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Cities’ cores are hollowing out, but small towns tell a different story

In this issue of Konfidis Insights, we dive into a recently released study from the Canadian Chamber of Commerce’s Business Data Lab pertaining to “Mobility Trends” (see the full report here).

“The pandemic caused the biggest labour market disruption of our lives. Social distancing forced rapid experimentation with remote work, altering mobility patterns and prompting businesses and workers to fundamentally re-examine where, when and how they work,” Chief Economist, Canadian Chamber of Commerce.

The “mobility to workplaces” data quantifies broad patterns using aggregated location-enabled mobile devices crossing pre-defined downtown and CMA boundaries to travel to workplaces. In layman’s terms, it assesses the number of people that cross a Downtown or census metropolitan area (CMA) boundary to travel to work.

The report assesses the number of people that currently cross these boundaries to commute to work compared to pre-pandemic levels (January 2020). For workplaces across Canada, mobility dropped as much as 40% compared to pre-pandemic levels and has recovered to only a 7% drop. However, for workplaces in Downtown Toronto, mobility dropped over 80% in the early months of the pandemic and are still down over 40% as at September 2022 (see chart below).

Source: BDL calculations using Environics Analytics data, per Canadian Chamber of Commerce Business Data Lab.

As later profiled in The Globe and Mail (see full article here), the report highlights that “the downtowns of most major Canadian cities continue to face a substantial dip in foot traffic compared with pre-pandemic norms – but the opposite is true of smaller towns and suburbs within commutable distance of those cities, data from a new study show.”

The results of the study suggests that almost three years into the pandemic, a new economic pattern is emerging in metropolitan areas across the country – a hollowing out of the central hubs of large cities owing largely to hybrid work, and growth in mobility in the outlying spokes of those cities.

“Canada’s biggest cities are significantly behind in terms of workers returning to the office. But we found that there’s been a substantial increase in activity in the downtown cores of towns within a commutable distance of these cities,” said Stephen Tapp, chief economist at the chamber.

The report, which also relied on data from Statistics Canada and the marketing and research firm Environics Analytics, measured the mobility of workers in more than 150 metropolitan areas and 55 downtowns across the country using cellphone data of commuting workers. The data essentially tracks how many people in a given geographical location left their homes and commuted to their offices.

Mobility, or worker foot traffic, in downtown Toronto was 46 per cent lower in September, 2022 – when most large white-collar workplaces began mandating return-to-office policies – compared with January, 2020. Meanwhile, the Ontario cities of Brampton, Barrie and Brantford – all within a two-hour commute from Toronto – saw a surge in mobility of roughly 30 per cent between January, 2020, and September, 2022 (see Chart below). Overall, 14 of 55 downtowns experienced increased mobility over the period and most of those downtowns were in small cities.

This trend evidences increased demand for housing in Ontario’s secondary markets. Similar to this trend, Konfidis recently highlighted the Ontario’s Secondary Markets Population Boom Boon. Coupled with the increased demand for housing solutions in these markets, Canada is simply not building enough housing to meet the demand (see the recent Konfidis Insights - A Deep Dive into (the lack of) Housing Supply).

With this backdrop, Konfidis continues to see a very compelling landscape for single-family rental ownership in Ontario’s secondary markets as the long-term supply and demand fundamentals that support strong home price appreciation and inflation protection.

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