Md. businesses starting to see early impact of COVID-19

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Ian Goldstein, owner of Brothers Music in Baltimore, said this time of year business is generally bolstered by customers with a few extra bucks to spend from tax refunds. This year, amid growing concerns over the coronavirus outbreak, commerce has not been so brisk.

Since Feb. 24 the store’s logged seven days with sales under $100, he said. That decline in business at the shop coincides with cases of the virus, called COVID-19, spiking in China and Italy before spreading to the U.S. and elsewhere, leading global health officials to declare a pandemic.

“We’ve had a couple of zero dollar days as well,” Goldstein said.

The impact of the virus on local businesses, such as Brothers Music, represents a drop in a pond that ripples out to much larger players in the global economy in a variety of fields.

One industry that may eventually feel the pain of a store like Brothers Music is the commercial real estate market’s industrial sector, which depends heavily on tenants distributing products to retailers.

Matthew Laraway, executive vice president and partner at Hanover-based Chesapeake Real Estate group, said his firm is preparing for COVID-19 to create headwinds in various parts of its business.

A regional developer, Chesapeake Real Estate Group primarily builds and invests in industrial properties in the mid-Atlantic, but also has a property management section that handles office space.

Pandemic-related dips in the economy could disrupt the market for industrial properties that in recent years has produced the best results locally for commercial real estate investors.

Previously strong demand for distribution space, Laraway said, may fall off because of delays in the global supply chain. As a result of the weakened market, firms may focus on liquidity and back off signing leases.

With most companies restricting travel due to concerns about the new coronavirus, Laraway said, the previously strong capital market may slow. The acquisitions director from an institutional investor isn’t hopping on a plane any time soon to see a property.

On the other hand, there’s potential for the virus to push people to do more online shopping. If the supply chain isn’t too distorted, it may further fuel changes in long-term shopping habits, Laraway said, potentially juicing demand for distribution space.

“That asset class may be a little more stable than others,” he said.

Daraius Irani, chief economist for the Regional Economic Studies Institute at Towson University, said the financial consequences of the pandemic will infect industries ranging from sports to retail.

The obvious impact so far, he said, has been on cruises and airlines, which are major players in the local economy.

Previously, the Centers for Disease Control and Prevention issued a warning not to take cruises and to avoid non-essential air travel.

As a result demand for voyages with companies like Carnival Cruises, which offers cruises that depart from the Port of Baltimore, has decreased sharply.

There’s also been a dramatic decline in demand for flights, which has forced carriers like Southwest Airlines, which in 2018 captured nearly 67% of the market share at Baltimore Washington International Thurgood Marshall Airport, to ponder cutting flights.

The loss of those dollars in turn spreads out to other businesses because fewer travelers and tourists mean fewer people eating at restaurants, drinking in bars and staying in hotels.

Due to the decline in business, employees in those sectors may lose wages or, in a worst-case scenario, even their jobs. As a result those employees don’t rent new apartments, buy cars, or splurge on guitars.

Another potential pressure point from the virus, Irani said, is the loss of major events that fortify Maryland’s economy.

The National Basketball Association and National Hockey League, both of which have franchises in Washington, suspended their seasons. Major League Baseball, which has franchises in Baltimore and Washington, suspended spring training Thursday and delayed Opening Day for two weeks.

Concert venues in Washington, including the 9:30 Club, The Anthem, and Lincoln Theatre, have postponed shows. The Baltimore Symphony Orchestra has canceled concerts and public events through March 21.

The full impact of COVID-19 on Maryland’s economy may not be known, Irani said, for up to 90 days. The first indicators won’t arrive until the federal Labor Department releases its March jobs report in April, which will include the first data to begin quantifying the disruption to commerce.

“It’s a supply side issue and a demand side issue,” Irani said.

Goldstein, who also works full time in government affairs for the National Association of County Health Officials, posted a message Thursday on his store’s social media accounts explaining how ownership and staff are trying to keep the store safe.

Employees are disinfecting instruments, countertops and the screen that customers sign to complete credit card transactions. Goldstein said employees have their flu shots and they’re reminded to wash their hands regularly and to use hand sanitizer following transactions.

“Today’s post was just to say we’re aware of this and it’s safe to shop,” he said.