Toronto’s PATH system faces crisis as companies announce permanent hybrid work arrangements

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Many parts of the mall that fall under Toronto’s Financial District are staffed with shoppers, with more people cleaning the aisles than walking alongside them.

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While some Bay Street companies have begun allowing small numbers of employees to return to their office buildings, workers are leaving sporadically, if at all. As the pandemic progresses, the question of when – or whether – the region will regain its pre-COVID hub, is taking a toll on the more than 30-kilometer-long network of retail tunnels beneath the city centre. Is.

Downtowns around the world are grumbling about how to preserve their appeal as COVID-19 subsides. The huge underground mall in downtown Toronto – called The Path – is a microcosm of that concern, an area so tied to the economic fate of the buildings above it that it has the potential to become a place without a compelling reason for existence. takes risks.

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PATH was once a highly desirable retail location, with merchants and restaurants reliably accustomed to foot traffic congestion each week. But, he If the office towers are not refilled it becomes difficult to justify paying the premium rent. Or, as the pattern appears to be emerging, they fill only partly as companies permanently adopt the part-home-part-office hybrid model.

At Teppanyaki Grill, in PATH, restaurant owner Ernest Huang used to serve a steady stream of office workers and lineups around the perimeter of his stall. Now, in order to survive, he has cut more than half an hour and has taken up another job to make a living.

“It’s too slow,” he said. “My clients are telling me they’re only working one to two days a week.”

Most banks, insurance companies and other Bay Street firms have largely delayed their return to office until at least next year. Sun Life Financial Inc. And major office tenants such as PwC Canada have asked employees to choose when to come to the office. Royal Bank of Canada, National Bank and other banks have adopted some version of the hybrid working arrangement.

With the office model evolving, the volume of office workers and foot traffic may never return to pre-pandemic days.

According to information provided by building managers and tenants to consulting firm Strategic Regional Research Alliance, the number of people in Toronto’s downtown offices has quadrupled from pandemic lows – but was still only 12 percent above normal in early October . Recent transit data shows that the number of Go Train and TTC passengers counted at Union Station, a major transportation hub on Path, was only 16 percent and 30 percent of pre-pandemic norms, respectively.

Avison Young, a commercial real estate services firm, is tracking foot traffic in the downtown core using unidentified cellphone pings. As of last week, foot traffic was 86 percent lower than epidemic levels.

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Hundreds of Pathway retailers have been devastated by the work from home mandate and the evacuation of Toronto’s financial district. Corridors consist of spaces which are either closed or paper.

Instead of streams of transit riders and office workers passing daily through the 3.7-million-square-foot retail space in the PATH, which the city says generated $1.7 billion in annual sales before the pandemic, there’s only one trickle. At times it is possible to stand in tunnels and not see anyone else.

Laura Miller, associate professor of architecture at the University of Toronto, said PATH may need to reinvent itself for a permanently changed future.

“The path is at a halt and so this is the moment to take advantage of it and not just hope that we will return to normalcy because I think it’s nostalgic,” she said. “It’s nostalgic and also delusional.”

Pro. Miller, who has taught a course on PATH and is writing a book on it, drew a parallel with above-ground malls, which have to reinvent themselves by leasing space to call centers or other non-traditional tenants. was to be installed.

In the case of the tunnels under Downtown Toronto, it suggested that the network needed to better integrate with the city’s residential community. She questions whether new services can be established to cater to them in the tunnels due to the increasing number of people living in the city. And she wonders whether rents should drop, which would encourage a less homogenous retail mix that helps attract more than usual convenience buyers.

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Nineteen months into the pandemic, those convenience buyers are still in short supply. Signs of recovery in the region remain elusive. White-collar workers were among the first to work from home and many of the companies in these towers have been slow to bring back their employees.

Still, some are expressing cautious optimism that the worst may be over.

At Penny Loafers, a venerable trio of Showshine kiosks in Pathway that have weathered other crises including the 9/11 attacks on New York and the SARS outbreak, workers were cleaning chairs last week and resuming in earnest for the first time. Was doing. From the beginning of 2020.

Standing near a pair of tall chairs below First Canadian Place, supervisor Jenny Young said it was a good time to test the waters. Fall is traditionally one of their busiest periods of the year, as social outings increase and people switch from warmer weather to more formal footwear. The company plans to experiment with its hours of operation and staffing levels to find out what works best.

“We are not going to be able to operate at full capacity for some time,” Ms Young said, noting that it is difficult to predict the schedule for returning to normalcy. “Maybe January. Maybe. Or a year from now.”

Initial results were mixed. Company owner Penny Simmons later said that one attendant had seven customers on the first day while the other went home without making any money.

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Because PATH is such a special location, many landlords do not allow retailers to keep their location for sublet and prefer to take the location back, according to leasing brokers. Struggling retailers have had to either close permanently, use publicly funded rent relief or renegotiate the terms of their leases with their landlords.

For example, at one of Min Bao’s locations in Pathé, a Chinese steamed bun eatery negotiated a fare deal when traffic slowed significantly. Rent at a temporary location that is currently closed is based on a percentage of its sales, not a standard fixed amount every month. According to its co-owner Scott Ching, it pays full rent in the second location.

Stan Kravitz, who worked with dozens of PATH retailers as vice president of Savills Canada, a commercial real estate firm, said he is in constant talks with landlords. He said existing solutions to help tenants weather the pandemic do not amount to long-term improvement.

“All these talks are a temporary fix and none of these are long term and they are all based on the current situation. The landlord has the right to modify the deal as soon as it changes,” he said.

Ali Fieder, Avison Young’s vice president of retail, said that in some cases landlords are offering tenants incentives to stay. She said many retailers are hoping to tie their reopening dates back when they know office occupancy has returned to a reasonable range.

At Vasi, a menswear store in First Canadian Place, the outlook is terrifying. Owner Andre Vasi said there are practically no customers and predicts they will have to close next year if sales don’t go through. By mid-afternoon one week, a reporter was the only person who set foot in his store that day.

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“We all depend on the towers above us and basically the towers are empty,” he said. “It’s not regular retail.”

Just before the pandemic began, he tripled the size of his retail space as demand for his designs was increasing. His best-selling item used to be a sports jacket; Today it is a shoe.

To the south in the tunnel network, below the Royal Bank Plaza, the manager of an outlet at T. Kettle, selling fancy tea, was so short of customers that he had a thick hardcover book on the counter on a weekday. Stephen Bent, who plowed through the nearly 700-page fantasy bestseller, explained that you can clean and tidy up and organize stock before you need some to pass the time. a combination of light.

Foot traffic began to improve in September, he said, but then stabilized. Sales remain slow. There may be three customers in the morning “crowd”. all day long? Maybe 10 or 15 people. While he didn’t have any pre-pandemic sales figures to compare, since the location only opened in August, he thinks of the crowd he once told Path.

“People say it used to be side by side,” Mr. Bent said. “I’d love it, at least for a day.”

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