As coronavirus spreads, Charlotte settles into a new economic reality

As coronavirus spreads, Charlotte settles into a new economic reality
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Schools are closed for the foreseeable future, and thousands are working from home. We’ve converted dining room tables into makeshift desks; sweatpants are the new khakis.

As the temperatures rise, coronavirus has hit the pause button on nearly all the outdoor things Charlotte loves — al fresco dining, brewery hopping, sports, concerts. Our restaurant industry, thriving just weeks ago, is surviving on sales from takeout orders. These days, people leave their homes mostly just to go to the grocery store.

A new economic reality is settling in as COVID-19 continues to spread across the community.

The unemployment rate in Mecklenburg County is low — 3.7 percent. Officials say 60 or so people move here every day. We recently landed a Major League Soccer team, our third major league sports franchise. Large corporations like Truist pick Charlotte over rival cities for their new headquarters.

For a local economy that has been booming for the better part of a decade, a slowdown was impossible to imagine just a few weeks ago.

For a city that has come to define itself by its rapid growth, what happens when a global pandemic throws that growth into question?

How long, everyone wonders, will this shutdown last? Experts have no idea. They hope that a vibrant economy like Charlotte’s will bounce back, buoyed by a pop in spending once things return to normal. But already, this outbreak is costing people across multiple industries their jobs.

The COVID-19 pandemic is an “exogenous shock” to the economy, says John Connaughton, an economics professor at UNC Charlotte. Such a shock is an unexpected event, such as a natural disaster, or in this case a virus, that alters the flow of money.

“We’re in uncharted territory,” Connaughton says. If local governments stay aggressive about stopping the spread of COVID-19, he adds, we may only experience a “mild recession.”

In an analysis last week, the Charlotte Regional Business Alliance found that the Charlotte region might feel more of the financial pain of coronavirus than other parts of the U.S.

That’s because Charlotte has a higher share (18.3 percent) of employment in “high-risk industries” than the top 100 metro average (16.3 percent). “High-risk industries,” the Alliance notes, include hospitality, leisure, and entertainment.

So far, it’s hard to think of an industry here this outbreak hasn’t touched in some way.

Large social gatherings are banned throughout North Carolina. That’s temporarily crushed a city where many industries rely on bringing people together to socialize.

Charlotte has, for instance, nearly 40 breweries, up from just two — Olde Mecklenburg and Rock Bottom — just a decade ago. Now, that industry’s growth is at a standstill.

Crowds at Olde Mecklenburg Brewery, Charlotte’s oldest brewery

Legion Brewing, one of the area’s most popular craft-beer makers, laid off nearly its entire staff last week.

The skeleton crew includes 15 employees, down from 150 a week ago. Those who remain are focused on making and selling to-go cans and crowlers of beer. It’s a sales experience that owner Phil Buchy calls “sobering.”

In the last week, Buchy says, retail sales have averaged less than 5 percent of the normal incoming retail sales revenue.

“We do see the trend increasing as our friends around our neighborhood and Charlotte get used to the new temporary norm,” Buchy says.

“But in all reality, the service industry as a whole cannot sustain for very long under these harsh business restrictions.”

Months ago, Legion had announced plans for two additional locations — a restaurant and brewery at the Trolley Barn at Atherton Mill, and a brewery on West Morehead. The goal was to open both by the end of this year.

But Buchy’s focus now is just on surviving the virus. Growth, he says, is an afterthought.

“Luckily these projects are far enough out in the future to table those decisions for later,” Buchy says.

Legion Brewing’s planned location on West Morehead

Another booming sector in Charlotte is development. If you drive through town today, you’ll find that crews are still moving dirt. You will still find cranes in nearly every neighborhood.

Work on most big construction projects continues. Developers such as Lincoln Harris say they’re in close contact with their general contractors to ensure workers are safe. You won’t yet find half finished, abandoned construction sites scattered around town like Charlotte had in 2008.

But not all major developments will continue on schedule now, though, either.

The owners of 10 Tryon, a 15-story mixed-use development Uptown, were supposed to break ground on the long-delayed project in the second quarter of this year. The project includes a Publix on the ground floor, plus office space and a rooftop restaurant.

Now the developer, Armada Hoffler Properties, says that its projects are on hold.

“We will be deferring several of our development projects until economic conditions normalize, thereby alleviating any near-term need for additional capital,” CEO Louis Haddad said this week.

10 Tryon

Rendering of the 10 Tryon project in Uptown (Armada Hoffler Partners)

Long-term, business owners hope that the virus threat will pass and, when it does, a swell of pent-up spending will provide a delayed boost.

“We have to position ourselves, when this is over, to get people to do what we want them to do — and that is to go out and spend money like drunken sailors, to put it bluntly,” says Connaughton, the UNC Charlotte professor.

Problem is, when this is over in two (or four or eight or sixteen weeks), many consumers may not be flush with spending money.

Hourly employees and servers and bartenders, people who depend on tips, have lost their source of income as everything from malls to movie theaters to diners shut down.

Layoffs have extended beyond the hospitality industry.

Flywheel Sports, which has a cycle studio near Cotswold, told customers last week it laid off roughly 98 percent of its staff nationwide. More than 600 employees who work in concessions at Charlotte Douglas International Airport have been laid off or are on unpaid leave, the workers’ union told the Charlotte Observer.

The state received more than 40,000 claims for unemployment benefits last week. Usually, that number is around 3,000. The maximum amount a person can collect is $350 per week, though. That’s hardly enough to cover a month’s rent in most of Charlotte.

The economic fallout could stand to further exacerbate the economic divide that already exists in Charlotte.

To be sure, not every industry is contracting. Grocers like Publix are ramping up their hiring amid heightened demand from shoppers. Amazon and Walmart are hiring aggressively during the outbreak, too.

To understand the ramifications of the outbreak locally, the Charlotte Regional Business Alliance has been surveying member businesses. Only 2 percent of the 168 firms surveyed last week said that coronavirus was having no effect on their business.

One third, however, said that they cannot survive more than 30 days without any new sales.

“The small business disruption is undeniable,” says Janet LaBar, president and CEO of the Alliance.

“There are many looking for relief. How do they stay open? How do they manage to get through this without layoffs? How do they make payroll?”

One of the most frustrating aspects of this outbreak is that no one knows how long it’ll last.

Maybe, like Buchy said, we should just consider this economic limbo we’re in a “temporary norm.” Maybe small businesses can quickly hire back the workers they laid off.

That’s what Buchy plans to do, at least.

“I look forward to having everyone back,” he says of his employees. “They were not only part of our team, but an extension of our family.”

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