Retailers located in the downtowns of major Canadian cities have been grappling with a few issues these last few years which have directly impacted their businesses.
First, the pandemic initially created ghost towns in inner cities across Canada with offices locked down as workers worked remotely. Three years later, the impact of that is still evident as downtown office vacancy rates in some cities remain high.
Remote work is here to stay as many companies have also adopted a hybrid work model where people work some days at home and some days in the office.
With fewer people in downtowns these days, it means less consumers for retailers and food establishments. And no one knows if we’ll ever get back to normal.
The second issue for businesses in downtowns is an increasingly growing concern across Canada. It’s one of safety. Some cities like Vancouver and Toronto are worse than others but almost any city of decent size in Canada is feeling the impact of this burgeoning issue – tent cities housing homeless people set up on downtown sidewalks or parks as well as drugs and crime.
“Hybrid work has sort of taken hold and those downtown businesses that were dependent on suburban commuters coming in and out every day – the lunch rush or the breakfast rush – have had to adjust,” said Mallough. “It’s still there some days of the week usually in the middle Tuesday through Thursday but it’s quieter Mondays and Fridays and we’ve seen some restaurants that used to be full service breakfast, lunch and dinner are maybe just breakfast and lunch or maybe just lunch and dinner. So there have been some adjustments on that side.
“The other area we have heard concerns around is the public safety side of things. A number of businesses we surveyed and about one in four (24 per cent) said they have been directly impacted by community safety issues like damaged property, theft, that sort of thing. There’s another third that while they haven’t been directly impacted are certainly worried about it.
“There’s a lot of worry about the safety of their customers, the safety of their employees, personal safety, coming off of that as well.”
Mallough said the perception of safety is also important to the well-being of businesses located in downtowns across Canada.
“Anything that is making people nervous about going downtown or preventing them from going downtown is definitely a big concern,” he said.
“It’s something that we (CFIB) are starting to delve into. It’s popping up more than it traditionally has. That’s not to say this was never an issue but it’s certainly more of an issue now . . . We are seeing it on the rise as a concern.
“In terms of what there is to be done about it, that we’re still trying to hash out a little bit. It’s important to work with Mayors and Councils on making sure that the community does in fact feel safe.
“We need to reinforce the message that we do want people to come downtown. We want people to feel safe and we want to make sure that people are coming downtown, they are spending at their local business, supporting their local communities, because if we turn downtown cores into ghost towns we’re all going to be a lot worse off for it. It’s not going to fix anything from the public safety side and certainly not on the local economy side.”
“That really is driven by the influence of remote work,” said Gill, adding there’s almost 50 million square feet of vacant office space available within Canadian downtowns – a nearly 40 per cent increase since the pandemic.
“That’s the equivalent of about 89 baseball stadiums the size of the Rogers Centre in Toronto. That has caused a huge ripple effect . . . The downtowns of Canada’s 10 largest cities, the movement of their workforce on a weekly basis, is still 30 per cent below where it was before the pandemic. That has a domino effect on office vacancy, that also has a domino effect, or a ripple effect, on all the different sectors or components of downtown urban centres that rely on workers commuting every single day to the office.
“So you see that ripple effect on main streets and the type of businesses that are specifically around to cater to the typical commuter.”
The other big dynamic shift being experienced now as well is consumer behaviour, added Gill.
Transaction data for July when the Bank of Canada started raising interest rates in June indicates that started a downward trend in consumer spending. Consumers have started to hold onto their wallet more because it’s becoming more expensive. That is having an impact on discretionary consumer spending in Canada’s downtowns.
“When you have a confluence of fewer people in the area and trending towards lower spending because of tighter times, that has knock-on effects broadly,” said Gill.
Despite those challenges, many businesses have been resilient and optimistic.
“They’re feeling optimistic about the future. They’re holding in tight. They still plan on hiring more people. They expect sales to continue to grow,” he said.
David Downey, President & CEO of the International Downtown Association, said there are continuing concerns for small businesses and small business survival in Canadian cities post-pandemic which in part is due to the reduction in daytime foot traffic.
“That of course can be attributed in part to reductions in the office worker during the week, in particular. And really the future of the hybrid work environment is something that all downtowns across the world are trying to wrap their arms around and looking for opportunities to move forward,” he said.
Downey said social issues within urban centres are visible everywhere.
“In particular, the presence or visibility of unhoused or our neighbours who are burdened by mental health or substance abuse and addictions is becoming more visible in part because of the people that are on the streets throughout our urban centres,” he said.
“This sort of activity is one that is a negative perception on the safety and security of our urban centres. So ongoing this becomes a challenge for trying to bring people back to the urban centres, hosting events or doing placemaking activities. It’s something where people have to overcome any perceptions that there is in fact unsafe environments. And we can share statistics that crime in urban centres is down and in downtowns it’s lower but there still is the ultimate perception that our sidewalks are seemingly unsafe.”
Downey said many of the association’s members have begun to develop outreach coordinated teams who are trained professionals that can help assist the unhoused and those with mental health and addictions crises and rather than law enforcement, they go in and help provide connection to public services and social services and assist individuals in their time of need.
“Cities are certainly on the rise. Recovery is beginning and getting stronger. And like any disruption it’s going to take the entire community to step forward and really embrace what will be our new future. Downtowns are still fabulous, wonderful places to be. So we’re excited for the future,” he said.