State of the Economy St. John's Metro

State of the Economy St. John's Metro May 2017

Published by: Economic Development, Culture & Partnerships Department of Community Services City of St. John's Email: business@stjohns.ca Economic Updates (monthly), Economic Reviews and Outlooks (biannual) are also available in the publications section of the website www.stjohns.ca or can be subscribed to by visiting the e-updates section. Although every effort has been made to ensure the completeness and accuracy of the information contained in this publication, the City of St. John s does not guarantee, warrant or make any representations, express or otherwise, that the information contained herein is complete and correct. All numbers are nominal unless otherwise stated. Publication date: May 2017 2

St. John's CMA¹ economic indicators 2015 2016e % Change 2015-2016e Real GDP (2007$M) 12,502 12,891 3.1% Retail Trade ($M) 3,914 3,979 0.9% Household Income ($M) 10,828 10,952 1.1% Consumer Price Index (2002=100) 128.7 132.0 2.6% 1 St. John s Census Metropolitan Area (CMA) is a geographic area defined by Statistics Canada that includes St. John s and several neighbouring communities. St. John s CMA may also be referred to as St. John s metro throughout this document. Please refer to the following website for a map of St. John s CMA http://stats.gov.nl.ca/maps/ Table shows change from previous year. 2016 data is estimated. Source: Statistics Canada; Government of NL, Department of Finance, Economic Research and Analysis Division. e: estimate, f: forecast 3

The St. John's metro unemployment rate increased by 1.3 percentage points to 7.8% in 2016. 2015 2016e % Change 2015-2016e Labour Force 123,900 126,300 1.9% Employment 115,900 116,400 0.4% Unemployment Rate 6.5% 7.8% 1.3 ppts Participation Rate 69.3% 69.6% 0.3 ppts Table shows change from previous year. 2016 data is estimated. Source: Statistics Canada; Government of NL, Department of Finance, Economic Research and Analysis Division. e: estimate, f: forecast. 4

Business approvals in the City of St. John s, including Home Based Businesses. 2013 2014 2015 2016 Home Based Businesses 51 59 43 57 General 89 89 102 74 Total 140 148 145 131 Source: City of St. John s 5

Economic growth and oil production Real GDP growth in the St. John s CMA is sensitive to changes in oil production. The majority of oil industry activity is resident in the area, therefore most of the province s oil-related Real GDP is allocated to the CMA. Real GDP Growth With and Without Oil & Gas St. John's CMA (%) 10 5 6.3 4.4 2.0 3.1 0.6 0-5 -0.4-0.1-0.3-1.2-2.5 With Oil & Gas Excluding Oil & Gas -10 2012 2013 2014 2015 2016 Source: Government of NL, Department of Finance, Economic Research and Analysis Division. 6

Oil production impacts local and provincial economies. The Hebron project is scheduled to begin oil production in 2017. Exploration continues with recent discoveries, including Bay du Nord. Source: Canada-Newfoundland and Labrador Offshore Petroleum Board (C-NLOPB), January 2017 7

Major projects in the province are making significant investments and contributing to the local economy. Project Value Hebron Offshore Oil Development (2008-2024) Lower Churchill Phase 1, Muskrat Falls Hydroelectric Generation Facility Vale Long Harbour Nickel Processing Facility (2009-2018) Vale Voisey's Bay Underground Mine Development $14 B $9.396 B $4.25 B ($US) NA Note : This is not a complete list of Major Projects. Source: Government of NL, Department of Finance, Economic Research and Analysis Division 8

Millions of dollars in ongoing developments in the City of St. John s Project $10 M St. John's International Airport 2014-2020 Capital Plan $245 Galway and Glencrest Development 2013-2017, Phase One $102 Alt Hotel, 123 Water Street $35 Star of the Sea Condos, 40 Henry Street St. John s Harbour Upgrade Project, Irving Oil $22 $20 Best Western Plus St. John s Airport Hotel $17 Sandman Hotel, 227 Kenmount Rd. $10.6 Micro Boutique Living, 12 Water Street $10 MIX residences, 345 Duckworth Street $15.4 Note: Table is not a complete list of all projects. Source: City of St. John s, Government of NL, Department of Finance, Economic Research and Analysis Division, Project Proponent 9

City of St. John s Initiatives Project $1 M Paul Reynolds Community Centre, Wedgewood Park $38.5 Water Transmission Main Replacement Program (2013-2017) $34 Bay Bulls Big Pond Water Treatment Facility Upgrade $12 Kenmount Terrace Park $10 City of St. John s Street Rehabilitation Program 2016 $9.8 Metrobus Capital Works $6.1 St. Patrick s Housing Project $4.6 Community Market, 245 Freshwater Rd. $3.7 Note: Table is not a complete list of all projects. Source: City of St. John s 10

Other Public Investments in St. John s Project $15 M Memorial University Core Science Facility (2016-2020) $325 Team Gushue Highway Extension (2010-2017) $61.3 Atlantic Region Coast Guard Headquarters (2015-2018) $40.0 Memorial University Battery Facility (2013-2017) $25.6 Colonial Building Restoration (2009-2018) $22.2 Note: Table is not a complete list of all projects. Source: City of St. John s, Government of NL, Department of Finance, Economic Research and Analysis Division 11

Harvey s Power Centre, east side of Torbay Road Field Power Centre, west side of Torbay Road Glencrest Industrial Centre, Phase One Galway residential and retail For location and further information: http://teamcapitalnl.ca/listing/harvey-power-centre/ http://teamcapitalnl.ca/listing/661-699-torbay-rd-field-power-centre/ www.glencrest.ca www.galwaynl.ca Map: City of St. John s 12

St. John s CMA housing starts decreased by 15% to 833 units in 2016. In the City of St. John s, housing starts declined to 294 units. Housing Starts - City of St. John's and St. John's CMA 2006-2016 2500 CMA St. John's 2153 2000 1500 1275 1480 1863 1703 1816 1923 1734 1230 1000 500 579 713 670 751 701 949 1,001 759 503 985 398 833 294 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Note: CMA housing starts include St. John's housing starts. Source: Canada Mortgage and Housing Corporation (CMHC) 13

Thousands $ The average MLS ¹ housing price almost doubled from 2007 to 2014, decreasing to $305,763 in 2016². Average MLS Housing Price in St. John's CMA 2007-2016 350 325 300 275 274.2 291.0 307.5 322.7 335.0 319.3 305.7 250 225 203.1 236.0 200 169.5 175 150 125 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1 MLS (Multiple Listing Service) is a registered trademark of the Canadian Real Estate Association (CREA). ² CREA has made changes to the way the historical series is aggregated so prices are different from previous editions of the State of the Economy. Source: CMHC, adapted from MLS data. 14

Rent per sq foot Total Vacancy Rate Industrial market rental rates increased 5% to $14.35 per square foot and the vacancy rate increased to 16% in January 2016. First Quarter Gross Rental Rate and Vacancy Rate, Industrial St. John's CMA 2006-2016 $16.00 $14.00 $12.00 $10.00 $8.00 $6.00 $4.00 $8.72 5.6% $9.01 $9.25 5.2% $9.89 6.3% $10.53 $10.47 7.3% $11.02 5.6% 5.9% $12.51 4.9% $13.12 9.9% $13.63 9.9% $14.35 16.0% 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% $2.00 3.6% 2.0% $0.00 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 0.0% Source: Cushman & Wakefield Atlantic 15

psf/yr Office market rental rates increased slightly to $35.09 per square foot in the first quarter of 2016 and have increased 84% over the last ten years. First Quarter Gross Rental Rate St. John's 2007-2016 $40 $30 $24.57 $27.50 $29.11 $31.05 $33.10 $34.63 $35.09 $20 $19.05 $18.58 $20.70 $10 $0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: Cushman & Wakefield Atlantic 16

Office vacancy rates rose in 2016, reaching 13.4%, an increase of 44% from Q1 2015. An additional 358,028 sq. ft. of office space has been completed and occupied over the last couple of years. 14 12 10 8.5 1st Quarter Office Market Overall Vacancy St. John's CMA (%) 2006-2016 Class A Overall* 9.3 13.4 9.9 8 6 4 2 0 6.4 5.7 5.3 4.6 3.9 4.6 4.1 3.7 2.6 2.4 1.1 0.8 0.7 0.1 0.4 0.0 0.0 0.1 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 * Class A buildings in St. John's are: Baine Johnson Building, Fort William Building, Cabot Place, lll Fifty One Water Street, Fortis Place and Scotia Centre. Source: Cushman & Wakefield Atlantic, Altus Group 17

$Millions The value of commercial building permits in St. John s was $131 million in 2016 while residential and repair permits were $98.2 million. Value of Construction from Commercial and Residential Building Permits City of St. John's, 2007-2016, $Millions 300 Com Res 200 100 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Com = Commercial Permits; Res = Residential and Repair Permits Source: City of St. John's 18

Investment in non-residential* building construction in the St. John s CMA reached $59 million in the third quarter of 2016, down -52.6% from the fourth quarter of 2015. Investment in non-residential building construction, selected CMA s seasonally adjusted 3rd Qrt 3rd Qrt 3 rd Qrt 2015 to 2015 2016 3 rd Qrt 2016 $ millions $ millions % change London 118 186 57.8 Moncton 47 75 57.3 Saskatoon 134 193 43.8 Victoria 79 91 15.1 Toronto 2618 2504 6.5 Vancouver 914 943 3.2 Calgary 1,133 1,012-4.4 Quebec 205 178-13.1 Kingston 104 53-49.5 St. John's 124 59-52.6 Canada 12,825 12,514-2.4 Source: Statistics Canada. * The investment in non-residential building construction represents the spending value for enterprises and governments, for industrial, commercial and institutional buildings. It excludes engineering work (bridges, roads, electrical dams, etc.). 19

St. John s CMA labour force participation rate increased slightly (0.3 ppts) to 69.6% in 2016 but remained higher than the national rate (65.7%). Labour Force Participation Rates (%) St. John's CMA vs Canada 74 72 69.6 70 % 68 66 64 65.7 62 60 St. John's CMA Canada Source: Statistics Canada; Government of NL, Department of Finance, Economic Research and Analysis Division. 20

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 The annual unemployment rate in the St. John's CMA was 7.8% in 2016. The rate in Canada was 7.0%. 16 Annual Unemployment Rate (%) St. John's CMA 2000-2016 14 12 10 8 6 9.5 9.2 9.2 9.9 9.0 8.8 8.1 6.9 7.8 8.3 7.7 6.6 7.2 6.1 6.0 6.5 7.8 4 Source: Statistics Canada; Government of NL, Department of Finance, Economic Research and Analysis Division. 21

City of St. John s 2011 Census 2016 Census Population % Change Population 106,172 108,860 2.5% St. John's Census Metropolitan Area (CMA) Occupied Private Dwellings 47,627 5.8% St. John s CMA 2011 Census 2016 Census % Change Population 196,954 205,955 4.6% Occupied Private Dwellings 85,015 7.7% Source: Department of Finance, Newfoundland & Labrador Statistics Agency Source: Statistics Canada, 2016 Census of Population. 22

St. John s CMA - A Demographic Snapshot: A glimpse into the future The percentage of the population of Newfoundland and Labrador living in St. John s CMA continues to grow Source: Government of Newfoundland and Labrador, Department of Finance, Economic Research and Analysis Division, Population Projections, medium scenario, 2014. 23

St. John s CMA - A Demographic Snapshot: A glimpse into the future It is forecasted that the number of households will increase at a greater rate than the population. Source: Government of Newfoundland and Labrador, Department of Finance, Economic Research and Analysis Division, Population Projections, medium scenario, 2014. 24

St. John s CMA - A Demographic Snapshot: A glimpse into the future An Aging Population: The portion of the population aged 65 and over grows while the 20-64 age group declines. Source: Government of Newfoundland and Labrador, Department of Finance, Economic Research and Analysis Division, Population Projections, medium scenario, 2014. 25

St. John s CMA - A Demographic Snapshot: A glimpse into the future Population growth forecasted in the City of St. John s and St. John s CMA Source: Government of Newfoundland and Labrador, Department of Finance, Economic Research and Analysis Division, Population Projections, medium scenario, 2014. 26

Average weekly earnings declined in 2016 decreasing 4.5%, but are 45% higher than they were 10 years ago. The consumer price index increased 18% between Jan 2006 and Jan 2016. Average January Weekly Earnings St. John's CMA 2006-2016 $1,100 $1,000 $949 $998 $900 $800 $781 $805 $860 $913 $1,003 $953 $700 $640 $748 $600 $658 $500 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: Canada Mortgage and Housing Corporation (CMHC), adapted from Statistics Canada (CANSIM) 27

The median family income in the St. John s CMA rose by 1.3% to $94,060 compared to an increase of 1.1% in Canada. Median total income of all census families % Change 2013 2014 2013 to 2014 $ $ Kelowna 78,370 80,000 2.1 Saint John 75,040 76,450 1.9 Windsor 74,880 76,260 1.8 Vancouver 74,820 76,040 1.6 St. John's 92,880 94,060 1.3 Calgary 103,240 104,530 1.2 Regina 93,670 96,080 0.6 Quebec 85,800 86,110 0.4 Sherbrooke 72,090 72,070 0.0 Canada 78,050 78,870 1.1 Source: Statistics Canada. 2016-07-14. Census families include couple families, with or without children, and lone-parent families. 28

Billions $ Slower growth in household income resulted in retail sales of $3.9 billion in 2016, on par with 2015. Retail Sales ($B) - St. John's CMA 2007-2016 4.2 4.0 $3.88 $3.91 3.8 3.6 3.4 $3.44 $3.74 $3.91 $3.95 3.2 3.0 2.8 $3.03 $3.12 $3.25 2.6 $2.76 2.4 2.2 2.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: Statistics Canada; Government of NL, Department of Finance, Economic Research and Analysis Division.

84% of businesses in St. John s CMA have less than 20 employees. # of businesses by Employment Size Range St. John's CMA 2016 (n=6,943) 12.7% 2.5% 0.7% 50.3% 33.8% 1 to 4 5 to 19 20 to 99 100 to 499 500+ Source: Statistics Canada, Business Register 30

Approximately 32% of the 17,422 students enrolled at Memorial University in 2016 were from out of province. International student enrolment increased 6.7% over 2015. Number of International and Other Canadian Students Enrolled at MUN, Fall Semesters 2007-2016 4000 3500 Other Canadian International 3021 3196 3211 3300 3239 3283 3068 3000 2602 2852 2861 2500 2000 2123 2318 2474 1500 1694 1872 1000 500 978 948 1143 1273 1423 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: Center for Institutional Analysis and Planning, Memorial University. 31

St. John's average hotel occupancy rate was 60.36% in 2016, down from 62.95% in 2015. Room nights available increased to 939,909 from 892,368 in 2016. The average rate was $148.84 per night in 2016, in 2015 it was $149.72. Note: These numbers reflect all room nights including major hotels, boutique hotels, and B & Bs. An increase in room nights available in 2016 has affected the comparison of occupancy rates slightly. Source: Destination St. John s 32

St. John s Convention and Cruise Data The new St. John's Convention Centre opened in May 2016! 2014 2015 2016 *Meetings and conventions of greater than 50 people Source: Destination St. John s, City of St. John s Note: The St. John s Convention Centre was closed from fall of 2014 to spring 2016 for construction 2014 2015 2016 Convention Delegates* 24,490 21,215 24,098 Number of ship visits Number of Passengers 17 17 20 17,775 16,756 15,439 33

Thousands Passenger traffic increased 4.3% in 2016 to 1.6 million. Airline Passenger Movements at St. John's International Airport 2007-2016 (000's) 1700 1600 1576 1600 1500 1400 1371 1447 1487 1505 1300 1224 1319 1200 1100 1185 1223 1000 900 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: St. John's International Airport Authority and Transport Canada 34

Thousands Port Data The number of vessel arrivals increased to 1,436 in 2016 while total port cargo decreased. 2000 1800 1600 1400 1200 1000 800 1800 1600 1483 St. John's Total Port Cargo (metric tonnes) 2007-2016 (000's) 1403 1409 1487 1422 1464 1784 St. John's Port Vessel Arrivals 2007-2016 1669 1545 1804 1724 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1601 1400 1200 1050 1053 1261 1322 1300 1316 1358 1436 1000 Note: vessel arrivals exclude non-commercial, e.g., Department of National Defence and small commercial vessels entering the Port of St. John s. Source: St. John's Port Authority 800 600 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 35

How does St. John s rank? Studies offer comparisons with other cities nationally and internationally City Magnets III: Benchmarking the Attractiveness of 50 Canadian Cities The City of St. John s received an A grade in this study from the Conference Board of Canada. St. John s is ranked as the sixth most attractive city in Canada for newcomers. St. John s ranked second out of 50 cities in the category of full-time employment (2011 data). St. John s is one of only 2 cities to receive an A in Health. KPMG Competitive Alternatives 2016 Out of 111 cities internationally, St. John s ranked 12 th. St. John s ranked 10 th among the 17 featured Canadian Cities. Within the New England/Atlantic region, St. John s ranked 5 th out of 11 cities. St. John s now has the lowest effective corporate income tax rate among cities in this study. Note: City Magnets III is a study conducted by the Conference Board of Canada that grades and ranks 50 Canadian cities according to features that make them attractive to mobile populations. Released in September 2014. http://www.stjohns.ca/media-release/st-johns-amongst-best-magnet-newcomers KPMG s 2016 Competitive Alternatives report explores the most significant business cost factors in more than 100 cities and 10 countries around the world to provide an independent comparison of international business locations. Released March 2016. https://www.competitivealternatives.com/countries/ca.aspx 36

Outlook for 2017 The economic outlook for St. John s CMA is expected to remain subdued in 2017. There will be a significant decline in capital investment as the Hebron and Long Harbour projects move past peak construction, although capital investment will remain high in a historical context. Government deficit reduction measures are expedited to curtail expenditures in the public sector. Source: Statistics Canada; Government of NL, Department of Finance, Economic Research and Analysis Division. 37