ECONOMIC VIEWPOINT
WILL THE PANDEMIC LEAD TO THE DECLINE OF THE DOWNTOWN CORE?
EN
René Vézina Journalist
New York City’s upscale districts are losing big-name retailers. Unthinkable not so long ago, rents in the heart of Manhattan are now dropping steadily. The price per square foot has just slipped below 700 dollars, a figure not seen since 2011 at the end of the previous recession. Some sectors have been hit harder than others. In the trendy district of Soho, for example, prices are plummeting. Over the past year prices have fallen from $699 to $437, a drop of 37.5%, according to an analysis published on cnbc.com. In general, tourists are becoming scarcer and New Yorkers themselves are shopping less frequently. Once popular businesses are closing down one after the other, posh streets like Fifth Avenue are now peppered with "For Rent" signs, and building owners have no choice but to offer cheaper rents. And it’s the same all across the United States – in Chicago, Los Angeles and elsewhere.
René Vézina has been a journalist for the past 40 years. He has worked in print media such as Les Affaires, where he was the editor of the business and finance magazine in the early 2000s, and also in electronic media, notably with the Radio-Canada radio network, where he worked for 15 years as its business and economics columnist. Over the course of his career, he has become an expert renowned for his in-depth coverage of economic news.
It’s not just retail that’s suffering from Covid-19. Many office towers have been depopulated as well. Large companies are encouraging teleworking, and some, starting with Facebook, are indicating that they intend to continue with teleworking even once the pandemic has ended. Facebook boss Mark Zuckerberg said last May that he would like to see half of his 45,000 or so employees working from home on a regular basis within 10 years. Obviously, that attitude is not due to sheer generosity of spirit. Having
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fewer people in the office means less space to rent and lower rental bills. Is the trend also apparent in Québec? And if so, could it become the rule here too, rather than the exception? There are already signs of weakness. On August 7 Cominar released its most recent financial statement and report on the effects of the pandemic, announcing that it would have to devalue a portion of its commercial assets. Even the temporary closure of stores has destabilized many retailers. Cominar was able to collect only 46% of the rent it would normally have collected between April and June. As a result, the company had to write down $165 million of the value of its shopping centre portfolio. If office buildings, also under pressure, are included, then the devaluation reaches $251.5 million. "Teleworking is definitely gaining in popularity and space requirements are likely to decrease in office buildings," said Marie-France Benoit, Senior Director, Strategic Development, for the Altus Group in Montréal. "But keep in mind that commercial leases are for five or ten years, so you can’t just pick up and leave on short notice."
