Cedar Rapids' retail economy: True recovery or flood recovery?

The Cedar Rapids retail economy was buffered from the effects of the national recession by spending on recovery from the 2008 flood

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April 1, 2014 | 1:36 am

The flood, for all the problems it created, actually did some good.

A study of state data shows that the Cedar Rapids retail economy was buffered from the effects of the national recession by spending on recovery from the June 2008 flood until dropping sharply in fiscal 2010.

Even after that hefty decline in fiscal 2010, The Gazette  found the city's retail economy has switched back into recovery mode.

After the flood, "A lot of people were expecting a really poor retail performance, and it ended up looking quite different," said Liesl Eathington of Iowa State University's Iowa Community Indicators Program.

But even though the 9.8 percent drop in Cedar Rapids retail sales for fiscal 2010 was greater than the statewide drop in retail sales of 6 percent, Eathington noted that was largely due to Cedar Rapids's retail sales being so high in 2009.

"Even without the recession, we would have expected a decline in fiscal year 2010 as activity levels began returning to "normal" after the flood bump," Eathington said.

Per-capital retail sales in Cedar Rapids grew 5.5 percent over the post-recession period, from 2008 through 2011, compared to a statewide increase of less than 1 percent over that period, Eathington said.

Those gains were not distributed uniformly across the Cedar Rapids economy. Businesses in the building materials sector, for example, still dream of getting back to pre-recession levels.

"It has definitely taken a toll on the profitability of our company," said Larry Paulsen, president and co-owner of Ogden & Adams Lumber, 144 32nd St. Drive SE.

Paulsen said he resisted the temptation to reduce staff even though business conditions warranted layoffs. While business is still far below pre-recession levels, he said Cedar Rapids clearly has done better than larger metro markets across the country.

Saying that the flood masked the recovery is only part of a more complex picture, according to Ralph Palmer, president of home furnishings business Ar-Jay Center in Cedar Rapids.

"It's kind of hard to stand back far enough to interpret what this mosaic means," Palmer said.

While he agrees that the flood stimulated much demand for product, he said the price tag of houses built during the post-recession/flood period have been much lower than houses built before.

Palmer said the flood and recession reduced the number of family-wage paychecks in Cedar Rapids. He blames the flood for taking away jobs at places such as Swiss Valley Farms Dairy and Norwood Souvenir, and the recession for taking more jobs at Midland Forge, Sealed Air Cryovac, and Terex.

When demand for Ar-Jay Center's fixtures and other home products began to come back, Palmer said it was in an unexpected pattern. Traffic at the store would be great one weekend, and weak the next.

"Since the first half of 2012 we've seen the market come with consistency," Palmer said.

The most recent sales and use tax data is for the first fiscal quarter of 2012. For that quarter ending March 31, 2012, sales are running 3.3 percent ahead of one year earlier.

"This year has definitely been a positive," said Amiee Wainwright, a sales and design specialist at Randy's Carpets & Interiors, 5454 Center Point Road NE.

Wainwright said the year after the June 2008 flood was not as good as the Coralville-based company had expected. She said many homeowners didn't get around to buying flooring for their flood recovery projects during the first year, and local retailers lost some sales to transient merchants who showed up to work the flood.

Some areas of retail, such as auto dales, didn't get much of a bump at all from the flood recovery.

After several weak years, sales "started to pick up in late winter 2011 and continued in the spring," at Mark Zimmerman Ford-Hyundai-BMW-Mitsubishi, 4001 1st Ave SE, explained president Mark Zimmerman.

"This year, there has been a lot of pent-up demand for automobiles," Zimmerman said. Low interest rates and high trade-in values on used cars have helped fuel the vehicle replacement trend, he added.

Retail sales tax figures show that Coralville and Iowa City were also somewhat insulated from the nationwide recession. Coralville has shown consistent improvement in year-over-year quarterly taxable sales, while Iowa City's sales have been more flat.

Eathington said Iowa City has seen some erosion in retail sales with the growth in Coralville, but that it probably makes little difference to the metro economy the cities share.

One factor that helped Cedar Rapids' retail economy from struggling during the recession was the city's large trade area, Eathington said. The city pulls in shoppers from a large region, she noted, and that effect probably increased during the recession.

The recession also had the effect of winnowing out retailers.

Many auto dealerships closed during the recession, Zimmerman noted, citing the GM and Chrysler bankruptcies in addition to the overall economy as factors.

Wainwright said Randy's Carpets also saw a number of competitors flounder and close during the recession, and even came to the aid of some customers who had made deposits on flooring that another retailer failed to deliver when it closed.

Zimmerman was among many retailers who wasn't too happy with the economy, but was glad he weathered the recession in Cedar Rapids instead of elsewhere. While others credited the area's economic diversity, Zimmerman said the consumers themselves are a big part of the mix. He said consumers in the local work force tend to have a strong work ethnic and good credit histories that

keep their spending power more stable in a downturn.

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