The Times They Are A-Changin'

Times are a-changin'

Recently I took the subway downtown to work (a daily occurrence for 25+ years but a very rare experience over the last 16 months) and was surprised to see the pace of activity was still very quiet. It was a Friday in the summer but it felt more like a weekend downtown, with the lack of activity. Elevators were sparse and no issues running into people and the PATH and food courts were similarly quiet. Additionally, it appeared most restaurants and patios were far from full. There might be several different explanations for this. It could be concern about health and safety, and working indoors. It could be a result of CERB and being able to ‘enjoy the summer’ and still get paid. I also think immigration which is approximately one-third below expectations, is another factor although that is expected to increase with Canada relaxing travel restrictions. Lastly, the work from home traction may be stickier in that many workers are now used to their new routines and especially with the good weather, are not in a rush to go back to their offices. It appears many companies are apprehensive with their Fall plans to bring workers back to the office. Whether by choice or not, companies do not want to rush employees back although many have the goal of getting people back in the office on a more regular basis in 2022.

One’s expectations can be influenced by their perceptions and experiences. In the early Spring, when things were being locked down again in Toronto, being back in the office in August seemed like a stretch. However, we step back to 2020, one’s expectations might have different, either more optimistic or pessimistic. Often, it is coloured by what we are reading and listening to. In today’s technology-enabled world, we can get instant updates but news that lacks depth and is just presented for ‘clicks’. We know that news can sometimes be negative or attention-getting will often lead a broadcast or be positioned more prominently on a website. The feel-good stories are often saved for the end of the newscast, or further down a news website. The Summer Olympics ratings were down significantly this year. NBC had its lowest primetime ratings ever and was half of the 2012 games. Comparisons with previous Olympic Games are imperfect given the different time zones, the pandemic, and fewer streaming options in the past and of course this year there were no spectators, which I think dampens some of the excitement. While I missed many events, I certainly enjoyed receiving Canadian medal alerts and watching the highlights of the events. Viewing habits have changed dramatically over the years and other sports have seen their ratings change as well, as schedules have been pushed back and later than normal finals. With streaming, now even Disney is releasing some movies at the same time as they are offered in cinemas. So far, the numbers back this strategy up, and the genie is not going back in the bottle. Twenty years ago, Netflix was a DVD mail-order business today, they have 200 million subscribers, around the world. Additionally, streaming services are now even bidding on actual broadcast rights, such as Amazon with the NFL

It will be fascinating to see the Pay TV vs non-Pay-TV battle and how it plays out as the field has become very crowded. The chart below shows that US Pay TV households are expected to pass Non-Pay-TV in a couple of years. Great for consumers with more choices, but at some point, ‘too many’ choices and complexity with having more streaming services and only so much time in the day to watch. The times have changed where viewers know they can watch a live event ‘anywhere’ (stream at the cottage, for example) and do not have to necessarily be at home to watch the Olympics or other big game sports events.

Mobility Trends

Here is how the traffic congestion trends since January 13, 2020 for Toronto. Driving is up significantly with summer vacations as well as suburban employees driving more, despite not going into the office. Transit remains below January 2020 levels:

I have not seen similar data for Canada but below is the latest US office occupancy data from Kastle Systems, which operates security card systems across the country. They count “swipes” to enter a building or workspace as meaning that a client’s employee is in the office rather than working remotely. The red line, which represents top-10 US city average occupancy, dropped last week to 32.9% from 34.8% in mid-July. My expectation is that Canadian numbers would be sharply lower.

Despite the Work from Home trend continuing, it is interesting to note that U.S. gasoline demand has recovered to only 3% being the 2019 peak level. Additionally, demand has remained quite strong this summer indicating many Americans are choosing to travel by car this summer. Auto sales have been quite strong and it may also indicate an increase in suburbanization that has spurred additional demand for cars. 

Summary

Telecommuting and Work From Home (WFH) will remain post-pandemic, which will be a benefit for companies to retain workers. However, it will vary widely by the type of business and the question is to what extent will WFH be allowed by companies? Some workers will almost exclusively work from their homes while others will benefit tremendously from returning back to the office, in a collaborative environment. Workers will have more flexibility and hybrid practices such as working one or two days from home could become the norm for others. This should greatly improve the quality of life for all workers as commutes become faster, public transportation becomes less crowded and life generally becomes less hectic. Commuting equals stress, so that is one positive benefit. Estimates for business travel in the future vary widely from Delta Airlines CEO estimating a 10 to 20% decline while Bill Gates believes a 50% decline is possible. Those Zoom and Teams meetings will continue and they work very well to bring people together from different cities. The flipside is that in some meetings they either can be less beneficial as some may not get their voice heard as much as they would during an in-person meeting or miss out on the side meetings, introductions and conversations. Technology has certainly made the shift to WFH easier and now it remains to be seen how long the shift back to the office will take.