Investment

Halifax’s real GDP fell by 3.5% in 2020 to $20.48 billion. While this was one of the largest annual declines experienced, Halifax has rebounded well and the Conference Board of Canada predicts a robust GDP growth of 4.6% for 2021. With mandated lockdowns, physical-distancing requirements, and travel restrictions, much of the decline was in the service sector, which makes up over 80% of the city’s employment.

As well, retail sales in Halifax fell by 4.8% although The Conference Board of Canada expects this figure to rebound by 4.3% in 2021 as pent-up demand for finished goods comes back to the marketplace.

In comparison to benchmark cities, Halifax performed better than most. With the second-lowest percentage drop in GDP, Halifax was only behind Victoria (-2.9%). Halifax’s drop in retail sales was the third-largest across benchmark cities. Only St. John’s and Victoria saw increases in retail sales with a growth of 1.5% and 1.9%, respectively.

The total number of active businesses^{1, 2}fell year over year across all benchmark cities. Halifax saw a 3.9% decrease in the number of active businesses between 2019 and 2020, but it remained above 2015 levels (the earliest year in Statistics Canada’s data series). In fact, Halifax experienced the smallest decline across all benchmark cities.

With the onset of the pandemic, consumer confidence in Halifax, as measured by Narrative Research’s Consumer Confidence Index (CCI), plunged in the first three quarters of 2020. This brought the CCI to a 10-year low of 83.6 points. As the economy rebounded and reopened, the year ended with a small increase of 1.7 points in Q4.

Halifax Partnership’s Business Confidence Survey, carried out by Narrative Research, gathers views on Halifax’s economy from business owners. The Business Confidence Index (BCI) is calculated on a scale from -100 to +100 based on 5 questions that cover the past, current, and future performance of Halifax’s economy as well as its performance relative to other cities.

In 2021, Halifax’s BCI set another record high of 37.8. Even with mandated COVID-19 restrictions, business opinions continued to improve. However, the third wave of the pandemic started halfway through the survey period, and the difference in the BCI score pre- and post-third wave is stark. Responses collected before April 26, 2021 (pre-third wave) had a score of 39.3, while the score calculated from responses after this date was 31.9.

Halifax’s quality of life remains the city’s greatest advantage for business owners, with 88% considering it a benefit, for a net advantage³ of 82%. On the other hand, the factor considered a net disadvantage⁴ by most business was the tax environment at -28%. The availability of labour was the only factor that jumped from being a net disadvantage in 2020 to a net advantage in 2021, from -5% to 4%. The cost of real estate or office rent went from being a net disadvantage in 2020 to balanced in 2021.

With construction work deemed an essential service, total investment in non-residential construction increased by 1.6% in 2020, which amounted to a total of $5.1 million. This increase mainly came from 3.9% growth in commercial projects, an increase of $10.5 million. Investment in industrial and institutional construction both fell by 20.0% ($5 million) and 1.6% ($360k), respectively.

With many offices shifting to working from home at the start of the pandemic, the downtown office vacancy rate in Halifax increased almost 2 percentage points in Q2 2020. For the remainder of the year, this figure was relatively stable, closing at 19.9%. In comparison, the national downtown office vacancy rate was 13% in 2020. With a figure much closer to the national average (14%), Halifax’s suburban office vacancy rate closed at 13% in 2020, 0.3 percentage points lower than 2019.

After staying level for most of the year, demand for industrial space in Halifax sharply outpaced supply at the end of 2020. In Q4, Halifax had a record high (449,140 sq. ft.) of positive net absorption⁶ for industrial space, overtaking the last high experienced in Q1 2013. With the high absorption rate in Q4, availability of industrial space dropped to 4.7%, a steep fall from Q3. Prior to Q4, the industrial space availability rate had remained relatively stable between 6.5% and 6.8% since the second quarter of 2019.

Just like in 2019, rents for both office and industrial space rose throughout 2020, but both remained lower than national figures.

The Halifax Gateway includes the Port of Halifax, the Halifax Stanfield International Airport, the Halifax Logistics Park, the Port of Sheet Harbour, and CN’s transportation infrastructure. As expected, due to the strict travel and trade limitations resulting from COVID-19, Gateway numbers declined significantly in 2020.

After welcoming a record number of cruise passengers in 2019, cruises were fully suspended in 2020. Both cruise ship and passenger numbers plummeted to 0 and the cruise season has been suspended again for 2021.

The number of air passengers dropped significantly in 2020 after an exceptional year in 2019. With strict international travel restrictions, Halifax Stanfield International Airport saw a massive 76.2% decrease in air passengers to a total of 995,426 in 2020. Air cargo also fell by approximately 20% to a total of 32,984 metric tonnes.

This is the first decline in air cargo that the Stanfield International Airport has seen in 6 years. On a brighter note, construction of the $36 million Air Cargo Logistics Park at Halifax Stanfield is expected to be completed by the end of 2021.

Port-wide cargo declined 4.0% in 2020. With a total of 8,273,457 metric tonnes shipped, this is the lowest level since 2016. Similarly, 507,185 TEUs (20-foot equivalent units) were shipped through Halifax Port Authority facilities in 2020, down 7.2% from 2019. This was the lowest amount shipped since 2016. Currently under construction at the former Seaport Farmers’ Market is The PIER, short for Port Innovation, Engagement, and Research. The PIER will serve as a global centre where entrepreneurs, partners, and researchers can come together to tackle problems related to maritime transportation and logistics.

After tremendous growth in 2019, the tourism industry in Halifax experienced a massive drop in 2020. Travel restrictions, social-distancing requirements, and public-gathering limits hit this sector hardest.

As noted earlier, Stanfield International Airport recorded a 76.2% decrease in air passengers while cruise ships and passengers were both at 0 for 2020.

Overnight hotel stays declined by 56.5%, and room nights sold in the room sharing economy declined by 42.5%. Hotel room capacity, however, grew by 6.8% (402 rooms).

To aid businesses during the time of high supply and low demand, the Government of Nova Scotia implemented various programs like the Small Business Impact Grant and Tourism Accommodations Real Property Tax Rebate Program.

Many businesses in the tourism industry closed permanently in 2020. Across the province, at the height of the pandemic, the number of active businesses in the tourism industry dropped to its lowest recorded figure of 1,551. Although it has increased since, the number still remains below pre-pandemic levels.

Guest Author: Peter Moreira, Principal of Entrevestor

After initial pangs of fear, the pandemic unleashed energy and creativity in Halifax’s innovation community, generating economic growth and helping society cope with the global crisis. Both the information technology and life sciences sectors in Halifax thrived with many businesses and governments focusing on digital transformation and health care.

IT companies like Proposify Inc., and LifeRaft Inc., reported strong growth of their digital products, and both were rewarded with funding from the Canadian Business Growth Fund, a new venture capital firm set up by the country’s largest financial institutions. Some IT companies, like Side Door Access which arranges concerts in people’s homes, pivoted to offering online offerings. Life sciences companies rallied to develop products to address the COVID-19 crisis. These efforts helped Halifax biotech companies raise a record $55 million in stock market funding.

The biggest event of the year was the venture capital funding by CarbonCure Technologies Inc., with investors such as Amazon.com Inc., Microsoft Corporation, and Breakthru Ventures (whose backers include Mike Bloomberg and Jeff Bezos, among others).

With university campuses all but empty, there were fewer new startups⁷than the previous year, but still more than 2018 levels. The innovation community is continuing to grow due to more and more companies moving into Halifax. The city is becoming Canada’s ocean-tech startup hub with 55 of the 101 ocean-tech startups in Atlantic Canada that Entrevestor tracks. In 2020, Creative Destruction Lab - Atlantic, overseen by Dalhousie University, launched its ocean stream and the Halifax Port Authority is planning a digital innovation space call The PIER, which will complement Innovacorp’s Start-Up Yard in Dartmouth.

With COVID-19 came steep job losses and widespread business restrictions and closures. All levels of government rolled out emergency-assistance programs to keep people and businesses afloat. These sharp hikes in government spending were financed through increased borrowing that will be paid back over time.

Nova Scotia, as has been the case for some time, remains in the middle of the pack across provinces for net debt per capita. According to the 2021-22 Nova Scotia budget, the net debt of the province is expected to be $16.7 billion for 2020-21 and increase to $18.0 billion for 2021-22. The 2020-21 figure equates to $17,032 per capita and 37.4% of GDP.

Fiscal 2020-21 saw total Halifax Regional Municipality revenue decline by 1.8%, and it is expected to decline again by 3.5% in 2021-22. Property taxes remained the largest source of revenue in 2020-21. Revenue generated through other sources, however, increased in 2020-21 mainly due to stimulus packages from the federal and provincial governments, somewhat offsetting pandemic-related declines in transit fares and parking revenues.

Municipal debt remained the same at $235.7 million in 2020-21 as it was in 2019-20. Debt is expected to increase to $241.2 million in 2021-22, the first increase in a decade.

Municipal spending is expected to increase by $51.3 million (5.4%) in 2021-22. The departments with the largest proportional increases were Planning and Development, Corporate and Customer Services, and Other Government Support Services.