Coronavirus Threatens Survival of Toronto Small Businesses

The Broadview-Danforth Business Improvement Association (on behalf of dozens of Toronto BIAs) recently surveyed 561 small business tenants and 137 landlords across the city as to how the Coronavirus lockdown has affected them. A majority of the respondents (61%) said that they would not survive over the next 3 months without rent relief, and 76% said that they would have to close down for good within 5 months.

Another recent survey, conducted by Restaurants Canada, concluded that, if conditions don’t improve within three months, 50% of independent restaurants won’t survive, and most multi-unit foodservice businesses will have to permanently close at least one of their locations. Most of these businesses are extremely concerned about the amount of additional debt they will have accumulated when the crisis is past, even if they do manage to survive.

Restaurants Canada received a total of 914 completed surveys from foodservice operators across Canada, representing 11,856 locations (as many respondents belong to multi-unit businesses). Canada’s commercial foodservice industry is made up of 97,500 establishments, including full-service restaurants, quick-service restaurants, caterers and drinking places. A very large number of jobs are involved, so say the least.

While the federal government has announced the ‘Canada Emergency Commercial Rent Assistance’ program, which will provide loans to small businesses to provide some rent relief, there are concerns that loans will only delay the problem until later.

These snapshots show how serious the impact of the business closures has been, and how much worse it will get as the lock-down drags on. It’s simply not possible to switch off the economy and expect everything to go back to ‘normal’ quickly once the switch is turned back on. Government money will cushion the blow to some extent, but government spending will not substitute for lost economic activity, nor will it replace lost jobs and businesses.

Obviously, the real estate market has also felt the effects of the virus. Since the lock-down started, sales of homes and condos have been cut by more than two thirds and, while prices have held up remarkably well, the knock-on effects on the economy of the reduced activity (fewer renovations, appliance & furniture sales, etc) will be more and more significant as time goes on. Plus, many people will emerge from the crisis with more debt than ever: this could make buyers reluctant to purchase until they have repaired their balance sheets; and some people may need to sell. And another potential impact: the stresses of forcible confinement could lead to a surge in marriage break-ups leading to family homes being put up for sale. Rather than a strong ‘bounce-back’ later this year, we might instead have a sustained buyers’ market (more sellers than buyers) and falling prices for the first time in more than 20 years. Good news, perhaps, for millennials who have had a tough time affording a home for many years, but still, the longer the lock-down continues, the larger the negative impact on both the real estate market and the economy as a whole.

As we learn more about the extent of the damage being done to the economy, we are also learning more about the coronavirus itself. For example, while there is still much that is not known about the virus, there is evidence from many sources that the virus is much less lethal than was indicated by early information. We also know that the virus is much more lethal among the elderly and those with other health problems, while young, healthy people often have only mild symptoms or none at all. SARS CoV-2 is a very nasty virus to be sure, but we need to maintain some perspective and to dial back the fear and hysteria rather than continuing to feed it.

It is certainly sensible that we continue to encourage social distancing; to discourage people from congregating in large groups; and in particular to focus on protecting the elderly and immunocompromised among us. However, we also need to re-open the economy and get people back to work as soon as we can safely do so. The virus will probably be with us for a long time (it’s unlikely there will be an effective vaccine any time soon, if ever), and most people will follow the rules well enough to ‘keep the curve flattened’ and prevent overloading our health care system while the virus continues to spread slowly through the population. After all, the goal from the beginning was to slow the spread of the virus, not to eliminate the risk of being infected. As stated in the federal government’s guidance publication, Public health measures: Canadian Pandemic Influenza Preparedness: Planning Guidance for the Health Sector:

“When planning public health measures, decision-makers must weigh not just the costs of implementation but also any secondary impacts. Social and economic impacts on individuals, families, communities and businesses due to, for example, closing schools or cancellation of public events, should be considered with any intervention and weighed against its potential benefit. Individual behavioural measures, such as practicing hand hygiene, respiratory etiquette and self-isolation when ill, are promoted during seasonal influenza and should be encouraged in any pandemic scenario. Other measures, such as school closures and border restrictions, are complex, costly to sustain and likely to have unintended societal and economic consequences.”

This document didn’t anticipate the unprecedented actions that have closed down significant portions of the economy but, of course, the same principle of weighing costs versus benefits must apply. A lot of economic damage has already been done and, even if the economy were to be opened up today, it would be quite some time before businesses would return to something resembling normal. Many jobs may have been permanently lost. It is critical that the authorities constantly seek to strike the right balance between minimizing the impact of the virus on public health versus on our economic well-being. Both are vitally important.