Downtown Toronto lags behind North American cities in economic recovery, study says

From March through May, the study found, Toronto was at just 46 per cent of levels for the same period in 2019, tied with Oakland, New Orleans and Calgary. In contrast, top-ranked Salt Lake City, Utah, was at 155 per cent. Last-place San Francisco was at 31 per cent.

It is no coincidence, said study co-author Karen Chapple, that Toronto and San Francisco were two cities with some of the longest, deepest lockdowns during COVID-19. Other Canadian cities also lagged behind their U.S. counterparts.

“It’s clear. You look at that ranking chart and you look at the red cities, which are the Canadian ones, and Canada had much stricter lockdown policies than almost anywhere in the United States, with a couple of exceptions. The San Francisco area, sometimes New York were almost on the Canadian models,” said Chapple, director of the School of Cities at the University of Toronto.

The top-ranked Canadian city in the study was Halifax, in 20th place, with a 72 per cent recovery. London was the top-ranked Ontario city in 32nd place, with a 57 per cent recovery. Montreal and Vancouver were 55th and 57th, at 44 and 43 per cent, respectively.

While the severity and length of lockdowns played a key role in how a city’s downtown economy came through COVID, two other factors were also major contributors, Chapple added. And both have made it harder for Toronto during the recovery.

“The two most important things were composition of the economy — whether you’re reliant on sectors that had a lot of remote work, like finance, tech and professional services. If you’re overly specialized, as Toronto is, in those sectors? You didn’t do so well. The other thing that really mattered was how you got to work. Because people haven’t wanted to get back on transit,” said Chapple. Toronto is usually a place that relies heavily on transit, Chapple added; before COVID, there were 1.7 million trips on the TTC on an average weekday.

For small businesses in the downtown core, the study comes as bitter confirmation of the day-to-day reality they’re facing, said Ryan Mallough, Ontario regional vice president for the Canadian Federation of Independent Business.

“I don’t think this would come as any surprise to our members. That Toronto and the downtown core in particular are struggling lines up with what we’re hearing from members. That has been the case since the first lockdown: Toronto has lagged behind,” said Mallough, adding that many small business owners are realizing that the economic landscape might have changed permanently.

“The reality is that at the very least hybrid work — if not fully remote work — is pretty much here to stay,” said Mallough. “It’s something businesses are already starting to learn that they’re going to have to adjust to.”

The harsher new reality is being felt by retailers in the downtown core, said Michelle Wasylyshen, spokesperson for the Retail Council of Canada. Further afield, it’s a different story, she added.

“Retailers with locations in the suburbs are seeing steady traffic — people are shopping where they work and live,” said Wasylyshen, adding that the flow of tourists into the city is also a fraction of what it was before COVID struck.

“That impacts Toronto downtown,” Wasylyshen said.

In an emailed statement, Toronto Mayor John Tory acknowledged the downtown recovery has taken longer than he’d hoped.

“If you had to put it down to one reason why our downtown recovery has been a bit slower, it is the slower return to work especially by those employed by larger companies. I have been meeting with those employers consistently to assist and encourage them in having their teams return to work downtown but I understand the challenge involved,” said Tory, who also suggested the labour shortage has made businesses leery of leaning on workers to come back.

“The labour shortage has made it much more difficult to set rules or deadlines as opposed to persuading and offering incentives. By definition this is a slower process but it reflects the fact that a stricter approach may have caused some of those very same employees to change jobs,” Tory said.

The mayor also says the numbers are starting to pick up for public transit, rising to 60 per cent of pre-pandemic ridership from the 20s during the depths of the pandemic.

Still, suggesting Toronto’s downtown core is going to wither away isn’t quite accurate either, argued Marcy Burchfield, vice president of the Toronto Region Board of Trade’s Economic Blueprint Institute.

“It’s premature to declare the death of downtown Toronto. That’s not the case at all,” said Burchfield. “We’ve attracted a lot of new tech companies through the pandemic. We’ve got universities, colleges and incubators that are knowledge hubs. We’ve got a strong private sector. We’ve got a great mix.”

A spokesperson for Ontario’s economic development minister Vic Fedeli agreed, pointing to a recent announcement by Tata Consultancy Services that it’s investing in a new “innovation hub” which will provide 5,000 jobs in downtown Toronto by 2027.

Cost-cutting has also helped, said the spokesperson, Kristin Demeny.

“By reducing the cost of doing business in the province by $7 billion a year, we have created the conditions for the economy to grow and thrive,” said Demeny.

If there was one bit of hope for Toronto in the study, it’s The Big Apple, said Chapple.

“In February, New York was still at 40 per cent. And now New York’s at 78 per cent. So that gives me hope. And that’s because arts and entertainment have come roaring back, and it has a diverse economy. So that’s a message for a place like Toronto.”