Urban planner Andy Yan, director of the City Program at SFU, thinks the pandemic has exposed Vancouver’s economic fragility. Besides real estate, Yan explains, the economy is driven by service industries such as tourism, which has been clobbered by COVID-19. Not only do tourists help fuel short-term rentals like Airbnb, but many long-term renters work in tourism and hospitality. “If you were either counting on Airbnb or on a renter living in your secondary suite helping pay for your mortgage, and now they can’t, what do you do?” Yan asks.
Add in the fact that international travel is now very difficult, and things could get much uglier. “You have the local economy not doing well, and now you’re cut off from the global economy,” Yan says. “So it feels like it’s 1978,” when Metro Vancouver resembled what he calls Detroit by the Pacific. His summary of that era: “It wasn’t good.”
When it comes to retail and office real estate, the future looks uncertain, too, Yan reckons. It’s easy to blame Amazon, but storefront retail was already struggling before the crisis, he says. “You know how COVID takes out people with pre-existing health conditions? Well, we have pre-existing economic conditions.”
As for the office property market, Yan says that before people started staying home, 20 to 30 percent of Metro Vancouver’s labour force already worked there. “If you accelerate that and it goes into now 40 or 45, maybe even 50, how much are they going to stay at home?”
Bryan Yu, deputy chief economist with Central 1 Credit Union, also sees uncertainty ahead. “Commercial is probably a little bit problematic, especially the retail side, and even for some of the commercial product as work from home becomes much more normalized,” he says. “Will companies go back to requiring that large footprint they have now, or are they moving to a more nimble, work-from-home type of environment?”
Either way, creating a new local economy won’t be easy. Given what the pandemic has revealed about the risks of relying on global supply chains, one possible scenario is that manufacturing returns to the region. But as Yan points out, the City of Vancouver converted much of its industrial land to residential in the 1980s and ’90s. “Now where does that industrial perhaps go?” he asks. “It either goes to, say, Surrey or Abbotsford, or it goes to Calgary or Winnipeg.”
For the province as a whole, the fact that tourism, retail and other service industries dominate spells trouble in a deglobalized world, Yan warns. In food service alone, more than 120,000 B.C. workers have lost their jobs, at least temporarily, Restaurants Canada estimates. “There are these green shoots in technology or highly specialized manufacturing, but they can’t generate a mass of employment,” Yan says.
Apt metaphors include Biblical ‘feet of clay’ and Buffett’s “when the tide goes out you discover who has been swimming naked”.