The lifeblood of Montreal’s downtown core used to be office workers. Now, they’re missing

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For the past two years, Michel Leblanc was the guy in the tie trying to save downtown Montreal from pandemic-induced ruin – a fate the city centre avoided. Now comes the hard part: reviving its office culture.

Mr. Leblanc is president and CEO of the Chamber of Commerce of Metropolitan Montreal, a business group with outsized influence and a rich history of accomplishments. In its early days, merchant members organized the dredging of the St. Lawrence River so Montreal’s port could accommodate bigger ships. Later on, they pitched the creation of what is now the internationally renowned business school, École des Hautes Études Commerciales.

So when the Quebec government opened its purse strings in March, 2021, to try to stimulate an economic recovery in Montreal’s financial centre after successive COVID-19 waves and work-from-home mandates, the Chamber of Commerce was a logical recipient of public funds. The group was handed $14.5-million to finance the effort, second only to the City of Montreal’s $22-million.

The things Mr. Leblanc has done with the money range from predictable to imaginative, from polling business people on their intentions to organizing eye-catching, street-level art installations. But for the city centre’s white-collar professionals, work from home has become entrenched – often with the blessing of their employers. And dislodging that is proving harder than anyone might have imagined.

“Although the entire economy of the metropolitan area has found its way back to normal, our downtown area still seems to be suffering from a kind of long COVID,” Mr. Leblanc told political and business leaders gathered last week for a forum on the health of the city centre.

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Quebec had more severe lockdowns than elsewhere in North America and that continues to have a lasting psychological impact on workers, Mr. Leblanc said in a recent interview. At the same time, many companies as well as government departments are hesitant to impose mandatory in-person attendance for their staff amid a tight labour market. The result is that, on any given day, only about half of the city centre’s estimated 300,000 white-collar workers are coming into the office.

Mr. Leblanc has been particularly critical of the federal government for what he calls its inertia and lack of leadership in bringing its staff back to the office, which has left big buildings in the downtown core largely empty.

“They are not in tune with the rest of the economy, the rest of the decision makers, they are much slower,” he said, referring to the federal bureaucrats making these decisions.

In general, he said, there are differences of opinion between workers and their bosses on how hybrid work should be structured.

“When we poll employees, they’d rather have a two- to three-day model,” he said. “When we poll employers, it’s a three- to four-day model. So we’ll see how it evolves.”

Right now, the trends are clear for the downtown core in Canada’s second-largest city: Students are there. Tourists are back. And the area’s population is experiencing a surprising surge as more residents move in, even if the raw numbers remain small.

All that has been great for business. Foot traffic downtown largely returned to prepandemic levels this past summer, meaning people generally are gravitating there. The statistics show a reduction in the percentage of retail and service companies that have permanently or temporarily closed since the health crisis started.

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But the lifeblood of the downtown core has for years been professionals, the people working at the banks, engineering firms and other public- and private-sector employers. The city centre is home to head offices of 24 companies with annual revenue topping $1-billion each, as well as 65 international organizations. And while their employees are dipping their toes back into their office environments, it’s not in great numbers.

The Chamber of Commerce’s most recent surveys show 63 per cent of Montreal’s downtown workers have returned to the office one to three days a week. Fewer than half say they’re satisfied with the employee experience at the office. Traffic congestion because of roadwork is also dampening their enthusiasm.

Their absence is having consequences, most notably on commercial real estate. The availability rate of office building space in Montreal’s downtown has roughly doubled since 2020 and now stands at 17.4 per cent, according to data from Altus Group. That number includes vacant space available now, as well as space where tenants have given their notice and do not plan to renew their leases.

The situation could get worse before it gets better. Altus forecasts that availability rates for Class A and Class B real estate, the highest-quality buildings, could reach 29 per cent by 2027.

Major companies such as Canadian National Railway Co., SNC-Lavalin Group Inc. and Laurentian Bank are all downsizing in the city centre as they embrace hybrid work models. For Laurentian, which is cutting the footprint of its headquarters on René Levesque Boulevard from 10 floors to five, the decision will drive employee retention and even give the lender “a competitive advantage in the war for talent,” spokesman Merick Seguin said.

Mr. Leblanc, an economist by training, is trying to plug those holes. To help companies find takers for their surplus square footage, the Chamber of Commerce launched an online platform where they can list space they have for lease or sublease. Such arrangements might pull in new businesses that previously would not have considered the downtown core, he said.

The Chamber of Commerce CEO and his team are also getting creative. The group curated a list of 14 projects and art installations that aim to make the city centre “a fun place to be” for workers, including The Ring – a circle sculpture several storeys high at the Caisse de dépôt et placement du Québec’s Place Ville Marie complex. And it launched TV and internet marketing campaigns playing up the positive aspects of working in-person.

Brett Miller, CEO of Canadian real estate company Canderel Ltd., sees a major role for property owners and managers in rethinking what the future office tower should be as the office-home balance shakes out.

“It’s no longer ‘Sign up a tenant, hook them into a 10-year lease and forget about them.’ It’s really much more of a service business,” he said. Mr. Miller predicts commercial landlords will offer more flexible leases and more amenities, such as bike racks and gyms. And he expects they’ll also host activities. “We’re going to be like the GOs, the ‘gentil organisateurs,’ at Club Med,” he said.

Downtown will survive even if office vacancy explodes, said Glenn Castanheira, a business development consultant who leads the downtown merchants’ association Montréal Centre-Ville. The area has bounced back from crises before, including the corporate decampment in the wake of the 1980 sovereignty referendum, and today it has stronger educational and cultural institutions, he said.

The biggest risk for Montreal now isn’t that the city centre hollows out but rather that its offices hollow out and commercial property values decline, Mr. Castanheira said. That’s a problem for Montreal’s municipal government in particular, which is hugely dependent on the taxes generated from downtown real estate, he said.

Companies that have their senior staff downtown and meet their stakeholders in person will be the successful ones that drive Montreal’s city centre forward, said Mr. Leblanc. “Those who say, ‘We can manage from Mont Tremblant or Lac Memphrémagog,’ I believe those companies will lag.”