Investment is essential to a healthy economy. Individuals must have confidence in the stability of the economy to make major purchases, and businesses must have confidence to expand their operations. When this occurs, the wealth and well-being of a community improves.
Halifax had many positive indicators in 2019 and demonstrated strong economic growth: GDP grew faster than in most benchmark cities, retail activity was strong, and consumer confidence neared an all-time high.
Prior to the COVID-19 crisis, businesses expressed record-high levels of confidence in their economic prospects.
Local businesses cited factors such as the city’s high quality of life, connections to post-secondary institutions, and a workplace safety culture as advantages.
Investment in non-residential construction declined from its 2018 peak but remained high. Meanwhile, the availability of office and industrial space declined as businesses began to occupy the large volume of new space constructed in recent years. Rents remain lower and availability rates higher than national averages, suggesting that Halifax will remain quite competitive in terms of real estate offerings when attracting investment to the city.
It is clear that the very positive results for 2019 do not reflect our current economic realities, which must be viewed in the context of the COVID-19 public health crisis. The uncertainty caused by COVID-19 has upended business as usual. This makes it difficult for companies to plan ahead or find meaningful signals across the shifting economic landscape. As businesses consider their future investment, a healthy level of caution is warranted.
While 2020 is likely to include a significant decline in investment compared to 2019, the strong economic indicators from last year suggest that Halifax has the fundamentals needed for businesses to once again be successful and for the economy to return to growth.
2019 was a banner year for Halifax, with real GDP growth of 2.6% and strong indicators in many key sectors of the economy. According to the Conference Board of Canada, this increase in economic activity was driven by 12% growth in the construction sector and 5% growth in the health care sector. Meanwhile, retail sales grew by an impressive 3% in 2019, increasing to $8.3 billion. Halifax outperformed many of its benchmark cities boasting the third-fastest growth in real GDP (behind St. John’s and Victoria) and the fastest growth in retail sales.
Consumer confidence also has been strong. According to Narrative Research, Halifax’s Consumer Confidence Index was 105.4 in Q4 2019, up from an average of 104.5 in 2018. Not only has Halifax’s consumer confidence grown, it was just 2% below the city’s record-high recorded in Q4 2009.
However, satisfaction with such strong economic performance must be tempered with a healthy dose of caution. Since these data were gathered, the COVID-19 crisis has stalled economic growth, upended business as usual, and put a damper on consumer confidence. Within the retail sector, consumers will likely delay key purchases until they feel it is safe to go out in public. Many businesses and consumers alike will avoid making major investments until their income and employment situations have stabilized.
Despite these temporary disruptions, Halifax has demonstrated strong economic fundamentals including rising incomes, strong construction and retail activity, and high consumer confidence. The exceptional growth seen in 2019 will not be matched in 2020 when economic contraction seems all but certain; however, the city has a strong foundation on which to rebuild.
Source: Conference Board of Canada, Metropolitan Outlook - Winter 2020
Source: Conference Board of Canada, Metropolitan Outlook - Winter 2020
The Consumer Confidence Index is a composite of 5 questions on household economic well-being and expectations around the economy.
Data were not collected in Q1 2019 nor Q3 2019.
Source: Narrative Research, Consumer Confidence Index (Various)
The Partnership’s Business Confidence Survey gathers input on various issues from business owners across the city and their views on Halifax’s economy. Through our partner and Investor Narrative Research, we construct a Business Confidence Index (BCI) on a scale from -100 to +100 based on the responses to 5 questions. These questions cover the past and current performance of Halifax’s economy, its performance relative to other cities, and predictions about future prospects.
The 2020 BCI hit a record high and continues a trend of steadily improving business opinion that began in 2015. The current survey was conducted between February 28 and March 16, so most responses were recorded prior to the implementation of social-distancing measures. Therefore, this year’s BCI reflects opinions of Halifax under largely normal circumstances. It should be interpreted as a benchmark of business opinion before the crisis.
Businesses indicated significant plans for growth in 2020, including increases in their sales activities, widespread additional hiring, investments in R&D, and the introduction of new processes or services. Unlike past editions of the Halifax Index, we have deliberately chosen to exclude these data here. The circumstances surrounding the COVID-19 crisis have severely upended planned business activities and these results likely are no longer a meaningful reflection of future economic conditions or business activities.
Halifax businesses continue to have positive things to say about the city’s quality of life. Among all the factors that contribute to or detract from their operations, it is the most positively cited, with 79% of business-owners considering it an advantage. Other frequently cited advantages include connections to universities and colleges (77%), the workplace safety culture (77%), telecommunications and internet services (67%), and the quality of the labour force (64%). The factors most likely to be cited as a disadvantage are the tax environment (58%), energy costs (54%), and real estate or office rental costs (46%).
Year | BCI | Rating of Halifax as a Place to Do Business | ||||
|
| Above Average | Just Average | Below Average | Don’t Know/ | |
Spring 2013 | 24.6 | 19% | 59% | 18% | 4% | |
Spring 2014 | 20.2 | 14% | 66% | 17% | 4% | |
Spring 2015 | 21.1 | 15% | 61% | 20% | 4% | |
Spring 2016 | 28.1 | 26% | 55% | 14% | 5% | |
Spring 2017 | 29.1 | 23% | 60% | 12% | 4% | |
Spring 2018 | 32.9 | 27% | 57% | 12% | 3% | |
Spring 2019 | 32.8 | 26% | 61% | 10% | 3% | |
Spring 2020 | 34.9 | 32% | 55% | 10% | 4% | |
Source: Narrative Research, Business Confidence Survey (Various)
Survey Question: Would you say the following aspects of Halifax present a major advantage, moderate advantage, minor advantage, minor disadvantage, moderate disadvantage, or a major disadvantage for your business?
Source: Narrative Research, Business Confidence Survey (Various)
Overall investment in non-residential construction decreased by $50.6 million (-13.5%) in 2019. Investment in commercial and institutional construction fell by $31.3 million (-10.3%) and $22.5 million (-45.6%), respectively. Industrial construction investment grew by 3.2 million (13.3%) for a total of $27.3 million, the highest level of industrial investment since 2015.
Although the downtown office vacancy rate dropped by almost a full percentage point through 2019, the 18.6% downtown office vacancy reached in Q4 2019 is almost double the national figure of 9.8%. Halifax’s suburban office vacancy rate rose to 13.3% in Q4 2019, much closer to the national figure of 12.2%.
According to CBRE, 2019 marked the third year in a row that more than 200,000 sq. ft. of industrial space was leased in Halifax. While the tightening industrial market has caused the industrial availability rate to fall by almost half since 2016, the 6.7% rate reached in Q4 2019 is still more than double the national rate of 3.0%.
Rents for office and industrial space rose through 2019, though both remain noticeably lower than national averages.
Source: Statistics Canada, Investment in Construction, Table 34-10-0175-01
Source: CBRE, Office Marketview (Various)
Source: CBRE, Industrial Marketview (Various)
Trade and tourism experienced another strong year in Halifax. New records were set for air cargo volumes, overnight stays, and cruise passengers. Unfortunately, tourism-related industries suffered significant losses in the initial weeks of the COVID-19 crisis.
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