This article is a preview of The Logic’s Daily Briefing newsletter, sent every weekday.
Get complimentary access to award-winning reporting to navigate these unprecedented times. Sign up now.
It’s day 72 since Canada’s 100th coronavirus case. The number of cases is 81,277 as of publication time, up 1,135 since yesterday—a five per cent increase from the seven-day prior average of new cases. On their respective 72nd day, U.S. daily new cases were down 11 per cent from the seven-day prior average; the U.K. was down six per cent in daily new cases from the seven-day prior; and in Italy, new cases were down 34 per cent.*
Off campus: Shopify CEO Tobi Lütke announced his company will keep its offices closed until 2021, and that most of the firm’s 5,000 staff will permanently work from home. “[COVID-19] is challenging us all to work together in new ways,” Lütke said on Twitter. “We choose to jump in the driver’s seat, instead of being passengers to the changes ahead. We cannot go back to the way things were. This isn’t a choice.”
Facebook announced similar working arrangements on Thursday, giving new recruits the option to work remotely and soon allowing current employees to request to do the same. The shift could see about half of the social media giant’s workforce become permanently remote within five to 10 years, said CEO Mark Zuckerberg.
Shopify and Facebook are among the growing faction of tech firms electing to not only extend their office hiatus for the year, but make it the new normal. Twitter and Square CEO Jack Dorsey announced earlier this month that employees from both companies can work from home indefinitely. Waterloo-based software giant OpenText decided back in April to close half of its global offices and have 2,000 staff—about 13 per cent of its workforce—remain permanently remote after noting that work during the pandemic had been “amazingly productive.”
While the arrangements could add flexibility for companies and their workers—and save the firms money—the trend could deliver a blow to landlords who count these firms as anchor tenants. Shopify leases more than 1.3 million square feet of office space in Canada, and spent US$29.3 million on lease expenses last year. That was expected to increase by about US$14.8 million in 2021 and an additional US$8.4 million the following year, according to annual reports. The firm has offices in 16 cities around the world, with remaining terms ranging from one to 13 years. The leases for two of its Toronto offices were set to expire next year and one of its Kitchener-Waterloo offices in September 2022, according to a 2018 regulatory filing. Shopify still plans to take possession of its forthcoming space in The Well, a Toronto development that it previously estimated would cost as much as $500 million. The company did not respond to questions about whether it planned to close any offices as fewer staff use them. Meg Sinclair, a spokesperson for Facebook Canada, said the firm is not planning on closing any offices.
Paul Morassutti, vice-chairman of CBRE Canada, noted in a virtual market outlook last week that the office-real-estate sector can expect more remote working, as well as de-densification—that is, tenants occupying more space when they do return to the office. However, he hesitated to predict the longer-term impact of those dynamics. “There is a considerable cost to de-densifying in that manner and most companies will not exactly be cash rich over the next few years,” he said. “I would suspect that once we are on the other side of a recovery and in the fullness of time, the overall impact might be neutral. But again, it is just too early to make a definitive call.”
The shift to remote work could also affect employee compensation. Zuckerberg said Facebook staff would have their salary adjusted based on their location as of Jan. 1, 2021. It could also mean people outside tech hubs can compete for those jobs. Shopify has previously made region-specific job commitments, including a plan to have 1,500 workers in Toronto by 2022 and a January pledge to hire 1,000 people in Vancouver with a space “set to open in late 2020, occupying four floors and 70,000+ square feet in downtown Vancouver.” The company has since updated its careers website to classify open positions by continent rather than city.
LSPD: Point-of-sale technology firm Lightspeed grew revenues 70 per cent to US$36.3 million in its fiscal fourth quarter. The stock jumped as much as 30 per cent in early Thursday afternoon trading, as the results showed the company weathering the COVID-19 pandemic better than analysts expected. The outbreak has accelerated independent retailers’ and restaurants’ shift to software-based point-of-sale systems, and Lightspeed believes it is poised to benefit. The firm has held onto most of its merchants so far, crucial as its revenue depends on monthly or annual subscriptions rather than transaction fees.
There are now more unemployed Americans than the entire population of Canada: The U.S. reported 2.4 million people filing for unemployment benefits last week, bringing the total since mid-March to over 38 million. Half of jobs at firms with fewer than 100 employees are vulnerable, compared with 40 per cent of jobs at firms with 500 or more staff, according to an analysis by McKinsey & Company. The U.S. also hit a six-year high in leveraged-loan defaults this month.
In the markets: All major North American indices closed down today amid rising Washington-Beijing tensions combined with negative economic data, globally. South Korea and Japan reported export drops of over 20 per cent. IMF managing director Kristalina Georgieva is calling for a halt to bank dividends and buybacks. Analysts estimate that Canadian banks will report a 36 per cent drop in second-quarter earnings. The dollar fell to 71.68 cents U.S. in late-afternoon trading. There were some positive indicators. Italy raised a record €22 billion in a bond sale, while business activity in the eurozone increased from 13.6 in April to 30.5 in May. Banks on the continent aren’t lending under government-backed programs as quickly as many expected, which may be hindering the recovery. Brent crude hit its highest price since March as inventories and output fell, assuaging concerns about a supply glut. Chinese search giant Baidu is reconsidering its U.S. listing following tightened rules requiring greater disclosure from companies looking to go public.
“The thing I miss most is going to school. I miss having a purpose. Online school is not the same”: High school seniors, like Zoey Meyer from South Africa, are worried about losing summer jobs and considering taking gap years as they reluctantly come of age in an online world.
Cross-country checkup: Experts told a federal committee Canada’s pandemic response has been severely limited due to a lack of real-time data. B.C.’s provincial health officer Bonnie Henry warned that a second wave of the coronavirus was inevitable in Canada. Ontario will unveil a plan for random testing next week. The Canadian Civil Liberties Association has filed a lawsuit against Newfoundland and Labrador, arguing the province’s travel restrictions violate the Charter of Rights and Freedoms. Authorities are investigating possible security breaches at Canadian organizations conducting COVID-19 research. Meanwhile, Ottawa has delayed the release of its plan to meet more stringent emissions-reduction targets for 2030, due to the pandemic. The Alberta Energy Regulator also cited COVID-19 restrictions in its decision to suspend environmental-monitoring requirements for the province’s oil and gas industry. The country’s agriculture sector is facing a shortage of migrant workers; the government is exploring “additional ways to shore up our domestic labor supply.”
Startup slowdown: A report from Prospect and BDC Capital found that new job creation at Canadian startups dropped by 61 per cent in April, compared to the monthly first-quarter average. Nearly a quarter of Canadian startups have had layoffs, amounting to 5.5 per cent of the total workforce. Almost one-third of those laid off were in marketing and communications, while 22 per cent were in software engineering, according to the Canadian COVID-19 Talent Help List, a public database of self-identified tech workers who have lost work. The report found that 73 per cent of startups were scaling back hiring due to the pandemic, while 69 per cent said their ability to raise funds had been negatively impacted.
Bay Street to Main Street: Rents are falling rapidly in major Canadian cities, which could drag down house prices, according to a report from Capital Economics. Vancouver saw a 16 per cent month-over-month drop in prices for two-bedroom apartments in April, while in Ottawa, they fell nine per cent and in Toronto eight per cent. Capital Economics estimated the vacancy rate could rise from 2.2 per cent to 3.5 per cent, the highest since 1997. Part of the problem is the travel ban, which has led to a precipitous drop in net immigration from the usual 30,000 a month, reducing the number of people looking to rent. At the same time, a surge in unemployment makes current renters less likely to move to a new property.
- Outgoing Bank of Canada governor Stephen Poloz said Thursday afternoon that interest rates would likely stay low, as growth is expected to shrink by 15 per cent in the second quarter compared with the last quarter of 2019.
- Prime Minister Justin Trudeau said the government will have “careful discussions” with airlines offering travel vouchers instead of cash refunds for cancellations. Meanwhile, Air Canada will stop using the federal wage subsidy. S&P Global Ratings has downgraded the airline along with WestJet.
- Chinese vaccine maker CanSino Biologics has signed a deal with Vancouver-based Precision NanoSystems to test and sell a vaccine the firms are developing.
- Spiked mergers and acquisition deals are becoming increasingly common on Bay Street, following a long dealmaking bull run.
Crowdsourcing the crisis: The Prosperity Project, a non-profit supported by 64 women leaders from across Canada, launched today to help mitigate the economic impact of COVID-19 on women. The organization will conduct a long-term study on how women are faring in the Canadian economy, looking at factors like employment, income and support network. It will also create a new Canadian household purchasing index to measure women’s confidence in the economy, as well as annual reports on the number of women in executive and management roles among the FP500. With schools shut down and limited child-care options, Penny Collenette, a University of Ottawa professor and project member told The Logic the group is worried that “women’s path to prosperity has been challenged” by the pandemic. “Any progress we may have made in terms of numbers of careers for women could be jettisoned,” Collenette said.
Trace me on my cellphone: Italian Premier Giuseppe Conte said the country’s app will begin testing in the next few days. Spain will test its technology at the end of June in the Canary Islands. The United Arab Emirates has launched a nationwide campaign to urge all residents to download Alhosn, its official contact-tracing ap, which requires “a high number of subscribers to ensure effectiveness.”
In the lab: Halifax-based Appili Therapeutics has received Health Canada clearance to test favipiravir as a preventive measure against COVID-19; Wuhan researchers have seen positive results using the antiviral. U.K.-based drugmaker AstraZeneca said it can manufacture one billion doses of the University of Oxford’s potential vaccine and will begin to supply it in September if clinical trials are successful. The company has signed a contract to deliver at least 400 million doses, 300 million of which are set to go to the U.S. after a US$1-billion investment by the country’s Biomedical Advanced Research and Development Authority. Meanwhile, William Haseltine, the U.S. scientist behind research in cancer and HIV/AIDS, said that he “wouldn’t count on” a COVID-19 vaccine, saying measures like isolation and infection tracing will be more effective.
Drinking from the firehose:
- Amazon has launched a food-delivery service in four markets in India; the announcement comes as local competitors Swiggy and Zomato grapple with low sales during the pandemic.
- Some tech firms are equipping workers with contact-tracing Bluetooth devices to monitor their exposure to the virus.
- Peloton is developing a cheaper alternative to its US$2,000 stationary bike in a bid to make its equipment affordable for everyone as more people work out at home.
- German airline Lufthansa is in advanced talks to secure a US$9.9-billion state bailout that would give Germany a 20 per cent stake in the company.
- Gap is fast-tracking its rollout of assembly-line robots to help buoy its business in the absence of human workers.
- L Brands, parent company of Victoria’s Secret and Bath & Body Works, is permanently closing hundreds of retail locations in Canada and the U.S.
- Mindstrong, a digital mental health firm run by former Uber executive Daniel Graf, raised US$100 million from investors including General Catalyst, Foresite Capital and Bezos Expeditions.
- U.K. sports-car maker McLaren is battling with investors over a collection of classic cars the investors claim is pledged to them, but which the company wants to mortgage to new lenders.
Around the world: The U.S. could have prevented roughly 36,000 COVID-19 deaths if social-distancing measures had been put in place one week earlier than it did in March, according to a new study by Columbia University. The United Nations estimated that more than half a billion children under the age of 18 have lost access to education due to school closures. EU regulators called on passengers to wear face masks and for airlines to scrap food trolleys in new guidelines for air travel.
Some bad news: John Krasinski’s self-produced web series “Some Good News” is moving from YouTube to ViacomCBS; Krasinski will no longer be the host.
* We’re emphasizing new cases, rather than running totals, because “flattening the curve” is when each day’s new cases are fewer than those of the previous day. The percentage increase is determined based on how today’s cases compare to a rolling seven-day prior average. Numbers may also vary based on countries’ individual testing capacity and reporting.
Our reporting team is working tirelessly around the clock to deliver the very latest information on the COVID-19 crisis. If you like our journalism, please consider subscribing. You can get a subscription today for more than $100 off your first year.