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Commercial Department: Spotlight: Illinois: June 2018


Spotlight: Illinois

The Prairie State’s economy faces some big hurdles.

Illinois, also known as the Prairie State, welcomed its first European visitors in the latter half of the 17th century when famed French explorers Louis Jolliet and Jacques Marquette arrived. It became a state in 1818 and quickly established itself as a key shipping and railroad hub for the Great Lakes region.

Although its population has declined recently, Chicago is the state’s largest city — and the third-largest in the U.S. — with 2.7 million people. It attracts more than 50 million visitors annually. The Windy City is wrapping up a five-year affordable-housing plan this year in which it aims to invest more than $1.3 billion to construct, rehabilitate and preserve more than 40,000 housing units.

Illinois’ post-recession economy lags behind that of neighboring states and much of the U.S., a Moody’s Analytics report from this past February said. Labor-force contractions, rather than employment gains, are responsible for the state’s falling unemployment rate as Illinois’ population has declined in each of the last four years. Illinois’ fiscal instability may be discouraging some private businesses from entering the state and growing costs for state-worker retirement benefits are projected to constrain public-sector employment growth, according to the Moody’s report.

Despite these struggles, there are positive signs. Fifty companies with ties to Illinois landed on last year’s Fortune 500 list. Fourteen of the world’s 500 largest companies were headquartered in the Prairie State as of 2016, including Walgreens Boots Alliance, Boeing, State Farm and Archer Daniels Midland. And the state approved a plan this past August to increase funding for public schools, while also allowing tax credits for private-school scholarship donations and giving wealthier school districts the option to reduce property taxes.

The state’s workforce is projected to increase by nearly 6 percent by 2024, according to the Illinois Department of Employment Security. Industries such as health care and social assistance; accommodation and food services; and professional, scientific and technical services — each of which currently employ more than 380,000 people — are expecting double-digit percentage growth in employment between 2014 and 2024.

The Prairie State’s per-capita personal income of $52,808 in 2017 ranked 15th among all states, according to U.S. Department of Commerce figures. Illinois’ gross domestic product (GDP) grew 1 percent in 2016, compared to the national average of 1.5 percent. Despite having the nation’s fifth-largest GDP and adding $175 billion to its economy from 2006 to 2016, the state’s compound annual growth rate of 0.5 percent over the period was less than half the national average, according to Commerce Department data.

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Chicago office market

c_2018-06_Spotlight_chart-1.jpgDowntown Chicago’s office market had a 12.3 percent vacancy rate during fourth-quarter 2017, only 110 basis points above the low point of the current real estate cycle, according to a Colliers International report. The average lease rate in 2017 increased year over year from $37.97 to $39.37 per square foot. Office-investment sales in the central business district declined year over year, however, from $2.4 billion in 2016 to $1.8 billion in 2017, Colliers reported.

A separate fourth-quarter 2017 report from Colliers on the suburban Chicago office market indicates that there was a slight decline in vacancy rates and a slight uptick in lease rates, compared to fourth-quarter 2016. Suburban neighborhoods saw 25 new lease transactions of more than 25,000 square feet last year, compared to 19 such transactions in 2016. The O’Hare and Oak Brook submarkets are seeing the most demand, Colliers said, with office owners focusing on building improvements to attract and retain tenants.

Focus: Manufacturing

Manufacturing is Illinois’ second-largest employment sector, accounting for 12.5 percent of all jobs, according to 2016 numbers from the Illinois Department of Employment Security (IDES). Most neighboring states added manufacturing jobs from December 2012 through December 2016, but Illinois lost 18,000 positions, the U.S. Department of Labor said.

The average manufacturing employee in Illinois earned $85,000 in 2016, the National Association of Manufacturers (NAM) said. Chemical products; machinery; and food, beverage and tobacco products each generated at least $12 billion for the state in 2015, NAM reported. The state has been criticized, however, for having some of the highest worker-compensation costs in the Midwest and some of the highest property-tax rates in the nation.


c_2018-06_Spotlight_chart-2.jpgThe Prairie State’s unemployment rate has been consistently higher than the national average since 2008. Illinois had 4.7 percent unemployment this past February, compared to 4.1 percent nationwide, according to U.S. Department of Labor data. Along with manufacturing, the construction sector has been particularly hard-hit by job losses, with employment in the sector declining by nearly 29 percent between 2007 and 2015, labor statistics show.

A report from IDES this past January indicates that Illinois’ labor-force participation rate dropped to 64 percent for the month, the lowest level since 1977. The only age group that has grown its participation rate since 2000 are workers 55 and older, who now comprise 44 percent of the workforce. High taxes may be complicating employment issues. A report this past March from personal-finance website WalletHub found Illinois households earning the median U.S. income had an effective state and local tax rate of 14.89 percent, the highest in the nation.

Sources: Champaign County Economic Development Corporation, Chicago Tribune, Crain’s Chicago Business, City of Chicago, City of Naperville, City of Springfield,, Illinois Department of Employment Security, Illinois Policy, National Association of Manufacturers, St. John’s Hospital, The State Journal-Register, U.S. Census Bureau, U.S. Department of Commerce, U.S. Department of Labor, U.S. News & World Report, WalletHub

3 Cities to Watch


Many Illinois cities with at least 50,000 people lost population from 2013 to 2016, but Champaign grew at a 3.45 percent clip, the highest rate in the state, according to the U.S. Census Bureau. Champaign County had a population of 209,000 as of this past July. Much of the economic activity centers around the University of Illinois at Urbana-Champaign, which has been lauded for its academic commitment to engineering, technology and computer sciences. Other large employers in the area include health care provider Carle, food manufacturer Kraft Heinz Co. and packaging company Plastipak Holdings Inc.


c_2018-06_Spotlight_city.jpgThe state capital and home to 115,000 people, it is located about 200 miles from Chicago and 100 miles from St. Louis. Tourists flock to Springfield to visit the Abraham Lincoln Presidential Library and Museum. St. John’s Hospital broke ground last year on a $48 million expansion and Memorial Medical Center completed a $152 million addition in 2015. Other major employers in the city include Blue Cross Blue Shield, Wells Fargo and beverage-equipment manufacturer BUNN.


Located 30 miles to the west of downtown Chicago, it is home to 147,000 people. It’s a relatively young and affluent suburb, with a median age of 35 and a median household income of $109,512, according to the city’s website. Public safety and family friendliness have helped it become a regular selection to Money magazine’s annual Best Places to Live lists. The city issued 6,930 building permits from October 2016 to September 2017, a 15 percent increase over the prior 12 months.

What the locals say

“Illinois is a great transportation hub with an ever-present focus on faster and cost-effective distribution in the greater economy. Therefore, I would expect the distribution and warehousing sector to be strong for some time. Additionally, the expansion of O’Hare International Airport should be a boon for that submarket and the state as a whole. … Chicago and Champaign have become technological hubs with great universities, including some of the best engineering schools in the country, which is evident by the recent influx of tech companies.”


Art Rendak
President, Inland Mortgage Capital LLC 


Neil Pierson is editor in chief of Scotsman Guide Media. Reach him at or (800) 297-6061.

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