Forecasting the business trends of 2017

Compiled by Adam Moore

In early December, we asked a handful of Corridor business leaders from various sectors for the trends they would be watching in 2017, in hopes of getting a fuller picture of the business year to come. Their answers seem to collectively point to a year of growth, but also heavy competition for customers and talent.

Changing shopping habits, driven by the ease of online shopping, will force retailers to innovate and create new experiences. The continued workforce shortage will push companies to focus on culture and training to retain their best employees. New technologies will continue to reshape our interactions with everything from our favorite brands to the devices controlling our homes.

Indeed, 2017 has the chance to be either exciting or exhausting, depending on your outlook. What business trends will you be watching in the new year? Share with us on Facebook or Twitter, #CBJ2017.



Charlie Funk
President and CEO, MidWestOne Bank



Rates and technology on the rise

As we look at the banking industry in 2017, the news is primarily positive for consumers. I see three primary trends that will become more evident in the New Year.

First, it appears that interest rates are trending up and that will reverse a 10-year trend of historically low rates. Borrowers will likely pay more, though borrowing rates remain low by historical standards. There is good news for savers, however, as rates on savings types of instruments are likely to also rise in 2017.

Get used to hearing the word “fintech,” which stands for “financial technology.” As 2017 begins, many banks are evaluating new and revolutionary technologies that will make life easier for their customers. There are programs that offer quick loan approval for relatively small loans – both consumer and business. Expect to see multiple applications that allow customers to easily make and receive payments to and from others outside of the customer’s primary bank. It is important to remember our industry is held to a very high standard in terms of information security and, thus, you can also expect to see stepped up efforts by your financial provider to assure the security of your information.

Finally, there is likely to be a needed rolling back of some of the illogical regulation that affects banks and their customers. Note I did not say “repeal.” As 2017 unfolds, expect to see slightly less unneeded “paperwork” that is associated with certain banking products.



Brent Cobb
President, World Class Industries



Tight times remain for manufacturers, suppliers

Increases in the stock prices of Deere & Co. and Caterpillar are misleading indicators for the North American off-road and ag equipment markets in the coming year. More revealing is the 5-10 percent decline in North American ag equipment Deere forecast in its most recent earnings call; Caterpillar has similarly dampened expectations for 2017 by confirming guidance that implies a decline in its 2017 sales. Despite the optimism by shareholders that has been pushing stock prices in the sector up, a recovery in those markets is still a year away.

For suppliers to Deere and Cat, including World Class Industries, that means renewed focus on bringing value to customers. The general levers in 2017 will include cost reductions and technology. Cost reductions will be aided by increasing strength in the dollar and the purchasing power it has with international sub-suppliers. Technology will help lower internal costs, as well in the design of component parts. The suppliers who are the most successful in those areas will be positioned for more success in 2017 and as the market recovers.



DaLayne Williamson,
Workforce Business Services Director, ICAD Group



Recruitment, education efforts paying off

2017 should be a great year for the Corridor. Companies are embracing a more employee-centric culture to attract and retain top talent, and it’s showing in their bottom line. The workforce changes we talk about are already here. Millennials have been the largest generation in the U.S. workforce for over a year.

There are hundreds of positions open in the Corridor in a variety of industries and skill levels. Even though we have experienced some shifts recently, many of those same companies that have had reductions continue to hire in other areas. Schools are partnering more and more with businesses to target the skill sets that are most needed, and efforts to build awareness through internships for students at all levels are paying off.

Things are good in the Corridor, but now is not the time to be complacent. I invite everyone to be an active ambassador for newcomers and be the change you want to see.



Hillary Hughes
Director, Prairie Capital Advisors



Companies ready to put capital to work

In summary, the 2016 M&A lower-middle market (deals less than $300 million transaction value) felt like a year of holding your breath. The uncertainty around the election and Fed policies left companies and investors with little motivation to make real investment, despite favorable lending conditions.

Looking into 2017, we still have little clarity into what our future exactly holds. For business owners, we see business value as very favorable for many industries, with agriculture and construction the exceptions. If considering an exit, consider your likely business growth over the next five years and your risk appetite to withstand potentially higher operating volatility. The depressed deal volume in 2016 has left companies and investors with a strong appetite in 2017 to put their capital to work. We expect capital to remain competitive throughout 2017 as companies continue to seek growth.



Douglas Laird
Vice President and COO, Skogman Realty



Tight inventories, high prices begin to correct

The year ahead is probably best described as a transition year. The public policies affecting residential and commercial real estate will be formulated in the first half of 2017, debated and implemented in the second half, with impacts felt from late 2017 to early 2018. Buckle up; this will be an exciting ride.

When it comes to commercial leasing and sales, the good news is that industrial land sales are finally increasing. This indicates increased developments of basic industry and jobs. Net leased properties will continue to have an excess of cash buyers hunting for too few projects. The low interest rates have kept prices high. We expect this high value to gradually correct over the next two years, with an expected softening of prices as interest and cap rates rise.

Retail and office properties continue to be overbuilt, and vacancy continues to increase as new units come online without retailers to backfill existing space.

When it comes to the residential housing outlook, the coming spike in interest rates will likely slow down the market after years of very favorable rates. The lack of inventory that has plagued the industry nationally is expected to continue into 2017, and we expect the same for the metro area for at least the first part of the new year. Hopefully, this will correct in 2018-2019.



Kent Statler
Executive Vice President and COO, Commercial Systems Rockwell Collins


Focus on connectivity continues to expand

Connectivity is a global megatrend. In 2017, Rockwell Collins’ commercial, government, and information management business areas will continue to focus on how we can leverage connectivity to improve lives around the world.

Consider the modern commercial aircraft. It’s digital from front to back. Intuitive, information-enabled flight decks leverage data from both onboard and external sources to provide new levels of analysis and awareness for pilots, airlines and manufacturers. Cabin solutions are changing the paradigm from one where airlines deliver pre-selected entertainment to passengers, to one where passengers entertain themselves with their own content. All this enables pilots to receive better information faster and passengers to use their personal electronic devices at 30,000 feet with the same broadband speed they receive in their homes.

In 2017, Rockwell Collins will invest significant resources to make connectivity just another part of life. In fact, you could say that our purpose is to keep people safe, connected and informed. And that’s a great way to start the new year.



Nancy Bird,
Executive Director, Iowa City Downtown District



The fight to stand out accelerates

To quote my friend Nick Westergaard, sustaining retailers these days have no choice but to get scrappy! Brick-and-mortar stores continue to remain relevant, although the rise of online shopping has pushed a rising trend of more niche retailing. We are seeing sustaining businesses look to differentiate themselves from their competitors, strengthen their localized storylines, build a one-of-a-kind customer experience and service, and move to quality over quantity product lines. There continues to be shifts in mobile technology that will allow them to ignite their digital presence while directing patrons to “push button” direct purchases – critical for those looking for convenience.

The pop-ups and showrooms aren’t just for the independents these days; we’re seeing national retailers in the game. The stronger big box stores continue to rethink their footprint and find compelling ways to integrate into local storylines, the employment base and community as they follow the trends to locate in dense urban areas and downtowns. All in all, sheer hustle is the name of the game for reaching your customer base in a constantly changing and crowded digital environment.



Scott Fisher
President, McCrossen Consulting



ACA repeal or not, uncertainty looms

There are promises of a repeal of the Affordable Care Act (ACA) in 2017, but all most employers want is lower health care premium increases in 2017.

Many employers hope the repeal of the ACA will lower premiums. Don’t count on it. At this point, it is much more likely that repeal will bring some regulatory relief from onerous filing requirements and a reduction or elimination of penalties for nonconforming health plans. For the federal government, the health care picture is bigger than employer-sponsored health plans. The federal agenda includes changes to social benefits, Medicare and Medicaid, along with individual health plans. This means that the private sector will have to continue to work on ways to manage health care cost increases rather than shift those costs. It is shaping up to be another year of uncertainty and change for employers and for health care.



Anne Gruenewald
President and CEO, Four Oaks



Data and collaborations becoming crucial

In 2017, the complexity of challenges facing Iowa’s children and families will increase. For human service organizations who serve them, there will be more pressure to be effective and efficient with dollars that are publically awarded and privately contributed. Data-driven outcomes and evidence-based practices will help meet those challenges.

To simplify and streamline those complexities, human services will work toward integration, where professionals across a variety of fields (education, housing, behavioral and overall health care, for example) partner in shared levels of service and results.

Because of those dynamics, human services work will continue to change by focusing on driving promising solutions, using strategies that are collaborative and integrated, and building a culture of employees and volunteers who are fulfilled with the work they do.



Stacey Halyard
Senior Portfolio Manager and Financial Advisor, Morgan Stanley Wealth Management


Generational, gender trends coming into focus

One thing that we know is constant is change. For the past 10 years, our focus as financial advisors has been on baby boomers as those most in need of help with investing and financial planning. In the next 10 years, the focus will shift in several significant ways.

Women currently drive between 70-80 percent of all consumer purchases. At the same time, it is predicted that boomers will transfer approximately $30 trillion in assets to their Gen X and millennial offspring over the next few decades.

As advisors, it is important that we recognize these population shifts. Statistically, women live longer than their spouses and will have different financial requirements as they age. Millennials are demonstrating that they have different ideas than their parents, and we need to be listening.

In our more immediate future, all eyes are on Washington and the new Trump administration. The possibilities for tax reform, deregulation and changes to trade policy are being met with both anticipation and apprehension. The initial surprise move to the upside by U.S. stocks could continue, but it’s also possible that we could see a turnaround based on valuations.

We believe that investors need to have a rigorous and defensible investment process that incorporates both risk and return goals. Holding a globally diversified portfolio across all asset classes can help to mitigate the effects of change in the future.



Maureen Kler Osako
Partner, Informatics Inc.



Digital innovations expanding the possibilities

Everyone wants to better leverage the web to grow their business and expand their reach. This technology continues to change and evolve quickly. For example, in one year alone, we have seen the rise and fall of major social networks (i.e. Meerkat and Vine), sophisticated attempts by hackers to disrupt businesses, the increasing production of fake news, and emerging – previously unimaginable – web design trends.

In this next year, most of our clients will continue to focus their online marketing budgets in three areas: driving traffic (SEO), capturing leads (digital marketing) and differentiating themselves (enhanced design). In addition, 2017 will bring increased interest in secure, managed web hosting as well as the integration of disparate systems to better serve the needs of increasingly sophisticated users.

Other areas of continued growth in 2017 will be in the mobile-first concept, as well as strategic and creative content development, including the use of video, audio, photography and other forms of engaging messaging. Metric-based online efforts, such as paid Facebook advertising, will become increasingly popular. We also expect to see an uptick in specialized desktop and mobile applications as businesses look to attract and retain customers.



Patrick Deignan
Market President, Bankers Trust



Business fundamentals looking good for lending

2017 should be another strong year in community banking. With one interest rate increase in December and more likely in 2017, interest rates are starting to return to more normal levels. The rate increases are indicative of an improving economy. Our clients in Eastern Iowa continue to do well, with most having stronger balance sheets and earnings.

As the economy continues to improve, a trend that we have seen since the 2008 recession that I hope does not reverse itself is the improvement in the level of capital in projects. This includes not just real estate projects, but also corporate balance sheets, and startup and early-stage entrepreneurial ventures. If there is one thing that became abundantly clear during the recession, it’s that capital is the buffer that allows enterprises to grow and thrive during good times and bad. Business is being done smarter now – let’s keep it that way.



Dennis Jordan, Senior Business Development Manager
Mortenson Construction



Workforce issues continue, but spending returns

The unprecedented amount of construction work in the Cedar Rapids/Iowa City Corridor over the five years has created real challenges for labor availability and it will remain a key issue for 2017. Some relief will come from larger projects at the University of Iowa coming to a close, however several significant projects in both the public and private sector slated in the next 12-18 months will remain challenged with labor availability.

Also, with a newly elected president and Congress, many industries expect significant changes, but what’s not clear is how and when those changes will impact capital expenditures, including construction spending. Next year could start slowly, but you can expect the pace to pick up once state and federal policy agendas become clear.

Finally, with an expected rise in interest rates in 2017 and high levels of cash reserves, look for private industry to make capital expenditures sooner rather than later.   This of course assumes the stock market stays healthy, and there are no major world events that impact our relatively safe and stable economy.



Troy Van Beek
Founder and CEO, Ideal Energy, Inc.



Blue skies ahead for solar sector

2016 drew to a close with the U.S. solar industry reporting the largest growth year on record, marking the eighth-consecutive quarter in which more than a gigawatt of solar was installed in the country. This massive growth trend is expected to continue during 2017.

The looming question for our industry is what the incoming presidential administration will do with tax credits. Many industry sources have suggested the tax vehicles that have been partially responsible for the solar industry’s explosive growth, including the Investment Tax Credit (ITC) and Modified Accelerated Cost Recovery System (MACRS), will continue with strong support, due to job creation and the opportunity for savings to energy users.

In the Midwest, we’ve seen solar to be particularly lucrative to commercial and industrial operations, who typically realize a payback in the first 4-6 years with a 18-22 percent return on investment. With very little risk and high yielding returns, solar is becoming more attractive than investments in the stock markets.



Bruce Lehrman
Founder and CEO, Involta



Internet of Things moves closer to maturity

One of the nice things about my job is the opportunity to work with a lot of innovative companies that leverage technology to do amazing things. One area of interest that will result in massive change is the Internet of Things (IoT). Loosely defined, IoT is the connection of devices to the internet such as the lighting in your home, your bicycle, security cameras, medical devices in your body, etc.

Where early internet companies leveraged the internet for communication and then for software and mobile apps, the next generation of change is occurring in IoT. This provides incredible capability for businesses as consumers, but like any industry in its early stages, it will have some maturing to do related to security and scalability. One of the largest attacks on the internet occurred due to a hack of security cameras. The perpetrators controlled the internet usage of the cameras to take down a significant part of the country. Fortunately, security will improve.

The other change that IoT is causing is the rise of edge computing. Edge computing allows these devices to have quicker access to the internet and the computing to allow for quicker response times. If you have an autonomous car, every millisecond of time matters. Edge computing allows devices to interact with the rest of the world more quickly.



Mike Bails
Realtor, Urban Acres
Board Member, Iowa City Area Home Builder’s Association


Home buyers may find fewer choices in 2017

In the next year, interest rates will be the main subject of many real estate conversations. With the costs of construction and land prices on development land continuing to increase, it will be interesting to see to what degree home prices will be affected, as buyers in 2017 will be qualified at a lower price range than they were in 2016.

Move-up buyers who are looking to find a larger home may find that the homes they can afford now may not be as big a step up in size and quality as in recent years, which could leave some potential buyers on the sidelines. We are already seeing a push to increase affordability on the new construction front. Small home plans and homes without basements are just two examples of the efforts to put forth homes at a lower price.

Rental demand and the supply of new rental properties will continue to be on the rise. As more rental units come on to the market we may experience, if even just temporarily, a plateau in rental rates because of the increased competition. Due to the continued increase in population in the Corridor over the past decade and more, opportunities for more commercial development, especially restaurants and service industries, will also continue to expand.