MIDWEST: Great Lakes Growth
ECONOMIC OVERVIEW
Sandwiched in the middle of the country, this heartland region is certainly not middle of the road when it comes to economic recovery. In fact, its employment rate has seen a marked upturn over the past two years. In turn, its residents are finally getting a foothold on economic hope.
Chicago
Cautiously optimistic is the theme for the region encompassing the West North Central states and the East North Central states
JOB LOSS
While other regions like the West and Northeast were slower to bounce back, the Midwest basked in the glow of a slowly but surely declining jobless rate. During the economic downturn of the past several years, this region's rate topped out at 10.1 percent, according to the Bureau of Labor Statistics (BLS). But, by April 2012, its unemployment rate dipped down to 7.2 percent, the lowest of any of the country's four Census regions.
BUILDING CONFIDENCE
While consumers remained quite reserved about the hope for economic recovery in 2011, the tides turned significantly in 2012.
In May 2011, just 25.9 percent of Midwest consumers said they were “Confident” or “Very Confident” about the chances for a strong economy during the next six months, according to the BIGinsight Monthly Consumer Survey. At the time, this number represented the lowest consumer confidence of any region in the country.
But in May 2012, Midwesterners had a very different outlook. More than 31 percent said they were “Confident” or “Very Confident” about the chances for a strong economy during the next six months, according to BIGinsight.
Additionally, in May 2012, only 3.3 percent of Midwest consumers were concerned with being laid off, down from the 3.9 percent in May 2010.
SPENDING OUTLOOK
Even with economic recovery and confidence on the rise, more consumers (46.4 percent, up from 44.9 percent in 2011) here have become more practical and realistic in their purchases, according to the BIGinsight Monthly Consumer Survey. Similarly, 44.6 percent (down slightly from 45.3 percent in 2011) say they have become more budget conscious.
Consumers here are saving by shopping for sales more often (43.8 percent), using more coupons (39.6 percent), and buying more store brand/generic products (35.8 percent).
While an increasing number of Midwestern consumers say they will put more of an onus on paying down debt in the next three months (35.1 percent in May 2012, up from 32.4 in May 2011), many still plan to make larger purchases.
| OPTICAL FILE |
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| LENS MARKET |
| FREE-FORM. The Midwest leads the nation in free-form design lens sales. After experiencing in dip in sales last year, the ECPs from this region reported a healthy 11 percent increase in free-form sales, from 23 percent to 34 percent of lens sales. PALS. Another area in which the Midwest leads other regions is in sales of PALs versus other multifocals. A full 75 percent of multifocal lens sales of the Midwest respondents are PALs. LENS MATERIAL. Though it is the strongest selling of all premium lens materials, ECPs in the Midwest report fewer poly sales than other regions. The Midwest leads, however, in its sales of Trivex: the material represents 22 percent of premium lens material sales. Trivex sales are followed closely by sales of 1.67 index lenses (20 percent) and distantly by 1.60 index (seven percent) and 1.74 index (2 percent). Polarized lenses are as popular here as in the South, while photochromic lens sales here rank third among the regions. AR represents 80 percent of add-on features sold (second nationally after the South). |
| FRAME FOCUS |
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| In terms of frames, plastic is leading the Midwest market, but not to the extent of other sections of the country, while this traditional market is trying some new pricing strategies for success. MATERIALS: Metals have lagged across the country, and the Midwest is no exception. But while the reported sales of metal frames has dropped six percent this year, the area leads the nation. The Midwest has slightly dipped in terms of rimless sales and risen to 42 percent plastic frame sales. Even though that number represents a significant rise, the Midwest lags behind the rest of the nation in sales of plastic. PURCHASE PATTERNS: The regional trend to select new eyewear is back to 86 percent after a dip last year, while 14 percent of patients are reported to refill Rx in existing frames. SECOND PAIRS: The Midwest continues to lead the nation in clip sales and experienced a bump in sunwear. Falling significantly was the casual frame at 5 percent from 14 percent. PRICING: Frame pricing was most variable in the Midwest, with only 45 percent of respondents reporting that their retail frame prices remained the same while 17 percent expanded to include higher price points, 15 percent expanded to include lower price points, and 22 percent expanded to include both. |
| EDGING STATS | |
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| Like in all regions, fewer ECPs were edging in house by the first quarter of 2012, but those that do report more in-house jobs than last year. Sixty-two percent of ECPs surveyed here said they don't edge. 22%…more than last year 16%…same as last year 4%…less than last year | |
| Did you know | |
| Oak Park, III… Chicago… Minneapolis… Appleton, Wis… | highest percent of homes built before 1939 second only to New York in percent of population working in finance (Forbes) voted best Midwest city in which to live (citydata.com) trivia capital of the U.S. (Chicago Tribune) |
INCREASED COSTS
One downside for the Midwest's optimistic consumer population is that the Consumer Price Index (CPI/the prices paid by urban consumers for a representative basket of goods and services) rose by a significant 2.3 percent in this region over the 12-month period ending April 2012, according to the BLS.
RETAIL REAL ESTATE
Recovery is slower to hit the commercial real estate market in the Midwest, as vacancy rates remain among the highest in the country and rents remain among the lowest.
“Recovery in commercial real estate is definitely slower in the Midwest region where consumers are not quite as affluent,” says Ryan Severino, a senior economist with Reis, Inc. “You don't have the higher-end service sector jobs here and the manufacturing sector of the economy has also eroded over time.”
VACANCY RATES
While the overall U.S. vacancy rate came in at 10.9 percent in the first quarter of 2012, the Midwest hovered well above this with a rate of 12.9 percent, according to Reis, Inc. The Midwest and the Southwest both reported a 12.9 percent rate, which represents the highest vacancies in the country.
Kansas City, Mo.
RENTS
As vacancy rates remained high in the Midwest, effective rents edged up slightly to $13.85 per square foot in the first quarter of 2012, according to Reis, Inc. This number was up slightly from the $13.77 per square foot effective rent reported in the first quarter of 2011.
Reis, Inc. projects that by the year 2021, vacancy rates will dip to 7.5 percent and effective rents will top out at $19.03 per square foot.
METRO MARKETS
Overall, the Midwest region displayed disappointing commercial real estate results, with certain cities, such as Cincinnati (14.1 percent), Cleveland (15 percent), Dayton (16.7 percent), and Columbus (15.5 percent), continuing to experience sky-high vacancy rates for the first quarter of 2012. Still, a few Midwestern cities stood out as beacons of hope and economic recovery.
CITIES TO WATCH
Not surprisingly, the burgeoning urban metro of Chicago boasted lower vacancy rates and higher rents. In the first quarter of 2012, vacancy rates slid in at 11.8 percent while effective rents rang in at $19.08 per square foot (a slight decline over the first quarter of 2011), according to Reis, Inc.
Detroit displayed a vacancy rate of 11.7 percent and an effective rent of $16.87 per square foot. In the plains, Omaha fared better than most Midwest metros with a 9.5 percent vacancy rate and a per-square-foot rent of $13.60.
FASHION TRENDS
On a more positive note, fashion experts say that the Midwest is becoming more sophisticated and its consumers are more tuned in to the trends that help drive retail sales. “The Midwest is becoming more like the Northeast because of the Internet and everyone going on sites like Style.com and Net-a-Porter.com,” says Roseanne Morrison, fashion director at The Doneger Group.
Some key trends for the Fall 2012 season that will be lauded by Midwesterners include a woodsy, autumnal direction with browns and mossy greens plus layering.
“Fur continues to be important whether it's a trim or knitted into sweater or accessories,” says Morrison. “Texture is important, too—textured fabrics, crinkles, and novelty stitches.”
An artisanal trend direction will also be key for the Midwest's fashion devotees. “People in this region are not as fearful of trying new things,” adds Morrison. “We saw how neon colors took off here—if they could get their hands on it, they were buying it.” EB
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