BUSINESS

Escape from high costs

Business is saving money in the suburbs

PATRICIA CHISHOLM November 20 1989
BUSINESS

Escape from high costs

Business is saving money in the suburbs

PATRICIA CHISHOLM November 20 1989

Escape from high costs

BUSINESS

Business is saving money in the suburbs

For many businesses and individuals in Toronto, living in Canada’s largest city has become just too expensive and congested. Toronto’s hot economy, which has boomed for seven straight years, has pushed office rents, apartment rents and housing prices to punishingly high levels. As a result, both workers and businesses are moving to the far edges of Metropolitan Toronto. And some hard-pressed individuals are moving even farther afield. Errol Sharpe, a native of Prince Edward Island, lived in Toronto for 16 years before deciding to move back to the Maritimes last summer. Sharpe, 49, now lives in Halifax, where he is a publisher’s representative and co-owner of Fernwood Books, a small publishing house with offices in both cities. Said Sharpe: “There were too many people, too many cars and too much pollution.”

But despite the move to cheaper areas, many analysts say that both employees and business will ultimately find little relief. Toronto, and the cities in the Greater Toronto area—from Oakville on the west to Oshawa on the east—continue to pull in Canadians looking for work. And Metropolitan Toronto officials have estimated that the population of the whole region will balloon to 5.8 million by 2011, from

its present level of 3.8 million. The vast majority of that growth, about two million people, will take place in the regions just outside the metropolitan area.

Indeed, Metropolitan Toronto itself lost 38,225 more people than it gained last year, and according to Metropolitan Toronto planning officials, recent surveys show that at least 52 firms with between 200 and 499 employees have left the metropolitan area since 1987. Another 12 firms with more than 500 employees left during the same period. Firms such as business information company Dun & Bradstreet Canada Ltd., manufacturer Dover Elevator and a large segment of Revenue Canada have all recently moved to locations outside Metropolitan Toronto.

Still, the move to the edges of Greater Toronto has not caused downtown office buildings to be empty. As some employers pull out, the new vacancies in the downtown core are rapidly filling up with highly paid professionals

such as accountants, lawyers, bankers and brokers, who are prepared to pay premium rents for a downtown location. Realtor Joseph Castaldi, general manager of Remax West Realty Inc., calls the trend “the Manhattanization” of Toronto. He says that he expects the process to continue as the cost of living and doing business in Toronto escalates. Predicted Castaldi: “Average property prices in Toronto will jump by five times in the next 20 years.” As a result, many firms are moving, not simply to cut the cost of office space, but also to be closer to their labor force.

Despite the rising population in the region, employers are also finding that it is increasingly difficult to coax potential employees to Toronto from other cities. James Parr, a partner in the executive search section of consultants Peat Marwick Stevenson & Kellogg, said that even annual salaries as high as $75,000 to $80,000 are no longer enough to convince an employee to make the move from Montreal to Toronto.

And employees from other cities also say that they are concerned about the quality of life in Toronto, citing congestion and rising costs as major worries. Added Parr: “The trouble is,

ADDING UP THE TOLL

Avg. House Prices

Toronto.......$277,186

Vancouver. ..$206,024

Montreal.....$ 109,851

Calgary.......$109,139

Halifax..........$94,013

Edmonton.....$89,596

St. John's......$84,423

Winnipeg......$83,472

St. John........$73,176

Regina..........$70,155

Avg. Rent for a One-Bedroom Apt.

Toronto..........$493

Vancouver......$482

Halifax...........$463

St. John's.......$451

Montreal........$440

Winnipeg.......$417

Calgary..........$407

Edmonton......$396

Regina...........$396

St. John.........$338

Avg. Rent for Prime Office Space per sq. ft.

Toronto.......$43.00

Montreal.....$32.00

Vancouver...$32.00 St. John's....$25.00

Regina........$24.00

St. John......$24.00

Calgary.......$22.00

Winnipeg.... $21.00

Halifax........$20.00

Edmonton ...$18.00

Statistics are the most recent available.

they visit Toronto, return home and say, T’m glad I don’t live there.’ ”

And Brian Herbst, president of executive search firm the Adelaide Group in Toronto, noted that it is now almost impossible to recruit skilled employees. Said Herbst: “I used to be able to move people for higher salaries, but now I lose deals all the time because people from other cities don’t want to move here and then face driving from Mississauga to Scarborough.”

For people facing a move to Toronto from a city with lower-cost housing, Toronto housing prices pose a major obstacle. While the $277,186 average house price in Toronto is out of reach for many first-time home buyers, comparable houses in satellite communities such as Barrie,

90 km north of Toronto, frequently cost between $50,000 and $100,000 less.

The cheaper land in the Greater Toronto area is also attractive for Toronto-area companies. Prime office space rents for between $38 and $48 per square foot in downtown Toronto, compared with $20 to $25 per square foot for top-quality space in nearby Mississauga or

Scarborough. Office rents are also dramatically cheaper elsewhere in Canada. Indeed, TransCanada Pipelines recently announced that it was moving from Toronto to Calgary and, as a result, would save $4 million annually in office rents alone.

But downtown Toronto remains a favored location for those companies that depend on

prestige and close contacts with their city-based clients. In fact, even some companies that have tried suburban locations are now returning, at least in part, to the downtown core to be near their customers and advisers such as lawyers. Three years ago, Cigna Insurance Co. of Canada moved from midtown Toronto to Scarborough, but now it is renting space in the Scotia Plaza, in the heart of the city’s financial district, for its executive employees.

But with the anticipated g surge of even more people g into southern Ontario, it is I likely that the advantages and S' disadvantages of living in I Canada’s largest city will beI come more pronounced. ” When that happens, the consequences of choices like those made by Halifax’s Sharpe could become even more perplexing: whether to opt for the professional and financial advantages of Toronto, or the rewards of living in a less expensive place with a slower pace.

PATRICIA CHISHOLM

ANN WALMSLEY

GLEN ALLEN