Is the urban exodus about to slow down?

Workers who have left the city could face a dilemma if downtown office space reopens for good

Is the urban exodus about to slow down?

It was one of the most striking trends to impact Canada’s housing and mortgage markets at the onset of the COVID-19 pandemic: the so-called “urban exodus” that saw thousands of city dwellers up sticks and move to smaller or more rural areas.

That phenomenon arose thanks to a hurricane of factors: a remote-work revolution that allowed Canadians to work from virtually anywhere, skyrocketing house prices that made the hottest markets more unaffordable than ever, and a desire for more space during stay-at-home orders and travel restrictions.

The notoriously bloated Toronto market was among the most dramatic examples of that migration, with recently released figures from Statistics Canada revealing that over 64,000 people left that city to settle elsewhere in Ontario between July 2020 and the same month the following year.

With house prices only expected to continue rising this year – real estate firm Royal LePage has projected a further 10.5% increase across the country in 2022 – the desire of Canadians to seek a home in more affordable areas could be set to continue for a while yet.

Still, a big factor that will determine the future of Canada’s urban exodus remains unknown: namely, how long will companies continue to allow their employees to work from home?

Read more: Canada’s urban exodus – the lasting impact

In its Q4 report on Toronto’s office space, commercial real estate services firm Avison Young revealed that downtown vacancy had fallen quarter over quarter for the first time since the opening months of 2020.

However, its overall downtown vacancy rate – 7.5% – was still well over the Q1 2020 rate of 2.1%, with the number of Greater Toronto Area (GTA) buildings with more than 50,000 sq. ft. available increasing by two from the previous quarter.

Those mixed numbers were perhaps no surprise, given the Omicron surge that’s heralded fresh business closures and work-from-home orders across Ontario in recent weeks.

Restrictions that came into effect near the beginning of the month ended on January 31, allowing many businesses to reopen following a three-and-a-half-week shutdown.

Across the country, mortgage professionals will be watching intently to see if a hoped-for easing of the pandemic and related restrictions will also see employees called back to their city offices – a development that could slow the stream of Canadians leaving the priciest cities.

Another city that bore the brunt of the urban exodus was Montreal, which StatCan said had seen about 40,000 residents relocate to other parts of Quebec during that 12-month period between July 2020 and 2021.

Terry Kilakos (pictured top), president of the North East Real Estate & Mortgage Agency in Quebec, told Canadian Mortgage Professional that he had seen a significant number of Montreal-based clients turn their attention to properties well outside the city centre.

Read next: Mortgages in 2022 – what factors will dominate the space?

That’s intensified in part, he said, due to ongoing work on the Réseau express métropolitain (REM), a major public transit project whose construction work has led to problems including diverted and gridlocked traffic in downtown Montreal.

Nonetheless, Kilakos said despite that rise in interest he doubted that companies would allow their workers to work from home indefinitely.

“We’re seeing a lot of people making a move, and they all say the same thing to me: ‘Working from home is the new trend, and we’re going to make the move out there [to the suburbs] because we want the space, the backyards, and access to restaurants and stores that we don’t have in the downtown core,’” he said.

“It’s interesting to see this kind of shift occurring. My concern is that I think a lot of times, people are living in a little bit of a pipe dream in the sense that they think that businesses are going to continue to allow them to work from home.”

Kilakos pointed to the recent example of England, where prime minister Boris Johnson scrapped advice to work from home in mid-January. According to government body Transport for London, one million journeys took place on London’s Tube by 10am on the Monday following that change (January 24) – a 6% increase over the previous week.

“[Johnson] basically said, ‘Everything’s going back to normal. Call your employees, you’re going back to work in the office,’” he said. “That’s going to happen here, and I think a lot of people are going to be surprised when it happens.”