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toronto-downtown.jpg Elijah Lovkoff / Alamy Stock Photo

Why Workers Aren’t Returning to North America’s Second Biggest Financial Center

Toronto is North America’s fourth-largest city and second-largest financial center, and on many days its downtown is bustling again. However, a range of data suggest a more downbeat trend: Toronto’s workers are returning to the office at consistently lower rates than comparable metros.

(Bloomberg)—It’s been 360 days since Toronto’s last pandemic lockdown ended, and the vast underground mall running beneath its financial district is still showing scars.

A Starbucks next to the Hockey Hall of Fame, once a favorite place for dealmakers to meet, hasn’t reopened. A sprawling food court is largely devoid of restaurants. And in the underground thoroughfares between — built to allow the bankers, traders and investors of Canada’s financial capital to visit each other without going outside — many storefronts still sit empty.

Toronto is North America’s fourth-largest city and second-largest financial center, and on many days its downtown is bustling again. However, a range of data suggest a more downbeat trend: Toronto’s workers are returning to the office at consistently lower rates than comparable metros.

It ranked 41 out of 62 in a University of Toronto study of downtown recovery based on mobile phone data. Just 43% of employees were back in the office compared to pre-pandemic levels, according to early February data from the Strategic Regional Research Alliance. That’s lower than New York, San Francisco, Los Angeles, Chicago and most other US cities tracked by Kastle Systems, which also measures occupancy as a percentage of pre-Covid norms.

To be sure, the number of workers in the office has steadily climbed from below 10% in the early days of 2022, when the omicron outbreak was raging and Toronto was still under lockdown. Full subway cars are a more frequent sight in rush hour, and lunchtime lines are growing at the restaurants that are still open.

But foot traffic in mid-December was 60% lower than the week before the first Covid-19 lockdown, data from commercial real estate brokerage Avison Young show — worse than Boston, Los Angeles, Manhattan, San Francisco and Washington, DC.

“Not many people walk downtown any more,” said Catherine Yeunhee Cho, who has owned a shoe repair business in the financial district’s underground mall for the last decade. She says business is down by 50% compared to before the pandemic, and she doesn’t know how long she can last. “People just come to work a couple days a week, or one day. Our business is shoe repair. People need to wear their shoes more often. Now they don’t need to wear their shoes.”

The factors determining the rate at which workers return to the office in any city are complex, ranging from the makeup of the economy to local culture and the weather. For Toronto, workers’ reluctance to come back may also be related to the housebound habits that formed during one of the world’s longest Covid lockdowns, with restaurants closed to indoor dining for a total of 436 days and events barred from full capacity for 628.


Karen Chapple, director of the University of Toronto’s School of Cities, has been studying downtown recovery across North America. She believes the city’s financial district is only at the beginning of a decade-long transformation that will drive down office rents and see its bankers replaced by other professions, like non-profit workers or artists.

“It’s going to look very different,” she said. “Not so many suits.”

Chapple’s research suggests the biggest factor determining a downtown’s post-pandemic recovery is the type of industries based there, and for Toronto that’s finance, professional services like lawyers and accountants, and technology. All these types of jobs are relatively easy to do from home, which has meant fewer people returning to the office. It also doesn’t help that the North American tech industry is undergoing its biggest wave of layoffs since the dot-com crash. Or that Canadian bankers are more likely to spend their time underwriting mortgages than trading securities, making it easier to work from home than for their counterparts in New York City.

Toronto-Dominion Bank has asked its employees to come in only two days a week, while Bank of Nova Scotia plans to open two community working spaces this month in the city’s far eastern and western suburbs so further-flung employees don’t have to commute downtown. One of Toronto’s biggest law firms, Norton Rose Fulbright, is following the banks’ lead by asking workers to come in two or three days a week, while consultancy Deloitte has set no minimum for its Canadian employees at all, and only asks they come in when a meeting or event warrants it.

“There is resistance,” David McKay, chief executive officer of Royal Bank of Canada, said in a recent interview on BNN Bloomberg Television. Most workers are now coming in two days a week, he said, “and we’re trying to move that to three days a week.”

By contrast, Wall Street has pushed harder to bring workers back to their desks, with bosses like JPMorgan Chase & Co.’s Jamie Dimon and Morgan Stanley CEO James Gorman among remote work’s most vocal critics. Goldman Sachs Group Inc. CEO David Solomon has famously called working from home “an aberration.” However, some have conceded recently that their workers are typically only in the office three to four days a week.


Another reason for Toronto’s worse back-to-office numbers may be its very high cost of living relative to most peers. Toronto ranked as the fifth-least affordable housing market in North America in annual rankings put out by consultancy Demographia — worse than New York City, Miami, or Seattle.

House prices in Toronto have fallen over the last year but that’s been offset by the rise in mortgage rates, which have made it even less affordable for the average person to buy. It’s tough for renters too, with the apartment vacancy rate sitting at just 1.7%.

With shelter costs so high, many people took advantage of remote work to move to more affordable communities outside the city, leaving them with longer commutes to the downtown core.

Andrew Myles, a product manager at a Toronto-based data analytics firm, was one of them, moving to the small city of Barrie during the pandemic. Now his 100-kilometer (60-mile) commute takes up to two hours each way during rush hour, compared to about 30 minutes when he lived in Toronto.

Right now his company is only asking him to come in two days a week, which he says he’s fine with, but he may consider leaving if that number goes up. Canada’s economy added 150,000 jobs in January and the unemployment rate held steady near a record low of 5%.

“When I looked around I thought, ‘You know what, I could find another job if I had to,’” Myles said. “If there’s not flexibility at one employer, I think there’s probably flexibility out there in the market.”

Vacancy Rate

Another factor making the return to office unappealing for many Torontonians is the perception that public transit is becoming less reliable and more dangerous — a problem that New York and other American cities also had to address as they reopened.

Former Toronto Mayor John Tory, who resigned abruptly last week after saying he had a relationship with a staff member, had made building housing and transit top priorities for his third term in office. Now those plans are in limbo until his replacement is elected in the coming months.

In the meantime, Toronto’s downtown offices continue emptying — the vacancy rate rose to a nearly two-decade high of 13.6% at the end of last year — and it may take some time before new tenants come to fill them.

Chapple at the University of Toronto expects things will get worse before they get better, but the decline will eventually turn into a revival. “At a certain point, commercial rents are going to come way down,” she said. “And then you’ll get a whole bunch of interesting new folks coming in.”

--With assistance from Kevin Orland.

To contact the author of this story: Ari Altstedter in Toronto at [email protected]

© 2023 Bloomberg L.P.

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