News

To you, a sale sign. To Tiziano Giusti, a sign of the times.

This week, Mr. Giusti set out a sandwich board announcing that everything in his women's dress store was now 35 per cent off. For a man who had never held a sale before, it was as though the earth had shifted on it axis, ever so slightly.

And economically, it has. The market is crashing. Billion-dollar bailouts are the news of the day, and U.S. president George Bush has taken on the panic-stricken look of a man being dragged to his crucifixion.

Here on Toronto's Queen Street East, Mr. Giusti and his fellow business owners are experiencing the first effects of this economic catastrophe. “A lot of people are really sweating,” says Mr. Giusti. “It's hard times.”

Five years ago, Mr. Giusti opened Tizz, a store and design studio where he handcrafts ladies' evening wear. Located near Carlaw Avenue, Tizz joined a rising number of upscale businesses that were putting a new face on a street best known for hookers, grimy muffler shops, and beer-soaked strip joints such as

Jilly's.

Now there are designer food shops, luxury furniture stores, and a Starbucks – one of the surest signs of gentrification-in-progress.

But the uplift of a neighbourhood is the result of a complex set of forces that include low interest rates, consumer confidence, and capitalism's endless quest for a bargain – entrepreneurs and home owners moved to Queen East because prices were low, and hoped that gentrification would raise the value of their businesses and properties.

In many ways, the story of Queen East is the story of Toronto itself. For more than a decade, the city has been awash in money. As the Great Depression once created a generation of savers and skeptics, Toronto's good times have yielded one that believes in leveraged investment and the inevitability of gentrification – the new Torontonian looks at a rundown neighbourhood and sees a Manhattan-to-be.

Now, some wonder if a new generation of business owners knows what it will take to survive an economic downturn.

“Things were good,” says Mr. Giusti. “But everything's changing. Some businesses aren't going to make it.”

A few doors away, Chris Janosi also pondered the economy and its impact on Brick Street Breads, where he works as head baker. “There's definitely a change,” he says.

Brick Street, which opened just over a year ago, sells handmade, organic baked goods. The most popular item is a basil-and-parsley sourdough boule that costs $5 – about three times as much as a mass-produced loaf from a grocery store.

“I don't want to use the word boutique,” Mr. Janosi said. “But this isn't Wonder Bread. A lot of heart and soul goes into this.”

Over the past year, Brick Street's sales have doubled, to about $1,600 a day. But this has been offset by cost increases that are the result of forces beyond their control. The rise of China as an economic superpower, for example, has resulted in grain shortages and an accompanying commodity price rise: A 20-kilo bag of organic flour that cost $20 last year is now $43.

Although that concerns him, he's buoyed by the fact that he's producing a staple of life, even if it is a premium-priced one.

“There are a lot more people here who like quality food,” he says. “That's why you can sell a $5 loaf of bread.”

The buoyant economy of the past decade has created an optimistic mindset among a new generation of business people. “I've never seen a recession,” said Christie Silversides, manager of the Leslieville Cheese Market and Fine Foods. “I've only heard about them. I hope it isn't like the Great Depression, because that's what people are comparing it to.”

The market, which opened two years ago, caters to an urbane clientele that appreciates high-quality food, and is willing to pay for it.

Their offerings include Westphalian Ham Prosciutto and an array of connoisseur cheeses (the most exclusive is Stinking Bishop, which is made in England from the milk of Gloucester cattle, and sells for $99 per kilo). Ms. Silversides thinks the market can survive a recession. “If money gets tight, I think people will hold off on a Mercedes. But they'll still buy good food.”

Mr. Giusti has experienced the opposite effect. As he has learned, designer clothing quickly becomes expendable.

“My clients have high disposable incomes,” he says. “But when they see trouble on the horizon, the first thing they give up is the frivolous stuff.” He holds up a new $500 evening dress that he has just made: “Like this.”

Some businesses have shown surprising resiliency. Reliable Fish and Chips, just next door to Tizz, has been in business for almost 80 years, and still does well.

Further west on Queen, Mike Ederman operates Atlas Machinery, which has stayed in business since his father opened it in 1954. Mr. Ederman does a steady trade in what must be the most unlikely product sold on Queen Street West – precision and industrial machinery. Surrounded by art galleries, coffee shops and designer shoe stores, Atlas Machinery is a haven for contractors and tool fanatics, stocked with everything from miniature screwdrivers to 300-kg milling machines you could use to make an airplane.

“We have a good, loyal clientele,” says Mr. Ederman. “That's why we're still here.”

Economists have often theorized that some high-end businesses seem immune to downturn because they cater to extremely wealthy and passionate customers whose economic wherewithal insulates them from ups and downs.

That's what car dealer John Simoes is counting on as a recession looms. Located on Dupont Street, Mr. Simoes operates Gentry Lane, which sells classic and sports cars, including tiny, high-performance Lotuses, made in England. Mr. Simoes's customers include everyone from wealthy business owners to middle-class aficionados who scrimp elsewhere to afford their automotive passion.

This week, his showroom was quiet, but Mr. Simoes wasn't concerned.

“My customers are taking some time to look at the market and see what's happening,” he said. “They'll take a few days, then move on. Next week, they'll be back.”