Commercial real estate in downtown Hamilton poised for post-pandemic boom

Hamilton's downtown commercial core appears to be on the mend after months of sporadic closures, reduced traffic and stunted revenues during COVID-19.

Commercial storefront vacancies hover around 10 per cent - roughly the same rate reported in 2019, said Judy Lam, the city's manager of commercial districts and small business.

The downtown retail environment is not as bad as what we feared," Lam said in an interview Thursday. There's been just a few areas where there may have been a slight increase in vacancies, but, as a whole, it's actually fared fairly well."

The heart of Hamilton's once bustling downtown became a shell of itself at the onset of the pandemic.

One study - which looked at an area of the downtown centred on the intersection of King and Catharine streets extending one block in each direction - found business visits dropped by more than half last year.

Visits in the area fell from about 784,000 between April and September 2019 to less than 341,000 between April and September 2020, a stark decrease of 57 per cent, according to the study.

About 85 per cent of the 66 businesses surveyed - half of which were food or general retail services - also operated under reduced revenues," said the study, which was commissioned by the Canadian Urban Institute.

But the study importantly noted there were no permanent business closures in the surveyed area.

Part of the that, Lam said, is attributable to storefront operations quickly adapting to a changing market.

Especially when you think about the food industry," she said. They were able to pivot to delivery models and curbside pickups and, because of that, didn't suffer as much."

She added another factor key to retail survival was an enhanced e-commerce presence. The city's Digital Main Street program, for instance, helped plenty of small businesses without websites achieve digital transformations amid the pandemic, Lam said.

We wanted to make sure businesses had a chance - even if they didn't have a website - to have people to buy gift cards and order (products) from them."

While downtown retail vacancies remained steady during COVID, office towers saw a slight increase.

Office vacancy trends

Lam said office vacancies jumped from around 11.8 per cent pre-pandemic to around 12.8 per cent this summer.

When you think about pre-COVID to now, that one per cent isn't as large as I thought it would be," said Lam. And that's good news."

The question is: As more employers shift to work-from-home models, will that pattern hold?

I think there's too much evidence that people need each other and the social environment of an office," said Keanin Loomis, president and CEO of the Hamilton Chamber of Commerce. There will always be a need for a centralized location for most businesses."

Indeed, recent trends in the downtown real estate market suggest the city is on the precipice of a commercial boom.

Commercial property sales in the lower city tripled in the first six months of 2021 relative to the same period last year, from 15 to 48, according to data provided by the Realtors' Association of Hamilton and Burlington (RAHB).

Sales in the rest of the city were hot, as well. From January to June, the city as a whole had 108 commercial sales - up a whopping 175 per cent over the 39 sold in the same period in 2020.

It's an upswing that signals companies and investors are believing in the long-term viability of Hamilton's commercial market, and particularly in the downtown core, said Lam.

There's a huge demand for starting business in Hamilton," she said. Frankly, we're surprised how much of an interest there is."

But why here and not, say, Toronto?

Lam said the prospect of light rail transit is certainly attractive to businesses. So too are the dozens of proposed highrise condos in the lower city, some of which have already broken ground, that promise increased consumer traffic.

Another theory from Lam is the hub-and-spoke model": companies understanding their employees' geographical limitations. As more and more people migrate to Hamilton from nearby cities, some companies in the GTA are saying they recognize office workers don't want to commute too long," said Lam.

A company might say, Gee, most of our office workers live in the Hamilton area.' And if they know a lot of their employees live here, then why not open a satellite office in Hamilton?

That's where we see a lot of potential for the Hamilton office market."

Sebastian Bron is a Hamilton-based reporter at The Spectator. Reach him via email: sbron@thespec.com