Comment: Leaving town for the country

With more people able to work from home, many consumers are apparently looking to trade in city living for open space, and the agri-food sector will have to adjust

People seem to want to flee urban centres these days. The real estate market is overheating in regions outside of major cities like Toronto, Montreal, Vancouver, and Halifax. Recent real estate reports suggest sales are up 20 per cent in many rural markets and prices have increased by at least five per cent since the start of the pandemic.

Cottage countries are exploding for two main reasons:

First, many have realized that space can be an issue, especially when dealing with a pandemic. Many want more space and to get away from neighbours. Spending three months in a two-bedroom apartment can make you think differently about space.

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Second, telecommuting is an emerging factor. This is something the food industry will need to keep a close eye on in months to come.

Just six months ago, telecommuting was barely on anyone’s mind. Today, according to a recent Angus Reid survey, most Canadians now plan or want to work from home regularly. In other words, one’s personal residence may be less of an obstacle for career choices. People in northern Ontario could think of working for a company in Regina, Sask. One’s personal address could become less of an obstacle.

Financially, the case for more telecommuting is very strong. Indeed, an employee at home spends less on clothes, transportation, of course, and restaurants. All of these factors are the same for employers. Business lunches, team meetings over coffee, dinner meetings — these activities are not likely to happen as often. Telecommuting has the potential to disrupt the real estate market and how the food-service industry coalesces with the housing fabric of communities.

The food-service sector has already gone through a period of great upheaval. Some estimates for 2020 predict that the food-service sector will not even generate 40 per cent of the revenues it achieved in 2019. According to Restaurants Canada, more than 25 per cent of restaurants in Canada that closed in March will never open again. This is roughly 24,000 establishments out of the 97,000 restaurants in Canada, a staggering figure. And that number will likely increase over the next six months or so.

With telecommuting, regionalizing the sector’s network of outlets will likely be the norm, similar to what we see in Europe. With this proximity to the regions, farmers, processors and others can dream of catering in the countryside, and why not. In the past, small country restaurants have always been fuelled by loyal locals or by adventurous urbanites. Given the number of restaurants that can be found in any downtown core, driving out of the city is not an overly attractive proposition. Standardization of menus and experience may no longer be the criteria of choice for a growing number of customers, as it was before COVID-19. Franchises and major chains have made a living by doing the complete opposite. Think of McDonald’s, Starbucks, Burger King, A&W and many others. Tim Hortons and Subway have mastered their way to smaller markets, with lower franchise fees and manageable menus. But major expansion plans for most of these companies may need to be rewritten, as a greater number of Canadians seek refuge in small-town Canada.

Food retail will not be spared either. Because of COVID-19, the market is likely overstored as management costs have gone up. Also, more are looking at e-commerce to grocery shop regularly. Online shopping will take up more and more space. For their survival, performance measures for grocers will change and focus more on efficiency, safety and public health, less on brands and market presence. For regions where we may see more customers looking for a place to grocery shop, e-commerce comes in handy. We can easily see grocers setting up pickup stores to support a growing rural market without committing to more costly outlets, which cannot move once built.

Strangely enough, despite the economic chaos caused by the pandemic, house prices in most large urban areas have actually increased compared to the same period last year. Incredible. Leaving cities to telecommute from a more affordable home is indeed a compelling argument. Free money will do that to a real estate market. It is still unclear how COVID-19 will impact the real estate market over time, but if this summer is any indication of what is to come, the entire food industry is in for a complete recalibration.

About the author

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Sylvain Charlebois is senior director, Agri-Food Analytics Lab, and professor in food distribution policy, Dalhousie University.

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