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The Economic Outlook for Toronto - Thinking Ahead to the Pan-Am Games

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Alex Carrick

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Alex Carrick is Chief Economist for Reed Construction Data. He specializes in economic forecasting and statistical services.

Economists

Yes, the Pan American Games will provide a significant boost for Toronto/'s economy. And 2015 is not that far away. This city needs something to get charged up about.

Yes, the Pan American Games will provide a significant boost for Toronto/'s economy. And 2015 is not that far away. This city needs something to get charged up about.

At a population of 5.6 million, Toronto is by far the largest city in Canada. That comes to 6.0 million when the Oshawa CMA is added as well. Montreal is next at 3.8 million.

Toronto CMA adds 100,000 people per year. That’s about 50,000 new vehicles as well. The latest annual population growth rate was +1.8% versus +1.1% for Canada as a whole.

But demographics are turning slightly away from the city. Immigrants are choosing to locate in other urban centres across the country whereas they used to almost all flock here. They’ve been hearing about the booming resource sectors in the West (especially Alberta) and even, to a lesser degree, the Atlantic Region (offshore oil). And the next cycle will, once again, be mainly about commodities and demand from China, Southeast Asia, India, etc.

Toronto’s financial community came through the credit crisis with a greatly increased international reputation. But Ottawa has not allowed mergers and acquisitions among the big banks and this means that they are still small players on the global stage. We’ve probably missed an important opportunity to expand into global capital markets.

The absence of M & A activity in the banks, however, has helped to keep our office buildings well occupied. There has been a degree of overbuilding of office space in the last two years, but to nothing like the same degree as in earlier decades. There will be normal cyclical recovery in office building construction this time around, as opposed to the 10-year gap in such work in the 1990s.

The auto sector is in better shape, what with new ownership at Chrysler and rationalizations at GM. Still, there are now something like eight carmakers in North America where there used to be three and further shake-out in this industry seems quite likely. In a year or two, somebody may well be in deep trouble again. But this won’t be as stressful since the overall economy will be in better shape.

The delay of new nuclear power expansion will become contentious. Once recovery is well underway, power demand will be on the rise and potential shortfalls will become more apparent. The problems at AECL need to be resolved. But if Ontario does commit to expanding electricity generation in the nuclear area, this will be a tremendous long-term drain on resources. It will take money away from some other uses.

The province has already committed to major transit projects. Union Station renewal, the rapid transit line from Union to Pearson Airport, the Spadina Subway line, the Yonge Street north subway line and further 407 work at its eastern end are all major projects requiring lots of money.

I’m encouraged by what appears to be happening at the waterfront. It looks like the eastern harbor area is finally starting to move. The Moshe Safdie latest proposal for a large condo/commercial project may kick-off a new era of people moving into the region.

I’ve loved the Distillery District since its inception. It’s been one of the few really innovative design and development projects to happen in Toronto. Work that is proceeding at the CNE Grounds is also quite interesting.

This city is somewhat trapped in its own mythology. We’re all about preserving neighbourhoods. Sometimes you have to go beyond that and think about the future, not just in terms of rhetoric about quality of life (i.e., if you’re fortunate enough to live downtown), but also in terms of how one is supposed to get around in this city.

We’re already somewhat notorious in terms of traffic gridlock. This isn’t just an academic issue or a matter of patience. It seriously cuts into productivity when it limits the ability of businesses to move their product around.

The high tech sector is still strong in the region, with good prospects for further growth. Another sector that is hugely important and little recognized is tourism and accommodation. We’re suffering along with the rest of the country in this area due to the rising Canadian dollar versus the greenback and American moves to tighten border security and require U.S. citizens to carry passports.

The potential for an even higher valued loonie is a drawing card for more foreign investment in the city. For example, condos here - which seem expensive to us - are seen as relatively cheap by residents of many other nations.

So generally speaking, the prospects look good. But it will probably still be the resource regions that lead the way in 2010 and onward in Canada. Torontonians need to take measures into their own hands if they want to keep this city vibrant and growing. The Pan-Am Games will be a good spur to keep the heat on our political and civic leaders.

Alex Carrick

Find Canadian construction-related economic articles in Canadian Construction Market News and in the Economic Outlook section of Daily Commercial News. Mr. Carrick also has a lifestyle blog that can be reached by clicking here.

by Alex Carrick

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