Point of no return

Businesses need to step in if our cities are to stop rotting from their downtown cores.

Downtown Montreal has a lot going for it. In addition to being the economic engine of Quebec’s most important metropolitan area, it is set apart from other downtowns in North America by its seamless blend of functions, combining business, retail, culture, restaurants, entertainment, education, tourism and housing.

The pandemic, however, fundamentally altered the city’s trajectory. Across the world, migration flows, increasing housing costs, hybrid work arrangements, office vacancies and falling transit ridership function as both cause and effect of a pervasive downturn in urban activity. In Montreal, for example, rents have risen by 14 per cent since last year and are set to increase by 30 per cent by 2025; office vacancy rates in the central business district are expected to approach 25 per cent by 2025; and transit ridership remains stalled at 75 per cent of its pre-pandemic levels.

The profound effects of the pandemic have led several observers to predict an “urban doom loop.” They foresee a self-reinforcing cycle of collapse in which a decline in activity downtown results in business closures and tumbling municipal tax revenues. This, in turn, forces cities to cut services, thus speeding the flight of residents and businesses. In this scenario, the cycle repeats until city centres become abandoned to crime, poverty and homelessness. According to some observers, the precarious situation in which downtowns find themselves today is similar to that of “rust belt” cities such as Detroit and Pittsburgh in the 1970s, when waves of technological change eroded manufacturing activity and sent these urban centres into a protracted downward spiral.

Whether or not this turns out to be true, the effects of the confluence of trends we are seeing today are not only worrying for their impact on cities, but also for their impact on businesses and the economy as a whole. According to Statistics Canada, in the six largest metropolitan areas — Vancouver, Calgary, Edmonton, Ottawa, Toronto and Montreal — downtowns cover only 0.1 per cent to 0.3 per cent of the land area, but account for 15 per cent to 24 per cent of jobs and 13 per cent to 24 per cent of the country’s gross domestic product. Indeed, dense and complex city centres create a clustering of talent, ideas and knowledge that companies need in order to innovate and grow. The concentration of leading sector jobs attracts highly skilled workers, who then offer more opportunities for companies to develop specialized products and services. In Montreal, this has led to rich ecosystems of expertise in aerospace, artificial intelligence, software development, fintech and other sectors that have powered the economy.

As the long-term effects of the pandemic on our living and working habits gradually became apparent, governments at all levels have implemented programs and committed funds to revitalize downtowns. Although this is necessary, governments alone cannot realistically muster sufficient resources to kickstart a revival of downtown cores. Instead, revitalization requires a comprehensive solution involving all stakeholders. Therein lies an opportunity for businesses from all sectors to determine where public and private interests overlap, and to pressure governments into being part of the solution. The benefits that come from having dynamic downtowns, as demonstrated by Montreal, should be enough to persuade them.