1683895502 Canadas empty inner cities brave a return to post pandemic normalcy

Canada’s empty inner cities brave a return to post-pandemic normalcy – and business owners are feeling the pain – Financial Post

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    • The business recipe for success is being disrupted as downtown cores transform from places where people work and spend money to places where they don’t do much either

    Posted on May 12, 2023 • Last updated 34 minutes ago • 8 minutes read

    A pedestrian walks through a construction tunnel on King Street West in Toronto. A pedestrian walks through a construction tunnel on King Street West in Toronto. Photo by Peter J. Thompson/Financial Post

    Karen Chapple strolled near the University of Toronto’s downtown campus on a May afternoon, a sun-drenched glow created after an extended spell of rain. A few fire engines drove by nearby, sirens wailing, as the principal of the university’s School of Cities walked to a tram stop and gleefully observed that “a lot of people” were outside, no doubt cheered up by this after-school class, the after-work glow that urban environments are having powered.

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    It is a unique human energy, and the renewed rush of city life is reflected in the latest statistics. For example, according to a study by Deloitte, face-to-face work conferencing is on the rise as business travelers want to reconnect with and attract new customers. Air Canada reports that the total capacity of its flights has increased back to about 90 percent of pre-pandemic levels. And trackers from CGA, a consumer research firm, found that Canadians are once again looking for drinks and good food.

    And why not? There is much to celebrate, including the World Health Organization’s declaration that the global health emergency caused by COVID-19 is over. People make up for lost time by getting back to the mundane things we usually did without a second thought, with one glaring exception: going to the office and hanging around nearby afterwards.

    Amid the general trend toward pre-pandemic normalcy, working from home remains a persistent post-pandemic reality. It’s this new normal of not banging around the cubicle Monday through Friday that has radically and perhaps permanently transformed the downtown areas of major Canadian cities from places where people work and spend money to places where they don’t work a lot and don’t spend money

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    “People go to sporting events, they go to concerts, festivals are coming back, there are students everywhere, and there’s a lot of visitor activity in downtown Toronto,” Chapple said. “But it’s the inner-city working-class segment that remains extremely weak.”

    How weak? Chapple and her colleagues use cellular data to compare current activity levels — the number of people downtown on any given day — to pre-pandemic levels. Some North American urban cores have come back to life or even been reinvented as post-COVID-19 boomtowns. For example, activity levels in Salt Lake City are 139 percent of 2019 levels. However, Toronto, Ottawa, Vancouver, Montreal, Edmonton and Calgary are all around 50 percent.

    A construction worker walks past a mural of a future building on King Street West in Toronto. A construction worker walks past a mural of a future building on King Street West in Toronto. Photo by Peter J. Thompson/Financial Post

    That’s a lot of missing people, and it’s a crease in a hypothetical downtown recovery from the pandemic that caught Chapple by surprise. She and her team predicted Toronto’s numbers would drop to 70 percent, though they now appear to be pretty “stuck.”

    The main contributors appear to be commute times – Toronto scores among the worst in North America on this score – and the job market. Unemployment is low and workers are in demand, but many of these people are reluctant to come into the office. When a company starts sitting down at their desk, chances are that the happy employee will quit and find work with a company that doesn’t care where they work from.

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    It’s the folks who sit at home and enjoy a peanut butter sandwich for lunch instead of meeting up with a buddy in the office tower next door for a quick lunch bite — or a round of beers or two at the end of the day — that make the pros and Cons have imploded. Pandemic recipe for success for downtown entrepreneurs.

    “I was kind of blown away by how monumental the change was,” said Glen Kristenbrun, a restaurant industry veteran.

    Kristenbrun has restaurants in his blood. His father, Tom, has owned a number of establishments over the years, including El Mocambo, a famous nightclub where the Rolling Stones made a surprise appearance in 1977 (now immortalized on vinyl), and Bistro 990, a Toronto International Film haunt Festival glittering.

    I was kind of blown away by how monumental the change was

    Glen Kristenbrun

    But the younger Kristenbrun’s bread and butter was bacon and eggs. He once owned Over Easy, which was directly across from the Royal Ontario Museum. Above it was a gastropub, which he also owned. There was also a second breakfast spot downtown, just around the corner from the Hockey Hall of Fame. The money was good.

    “It was a captivating audience,” he said.

    Among his clients, Kristenbrun counted a mix of tourists, seniors who took their grandchildren out for breakfast, and businessmen who worked in nearby buildings. He eventually closed his seats to spend time with his family during the pandemic, but lately he’s been feeling the urge to get back in the game.

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    However, the rules he once knew to be true are in flux and may have changed irreversibly.

    “It’s really a mystery now because you can’t go back to the friendly construct you once knew,” he said. “People in the offices only come one, maybe two days a week.”

    A pedestrian walks past commercial space for lease in downtown Toronto. Office vacancy rates are high in downtown Canada. A pedestrian walks past commercial space for lease in downtown Toronto. Office vacancy rates are high in downtown Canada. Photo by Peter J. Thompson/Financial Post

    You can find the proof in the office vacancy rates. Despite near-record unemployment rates across the country, downtown Vancouver’s office vacancy rate is 10.4 percent, its highest since 2004, while Ottawa (13.2 percent) and Montreal (16.5 percent) have rates at the highest points at all. And in Toronto, the country’s largest office market and once known for fully occupied buildings, the downtown office vacancy rate is 15.3 percent, the highest since 1995.

    Kristenbrun isn’t the only one worrying about what’s going to happen next. Erik Joyal, President of Ascari Hospitality Group, is also a restaurateur with a track record who has suffered a crushing defeat during the pandemic.

    Eight months before the global shutdown in March 2020, he and his partners opened Ascari Enoteca, an Italian restaurant on King Street West, on the edge of downtown Toronto. Even in the best of times, opening a restaurant is a big gamble, but in those turbulent days before the world went haywire, the location “fitted all the bills,” Joyal said.

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    One of the most important checkpoints was the daily traffic. Tech and advertising firms, start-ups and all the ‘cool kids’ had office space in the area, while the more traditional suits in the bank towers were just a stone’s throw away. The area was booming, with a rush of visitors for both lunch and dinner. The new restaurant took off until, well, you know.

    “If you were walking down King Street today on a Tuesday afternoon, you could fire a cannon without anyone noticing,” Joyal said. “The daytime traffic is not there at all.”

    Restaurateur Erik Joyal. Restaurateur Erik Joyal says morale in the restaurant industry is hovering near the point of despair. Photo by Peter J. Thompson/Financial Post

    Some of that traffic, he said, has been shifted to friendly neighborhood restaurants, which were only open for dinner prior to the pandemic but now have enough homeworkers nearby to open at 11:30 a.m

    However, saturation in neighborhoods is low as there are only enough popular spots for locals to support. The operation in the city center has so far offered the most desirable thing: volume.

    Aside from geography, Joyal says there has been a huge shift in the industry over the past three years. The chef, who worked his way up the ranks in the kitchen in 2019, says he no longer wants to work in restaurants. The waiters left in droves. Morale is teetering on the brink of despair while food inflation and labor costs have pushed up business prices dramatically.

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    It’s enough to make one successful restaurant owner throw in the towel, but Joyal hasn’t given up hope — he has two locations in Toronto’s East End and a catering business — and he’s not ready to give up the downtown core entirely Place to operate, but will only step back in when conditions are “right”.

    Right now, conditions seem kind of weird, caught in an odd middle ground between the way things used to be and the way things are now. But count Larry Plummer, who teaches entrepreneurship at Western University’s Ivey School of Business, among the workers coming back.

    A pedestrian looks at the closed doors of a shuttered bar on King Street West in Toronto. A pedestrian looks at the closed doors of a shuttered bar on King Street West in Toronto. Photo by Peter J. Thompson/Financial Post

    He has no data to draw from, but deep in his business heart he can’t let go of the image of a boardroom full of whiteboards and people brainstorming, eating pizza and getting things done in an environment brimming with creativity at a zoom Call just can’t be replicated.

    Gut feeling aside, Plummer said there’s tangible value to organizations in having a brick-and-mortar office with regular staff, particularly for companies seeking private equity and venture capital funding.

    “It’s really difficult to raise money when you’re a virtual organization,” he said. “Investors want to be able to monitor their investments and you can go through the history of stupid behavior where people took money from an investor and used it to buy gold toilets or whatever, so investors want to have a place where they can walk.” to make sure you use the money as you promised.”

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    Plummer spoke from the business school’s offices on the 24th floor of First Canadian Place. Looking down at the Toronto streetscape at 4:30 p.m. on a Wednesday, he counted a handful of pedestrians instead of the horde that would have been there at the same time a few years ago.

    Uptown, Karen Chapple was waiting for the trolley. The sirens had died down and in the stillness she imagined a renewed core full of people in a city anchored to its waterfront, a mix of businesses and residents and the good old Monday-Friday life that reigned in the streets .

    “You have this huge urge to work from home and it’s really a new normal,” she said. “But downtown is still an area with extremely high property values, real estate prices, and global demand — and a million new immigrants — so it’s not like there’s going to be an urban doom loop for downtown.” It’s going to be something new and wonderful things come; We just don’t know what that is yet.”

    Or when it arrives.

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