Chicago businesses adapt to outlast 'agonizingly slow' COVID recovery 3 years after shutdown

CHICAGO - Even on a bright day in the middle of a workweek, downtown Chicago can’t shake the gloom.

Prime corners in many places are vacant, and the surviving restaurants, if they’re smart, have window or sidewalk signs declaring themselves open. Except for the commuting or lunch rushes, any day can seem like a drowsy Sunday from before the pandemic hit, now three years ago.

The businesses are in a "long COVID" fight of their own. Some have changed their hours and competitive approaches. But few who run them are certain about the rhythms of urban life they depended on. The pandemic, while receding as a health threat, has had a lasting effect on where people want to work and, therefore, spend.

For Atlas Stationers, a family-run business in the Loop that dates from 1939, new thinking had to happen in short order. When the shutdown hit in March 2020 — three years ago this week — a business that served fully staffed offices around them found income down to zero overnight. So President Don Schmidt, with cajoling from sons Brian and Brendan, implemented a plan.

The store’s still at 227 W. Lake St., but visitors who haven’t been there for a while will do a double-take. They might remember its old look — stacked to the ceiling with notebooks and accordion files like an office supply warehouse. It now sparkles like a jewelry store, but not to show off rings and watches. Fancy fountain pens and stationery are on display.

They form the core of Atlas’ new business, 75% of which consists of online orders sent throughout the U.S. The store’s active social media presence encouraged interest in old-fashioned pen-and-paper writing that emerged as people with time at home took up hobbies, the Schmidts said.

Don Schmidt said it took a year for Atlas to reach its pre-pandemic revenue. Now, it’s doing three times that level of business and has added five staff members in recent weeks, bringing the total workforce to 16. "I think that total is a peak for us," Schmidt said.

The store itself has been redesigned to put fewer items on lower shelves with more attractive displays, catering to tourists and walk-ins who discovered its niche online.

"Saturdays have become our busiest day," and the family looks forward to warmer weather bringing people to the Riverwalk near the store, Schmidt said.

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He said the online presence makes even first-time visitors feel like they know the place. A sense of welcome and some in-store events can help retailers survive, Schmidt believes. At Atlas, in the middle of valuable floor space is a table where people can test pens and some of the store’s 600-plus ink colors, and Schmidt said people love it.

He’s been able to track downtown’s comeback and how it differs from other areas. "You look at Fulton Market. That place is rocking. It’s packed," mostly by younger people working from home, Schmidt said. "But the Loop itself, it’s better. It was empty, but it’s steady now."

Like other merchants, Schmidt believes the old habit of five days in the office is gone. "I think the Monday, Friday [office visits] might be questionable for the foreseeable future," he said.

Similarly, Mike Flanagan, chief growth officer at Chicago-based Arch Amenities Group, has found opportunities out of the pandemic but knows risks abound. His company is a private-equity-backed firm that has acquired weaker competitors in the business of handling workout rooms, lounges, coffee bars and other services for office landlords and hotels. It’s even set up bowling alleys and virtual golf simulators.

It has more than 400 sites around the country, including 52 in Chicago and another 10 in the suburbs. Flanagan said Chicago’s downtown recovery is ahead of those in San Francisco, Portland and Seattle. But while office landlords think about how to make buildings more fun to draw users back, some are slow to commit to expensive work.

"What used to be a four-to-eight-month decision process has become two years," he said. As a result, Arch has furloughed a few workers.

Flanagan said improving amenities can cost a building $25 million to $30 million. Often, office building owners face an expensive call of whether to convert ground-floor space that ordinarily commands high rents into a tenant amenity, he said.

Weekly data from Kastle Systems, which tracks the comings and goings in buildings where it has security equipment, has shown that starting in late January, around 50% of downtown Chicago office workers were in the space daily. The proportion has increased just slightly in recent months, marking a rebound that Michael Edwards, head of the Chicago Loop Alliance, has called "agonizingly slow."

A key component of downtown life, the hotels, have fared better and anticipate more bookings as convention business picks up through the year. With tourism this summer also expected to improve, hotels are slowly raising average rates, according to data from research firm STR as provided by the Illinois Hotel & Lodging Association.

But things might not get back to pre-pandemic normalcy for at least two more years, said Michael Jacobson, the association’s president and CEO.

Broader measures of the economy show its resilience and the stabilizing effect of federal government aid. They also show that a job, even if it is work from home, is still a job. State government’s annual count of private sector employment found that through March 2022, there had been little overall change in job totals in Chicago’s central area since 2019, the last full year before the pandemic.

Overall, Chicago remains slightly below its pre-pandemic record of 1.2 million private sector jobs in 2019, the data show.

Other research by the labor-backed Illinois Economic Policy Institute covering job growth or decline through 2021 showed that most post-pandemic gains were in high-paying occupations that could be done remotely in such areas as management and financial services. Occupations that fell the most included administrative support roles as well as in restaurants and similar food services, all jobs tied to being at a site.

Meantime, while some business leaders push for at least a part-time return to office work, many staffers resist, still choosing a couch over a workstation. It might not matter if the office has free pizza. Preference for remote work could even benefit suburban office buildings, where brokers report an increase in leasing activity by companies tempting workers with a shorter commute.

Whether more downtown workers return could depend on worries about crime, said Atlas Stationers’ Schmidt. He said that during the unrest after the police murder of George Floyd, his store’s windows were smashed but nothing was taken. A survey by WBEZ showed riders cited crime, unreliable service and filth as reasons for not using the CTA more often.

To revive downtown, "it comes down to crime and taxes," said Arch Amenities’ Flanagan.

Schmidt and Flanagan both favor city-led efforts to bring more residences downtown, such as with a program to offer developers incentives to improve the La Salle Street corridor. It could take unfashionable office layouts off the market but requires expensive renovations. But there’s nothing rah-rah in their outlook, just realism.

"I don’t think the city has an alternative," Schmidt said.