May 6th - COVID-19 Economic Recovery and Rebound Update
Below is a message from Stephen Willis - General Manager, Planning, Real estate, and Economic Development
The purpose of this memo is to provide an update on the economic implications of the COVID-19 pandemic as well as the City’s Economic Recovery and Rebound Program.
Local Economic Implications
Ottawa’s economy continues to show positive signs of recovery across most sectors, despite the Omicron variant and recent sixth wave.
In its March 2022 Major City Insights Report, the Conference Board of Canada reported that Ottawa-Gatineau’s economy surpassed its pre-pandemic peak in 2021, expanding by 5.2 percent. The region’s Real Gross Domestic Product (GDP) is expected to expand by a further 3.4 percent this year before growth moderates to 1.4 percent in 2023.
Ottawa’s high concentration of public service employment is a key reason the economy has performed relatively well throughout the pandemic. The region’s public sector accounts for nearly one-third of real GDP and most jobs in this sector have shifted seamlessly to remote work, largely unaffected by provincial restrictions over the past two years. As well, unlike other areas in the province, Ottawa has a small manufacturing sector, leaving it less impacted by supply chain disruptions and associated economic implications.
Ottawa’s second-largest economic driver, the technology sector, has shown significant strength and resiliency throughout the pandemic, helping to mitigate broader community economic impacts and contributing significantly to economic recovery. The sector continues to excel based on the high concentration of technology jobs as a percentage of overall employment, which is seen as a key indicator of the relative strength of a city’s technology market and its growth potential. In CBRE’s 2021 North American Scoring Tech Talent Report, Ottawa ranked #1 out of 50 cities for technology talent concentration.
Another lift to Ottawa’s recovery is construction. The Conference Board of Canada’s March 2022 City Insights Report stated that the sector expanded by 11.3 percent in 2021 and is projected to grow by an additional 3.1 percent in 2022, with a further 0.6 percent output gain anticipated in 2023.
Though the strength of the sectors noted above has supported Ottawa’s path to economic recovery, it has not diminished the crushing and disproportionate impacts of the pandemic on the hardest-hit segments of Ottawa’s economy, including tourism and hospitality, festivals and events, live entertainment, and the small business sector (retail, restaurant, service). These sectors, which rely heavily on in-person contact and customer connection, have endured more than two years of provincial restrictions and open-close cycles that have resulted in operating uncertainties, waning consumer confidence, recruitment challenges, and high levels of job loss. Though Ottawa’s high vaccination rates combined with the lifting of most public health restrictions and capacity limits will help to lessen the impacts on these sectors over the coming months, the timeframe for recovery will continue to be prolonged and uneven.
In addition to a variation in economic impacts across sectors, there have also been variations across demographic groups. Specifically, COVID-19 has had a disproportionate impact on women, immigrants, and racialized populations, who are over-represented in essential front-line jobs and in the small business and hospitality sectors, where job disruptions and losses have been higher than in other sectors. This has further exacerbated existing socio-economic inequalities.
This means that Ottawa’s economic recovery will continue to be “K” shaped for the foreseeable future. This type of recovery divides the economy in two, where some industries and individuals recover from economic impacts quickly, while others lag over an extended period.
As reported by Statistics Canada, Ottawa’s unemployment rate in March 2022 was 5.3 percent. Although this is up slightly from the February 2022 rate of 5.0 percent, it is in line with the national rate (which is the lowest since records began in 1976) and well below the March 2021 rate of 6.3 percent. While the numbers demonstrate welcome signs of recovery, they also show that Ottawa, like many other cities across Canada, is experiencing unprecedented labour shortages resulting from workers permanently exiting the workforce and/or leaving more impacted sectors for other opportunities. Ottawa’s overall labour market is tight, with employers competing both nationally and internationally to attract and retain workers, including in the city’s hardest-hit sectors.
The substantial acceleration of inflation continues to pose major challenges in Ottawa and across the country. As reported by Statistics Canada, the national inflation rate has accelerated faster than expected, reaching 6.7 percent in March 2022, the fastest year-over-year increase in the consumer price index since January 1991. Ottawa's inflation rate for March sat at 7.5 percent, higher than Montreal, Toronto, and Vancouver, affecting consumer purchasing power at all income levels.
The Canadian commercial real estate industry is emerging from the pandemic remarkably well. As reported by CBRE in the Canada Market Outlook 2022, Ottawa entered 2022 with one of the three tightest office markets in North America, with demand and occupancy remaining relatively stable through the pandemic given the market’s base of government and technology tenants. While delays in return-to-office plans still pose a risk and will need to be monitored, particularly as it relates to Ottawa’s downtown and associated economic impacts, a robust commercial sector is expected to persist, and physical office occupancy is expected to climb through the remainder of 2022.
Lastly, industrial space remains in short supply in Ottawa. Record low vacancy and continued growth in e-commerce and logistics, for which Ottawa is geographically well positioned for same-day deliveries to the country’s most populous areas, will drive industrial real estate tightening for the balance of 2022. CBRE in the Canada Market Outlook 2022 predicts the availability of industrial space is expected to fall below 1.0 percent this year.
Economic Recovery and Rebound Program Update
As needed, the City will continue to provide, in collaboration with Ottawa Public Health and other partners, support for the small business sector through the provision of updated information and safe workplace guidance. These efforts will be more limited as government pandemic support programs wind down and provincial and federal government restrictions and mandates are reduced and eventually eliminated.
In addition, efforts will also focus on the continued implementation of the Economic Recovery and Rebound Program. This program supports Ottawa’s hardest-hit sectors as they struggle to return to pre-pandemic activity and plan for future growth. The following is a brief update on six program areas being delivered by Economic Development Services (EDS) in collaboration with economic partners:
1. Consumer Confidence – As recovery efforts shift towards Ottawa’s economic rebound and future economic resilience, restoring consumer confidence in the safe resumption of indoor business operations and employee confidence in a safe return to the workplace is critical. The relaunch of the POST (People Outside Safely Together) Promise Campaign, a joint initiative between the City, the Ottawa Board of Trade, and the Ottawa Coalition of BIAs (OCOBIA), as well as the ongoing business outreach and education efforts of Ottawa Public Health, will help residents confidently and safely shop and work in local businesses. In late 2021, the City collaborated with the Ottawa Coalition of BIAs, Ottawa Tourism, and Regroupement des gens d’affaires on a successful Ottawa Board of Trade-led application ($250,000) for a new Shop Local program. Almost $9M was invested in Ontario through the Ontario Chamber of Commerce to support awareness-building campaigns that promote consumer confidence and local businesses through shop-local branding and digital content, and seasonal campaigns directing shoppers to local small businesses.
2. Visitor and Event Strategy – The City continues to work with its key delivery partners, Ottawa Tourism, Ottawa Festival Network, and the Ottawa Music Industry Coalition, to support the economic rebound. The tourism and hospitality, festival and event, and live entertainment sectors will be the last to rebound from the impacts of COVID-19, with the pace of recovery forecast to be uneven and protracted. With tourism being Ottawa’s third-largest economic driver, the lost economic impact and ongoing labour shortages in this sector require continued senior government intervention and a collective community effort to support local tourism businesses and experiences until interprovincial and international leisure and business travel resumes. In 2020 and 2021, Ottawa Tourism delivered several rural-focused campaigns directed to residents and day-drive markets to encourage support for rural businesses and experiences. Carefully crafted itineraries and social media content featuring Ottawa’s four rural wards provided a necessary hyper-local marketing opportunity at times when provincial restrictions negatively impacted hotel occupancy and overall visitation. The Cultural Tourism Working Group, initiated by Mayor Watson in 2021 and facilitated by EDS, includes Ottawa Tourism, Tourisme Outaouais, and partners from the cultural sector working on a joint strategy to capitalize on the city’s many cultural assets and experiences to position 2022 as the Year of Cultural Tourism under the “Here to Inspire” campaign banner. The City Sounds Series, funded by the City and delivered by the Ottawa Music Industry Coalition in collaboration with area BIAs, premiered in August 2021 and featured weekend outdoor musical performances across the city to support the live entertainment sector, drive traffic to main streets and commercial areas, and create animation and vibrancy in the public realm. This program was so well received that it will be expanded in 2022. Ottawa Festival Network worked closely with Event Central and Ottawa Public Health in 2021 to develop a Festival Reopening Toolkit to support festival producers as they begin to execute plans to return to in-person events in 2022. The City also funded Ottawa Festival Network to develop a new volunteer app solution to help festival organizers rebuild their volunteer base. These examples highlight the great work that has been ongoing over the past two years to support the hardest-hit sectors.
3. Ottawa International Airport Advocacy – The Ottawa International Airport continues to experience significant operational challenges in the form of reductions in passenger volumes and numbers of air routes. However, there is cause for optimism. Led by Mayor Watson, a joint advocacy effort secured partial funding required to complete the Stage 2 LRT Airport Station. The lifting of provincial and federal government public health restrictions, capacity limits, border testing requirements, etc. has removed many barriers to air travel. As domestic and international leisure and business travel recovers and passenger volumes grow, the Airport will also recover. In 2022, the City will continue to work directly with the Airport to explore economic development opportunities in recognition of its significance as a vital citywide economic contributor to Ottawa’s future growth and prosperity.
4. Place Branding – Ottawa’s brand identity and reputation throughout Canada and the world is a vital component of a successful economic rebound. Effectively communicating the city’s competitive advantages helps attract immigrants, talent, visitors, business investment, and students. In partnership with Ottawa Tourism, and building on branding work already completed, the City collaborated on a recent in-person Brand Adoption Event to communicate the value proposition of Ottawa’s Place DNATM to economic development stakeholders and deploy refreshed place branding assets to support a consistent approach (CanadaInOneCity.ca) and Ottawa brand messaging. In a related initiative, the Ottawa Board of Trade, in collaboration with the City, Ottawa Tourism, and Invest Ottawa, has developed a new web portal highlighting Ottawa’s competitive advantages. It is available for the broad sector and public use to support economic activity and to build community awareness and pride. The web portal is a pillar of the Ottawa Board of Trade’s new Ambassador Program, also supported by the City. The City’s first Nightlife Economy Strategy, currently under development, will address the economic opportunities and challenges of Ottawa’s nightlife – the wide range of experiences achieved through leisure, live entertainment, and cultural activities, between 6 pm and 6 am. It includes the food, music, arts, and entertainment, as well as the sports and leisure sectors. Cities with vibrant nightlife economies differentiate themselves from other places and enjoy improved job creation, talent attraction, investment attraction, economic growth, tourism, and city brand building.
5. Talent Recovery Plan – The pandemic has exacerbated a previously tight labour market. This is impacting business competitiveness as well as the recovery of Ottawa’s hardest-hit sectors and small businesses who cannot find the skilled labour required to fill vacant positions. In consultation with over 20 organizations, economic development stakeholders identified the need to promote and centralize existing talent programs and services as well provide increased co-op placement opportunities at the City of Ottawa. To address this, EDS will facilitate the development of a centralized Talent Portal for Ottawa employers and jobseekers, with an emphasis on the hardest-hit sectors and the populations disproportionately affected by the pandemic. In addition, the City has been working with its postsecondary partners and has committed to increase the hiring of co-op students to 70 in 2022 and surpassing 100 co-op placements by 2024. Lastly, the City’s new Economic Development Strategy will seek to address broader talent issues over the next four years.
6. Downtown Recovery – According to 2021 Statistics Canada data, Ottawa had the highest rate of people working from home between April 2020 and June 2021, at 47 percent of all workers (Montreal 43 percent, Toronto 43 percent, Calgary 33 percent). The shift to working from home, combined with the decline in domestic and international business travel, meetings and conventions, and leisure tourism visitation, continues to have a significant impact on the local economy – and particularly the downtown. Over the past two years, 7,100 retail employees in 800 downtown businesses and 13,700 accommodation and food service employees in another 800 downtown businesses have been impacted by the pandemic. These businesses have responded to provincial closures and restrictions, daily customer volumes that are no longer adequate to support business operations, and the accompanying revenue declines and staff lay-offs. Staff have been monitoring downtown commercial water usage as an indicator of workforce return-to-office trends. Not surprisingly, the data demonstrates a slow and uneven return to pre-pandemic downtown commercial property occupancy. Comparing April 2021 - March 2022 to the same period a year prior, small commercial properties have seen the most significant increase in water usage followed by institutional, commercial, municipal, and government properties. Staff will continue to monitor this metric for the balance of 2022. EDS is currently developing a summary paper on the state of downtown. This work will support recommendations in the new Economic Development Strategy to be delivered for the next term of Council in early 2023. One recommendation will be the development of a Downtown Strategy to explore opportunities to revitalize and reimagine Ottawa’s downtown in a post-pandemic environment and transform it with a more balanced mix of residential, office (public and private sector), institutional, retail, entertainment, tourism, and cultural development and experiences.
The pandemic has demonstrated that Ottawa is truly “stronger together” as our economic partners and stakeholders have freely shared their expertise and experience and worked collaboratively to help the city weather the impacts of COVID-19. The coming months will see a continuation of many successful initiatives led and supported by the City to help the hardest-hit sectors and build future economic resilience. Both the Mayor’s Economic Partners Task Force and other internal and external stakeholders, including Ottawa Public Health, will be integral to ensuring ongoing collaboration and alignment of recovery and rebound efforts, as we turn the page on COVID-19 and return to a mindset of growth and prosperity.
Looking ahead, EDS has commenced work on a new Economic Development Strategy to be delivered to Council in Q2 2023. This important research anchored roadmap, based on a series of guiding principles and informed by economic stakeholder engagement and consultation, will reflect post-pandemic challenges and opportunities, and capitalize on Ottawa’s strengths, competitive advantages, and established partnerships and programs. The new strategy will leverage City staff expertise to provide a diversity, equity, and inclusion perspective to ensure that the implementation plan considers barriers to the equitable distribution of opportunities as well as lingering pandemic employment impacts amongst women, immigrants, and racialized communities.