The impact of the pandemic on the downtown areas of Canada’s six major cities

Downtown city centres in Canada have been hit hardest by the COVID-19 pandemic. Many elements that contribute to the vigour and appeal of downtown to visitors and residents, such as tourism, business travel, events, restaurants and hotels, have been affected while we navigate large-scale vaccine rollout. And as people avoid crowds and follow social distancing measures, the very essence of downtown city centres has become incompatible with imposed restrictions. The result has been a loss of workers, tourists and students, meaning fewer customers for local merchants.

Over the long term, downtown city centres will continue to be transformed by the acceleration of trends that were emerging before the pandemic, including the adoption of remote working, video conferencing, distance learning, an uptick in e-commerce and urban sprawl. Though we’ve adapted to life during the pandemic, if no action is taken to preserve the vitality of Canadian downtown city centres, there is a risk that a cycle of urban decay could begin, with grim economic results. The loss of activity has contributed to an overall decline in the attractiveness of downtown, strengthening devitalization.

In this report, we take a look at the impact of COVID-19 on six downtown city centres across Canada: Toronto, Montréal, Vancouver, Calgary, Edmonton and Ottawa.

Adoption of remote work

The massive shift to remote work will continue beyond the pandemic, as most of the downtown office towers are occupied by companies in sectors with a high capacity to make the shift to remote work. According to our Impact of the pandemic on the downtown areas of Canada’s six major cities report, higher adoption of remote work also means an estimated 10% to 20% fewer people commuting to downtown city centres each day, creating economic consequences for various sectors and a lessened demand for office space.

Toronto, Montréal, Vancouver and Calgary are particularly at risk because of their capacity to pivot to remote work. Commuting time could also deter workers from returning to the downtown core, especially in Toronto and Montréal.
Ottawa and Edmonton, where the public sector is prevalent, are less at risk because of the tendency of this sector to avoid major structural changes.
A decline in downtown workers could further impact retail and restaurants. Vancouver may be most affected because it has the highest ratio of stores and restaurants per 1,000 workers.
Toronto, Vancouver, Calgary and Montréal could also be more adversely affected by a downward valuation of commercial and office space. Given the low affordability of office space in Montréal and Vancouver, these cities may see more businesses reduce their space or move out of the downtown core entirely.

Decreased travel and tourism

In the first week of April 2020, hotel occupancy was less than 20% across Canada, according to Statista. In addition to low occupancy rates, downtown city centres are contending with public health and travel restrictions, and the closure of stores, restaurants and businesses reliant on tourism. While leisure tourism is partially protected by local tourism and expected to eventually fully recover, the decline in business travel will persist.

Given the importance of the tourism sector for Montréal, Toronto and Vancouver, economic activity based on tourism will be affected by the temporary or even permanent closure of some businesses.
In Ottawa, tourism is neck and neck with the high-tech sector, just behind the public sector, for its importance in the economy. As the nation’s capital, the city has several national attractions and historic sites, most of which are in the city centre or central business district.
Vancouver, Calgary and Edmonton might see a faster recovery in leisure tourism propelled by the local tourism segment. These cities are gateways to various national parks, and the outdoor tourism segment is the most promising for the years 2021–’22. This will accelerate their recovery.
But for Calgary and Edmonton, the favourable outlook for local tourism will not off-set the losses related to business tourism.

Impact of e-commerce

Before COVID-19, downtown businesses were already weakened by the rise of e-commerce. Since the pandemic, the growth of online shopping has only increased. Online sales reached CA$39.3 billion in May 2020, an increase of 99.3% from February 2020, according to StatsCan. The rise of e-commerce and its attractiveness to consumers, as well as competition with suburbs and their large, diverse and more accessible shopping centres, has impacted the strength of the downtown commercial hub—a trend likely to increase in the years ahead.

Montréal, Toronto and Vancouver are particularly at risk because they are the downtown city centres with the greatest decline in visitor traffic because of the shift to remote work, their dependence on tourism and the size of their student population.
Commercial businesses in downtown Ottawa are concentrated around the Rideau Centre and the ByWard Market, walking distance from office towers. The absence of public and private sector workers, tourists and students has had a severe impact on retail, food service and other businesses in this area. It’s uncertain at what level they will return to the city centre.
Downtown Edmonton can rely on the resilience of the public sector to mitigate the migration of workers away from the downtown core. In addition, relatively high and stable wages may fuel strong consumption.
Calgary’s downtown commercial sector is at risk because it has been designed based on the strong presence of business clientele and business meetings in this area. A significant decrease in foot traffic, particularly due to difficulties in the oil and gas sector, could hinder recovery.

Shift in culture and entertainment

Several organizations, including concert halls, museums and movie theatres, have had to close temporarily, while festivals and events have been cancelled. The pandemic is accelerating transformation in consumption patterns that were already happening before the pandemic, with online platforms proving to be more resilient since the beginning of the crisis.

Montréal, Toronto and Vancouver have the downtown city centres with the highest concentration of cultural institutions. The impact in these downtowns is expected to be greater, especially if no measures are implemented to support culture and entertainment going forward.
The cultural sector in Ottawa, Calgary and Edmonton has also been affected by the pandemic. Edmonton’s downtown arts district includes a large concert hall, theatre, art gallery, museum and library, normally attracting visitors and patrons to local cafés, restaurants, pubs, and bars. Many have closed their doors permanently. Nevertheless, the role of this sector in the recovery and revitalization of Edmonton’s downtowns should not be underestimated.
Prior to the crisis, Calgary and Edmonton were in the process of developing a strategy to revitalize their downtown areas, including significant investments in the cultural sector. Moving forward with these projects could prove to be an important factor in their recovery.

Next steps

These cities will increasingly face challenges in the coming years, which will become more complex over time. To address these challenges they will need to implement preventative strategies, that may include::

developing a downtown revitalization strategy that is premised on greener and more pedestrian oriented spaces
going beyond traditional cost-benefit analyses by incorporating a resilience lens into the approval process of new projects
implementing a smart city concept in order to increase resilience and create high value job opportunities
strengthening the cooperation between educational institutions and the business sector
giving larger cities more autonomy over their budgets ensuring support for sectors that are sustainable in the long term
encouraging visitors to return to the downtown core by public transit and active transport