The pandemic hurt many retail businesses in the past year but downtown areas such as Yonge Street in Toronto were particularly hard hit due to all the lockdowns, the public health measures and the lack of office workers frequenting the area.
“I think retail has been struggling. The big banks are an indicator to seeing traffic flow to downtown Toronto and everybody thought that in the new year everybody was coming back and COVID was over but little did we know Omicron hit and that really just put a damper onto the retail side that’s flowing in downtown Toronto,” said Shawn Abramovitz, CEO and Broker of Record for Pivotal Commercial Realty in Toronto.
“Back in 2020, we saw 46 retail properties were leased. This is along Yonge Street in Toronto and then in 2021, 33 retail properties got leased. So there’s definitely been a downtick and in 2022 we’ve seen only 15 properties leased so far on Yonge Street.
“The idea of mandating people to the office and the 40-hour work week, that’s gone. I read a survey where 50 per cent of people said if you mandate the workforce to go back, they’ll leave the company. So I think what’s happening is we’re seeing that a lot of people are getting used to remote work and that’s really affecting streetfront retail, especially the underground PATH system. Those guys are getting decimated.”
Abramovitz said he doesn’t see a turnaround in the market just yet. COVID is still around. Air purification systems in office environments are still challenging.
“Until people feel safe to get back to work versus slamming the iron fists on the table to say get back to work, it’s just not going to work,” he said. “The smaller spaces, 1,000 square feet, there’s a lot of activity for retailers swimming in that space. You’ve got your typical food guys, your shawarmas, your pizzas, your fried chickens, all those guys are still running around.
“But when it comes to that bigger retail space, let’s call it plus 2,000 square feet all the way up to 5,000 square feet or greater, I mean those retailers are struggling and they continue to struggle. I think that the rents that are being offered for those spaces are, in my opinion, ridiculous. They’re pre-pandemic pricing. I do think regardless of the pandemic, the 800 to 1500 square foot tenants are always going to swim around and they’re always going to be looking for space and gobbling up space but the problem with Yonge Street is we have a lot of unrealistic pricing.”
Abramovitz said what will turn things around for retail in the downtown is a focus by offices to bring back that safe environment for people.
“If we don’t filter our air properly we’re going to have a tough time mandating people to get back to the office,” he said.
“We manage about 60 listings in about 40 different cities and we’re definitely seeing a lot more activity whether it’s in the GTA. I’ve got listings in North Bay that are on fire. Lots and lots of activity. Chatham as well. All in these areas we’re getting lots of activity. Pre-pandemic it was kind of ghost town. For example, Parry Sound. We just secured two drive-thru deals at Parry Sound Mall. Drive-thru is a really big deal here. It’s like the bitcoin of retail. If you’ve got a drive-thru, that’s what retailers are really, really looking forward to.”
Pauline Larsen, Director, Economic & Community Development for the Downtown Yonge BIA, said the BIA’s section of Yonge Street runs from Grosvenor Street in the north to Richmond Street in the south.
“Office occupancy absolutely tanked,” said Larsen, of downtown Toronto during the pandemic. “We saw it going down to seven, eight per cent during the course of the pandemic. And this is the whole downtown core office towers, not specifically our neighbourhood, but it gives you a good idea of the context.
“Then as we started to track up a little bit at the end of last year and then Omicron hit and it kind of went back down again. The latest data suggests that as of mid-April, they take the counts on the first and 15th of every month, the occupancy in the downtown Toronto office towers is about 22 per cent right now, which is significantly better than it was a year ago but of course that’s still 78 per cent vacant and that of course does have an impact on foot traffic.
“From an office occupancy perspective, we’re seeing recovery, we’re seeing an improvement but it is certainly not back to where it was before the pandemic.”
Larsen said the current vacancy rate overall for the Downtown Yonge BIA’s section is just under 14 per cent, “which honestly is not awful.”
“I would love it to be lower but given what we’ve been through in the last two years I’m always relieved to see it’s hovering at the 13.8-14 per cent level and that has stayed pretty consistent in the last six months,” she said. “So that’s been quite interesting to see.
“What I will say is the smaller streetfront businesses are typically struggling more with vacancy than the more established chains or the commercial real estate properties that have several tenants in them. It seems to be more the streetfront independent businesses that continue to have a hard time.”
The good news though, she said, is that the area has seen a definite trend towards recovery in pedestrian traffic.
“We track pedestrian traffic north and south on Yonge Street in our specific area. To give you an example, in March of 2019 we recorded about 6.2 million people, foot traffic, walking up and down Yonge Street. In 2021, that number in March fell to just under two million and in 2022 for March we’re up to 4.3 million. So it’s more than double what it was a year ago. It’s not quite at 2019 levels but it is certainly showing a tick upwards and I can say the same is true for both January and February. We’re seeing those things start to pick up again,” added Larsen.
“That makes sense. As the office occupancy starts to pick up, as the universities start to see students coming back, as people are starting to come back downtown. Our hotels are reporting they are starting to see more booking of conferences and that type of thing.
“Overall, I think the picture is cautiously optimistic and we’re very much looking forward to the warmer weather and the Spring and starting to see hopefully some activations on the street, more events, that are bringing people downtown.
“We’ve seen some really excellent new tenants coming into the neighbourhood. We’re getting I believe it’s the first urban format IKEA at the corner of Yonge and Gerard . . . We also have an attraction called Little Canada which moved into the neighbourhood last year and it’s basically this amazing attraction that has miniature versions of Canadian cities and neighbourhoods. They opened up also at Yonge and Dundas last year. But we’ve also seen some small retailers moving in and those are the ones that excite me.”
The BIA is also working with pop up activations in the neighbourhood.
Larsen said the BIA also tracks visitor and resident mobility. Residents in the BIA’s catchment area before the pandemic were going six to eight kilometres away from home to go out and about and they would spend an average of about 150 minutes per trip. That has actually increased over the last four to five months and they’re now travelling more like 8.5 kilometres away from home for an average 182 minutes per trip.
