushow Apparel, Zenni Optical, ZenB

EDDIE JACKSON Defensive back, Bears 29 $11.3 million $11.1 million$58.4 million; 4 years (2017) $200,000 Progressive

19 PATRICK WILLIAMS Power forward, Bulls 21 $11.3 million $7.8 million$32.1 million; 4 years (2020) $3.5 million1 Google, Nike, Panini, AT&T, BM Authentics, Toyota

23 TIM ANDERSON Shortstop, White Sox 29 $10.5 million $9.4 million$25 million; 6 years (2016) $1.1 millionBMW, JD Sports, Dairy Queen, Saks Fifth Avenue Menswear

NR SETH JONES Defenseman, Blackhawks 28 $10.2 million $10 million$76 million; 8 years (2021) $200,0002 CCM Hockey, NoBull, Fanatics, Upper Deck

NR XHERDAN SHAQIRI Mid elder, Fire 31 $8.3 million $8.2 million — 3 years (2022) $150,000 Hublot, Nike

NR CODY WHITEHAIR Guard, Bears 30 $8.2 million $8.1 million$51.3 million; 5 years (2016) $100,000 Nike

NR KENDALL GRAVEMAN Pitcher, White Sox 31 $8.1 million $8 million $24 million; 3 years (2022) $50,000 Nike

NR LUCAS GIOLITO Pitcher, White Sox 28 $7.6 million $7.5 million$7.5 million; 1 year (2017) $125,000 X nity

24

34 $7.4 million $6.9 million$84 million; 8 years (2007) $500,0002 Bauer Hockey, Sparx Hockey, Chevrolet, Frameworth, Upper Deck, Fanatics

24

25

25

LIAM HENDRIKS

Pitcher, White Sox

Last year’s rank: 15 Age: 33

2022 total income: $13.2 million

2022 salary (plus bonuses): $13 million

Contract (year started): $54 million; 3 years (2021)

Estimated marketing income: $150,000

Affiliated brands: Adidas, Rawlings

The three-time All-Star ranked No. 15 on last year’s list with a total income of $12.2 million. Now making our top 10, Crain’s estimates the 33-year-old White Sox pitcher earns about $13.2 million, with $150,000 coming from deals with Adidas and Rawlings. Hendriks signed a three-year, $54 million contract with the Sox in 2021 and has made the All-Star team each of the past two seasons.

Research by Sophie Rodgers

with

Burns Entertainment CEO Doug Shabelman and industry experts from sports marketing agency rEvolution. List includes all athletes currently on Chicago pro team rosters who played here in 2022. Salary gures include player bonuses and re ect playing contracts from the 2022 or, in some cases, the 2022-23 season. Marketing income was calculated using estimates from agents and industry experts of what players made from endorsements (including gear), promotional deals and appearance fees. Not included are other nancial investments and ownership stakes in companies. 1. Figure from Wasserman. 2. Figure from CAA aSports.

Several

high-pro le local

Willson Contreras is another Cubs vet who didn’t make the list.

e three-time All-Star, who helped the North Siders capture a World Series title in 2016, rejected the Cubs’ qualifying o er and signed a ve-year, $87.5 million deal with rival St. Louis Cardinals.

On the South Side, White Sox free agent José Abreu recently nalized a three-year, $58.5 million deal with the Houston Astros.

e three-time All-Star ranked No. 10 on Crain’s list last year with $16.3 million. e veteran rst baseman had been with the White Sox since 2014, starting with a six-year, $68 million contract. In 2019, he agreed to a three-year, $50 million contract extension. Abreu earned about $113 million from his nine seasons with the Sox, according to Spotrac.

White Sox out elder A.J. Pollock also would have made this list, having earned $11.5 million in 2022. e Sox acquired Pollock from the L.A. Dodgers last year in exchange for Craig Kimbrel. Having played only one season with the Sox, Pollock declined his $13 million option and now faces free agency.

Bears quarterback Justin Fields missed the list after ranking No. 14 on last year’s edition with $13.7 million. Fields secured a

Jason

spot last year due to his $11.1 million signing bonus and estimated marketing income of $2 million after

Progressive,

lining

Lowe’s

And as expected, no one from the Chicago Sky is represented on this list. e highest-paid player on the team, Kahleah Copper, made only $200,000 in 2022. Across the league, the highest Women’s National Basketball Association base salary in 2022 was $228,094.

Also missing from this list, because they weren’t on a Chicago roster in 2022, are Cody Bellinger, Jameson Taillon and Dansby Swanson. e Cubs just signed these three big name players in December. Bellinger reportedly signed a one-year, $17.5 million deal with the North Siders; Taillon agreed to a four-year, $68 million contract; and Swanson will join the team with a massive seven-year, $177 million deal.

CHICAGO CUBS

(sophie.rodgers@crain.com),

additional data provided by Spotrac.com,

He ranked No. 4 on last year’s list with a total income of $23.8 million, but  Jason Heyward no longer calls Wrigley Field home. With one year and $22 million still left on his contract, the Cubs o cially released the veteran North Sider in November. Despite his eight-year, $184 million contract, Heyward’s tenure as a Cub was largely a disappointment for fans, save for a legendary clubhouse speech said to have propelled the team to an extra-innings 2016 World Series victory. After one of his worst statistical seasons in 2021, a knee injury derailed Heyward’s performance in 2022, resulting in him playing only 48 games.

up a slew of deals with brands that included

Bose,

and Chipotle. Fields’ total cash only amounts to $1.5 million for the 2022-23 season, excluding marketing deals.

Heyward

Big-picture and local data paint an increasingly glum outlook

FOOD PRICES CLIMB

FACTORY FUNK?

In a sign that pandemicinduced labor shortages may be easing slightly, Illinois’ unemployment rate hit 4.7% in November, up from a recent low of 4.4% in July and well above the national rate of 3.7%.

Looking ahead, executives know the Federal Reserve will keep jacking up rates to bring down inflation. They don’t know if those rate hikes will trigger a recession this year, and, if so, how deep and prolonged the slump would be.

Unsure of what’s to come, companies generally are avoiding big moves in either direction. Major expansions and hiring sprees are off the table for now, even as many employers still struggle to fill open positions. Yet relatively few are ordering large-scale layoffs, with the notable exception of some tech companies.

Crain’s asked executives in several major industries what they expect in 2023. Here’s what they said:

MANUFACTURING

Like a lot of manufacturing executives these days, Jeff Dec is on the lookout for signs of a recession. He doesn’t see many yet.

“Business is very good,” says the president of Laystrom Manufacturing, a metal fabricator in Logan Square. “I’m very happy with the way things are progressing and moving.”

Inflation continues to pummel grocery aisles, and the price hikes are expected to continue in 2023. The price of groceries was up 12% year over year in November. As prices increase, grocery shoppers have been drifting toward private-label products in hopes of saving a few bucks at the store.

auto sector, Dutch automaker Stellantis plans to idle a downstate Belvidere factory that assembles Jeep Cherokees, laying off 1,350 workers. A longer-term concern: that Illinois’ auto industry, including Belvidere and Ford’s assembly plant on the South Side of Chicago, could lose out as automakers shift to electric vehicles.

Manufacturing is big and diverse, so it’s hard to make sweeping statements about its prospects. Different industrial sectors often move up and down at different times.

MANUFACTURING IS AN IMPORTANT PART OF THE LOCAL ECONOMY, EMPLOYING NEARLY 346,000 PEOPLE IN 2021,

Laystrom, which employs about 75 people, is trying to hire four more, says Dec, who projects sales will jump 20% in 2023, to more than $19 million. The company makes parts for farm equipment, power and electrical systems, medical equipment and trucks.

“We’re guarded,” he says. “We’re watching our customers,” but haven’t seen much evidence of a downturn yet.

With the Federal Reserve hiking shortterm interest rates, many economists expect its continuing battle against inflation to push the economy into a recession. The Fed’s last big inflationfighting campaign in the early 1980s devastated the economy and crushed manufacturers.

The picture is mixed today. One key indicator suggests the industry is heading in the wrong direction. A measure of factory activity tracked by the Institute of Supply Management dropped to 49.0 in November, its lowest reading since 2020 and down from 50.2 in October. A figure below 50 indicates a contraction is coming.

In a bad sign for the area’s

But Mark Denzler, president and CEO of the Illinois Manufacturers’ Association, hears from a broad range of industrial companies, and most of what they tell him is positive. Business is slowing down a bit, but they’re “still incredibly busy,” he says.

“They’re not really seeing the slowdown that I expected,” Denzler says.

Manufacturing is an important part of the local economy, employing nearly 346,000 people in 2021, or 10.3% of the Chicago-area workforce, according to the Illinois Department of Employment Security. But that’s down from 2001, when manufacturing accounted for 15.4% of all local jobs.

Like many companies, local manufacturers have struggled with supply bottlenecks and soaring prices. But supply-chain problems have eased recently, and inflation is slowly coming down.

For companies like Deere, business has never been better. Rising crop prices have boosted demand for the Moline-based company’s farm equipment, and its stock price hit an all-time

measure

factory activity tracked by the Institute of Supply Management dropped to 49.0 in November, its lowest reading since 2020. A figure below 50 indicates a manufacturing contraction is coming.

“People are staying home,” says Avli Managing Partner Louie Alexakis, “or they’re just really careful about where they’re eating.”

high in early December. Including dividends, Deere shares returned 27.4% last year, versus a loss of 12.4% for the S&P 500 Index.

Deere Chairman and CEO John May was bullish about 2023 in a November conference call with analysts, saying “the velocity of orders has remained strong.”

—Alby Gallun

RESTAURANTS/RETAIL

With food and labor costs expected to keep rising in 2023, restaurants will look to grow sales and protect their already depressed margins.

ose goals may come into conict this year. Menu prices are up 8.5% over 2021, according to the consumer price index, as restaurants pass along rising costs. But 3 out of 5 Americans are eating at restaurants less frequently, according to a recent survey from consulting rm L.E.K. Consulting. In 2023, restaurants could learn how much the market will bear, says analyst Sean Dunlop of Morningstar.

“No one knows quite where that breakpoint might be,” he says. “The challenge is partic-

HEADING UP

ularly tough for low-frequency, full-service restaurants.”

The tight labor market likely means restaurants will keep hiring, experts say. Illinois’ leisure and hospitality industry is still down about 1,000 workers from February 2020. Hiring trends in the retail industry will likely be similar, experts say.

Restaurants are open about 7% fewer hours than before the pandemic, and restaurant closings still outpace openings nationally, according to market research firm Datassential. Squeezed by staff shortages and shorter hours, many have also trimmed menus to focus on dishes that are more popular and easier to prepare.

“We’re in for a little bit more of a rough road before it could get better,” says Mark Brandau, an analyst at Datassential.

Greek restaurant Avli, which has five locations in the Chicago area, recently introduced a family style shared meal at an approachable price in hopes of drawing more customers.

“People are staying home,” says Managing Partner Louie Alexakis, “or they’re just really careful about

where they’re eating.”

Retailers also are seeing customers behave as if the economy is in a recession. Even in the recession-resistant beauty products business, shoppers are trading down to cheaper options.

Bolingbrook-based Ulta Beauty could ultimately bene t from the shift, says analyst Korinne Wolfmeyer of Piper Sandler. Unlike some of its competitors, Ulta carries a range of products at di erent price points.

“There’s lots of opportunity to capture share there,” she says.

—Ally Marotti

HEALTH CARE Hospitals in Chicago and across the country expect more pain in 2023 as labor shortages persist and budgets keep shrinking.

Employment at Illinois hospitals is still down 3% from before the pandemic. With hundreds of nursing, respiratory therapist and other roles open, there’s little evidence the staffing crunch will ease soon.

At the same time, hospitals face increasing financial pressures as costs rise and federal COVID-19 funding runs out. They are going into 2023 after suffering one of the worst years on record, according to research from Kaufman Hall & Associates.

“We’re getting a lot of calls to help hospitals who are in distress,” says Sanjay Pathak, a managing director at BDO’s health care management advisory services practice.

As ironic as it would be during a labor shortage, especially vulnerable and smaller hospitals may resort to laying off workers in 2023, Pathak says. Hospital chains across the country already laid off workers in 2022.

Pathak says he is seeing hospitals consolidate or cut expensive and unprofitable services. “That will continue into 2023 and

beyond,” he adds.

Unlike the vulnerable hospital industry, the pharmaceutical industry is a little more resilient, experts say.

“Discretionary spending will be down, but critical, necessary spending will be as robust as it can be based on economic conditions,” says Greg Grove, a partner at law firm Neal Gerber & Eisenberg who represents pharmaceutical clients.

A couple of major local drugmakers face uncertain prospects in 2023. Horizon Therapeutics has agreed to be acquired by Amgen, raising questions about the future of its Chicago-area operations and workforce. North Chicago- based AbbVie will for the first time face generic competition for Humira, the top-selling drug in the world and its leading revenue source.

While early-stage life sciences and health-tech companies will likely continue to struggle to raise money from investors during a widespread venture-capital slowdown, startups with proven technology and strong demand will still get funded, Grove predicts.

“There are large wells of money out there to support promising companies,” he says.

—Katherine Davis

RESIDENTIAL REAL ESTATE

Much of what happens in the

housing market in 2023 will depend on whether the Federal Reserve backs off from a series of rate hikes that chilled sales in 2022. If hikes continue, the chill could become an all-out freeze. If they don’t, buyers and sellers may get back in action, although nobody predicts a return to the frenzied market of the pandemicera housing boom.

Redfin and Zillow, two online real estate marketplaces, both expect existing-home prices to hold up better in Chicago than in most major cities, largely because they didn’t rise frothily here, so there’s less air to be let out of them. As prices drooped elsewhere around the country, they only flattened in the Chicago area, at least for now.

In the new-home business, like in the overall housing market, “most of the damage that resulted from dramatic price increases followed by interest rate hikes occurred in other areas of the country, such as Phoenix and Dallas, where price increases were much higher than here at home,” said Erik Doersching, CEO of Tracy Cross & Associates, a Schaumburg-based consultant to the homebuilding industry.

“In the Chicagoland area, while sales have slowed recently, price increases were not as dramatic and, more importantly, slower sales have resulted in large part from supply depletion,” not from

buyers exiting the market.

Doersching sees one particular source of strength in the local homebuilding industry. While early in the 21st century there were many small, locally owned suburban building firms, a fallow decade after the housing downturn of 2007-08 shifted the profile. Now, national firms based in other cities build about three-quarters of the new homes in Chicago-area subdivisions.

Because those large, publicly traded firms have deep pockets and a national perspective, they “have flexibility on pricing,” he says, which helps “our region’s ability to offer incentives, such as buying down mortgage interest rates, thus mitigating any significant falloff.”

Nevertheless, Doersching says smaller, privately owned builders could be impacted by “the broader tightening of money availability by lenders and investors.”

—Dennis Rodkin

COMMERCIAL REAL ESTATE

It will be far more expensive to do just about anything in commercial real estate in 2023. Want to develop a property? Construction costs have soared to historic levels. Need to refinance or sell a building? Interest rates just reached a 15-year high. Property taxes have jumped, too.

But the landscape for some types of property owners looks far di erent than it does for others.

Chicago’s office market, for example, is flooded with a record amount of available space. Weak demand and a surge of sublease offerings from companies trying to shed unneeded workspace are forcing landlords to shell out

huge amounts of cash and other perks to get deals done, while pushing some to surrender their properties to their lenders rather than face foreclosure battles.

Retail landlords are just as anxious to see more office workers coming downtown regularly again. Loop storefront vacancies stood at a 20-year high during much of 2022, as the absence of daily foot traffic compounded the effects of online shopping on brick-and-mortar retailing.

“In 2½ months, we’re going to be at the third anniversary of a really hard time” for retailers, says John Vance, principal of Chicago-based retail brokerage Stone Real Estate. “To hang in there that long is really hard.”

Hotel owners face big challenges in 2023, after leisure travel rebounded sharply last year from COVID’s sting. It’s an off year for a couple of the largest conventions and trade shows at McCormick Place, as questions remain about whether business travel will ever be as strong as it was pre-COVID.

It’s a far rosier outlook for apartment landlords, who enter 2023 with rents in top-tier buildings at record highs. Surging demand for rental units has fueled a run of plans for new apartment towers, particularly in the West Loop, where there are more units planned than all other downtown neighborhoods combined. Integra Realty Resources forecasts developers will complete around 2,900 units in 2023— close to a pre-pandemic annual average—and another 4,000 in 2024.

NAME CHANGES

ACCEND Construction has changed its name to Skyline Construction, as part of a companywide brand consolidation including Unimark and Skyline Capital Builders. ACCEND has operated as a sister company to Skyline Construction for years. This rebrand uni es all companies under one name, making it easier for clients to identify and partner with the company in Illinois, Washington and California.

All day-to-day operations, registered entity names and local teams remain the same. The Chicago of ce will continue to be led by the same local construction experts who are deeply knowledgeable in building commercial of ces, structures, healthcare, hospitality and life science projects.

JOHN R. BOEHM

Signals are blinking red in some business sectors as employers avoid big moves

In the industrial property sector, developers seemingly can’t build warehouses fast enough to handle the onslaught of demand for space to store and distribute goods bought online. Although companies’ ravenous appetite for warehouse space has ebbed a bit amid inflation and recession fears, demand would have to sink faster and for much longer before anyone worries about a warehouse glut.

—Danny Ecker

TECHNOLOGY

Local tech companies are bracing for another slow year, after 2022 brought an end to the bull market that peaked during the COVID-19 pandemic.

Chicago tech companies laid off more than 2,500 employees in 2022, based on reporting by Crain’s and LayoffsTracker.com.

It marked the first slowdown experienced by many entrepreneurs, investors and tech workers, sending tremors across the industry. The sectors being hit hardest were digital advertising,

technology spending in 2023 to $1.5 trillion, down slightly from 7.7% in 2022 and 9.6% growth in 2021.

“It’s not a bad market. It’s a different market,” says Tom Hulsebosch, who leads the Chicago office of consulting firm West Monroe. “We’re coming off probably the best two years I’ve ever seen for consulting. It’s slowed down, but it hasn’t stopped.”

Roughly half the firm’s business is tied to technology, much of it at non-tech companies, such as health care and energy. The firm laid off 180 workers in December because of the slowdown in tech itself, but it continues to hire and predicts overall revenue and headcount will grow 18% in 2023.

With the IPO market stalled and interest rates on the rise after a decade of dormancy, tech mergers and acquisitions in North America fell by one-third, according to S&P Global. Venture funding dropped by half in the third quarter and deals fell 30%, according to PitchBook.

Large tech companies, which

offs, pruning R&D projects and otherwise cutting costs. Two Chicago projects to watch in 2023: Salesforce is set to move into a new office tower at Wolf Point; Google, meanwhile, has offered few details about its plans for the Thompson Center in the Loop, a move announced before Big Tech pumped the brakes.

—John Pletz

CONSUMER PACKAGED GOODS

2023 will test the pricing power of Chicago’s giant brand-name food companies. So far, Kraft Heinz, Conagra and Mondelez haven’t lost too many customers as they raised prices to offset inflationary pressures that are driving up their costs.

Double-digit price increases have resulted in only single-digit volume declines for some. That’s a win in this environment, says Morningstar analyst Erin Lash. But with inflation expected to continue and recession fears looming, their biggest challenge is likely yet to come, experts say. Grocery prices were up 12% year over year in November, according to the consumer price index. Ketchup-maker Kraft Heinz, Oreo-maker Mondelez and Slim Jim-maker Conagra have all teased additional price increases, but experts say they’ll need to move carefully and respond quickly if they see consumers gravitating toward cheaper store brands.

quickly.”

Market data suggests the switch has already begun. Private- label food and beverage products had an 18.3% market share in October, up from 17.8% a year earlier, according to researchers at IRI. Once a customer switches, it’s hard for a more expensive brand-name product to win them back, says analyst Tom Bailey of Rabobank.

“We’ll see more of it in 2023,” he predicts.

If shoppers resist price hikes, companies could look to bolster profit margins by cutting costs. That could mean layoffs, like those reportedly underway at PepsiCo. But experts say research and development and marketing teams—many of which are in the Chicago area—will likely be safe, as those areas will be key to consumer retention.

—Ally Marotti

ENERGY

Utility regulation will make a comeback in 2023 as laws that largely sidelined the Illinois Commerce Commission sunset after giving energy companies wide latitude to raise rates for a decade.

With automatic rate-setting regimes either expired or expiring, regulators will have more power to reject rate hikes by utilities like Commonwealth Edison and Peoples Gas.

“It feels like business travel, and this probably is indicative of pre-recessionary kind of behavior, has plateaued even though our total revenues are still going up,” United Airlines CEO Scott Kirby told CNBC on Dec. 6.

e-commerce and other facets of consumer tech.

Research firm Gartner says it expects a 6.5% increase in U.S.

have been the drivers of hiring and real estate deals in recent years, have grown cautious, slowing new hires or doing lay-

“This will be a test,” Lash says. “Sometimes (companies) have gotten caught flat-footed and haven’t been able to respond as

ICC decisions in 2023 are likely to have long-term repercussions for the prices consumers and businesses pay for electricity and heat, as well as what kind of

energy sources are tapped in the future.

For the utilities themselves, the year may well be pivotal in whether the strategies of the past decade—historically high capital spending on infrastructure, leading to ever-higher rates, profits and shareholder dividends— have staying power. With energy prices higher now than they have been for most of that period, utility costs increasingly are unaffordable for low-income households and threaten to undermine the competitiveness of Illinois businesses.

In January, ComEd will file a four-year rate plan with the ICC, kicking off 11 months of backand-forth with the regulator. ComEd will argue higher rates are needed to make Gov. J.B. Pritzker’s clean-energy vision a reality. Consumer advocates will contest many of the ideas as needlessly expensive and low priorities.

For Peoples, the natural gas utility for the city of Chicago, a reckoning is nearing for its multibillion-dollar program to overhaul thousands of miles of underground gas pipes. Peoples has spent $300 million a year on the massive project, which has been consistently over budget and behind schedule. Customers bear much of the project’s cost through a monthly surcharge on gas bills that now is at $15 for the average household. The surcharge expires at the end of 2023, and Pritzker is opposed to extending it.

That means Peoples is likely for the first time in years to file with the ICC for a full-blown

Tom Hulsebosch, head of the Chicago o ce of consulting

rm West Monroe

JOHN R. BOEHM

WITH THE IPO MARKET STALLED AND INTEREST RATES ON THE RISE AFTER A DECADE OF DORMANCY, TECH MERGERS AND ACQUISITIONS IN NORTH AMERICA FELL BY ONE-THIRD, ACCORDING TO S&P GLOBAL.

rate hike, giving regulators the chance finally to weigh in on the scope and scale of the program.

—Steve Daniels

BANKING AND FINANCE

Banks, private-equity rms and investors are turning the calendar to one of the most unsettled nancial landscapes in years.

Economists and bankers expect a recession in 2023 as the Federal Reserve’s battle to squelch inflation by raising interest rates takes its toll. The question is whether it will be deep or shallow.

Jamie Dimon, CEO of JPMorgan Chase, the largest bank in both the nation and the Chicago market, told CNBC recently that consumers have $1.5 trillion more in checking accounts now than before the pandemic.

But he warned, “Inflation is eroding everything . . . and that trillion and a half dollars will run out sometime (middle of) next year. When you’re looking out forward, those things may very well derail the economy and cause a mild or hard recession that people worry about.”

How bad it gets matters to banks and credit card companies like Riverwoods-based Discover Financial Services. If the recession produces big job losses— some are lost in virtually every recession—loan defaults will rise, eating into profits. A recession also would likely lead banks to tighten lending standards, exacerbating the slump.

Private equity—Chicago is home to big rms like Madison Dearborn Partners and GTCR—will be

under greater pressure to deploy buckets of cash from institutional investors after a fallow 2022. But rising rates make banks reluctant to nance big private-equity buyouts and also reduce the potential return on deals.

Private-equity firms have resorted to other financing methods to get some transactions done. But a return to normal deal activity depends on two unknowns: when the Fed’s ratehike campaign will end and when target companies will lower their buyout price expectations.

The future of cryptocurrencies as a significant asset class likely will come more clearly into view in 2023. One of Chicago’s two big commodities exchanges, Cboe Global Markets, is seeking to step into the breach left by the collapse of FTX, one of the world’s largest crypto exchanges.

—Steve Daniels

AVIATION

The airline industry’s hopes to extend its pandemic recovery are flying into headwinds of rising interest rates and inflation.

Pent-up leisure travel demand lifted airlines such as United back to pro tability last summer. Lagging business travel, however, provided more drag than expected.

“It feels like business travel, and this probably is indicative of pre-recessionary kind of behavior, has plateaued even though our total revenues are still going up,” United CEO Scott Kirby told CNBC on Dec. 6.

That’s because airlines have maintained pricing power, despite higher fuel prices, shortag-

es of pilots and planes, as well as operational woes that kept them from adding as many flights as they wanted. Fuel prices have declined, but wages and other costs are likely to rise.

“Airlines seem to be saying . . . demand remains solid, and although costs are rising, they are still able to hold air fares to cover these costs. Whether this continues in 2023 is the big question,” Helane Becker, an analyst with Cowen, wrote in a note to clients Dec. 8.

Still, United is betting on future growth. The airline plans to take delivery of a record number of new aircraft this year, and recently ordered 200 more planes from Boeing. It’s hiring aggressively, too, with plans to add 15,000 workers this year, including 2,600 in Chicago.

Such brisk hiring comes as United is negotiating contracts with all of its unions, which are seeking double-digit raises. Labor relations, which were unusually smooth during the pandemic, are beginning to fray.

Chicago’s primary airport also has a lot riding on a travel recovery. The price tag of O’Hare’s terminal overhaul grew by more than $1 billion since it was announced in 2018, with the tab now estimated at $12.1 billion. The project, which was largely in limbo during the pandemic, received final approval from the Federal Aviation Administration. Rising interest rates mean that the airport will be under more pressure to hold down costs as the project moves forward this year.

TIMES AHEAD

CLASSIFIEDS

To

REQUEST FOR BIDS

New NU president is facing unique challenges

Chicago and UCLA. “My job right now is to identify the areas that need to be focused on and then continue that upward trajectory.”

Just a few months into the new job, however, he’ll need to deal with unionizing graduate students who are poised for a victor y, as well as continued staffing shortages, rising inflation rates and a massive stadium project that has nearby residents in a feisty mood. Meanwhile, an anticipated Supreme Court decision that would strike down affirmative action could reshape the entire university makeup as colleges and universities grapple with how to maintain diversity on campus.

“Higher education is a political football right now,” acknowledged Schill, and “neither the left nor the right loves us.”

The Supreme Court is hearing a case challenging the use of race as a factor in university decisions. If it strikes down use of race, Northwestern will have to reimagine the admissions formula that Schill says considers race as part of a holistic approach.

The ruling could make it harder to maintain a minority share of the school’s admitted freshmen each year, which has grown to 12.1% for Black students and 17% for Hispanic/Latino students in 2021, up from 6.5% and 7.8% in 2006.

law schools in a February vote.

“If the LSAT is utilized, among other indicators, like GPA, activities and recommendations, I think it plays a role” in the admissions process, Schill said. He acknowledged that the LSAT favored affluent students who could be coached to perform better on the test.

Northwestern reported a budget surplus of $138.7 million for fiscal year 2022, despite its endowment going from just over $16 billion in 2021 to $15.4 billion. Its endowment returns are down from 2021, which saw investment returns of 37%, a growth of almost $3.8 billion in one year, making it one of the largest endowments in the country. Over the past three years, the average budget surplus is over $100 million per year.

en’t even paid at the cost of living in Cook County,” said Sara Bowden, co-chair of NUGW.

Schill declined to comment on the graduate student union, citing labor law restrictions.

At the same time, the school is facing a staffing shortage as workers are leaving because of low wages amid high inflation.

As of October, the school has 645 open staff positions, down from 745 in April 2020, the school said.

Schill acknowledged the need to give raises as “people are losing their purchasing power of their salaries,” but said that Northwestern can’t raise them high enough to match the pace of inflation.

Trying to deal with the rising cost of inflation “has turned out to be more of a challenge than I expected,” Schill said, adding that it is one of the school’s greatest concerns at the moment.

NEW STADIUM

The university is pumping a reported $800 million into a new stadium so it can host concerts and other events as well as football games. Neighbors oppose it, saying it will turn the neighborhood into Wrigleyville.

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Northwestern has begun early talks about other ways of maintaining minority enrollment, but Schill says it’s premature to get into any details about what the school is considering without an official ruling from the court.

“If you’re an organization, a college and university, and you’re not thinking about that right now, you better start Jan. 1st,” said Alvin B. Tillery Jr., a professor of political science and director of Northwestern’s Center for the Study of Diversity & Democracy.

Workarounds can be expensive. The University of California system has spent about a half-billion dollars since 2004 to increase diversity on campuses ever since that state banned the consideration of race in applications.

NU’s law school, along with other elite law schools across the country, recently dropped out of the prestigious U.S. News & World Report rankings because of concerns that the rankings’ metrics discouraged and penalized diversity efforts.

Schill said he supported the decision to leave and added that the current U.S. News rankings “don’t provide positive incentives for having a diverse student body” and that measures which enhance diversity are oftentimes penalized by the publication.

One step further, Tillery said, would be to drop standardized testing altogether, a move the American Bar Association is poised to do, potentially dropping its LSAT requirement for

Last year, the school announced a tuition hike of 3.5% for the 2022-23 school year to $62,391; standard room and board is increasing 6.4% to $19,440; and a student health services fee will skyrocket 276% to $780. That means the price tag for an on-campus student without financial aid has ballooned to $82,908 for the next academic year.

As Crain’s previously reported, Northwestern has increased tuition by at least 3.5% for 12 consecutive years, perturbing parents who have pushed back against the trend.

UNION SUPPORT

A majority of 3,500 graduate students signed cards supporting a union. Now a vote will be held, and Schill will have to negotiate wages and benefits with the Northwestern University Graduate Workers, or NUGW, union if a simple majority votes for unionization.

The union will seek at least $40,000 per student in a new stipend that will put them more in line with other top private schools like Columbia University, Princeton and Harvard. NU’s current minimum stipend is $35,000. Any increase for these graduate students is going to put pressure on the university’s bottom line. If the union succeeds, an additional $5,000 per graduate student would increase the school’s overall graduate stipend by $17.5 million.

“We would love to be paid at the rate of inflation, but we ar-

“They’d really be changing the neighborhood by building this booze and entertainment profit center, where they would still be maintaining their tax-exempt status,” said David DeCarlo, an Evanston resident who lives near the stadium. DeCarlo, along with other residents, formed the nonprofit Most Livable City Association amid concerns that NU’s administration wasn’t listening to resident input.

The school reversed course on initial proposals to Evanston residents, adding 12 concerts and events to the stadium plan. Northwestern said adding the events, which will sell booze, “makes the project financially sustainable.”

Part of the money for the stadium will come from a record $480 million donation made in 2021 by the Ryan family. But how will the school cover the remaining balance? Spokesman Jon Yates cited an email sent to NU faculty that said additional money will come from “the operating income from the new stadium” and an additional gift from the Ryan family yet to be publicly disclosed.

In an email to Crain’s addressing recent neighborhood complaints, Schill said that the “vast majority of people” he has spoken with in Evanston support the project, adding that the school is working “with the community to address concerns and make the stadium a win-win.”

But despite the many challenges, observers are optimistic Schill has the experience required to navigate through this difficult time, Tillery said.

“Schill is such an accomplished leader, and I know he’s prepared for this moment, but I don’t see why anyone takes these presidential jobs. They’re just pressure cookers,” he said.

Digital Analytics Manager

NOTICE OF SALE OF REAL ESTATE LYONS TOWNSHIP HIGH SCHOOL DISTRICT NO. 204 -

BOARD OF EDUCATION OF LYONS TOWNSHIP HIGH SCHOOL DISTRICT NO. 204, COOK COUNTY, ILLINOIS

Michael Schill

research rm. “ is is just throwing good money after bad.”

Rising interest rates have cast a chill over the commercial real estate market, driving up borrowing costs and shrinking profit margins, depressing property values and sales and curbing construction of new high-rises. ey’ve also limited the options of many investors that need to renance low-interest loans taken out before in ation ared up and the Federal Reserve started hiking interest rates to tame it.

e choices are especially slim for owners of o ce buildings, a sector that’s su ering badly with

Millennium Park. A $678 million debt package on the tower matures on July 1.

It’s unlikely the building’s owner, New York-based 601W, could borrow that much today. e Aon Center’s $536 million senior mortgage, which 601W took out in 2018, carries an interest rate of 4.63%. A rate on a new loan would probably run in the low to mid-6% range, Clancy says.

ough the property at 200 E. Randolph St. is generating enough cash ow to cover interest payments on its current senior debt, it doesn’t have a big cushion to absorb an increase in borrowing costs, according to regulatory lings. Amid higher rates and declining property values, nding $678 million in debt for the Aon Center today is a lot harder than it was in 2018—if not impossible.

extend the maturity date on the debt, buying more time to come up with a solution, Clancy says. In addition to the $536 million in senior debt, 601W is also carrying $142 million in junior mezzanine nancing that also comes due July 1.

A 601W spokeswoman declines to comment, and a representative of the servicer of the Aon Center debt, KeyBank, did not return phone calls.

A lot of landlords will face similar choices over the next year or so. About $26.5 billion of loans that are packaged into commercial mortgage-backed securities, or CMBS, will mature by the end of 2023, including the senior debt on the Aon Center, according to a recent report from Fitch Ratings, a New York-based debt ratings agency. e loans have a weighted average interest rate of 4.7%, well below current rates of 6.5% to 7%.

salvage some value out of their property in the future, they’ll want to hang on to it. ey’ll try to extend a loan maturity date or even invest more equity in the building.

When the real estate market is booming, many investors will capitalize on rising property values through “cash-out renancing,” taking out a new and bigger loan to pay o an existing mortgage and pocketing the difference between the two. Now, Clancy expects to see the inverse: more cases of “cash-in re nancing,” with borrowers forced to put cash back into properties simply to avoid a loan default.

BAD DAYS AHEAD

weak economic growth contribute to more maturity defaults.”

The ratings agency expects the economy to slip into a mild recession in mid-2023, which won’t help the real estate market.

One big office property in the Chicago suburbs, Central Park of Lisle, is already in default danger. After the 690,000-square-foot property lost its biggest tenant, Armour Eckrich Meats, in 2022, a special servicer—a firm hired to oversee problem CMBS loans— took over $94 million in debt on the complex.

companies cutting back on space as more of their employees work remote or hybrid schedules. e downtown Chicago o ce vacancy rate sits at a record high of 21.3%, according to CBRE, a gure that makes many lenders wary.

DANGER ZONE

Properties on the re nancing bubble include one of the city’s biggest: the Aon Center, an 83-story high-rise overlooking

“ is is one people should watch really closely,” Clancy says. “Certainly, it’s covering its nut now, but it’s not covering it by an enormous amount.”

e problem has a solution: re nancing the property with less debt. But that means 601W would have to come up with cash to cover the nancing shortfall, possibly by investing more of its own money in the property or by bringing in a new equity partner. It’s also possible 601W could avoid trouble by negotiating to

Fitch found that $6.2 billion of the maturing loans, or 23% of the total, are in the danger zone: e landlords that owe the money won’t be able to pay it back unless their property incomes rise in the coming months or they make a “substantial equity infusion” in their buildings.

“It’s just going to force a lot of borrowers to make a decision over the next 12 months,” says mortgage broker David Hendrickson, senior managing director in the Chicago o ce of Walker & Dunlop.

If they’re optimistic they can

Hendrickson expects rising rates will also flush more properties out into the market. Unwilling to invest more equity into a building, an investor may just decide to sell it instead. If the property is worth more than its debt, they’ll still come out ahead, although not as much as they would have before interest rates jumped.

“If you can sell it and still make a profit and avoid a (loan) paydown, it’s still a good day,” Hendrickson says.

But some bad days may be ahead for other real estate investors. Fitch forecasts that the U.S. CMBS loan delinquency rate will rise to 4.0% to 4.5% by the end of 2023, up from 1.9% in October, “as higher interest rates, persistent inflation and

The debt matured Jan. 1, and it’s unclear how the property’s owner, a venture led by Dallasbas ed Lincoln Property, will pay it off. A Lincoln spokesman did not return phone calls.

Though anxiety has risen with interest rates, Hendrickson doesn’t see a catastrophe on the horizon for landlords. Interest rates may not go much higher, he says; the rate on 10-year Treasury bonds, a key benchmark, has actually fallen over the past couple of months. One reason: Bond investors are bracing for a recession.

Even if investors and many economists are right about that, a “massive correction” for commercial real estate, like the one that hit the industry in the Great Recession, isn’t in the cards, Hendrickson says.

“I don’t see it anywhere near ’08 or ’09,” he says.

Rising interest rates will squeeze landlords with loans due to mature in 2023 Struggling

LUNCH from Page 3

growth is out of the question.

“ e question really is . . . where do we go from here?” said Hannah’s Bretzel founder Florian Pfahler. “We can only expand or regrow or stay in business if we have the volume and the sucient pro tability.”

e 17-year-old sandwich spot had seven locations prepandemic. It’s down to three. Only two of those are back to 2019 sales levels, said Pfahler. He declined to disclose overall revenue. To cope, Hannah’s Bretzel has raised menu prices and taken full-time employees to hourly schedules. at makes it harder to retain workers in an already tight labor market.

If lunch crowds—that is, o ce workers—don’t come back in greater numbers in the spring, Pfahler fears the situation will stay as is for the next three to ve years. ough ursdays are busy at Hannah’s Bretzel, Monday is about 50% of what it used to be. e Friday lunch rush is gone, and Pfahler does not expect it to come back.

at Monday and Friday lament is heard from restaurants in every corner of downtown. With workers sticking to their hybrid in-o ce and work-fromhome schedules, few commute

to the o ce on those days. Nationwide, Monday is the weekday struggling most to support a lunch shift. Restaurants have reduced operating hours on that day by 4% between 11:15 a.m. and 1:45 p.m. compared to pre-pandemic, according to market research rm Datassential. In downtown Chicago, that shift has likely been reduced even further, analyst Mark Brandau said. In Illinois, restaurant operating hours are down 7.3% overall.

‘NEW NORMAL’

Decreased operating hours aren’t the only troubling statistic. Restaurant closures outpaced openings almost every month of 2022 in the Chicago area, according to Datassential. at means restaurant count is still shrinking, in contrast to the regular growth it enjoyed in the years leading up to the pandemic. A continued loss of lunchtime business could drive that closure rate higher, experts say.

While some restaurant owners hold out hope for returned business, others have resigned to the new tra c patterns.

“This is the new normal. This is what it’s going to be,” said Dan Raskin, fourth-generation owner of Manny’s Cafeteria & Delicatessen. “You just have to

adjust to what it is now and cater toward that.”

at’s a tough pill to swallow for the 80-year-old South Loop lunch joint. Friday was its busiest day pre-pandemic, and it lost that. Raskin can see what’s happening: e attorney crowd from Cook County Circuit Court down the street is still doing most of their hearings on Zoom, for one.

Over in the West Loop, “lunch is still a struggle” at Japanese restaurant Gaijin, said co-owner Lance Richards. Lunch and happy hour made up 30% of the restaurant’s revenue prepandemic. Now, it’s about 15%.

“Transparently, we’ve gone back and forth with, ‘Does it make sense to close the restaurant for lunch Monday through ursday?’ ” he said. “We’re able to support the labor, but we could be more pro table if we closed. Right now, we’re kind of barely breaking even on those four days.”

Richards said he chooses to stay open for lunch those days so he doesn’t lose his sta . But the void of the o ce worker, even in the residential West Loop, is still felt.

ere are some signs of hope. Karen Browne, CEO of One O Hospitality, reports a steadily growing lunch business at Avec

in the West Loop. e restaurant started serving lunch again this fall. Other sit-down spots in the Loop and River North also say their lunch business is increasing, even if it’s not fully recovered.

RETURN TO OFFICES

At Gene & Georgetti in River North, about 65% of lunch business has returned, said third-generation owner Michelle Durpetti. ere’s a consistent uptick in takeout orders from the steakhouse, too. For dine-in, the weekends are the strongest days for lunch.

Business dining has not

bounced back from pandemic doldrums the way consumer spending has, according to joint data from market research rms Dinova and Technomic. Dinova predicted 2022 business dining would land at about 87% of 2019 levels. ough that’s up from 73% in 2021, restaurants see the remaining di erential in their bottom lines. And most hang recovery on Chicago workers’ return to the o ce.

“It’s better for everyone if people start going back to our ofces,” Durpetti said. “ e more people are out and in the city, the less likely we are to be living in a barren wasteland.”

Hannah’s Bretzel

David Hendrickson, senior managing director in the Chicago o ce of Walker & Dunlop

Chicago is getting a new major league team

Some big business names are backing the Chicago Slice, a professional pickleball team that’s been bought by an investment group

BY CORLI JAY

Chicago is adding another major league team this year. e Chicago Slice, a professional team, has been bought by an investment group led by privateequity rm irty-5 Capital, with some big-name backers.

Ron Saslow, founder and managing partner of irty-5 Capital, declined to disclose the purchase price for the Chicago Slice, the city’s rst Major League Pickle-

ceutical entrepreneur Je Aronin; and Craig Bondy, managing director at Chicago private-equity rm GTCR. Other league investors include supermodel Heidi Klum; athletes Chris Evert, Gigi Fernández and David Justice; and guitarist Joe Bonamassa.

e Chicago Slice will play season matches this year in Arizona, Florida, California and Georgia. Invented in 1965, pickleball is played with a small ball, paddles and a net. Often compared to tennis and pingpong, the co-ed teams play with two to four players.

ball team, but said “the teams are north of seven gures and they keep going up in value as (the MLP) continues to sell teams.”

Team investors include Cubs owner Tom Ricketts; Medline President Andy Mills; pharma-

Saslow said having Chicago in the league is important. “For anything to be legitimate and have a great run at it, having a presence in Chicago is critical,” he said.

e venture is part of Major League Pickleball’s expansion effort, going from 12 to 24 teams in the upcoming 2023 season, which begins in January. e league is doubling the number of events

and increasing prize money.

Asked how he became interested in the team, Saslow said his rm was already invested in pickleball with its company United Pickleball Properties, which owns paddle maker ProXR Pickleball.

“We really liked what (the

league was) doing, how they were going about putting together events. ere are several pro leagues, but we believe this was the best one out of all of them,” said Saslow. “We were very excited to put our hat in the ring when they had announced that they

would be expanding the league and o ering up more teams.”

Pickleball has been dubbed the fastest-growing sport in the country and has been the focus of many investors with its low price point compared to other major league sports.

Kyle Yates of the Hard Eights returns a shot during the Major League Pickleball nals match against BLQK in Columbus, Ohio, on Oct. 16.

BLOOMBERG

THE CHICAGO SLICE WILL PLAY SEASON MATCHES THIS YEAR IN ARIZONA, FLORIDA, CALIFORNIA AND GEORGIA.

A country house in more ways than one

Not only was this Schaumburg house once part of a huge estate for a Chicago family, it was later the longtime home of popular country musician Bob Atcher I

It may be only 30 miles northwest of downtown Chicago in a fully developed suburb, but this house from the 1930s is, in many senses, a country house.

e genteel look of the home, a brick and stone Tudor with a wall of built-in bookcases at one end of the living room beneath a tall, peaked ceiling, isn’t the only reason to call it a country house. First, when it was built in 1939, it was a Chicago family’s country home on more than 300 acres. en there’s a noted former owner, Bob Atcher, a singing cowboy who was a feature attraction of the old WLS National Barn Dance radio program.

Atcher, who with his wife, Maggie, owned this house on Groen Court from 1954 to 1989, was once described by the Chicago Tribune as “Chicago’s answer to Hollywood’s elite cowboys” like Gene Autry and Roy Rogers. He moonlighted as Schaumburg’s mayor from 1959 to 1975 and was instrumental in getting Wood eld Mall built.

Since 2006, Bess and Steve Klein have owned the house and put it through a round of hefty rehab. ey updated climate and plumbing and modernized the kitchen and baths while “preserving its looks,” Bess Klein says.

Now planning a move to Florida to be near their grandchildren, the couple, both retired public employees, put the house, four bedrooms and 2,800 square feet on slightly under half an acre, on the market Dec. 27 at just below $1.1 million. It’s represented by Dominick Clarizio and Judie Fiandaca of @properties Christie’s International Real Estate.

BY DENNIS RODKIN

INFLATION AND HUNGER AFFECT US ALL.

Let ’s rise to the challenge, Chicago.

Only a hunger-free community can really be healthy. When we help feed our neighbors, we truly become a greater Chicago.

Please give now.

chicagosfoodbank.org/rise