As the coronavirus has upended the daily lives of Canadians, a certain accepted wisdom has emerged about where and how people live. The pandemic, the thinking goes, has caused a dramatic shift in population patterns: namely, a depopulation of major urban areas in favour of suburban, exurban and rural areas. Call it the urban exodus.
These cities are showing how a reimagined economy can bring more resilience and prosperity even amid the economic shock of a pandemic.
And in some parts of Canada and the United States, this is exactly what is happening. Rents in core areas of some of the largest cities in the U.S. have decreased significantly compared to regions outside of the core, according to Bloomberg CityLab.
But two major metropolitan areas in Canada—Vancouver and Toronto—have defied this trend.
Fueled by growing industries like technology, media and entertainment, these cities are showing how a reimagined economy based on information and digital technologies can bring more resilience and prosperity even amid the economic shock of a pandemic.
Embracing the digital age
Take Vancouver. Since 2010, its economy has been the fastest-growing in Canada, according to the Conference Board of Canada. And its tech sector has grown at a 29% annual rate—the fastest in North America, according to CBRE. It attracts $2.5 billion a year in local startup investments, according to PitchBook and CVCA.
Then there is Toronto, which has also been fueled by information-age industries like artificial intelligence, video games and entertainment.
Housing prices in the Greater Toronto Area have increased substantially over the past 15 years. In January 2005, the benchmark price for a single-family home was $352,100. By October 2020, that had nearly tripled, to $1,017,100.
Perhaps most surprising, the pandemic has not slowed this down. In fact, prices for single-family homes in the Greater Toronto Area—which includes Mississauga, Oakville, Burlington, Markham, Milton and others—increased by nearly 6.3% from March last year, when the lockdown began, to October.
Even more remarkable, housing prices do not appear to be increasing in the Toronto region’s suburban areas faster than in the core. In the suburban town of Mississauga, for example, prices for single-family homes increased by 3.3% and only by 1.3% in Oakville-Milton—far less than the growth rate across the Greater Toronto Area.
Behind the growth
Fueling the boom times in Vancouver and Toronto is a mix of intellectual capital, government support and economic savvy.
Put simply, Vancouver and Toronto have attracted new-economy businesses centered on technology, media and entertainment, all of which have helped fight off the shock of the pandemic and the corrosive effect of the trade war.
One reason is government support. British Columbia and the Canadian government have offered programs to support early-stage tech and media companies, an investor tax credit for startups and for scientific research, as well as an array of grant programs that support especially the media and entertainment sectors.
The geographic advantage
There are also geographic advantages. For Vancouver, its location on the Pacific Ocean puts it closer to Asian markets, ideal for businesses focused on trade, logistics and consumer products, which are a big part of the Vancouver economy.
Amazon, for example, has a large center that serves as an entry point from Asia for consumer products bound for distribution in Canada. And not to be overlooked is Vancouver’s time zone, which is the same as the technology centers of Silicon Valley and Seattle and makes collaboration easier.
But Vancouver and Toronto have cost advantages as well. Even though some costs like office space are rising, the regions are still low-cost compared to Seattle or Silicon Valley. Some of the larger American technology companies use Vancouver as a development center, for example, to take advantage of the lower salaries for workers. The difference can be significant—salaries among Canadian technology workers are 55% lower than in the United States.
To be sure, the exchange rate has something to do with those savings, but it’s not the whole story. A ready supply of tech-savvy workers, aided by business-friendly immigration policies, have kept the pipeline of talent flowing. Part of it is the overflow from Silicon Valley, where the competition for talent in recent years has been so intense that companies have had to look farther afield—whether it’s in Austin, Tex.; Nashville, Tenn.; or Vancouver and Toronto.
This supply of talent, though, would not be nearly as great without the presence of major research universities and the human capital they provide. Every year, a steady stream of highly educated graduates walks past the Musqueam Post at University of British Columbia for the last time, or under the Roddick Gates at McGill, with skills and ambitions to match.
As RSM chief economist Joe Brusuelas has noted, it’s no accident that high-growth areas – like Austin, or Silicon Valley, or Northern Virginia — are those with major research universities nearby.
All of these factors – government support, geography, an educated workforce — have helped Vancouver and Toronto fend off the trade tensions of recent years. When lumber prices rise because of tariffs, Vancouver can offer low-cost information age services for a global clientele. And when pipelines are canceled or shut down, threatening the flow of oil and natural gas, Toronto makes itself an incubator of growing digital businesses.
Toronto still has strength in manufacturing, with suppliers taking advantage of cross-border proximity to the United States. But it is still the digital-age industries of technology and artificial intelligence that have fueled the region’s growth.
As the pandemic and trade tensions have posed challenges for Canada’s economy in recent years, Vancouver and Toronto have stood out as models for how Canada can foster a resilient economy based on information and digital-age technologies.
Terry Booth is RSM Canada’s leader of the technology, media and telecom, and is the market leader for Vancouver.