Canadian Opportunities for Growth in the New Normal
COVID-19 has shaken up global competitiveness, potentially offering Canada unique opportunities to recover and thrive.
Location Canada 2020
Long before the coronavirus spread across the globe, Deloitte’s 2019 Canada’s Competitiveness Scorecard highlighted eight key dimensions of global competitiveness in our country, as it related to our ability to compete for investment and talent with our global peers. Competitiveness is a key dimension of economic prosperity. It can measure how productive and innovative an economy is, and it is key to creating sustainable economic growth.
To develop the scorecard, Deloitte examined both areas of strength, such as talent, as well as productivity and innovation — dimensions where Canada has faltered in recent years relative to other countries. It is through this general lens that there are a number of new dynamics and observations that can be made in light of COVID-19.
Will Canada’s new normal support future Canadian competitiveness in the long-term?
Canada has lagged behind a number of its peers in its productivity and innovation performance in recent years, according to traditional measures. This has posed a challenge to our competitiveness and overall prosperity, but does COVID-19 represent a turning point? Along with healthcare, education, and transportation to name a few, commercial real estate is one of many industries which is being pushed to adapt. And that has introduced numerous pressures and incentives to innovate the ways properties and spaces are built, designed, occupied, maintained, and serviced.
Over the past few months, much of Canada’s business ecosystem has had to transition rapidly from the physical to the virtual world, with large segments of the workforce required to work from home. People and businesses have experienced varying ranges of challenges — from minor to profound — to adapt to this new normal, balancing families, blending home and office, while navigating economic closures, a harsh economic downturn, and physical distancing. These combined shifts have, of course, posed significant challenges to the commercial real estate industry.
As with other parts of the economy, the Canadian commercial real estate sector is now assessing impacts, adjusting operations, and executing contingency plans to support its response and recovery. The severity of COVID-19 on the Canadian commercial real estate market still remains largely unknown, with limited market forecasting taking place, given so much uncertainty.
Canada’s industrial sector, and as a result industrial real estate, is being heavily impacted by the COVID-19 disruption to international supply chains. It is clear that the utilization of office space will likely be permanently changed by the pandemic. Enduring remote work adoption beyond the end of states of emergencies and lockdowns, continued advanced technology adoption to support productivity virtually, and potential shifts in tenant preferences for office workspaces will all drive the future of office properties. Examples of new elements will include greater sensing technology adoption to measure and analyze workplace occupancy and air quality and inform sanitation practices, apps to manage employee movement throughout offices, and increased use of cloud-hosted building operations capabilities, including modern analytics to support remote facility monitoring and management.
Some businesses have seen high levels of productivity and job satisfaction from their remote workforce, while others are feeling the absence of social interactions, in-person efficiencies, and easy to access collaboration. But it may not have to be a case of either/or, as new opportunities for innovation may arise as physical distancing, remote work, and safeguarding of our workplaces continue.
Commercial property developers, owners, managers, and service providers will need to adapt on a number of fronts to recover and thrive, and have likely started planning and strategizing accordingly, to an extent. This may consist of how work and common spaces are redesigned to maintain social and collaborative opportunities, while including ample space for safety measures, new methods of maintaining and monitoring effective sanitation, and employing greater use of advanced technologies to support changes to space design and usage.
Some retail properties have faced severe limitations given COVID-19 restrictions on accessing high-traffic indoor areas and places. Many shopping centers have seen a large reduction in customers, temporary store closures, and reduced operating hours. Consumers are expected to remain cautious of congested retail environments, and the long-term effects from COVID-19 will likely have retailers reducing store congestion, expanding spaces, and retrofitting HVAC, all of which may involve new innovative solutions when it comes to space design, services, and tenancy choices. Research conducted by Deloitte in July of 2020 on the Future of the Mall found that a number of key trends could reimagine shopping centers in novel ways, to become multi-purpose destinations offering a range of leisure activities, the repositioning of food and dining as the anchor, and further capitalize on digital tools to maximize productivity and efficiency.
Canada has a world-class, highly skilled and educated labor force that can be viewed as a key competitive advantage, on a global scale. Canada’s industrial sector, and as a result industrial real estate, is also being heavily impacted by the COVID-19 disruption to international supply chains. Tenants may be required to restructure in order to allow for more liquidity and seek larger spaces to accommodate surplus inventory. Increases to online retail activity may also influence the demand for warehouses. Such a demand crunch would challenge the historically low industrial vacancy rates in Canada’s major markets. Thus, there may be incentives to reconfigure other available commercial property space, the exploration of smaller markets, and possible pressures to employ greater advanced technologies to further support productivity within the industrial sector.
While commercial real estate may not have been viewed as an industry ripe for innovative change, COVID-19 has triggered the industry to adapt in order to recover, which could play a key role towards recovery and bolster Canada’s competitiveness globally.
Canadian talent is a critical contributor to competitiveness, though the pandemic has challenged a number of key segments of its labor force.
Talent is the backbone of economic competitiveness in Canada. We have a world-class, highly skilled and educated labor force that can be viewed as a key competitive advantage, on a global scale. Further, Canada has untapped talent and skills, particularly when considering women, youth, new Canadians, racialized groups, and Indigenous people, notwithstanding relatively high labor force participation by some of these groups. These populations can face barriers to full employment, and this has only been heightened as a result of COVID-19, where marginalized communities have been disproportionately impacted.
On a number of fronts, Canada is supporting the continued employment of these groups, emphasizing a focus on supporting all of our country’s talent. For example, despite an economic downturn, Canada is remaining supportive of immigration, as it continues to be a critical contributor to our workforce. Newcomers are responsible for substantial Canadian labor force growth in recent years, and tend to be highly educated, often holding advanced skills that are in short supply here.
As COVID-19 has significantly challenged startups and small businesses, it is expected some of these businesses will not survive the downturn. Economists also believe that entrepreneurship and start-up activity will be particularly critical to drive economic recovery and support job creation. These challenges can potentially be addressed through the often entrepreneurial nature of Canadian newcomers.
There has been a steep decline in the number of permanent resident visas issued during the pandemic, reflecting the health risks and resulting economic lockdown and travel restrictions. However, Canada continues to process new applications for permanent and temporary residence, as well as for Express Entry draws. The Provincial Nominee Program also remains in operation, with a number of provinces inviting new immigration candidates even with travel restrictions imposed. Credit goes to the Canadian government for keeping this skilled labor pipeline open and welcoming immigrants that have the talents that align to Canada’s labor force needs, in spite of the current economic downturn.
Canada’s future path to recovery and competitiveness holds many unknowns, but it can be meaningfully shaped by our ability to seize key opportunities to adapt, enhance productivity, innovate across industries, and harness the full breadth of the talent and skills of all Canadians.
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