By Nichola Saminather

TORONTO (Reuters) – Business is slowly starting to percolate again at the Second Cup coffee shop franchise in Toronto’s PATH shopping mall as workers trickle back to major downtown office buildings above the world’s biggest underground retail hub.

Bryan Archee (who has been the Second Cup owner for eleven years) said that the pandemic reduced sales by 80%. His and the other businesses dependent on office workers have a reason to be hopeful with their return to the towers. Archee remains troubled by the announcements from many employers that they will accept a hybrid model of work.

He told Reuters that hybrid will have a significant impact on his business. Volume is what we require, as our average cheques are not very high. We won’t be able to survive if we don’t have enough volume.

The PATH is an ensemble of more than 1,200 restaurants, shops and other businesses that spans 30 kilometers (18.6 mile) below Toronto’s main financial district. Toronto claims that the PATH links office towers controlled by 35 corporate owners.

With 200,000 workers accessing the PATH every weekday, it was bustling before the epidemic. It is now quiet and empty of the bustling crowds of office workers who used to fill it during breaks and after-work.

By contrast, customers have returned much more rapidly to street-facing retailers and the neighbouring Eaton (NYSE:) Centre mall, a popular tourist and shopping destination.

The financial viability of Archee’s store and all other businesses in the PATH area depends on foot traffic. Many businesses plan for their employees to continue working remotely as part of the work week. They anticipate an uncertain future, even though they have already prepared for it.

Retailers such as Maska Mode, a fashion retailer, and Mad Radish, a gourmet fast food restaurant chain, have shuttered their PATH stores, while other shops and street-front locations are still open.

CHANGING BUSINESS MIX

Smaller businesses with no or few locations elsewhere will be especially hard hit, said Karl Littler, senior vice-president for public affairs at the Retail Council of Canada.

Tim Sanderson of JLL Canada’s national retail lead, stated that “the PATH” is complex but not the only destination. It remains food-focused and fashion, which have both been greatly affected by the current events. It’s likely that there will continue to be vacant properties.

Tenants may be able to end their leases if they don’t maintain an acceptable level of occupancy. That could increase the vacancy rate, according to Craig Patterson, retail consultant.

Landlords can find more flexible tenants if there aren’t thousands of workers who use the PATH every day. Bradley Jones, the head of retail for Oxford Properties Group, stated that clothing stores and traditional businesses could move on to other locations, such as clinics and technology spaces, libraries, or other services that would be attractive to residents. Oxford Properties has some of the office towers as well as sections of PATH.

It is difficult to compile comprehensive statistics because there are multiple owners of sections of the PATH. Some tenants that have closed their doors have been replaced by others who are on temporary leases or in pop-up shops.

Archee’s cafeteria is one example of a tenant who has survived due to government subsidies and landlord leniency in lockdowns.

“The real question is what will happen when those blankets are taken off?” Frank Magliocco is the real estate lead at PwC Canada. Do they have the resources to help them get on their feet again?

Jones stated that offices are currently occupied at 15% and will increase to about 50% by year’s end. This could help to revive businesses within the PATH.

He said, however that “there is no doubt” the underground and the PATH have been hardest hit. They will need longer to heal.”