The Times of Northwest Indiana

Editor's Note: The year that was brought us plenty of changes in the region business landscape. The coming 12 months promise to give us just as much. As we prepare to usher in a new year, The Times takes a look at some key industries in the region and what is in store for 2005 and beyond (in no particular order):

TECHNOLOGY: High-tech popping up near you

Technology and the jobs of the future will grow their toe-hold in the region in 2005, mainly through the development of high-tech business hubs.

The headliner will be the Purdue Technology Center of Northwest Indiana, which opened its doors last month in Merrillville. A half-dozen technology start-ups are already moving into the center and the 380 acres surrounding it are ripe for development.

In addition, a slew of other tech hubs ranging from an established technology "core" in downtown Hammond to Ivy Tech's new Valparaiso campus in Eastport Center, now under construction, will stretch the movement from east to west.

High-speed Internet access will continue to be the region's most sought after technology resource. This year will see significant progress in getting it to more communities, but slower dial-up access will continue to be the only option in others.

Technology companies are expanding high-speed access because area developers and home builders are demanding it for their housing tracts, according to George Fleetwood, SBC Indiana president. Along with three-car garages and Jacuzzis, it has become the must-have amenity.

SBC is extending its high-speed Internet reach to up-and-coming rural communities such as St. John, Cedar Lake and others, Fleetwood said.

Other providers are racing to do the same and that competition could result in bargains for customers.

-- Keith Benman

STEEL: Good times ahead for booming industry

Order books for U.S. steel companies indicate steel prices will increase and steel companies will continue to see good profits during at least the first half of 2005.

Early indications point toward steel price increases in the first and second quarters of 2005, according to a report from the American Institute for International Steel. The U.S. market, in addition to China, is an important source of upward momentum for steel industry prices, the report says.

Veteran steel analyst Charles Bradford is predicting a healthy steel market for 2005's first two quarters and even longer, depending on China's and the domestic economy. U.S. steel inventories dropped during the past three months, Bradford said.

"If customers are buying less now than they're consuming, we'll see a bounce back and that's what the order books showing," he said.

The AIIS said announcements from some U.S. mills indicate steel market prices will strengthen sometime in early 2005.

"Further, some pundits believe that by the second quarter, some prices could even eclipse the lofty levels seen in the early fall of this year," the institute said.

-- Andrea Holecek

GAMING: Riverboats watch for changes across state line

Northwest Indiana riverboat casinos are battening down the hatches in anticipation of a sea change in 2005.

High taxes on gambling revenues in Illinois in 2003 and 2004 helped drive gamblers across the state line to the five Lake Michigan moored casinos.

But the Illinois law is due to sunset in July, ending taxation of up to 70 percent on gambling revenues above $250 million a year in the neighboring state.

"It will change the dynamics of the market," said Rick Mazer, general manger of Horseshoe casino in Hammond.

Illinois casinos began cutting jobs and raising admission fees to help cover the cost of higher taxes on gambling revenues imposed by state lawmakers in July 2003.

Casinos complained gamblers were driven across the border by the loss of services and the stiff fees.

Northwest Indiana casinos were already riding the waves of a 2002 Indiana law change allowing dockside gambling so boats no longer had to cruise and make gamblers wait to board.

But competition could end up on a more even keel come July, Mazer said.

"Some of the market share will shift back to Illinois," he said.

-- Susan Erler

RETAIL: Westfield expansion sets tone for region

An expanding Westfield Shoppingtown Southlake mall could mean healthy times ahead for Northwest Indiana's retail sector.

"The Westfield expansion is very significant," said David Lasser, owner of the Merrillville commercial real estate firm Commercial In-Sites. "It shows that the largest retail center in the market is sustaining enough growth to encourage that type of expansion."

Already the region's biggest mall, Westfield plans to add another 150,000 square feet to its 1.5 million-square-foot size.

The mall sits at the center of 5 million square feet of retail tenants in surrounding strip malls, helping to attract growth to the region, Lasser said.

"They alone are probably one of the greatest magnets for additional development in this area," he said.

A population boom in southern Lake County spreading eastward into Porter County is sustaining the growth of smaller retail centers there.

The key is increased convenience, Lasser said. "As the population has stabilized and grown, more are getting built. Each time it's more convenient if you only have to go two miles instead of 10."

A healthy environment locally may not be enough to sustain all retailers.

One big question mark is how November's Sears, Roebuck and Co. and Kmart Holding Corp. merger will play out.

"It has yet to be determined which stores will close," Lasser said. "That will definitely the big story for next year."

-- Susan Erler

MANUFACTURING: Guarded optimism engulfs industry

"Optimism" is the byword of the nation's manufacturer's for 2005, but Indiana's manufacturing outlook may not be as bright.

A late September survey by the National Association of Manufacturers shows strong optimism among 87 percent of large companies and a positive or somewhat positive outlook among 85 percent of small companies.

"This report confirms our belief that the economy is gaining strength and will continue to expand throughout this year and next," stated NAM President John Engler. "Predicting the future is always risky, but it has been my experience that the people in the trenches have a really good feel for what is really happening out there in the marketplace."

Their "bullish outlook" was based on the expectation of continuing strong sales, he said.

But Jerry Conover, director of the Indiana Business Research Center, has predicted the productivity improvements and job outsourcing will continue to dampen growth prospects for factory jobs in the state during 2005.

Locally, steel mill employment is expected to shrink as Mittal Steel Co. N.V. buys International Steel Group Inc., and cuts salaried jobs in its restructuring.

-- Andrea Holecek

BANKING: Local branches learn to make change

Banks will continue to invest in technology to comply with new banking rules and that will drive them to look for ways to grow their markets.

One way they can do that is with new product offerings and another way is to combine forces with other banks through mergers or acquisitions, according to Paul Freeman, Indiana Bankers Association executive vice president and chief operating officer.

Region banks took both those routes in 2004 and figure to continue down that road in 2005.

Harris Bank, of Chicago, bought out Mercantile Bank in a deal that is still pending. J.P. Morgan Chase Co. bought up Bank One, which has 33 branches in the region.

Still, local community banks say they don't feel threatened in the new year. Staying flexible and offering customers personalized service is the key.

"If a customer wants face-to-face contact, you have to be able to do that," said David Bochnowski, Peoples Bank chairman and chief executive officer. "If they want electronic banking, you have to be able to do that."

The outlook for interest rates on home loans is generally stable, despite the Federal Reserve's repeated hikes in overnight rates. In part, that is because as the mortgage market cools there will be increased competition for customers.

More banks will be clearing checks more quickly in 2005, due to new federal "Check 21" legislation that allows them to clear checks electronically.

-- Keith Benman

AGRICULTURE: Soybean rust threat could dampen growing season

Farming is a risky business in any year, and 2005 could be even riskier.

Soybean rust is on the move in the U.S., spreading up from the South where it presumably was blown by Hurricane Ivan last summer.

The rust-colored fungus gobbles up the leaves on soybean plants, rendering the mini-factories incapable of producing beans.

Indiana officials aren't taking any chances with a blight which proved itself capable last year of wiping out acres of soybeans in Brazil, with losses in the millions of dollars.

"We're very concerned," said Purdue University agronomist Ellsworth Christmas.

Regions of the Midwest are likely to see soybean rust during the growing season of the coming year, Christmas said.

"But how early that will be and how severe, no one knows," he said.

Uncertainty in 2005 follows on the heels of 2004's bountiful harvest for Indiana farmers, with record yields of corn and better than expected soybean yields.

Ellsworth advised Indiana farmers to stay tuned as officials track the fungus once the growing season gets underway.

"But I hope farmers don't panic and make irrational decisions. They need to plan for this year as if it were not here, but stay tuned to where it is and how it's spreading -- and be prepared."

-- Susan Erler

UTILITIES: Regulations turn heat up for NIPSCO

Business at Northern Indiana Public Service Co. will involve so much more than just keeping the lights and heat on this year.

That's because the utility landscape is in a state of flux across the nation, as the Federal Energy Regulatory Commission continues to push for open energy markets and state regulators struggle to find their role.

The over-arching goal of all the changes is to increase reliability and to keep the cost of power economical, according to Larry Graham, a NIPSCO spokesman.

"This goes far beyond NIPSCO, in that the intent is to ensure the reliability of the entire electric grid," Graham said.

Two matters before the Indiana Utility Regulatory Commission will directly affect what NIPSCO customers pay. One is NIPSCO's application for a purchased power tracker. The tracker would allow the utility to pass on to customers some of the costs of wholesale power purchases.

The other matter has to do with how much utilities in Indiana can charge customers to get the heat back on after disconnections. Proposals for new rules on disconnections and security deposits were formulated by state regulators with NIPSCO in mind.

Also before the IURC is the potential closure or downsizing of four NIPSCO maintenance hubs, including those in Hammond and Crown Point. And an agreement setting the stage for handing the Dean H. Mitchell Generating Station over to the city of Gary still needs state approval.

-- Keith Benman

DEVELOPMENT: Building boom expected to continue

The building boom that pushed housing starts up 72 percent in Lake County and 13.5 percent in Porter County from 1998 to mid-2004 is expected to persist as families continue migrating from the urban communities in the north and from the suburbs across the state line.

Home buyers attracted to the housing market by relatively low mortgage interest rates are turning to the region for its available land, reasonable home prices, quality schools and amenities.

From Hawk Development's planned construction of 210 homes in Portage to the 254 single-family homes and mix of 200 duplexes and townhomes in St. John's Lake Hills subdivision, the region is poised for more double-digit residential growth. And -- as in the past -- economic development specialists say retail, restaurants and other service sector businesses will follow closely behind.

Large commercial investment also is slated for the area as changes in the state law aid Indiana's business climate. Purdue's new high-tech center in Merrillville already is filling with startups and other technology driven enterprises.

And developers anticipate that growth at area business parks will mimic the spurt in home sales.

-- Andrea Holecek