Ominous signs for downtown landlords—and upsides for Pritzker’s tax plan

By GREG HINZ | Crain’s Chicago Business

In a haunting sign for the Chicago-area office market, less than a third of businesspeople say they’re going to need all the space they currently occupy when the COVID-19 pandemic finally passes. But despite COVID—and clear concerns about public safety in Chicago—Gov. J.B. Pritzker’s proposed graduated income tax amendment is in surprisingly good shape.

Those are the top lines from the first edition of the Chicago Business Leaders Tracker, a survey of 200 Chicago-area business leaders conducted for Crain’s Chicago Business by the Harris Poll.

Overall, the survey, conducted online from Aug. 4 to 14 of owners and executives of small and midsize companies, indicates that recovery from the pandemic is going slowly and may well be affected by concerns over violence and crime in the city, as well as continuing pension woes. Most, 57 percent, said business conditions in the metropolitan area declined in the last month.

But there’s also a fair amount of nuance in the replies and some findings that may raise eyebrows.

The biggest thing holding back local business, according to respondents, was taxes, with 26 percent listing that as their top concern, compared to 20 percent worrying about the economy and 19 percent about crime.

Crime emerged highest on a question about important factors in “keeping your business located in Chicago.” Eighty-eight percent listed “public safety,” followed by the cost of doing business at 87 percent and taxes at 82 percent. But on the opposite side of the scale, 83 percent said quality of life is an important factor, 81 percent cited infrastructure and 78 percent listed the availability of talented workers. All three of those are areas in which the Chicago region traditionally does well.

Nonetheless, the pandemic now is affecting perceptions about nearly every aspect of business.

Companies clearly are thinking about bringing back workers—and in some cases beginning to do so—from remote locations, with 94 percent saying they plan to have at least a quarter of their staff return to the office within six months. Requiring face masks in the office is the most common protective step that employers will require of returning workers.

But not everyone will be returning, at least soon. Asked about returning at least three-quarters of their staff to the office, just 66 percent of respondents say they expect to do so within six months.

That almost certainly will translate into less demand for office quarters. Just 31 percent of respondents said they expect to keep all of the space they have. Thirty-four percent intend to dispose of at least half of their space, and 6 percent already have dropped or changed their lease.

Despite that, slightly more people said that fighting COVID ought to be a higher priority than reopening the economy—29 percent to 18 percent—with 17 percent saying that curbing crime ought to be the top concern. A quarter of the sample said all three are priorities. The poll also found a near-even split on what business conditions in metropolitan Chicago will be like in six months, with 41 percent saying good or very good compared to 37 percent bad or very bad.

As for Pritzker’s graduated income tax amendment, which will be on the Nov. 3 ballot, its prospects do not appear to have weakened much, despite the pandemic. A total of 55 percent of those surveyed said they strongly or somewhat back the proposal, compared to 45 percent opposed. That finding comes even though businesspeople tend to be in the higher-income brackets that the tax hike would most impact.

On another issue, respondents are pretty divided on where the proposed Chicago casino ought to be located, though there was far more support for putting it downtown or near downtown than in an outlying area.

Specifically, 27 percent said it should be somewhere downtown, 26 percent in the now largely empty McCormick Place East building and 16 percent at the former Michael Reese Hospital site just south of McCormick Place. Only 11 percent chose the former South Works steel site on the lakefront, and 9 percent a spot next to the Harborside International Golf Center.

The top Springfield priority for those surveyed: pension reform, with 91 percent saying it’s very or somewhat important that changes be made. The state’s pension systems alone are $138 billion short of the assets needed to pay promised benefits, with cities and other local governments short tens of billions.

Read the full story at Crain’s Chicago Business.