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CONTENTS

what’s on BUILDING.ca

READ > Tips for Millennials Investing in Real Estate Richard Crenian explains how Millennials can start investing in commercial real estate.

FEATURES

16 > Cold Comfort /

It’s time Canadian cities embraced their “true north” character, and all the seasons that go with it. By Rhys Phillips

22 > Changing Opportunities / “It’s a time of transition for the Canadian real estate markets, but it’s not a time for pessimism. Across the country, opportunities abound—only they’re not necessarily the same ones that have driven the markets’ growth in recent years.” By Andrew Warren

EXPLORE > Essence by BOMP Essence, a prototype skyscraper design by the Polish collective BOMP, won first place in the eVolo Skyscraper Competition.

EXPLORE > World Architecture Festival The Interlace, a vertical village in Singapore, was crowned World Building of the Year 2015.

28 > The Green in Green /

New studies show tangible benefits from improved sustainability performance across the North American commercial real estate sector. By Peter Sobchak

ABOVE IMAGE:

IN EVERY ISSUE

6 > Editor’s Notes 8 > Developments 12 > Market Watch 14 > Legal 30 > Viewpoint

building.ca

“The Hole Idea - Now in Technicolor” by Toronto-based Weiss Architecture & Urbanism won the International Warming Huts Art & Architecture Competition in Winnipeg, and was built in time for the start of the city’s skating season in January 2015 (Photo: Leif Norman).

Volume 65

06 Number

Nous sommes COP21

Editor / Peter Sobchak

In early December, 196 governments met in Paris for a climate change summit hosted by the UN. The 21st Conference of the Parties (COP21) was where world leaders and negotiators attempted to agree on a new climate deal aimed at curbing the damaging effects of greenhouse gas emissions on the global climate. Did they succeed? Well, a 31-page document was produced that if 55 countries sign could be turned into international law. But with the carcass of Kyoto in the rearview mirror, and the reality of trying to produce a binding agreement that balances environmental ambitions with global economic realities….let’s just say, fingers crossed. Enforceable or not, the Paris Agreement reiterates what we should already understand: human behaviour is changing the planet, and one of the main ways is through the building industry. Buildings are some of the biggest emitters of CO2, accounting for one-third of global greenhouse gasses, while commercial and residential buildings gobble up 40 per cent of the world’s energy consumption. To play its part in limiting global warming to two degrees — a primary goal of COP21 — the buildings sector must reduce emissions by 84 gigatonnes by 2050. A huge endeavour. But as Sean Tompkins, CEO of RICS correctly pointed out while attending the conference, “The property sector has a huge influence,” and it is imperative that professional organizations do everything they can to leverage this influence to support the efforts espoused in the new Paris climate deal. And many of them are trying to do exactly that. Green Building Councils (GBCs) from around the world unveiled commitments at COP21 to transform the sustainability of buildings to reduce greenhouse gas emissions. For example, 25 GBCs committed to register, renovate or certify over 1.25 billion square metres of green building space, and train over 127,000 qualified green building professionals by 2020. Additionally, all 74 national GBCs support the commitment from the World Green Building Council (the global network of which they are members) to achieve net zero carbon new building and energy efficient refurbishment of the existing building stock by 2050. Those commitments were echoed here at home by the CaGBC when it said it would not only push for a wide adoption of net zero certification, but will also be launching new initiatives to increase investment in green buildings, will work with governments at all levels to promote green building and sustainability policies, and will work to set ambitious targets. “We know that buildings must continue to be a key focus area for countries to reach carbon emissions reduction goals,” said Roger Platt, president, USGBC, and this largescale reduction of emissions is possible, but it will take transformative action and collaboration. What was heartening from the Paris talks is that it may already be happening. “Of real difference this year is the shift in the attitude of the business community towards this effort,” said Polyisocyanurate Insulation Manufacturers Association (PIMA) president Jared Blum, a presenter at the conference. “The prices of solar and wind energy technologies have fallen dramatically, energy storage R&D is making significant progress, and energy efficiency practices and policies have definitively demonstrated that economic growth can be separated from energy use.” The Paris Agreement could dramatically impact the built environment and the vital role it plays in helping governments meet their emissions targets and improve the energy efficiency of buildings, but only if it becomes standard operating procedure for new construction, makes deep retrofits worth the time and effort, and creates frameworks for businesses to act more responsibly in relation to their real estate assets. b

Art Director / Roy Gaiot Legal Editor / Jeffrey W. Lem Contributors /

Richard Joy, Rhys Phillips, Andrew Warren

Circulation Manager / Diane Rakoff 416 510 5216 Reader Services / Liz Callaghan Sales Manager / Faria Ahmed 416 510 6808 fahmed@building.ca Senior Publisher / Tom Arkell President, iQ Business Media Inc. / Alex Papanou

Building magazine is published by iQ Business Media Inc. 80 Valleybrook Dr. Toronto, ON M3B 2S9 Tel: (416) 510-6845 / Fax: (416) 510-5140 E-mail: info@building.ca Website: www.building.ca SUBSCRIPTION RATE: Canada: 1 year, $30.95; 2 years, $52.95; 3 years, $64.95 (plus H.S.T.) U.S.: 1 year, $38.95 US, Elsewhere: 1 year, $45.95 US. BACK ISSUES: Back copies are available for $8 for delivery in Canada, $10 US for delivery in U.S.A. and $15 US overseas. Please send prepayment to Building, 80 Valleybrook Dr. Toronto, ON M3B 2S9 or order online at www.building.ca Subscription and back issues inquiries please call 416-442-5600, ext. 3636, e-mail: circulation@building.ca or go to www.building.ca Please send changes of address to Circulation Department, Building magazine or e-mail to addresses@building.ca Building is indexed in the Canadian Magazine Index by Micromedia ProQuest Company, Toronto (www.micromedia.com) and National Archive Publishing Company, Ann Arbor, Michigan (www.napubco.com).

Occasionally we make our mailing list available to reputable organizations whose products or services can be of interest to our readers. If you do not wish to be included, please e-mail or write to us. Building is published six times a year. Printed in Canada. The content of this publication is the property of Building and cannot be reproduced without permission from the publisher. We acknowledge the financial support of the Government of Canada through the Canada Periodical Fund of the Department of Canadian Heritage.

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Peter Sobchak Editor We welcome your feedback. Send your questions and comments to psobchak@building.ca DECEMBER 2015 JANUARY 2016

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MENTS

News GTA developers, landlords and businesses being “driven” to locate near rapid transit

“The current transit infrastructure within the GTA is over capacity, with daily average commutes now more than 65 minutes. Employees have simply had enough of sitting in cars that go nowhere.”

DEVELOP-

Global construction industry at highest risk since Q1 LONDON, U.K | According to the latest update of Timetric’s Construction Risk Index (CRI), the overall level of risk facing the global construction industry picked up in Q3 2015, rising to its highest level in four quarters. This entirely reflects a worsening risk profile across most emerging markets, which offsets a marginal improvement in that for advanced economies. A total of 15 out of the 50 countries in the CRI recorded improvements in their risk profiles in Q3, notably the U.S. and South Korea, the former posting continued growth in its economy and construction industry, and the latter benefiting from a recent upgrade of its sovereign credit rating. As a result, the U.S. rose two places to fourth place in the rankings, remaining behind a top three that still comprises Sweden, Switzerland and Singapore, in that order. There is no change at the bottom of the rankings either, with Greece, Argentina and Venezuela remaining the highest risk countries in the CRI. Malaysia was the worst performer in the Q3 update, with its risk profile deteriorating in the face of a major corruption scandal engulfing the country’s prime minister and a sharp decline in the ringgit, the currency of Malaysia . Based on aggregate risk scores for the major regions, the Asia-Pacific region was the worst performer in the Q3 update. In addition to Malaysia’s problems, there are particular worries over the outlook for China’s economy, with the country’s policymakers facing the challenge of rebalancing the economy while still trying to maintain a high rate of growth. Low oil prices continue to contribute to a worsening risk profile for the Middle East and Africa, derailing investment in new and ongoing infrastructure and buildings projects. However, Eastern Europe remains the highest risk region, in part owing to impact over the past year of the fallout from Russia’s intervention in Ukraine. “The likelihood that the Federal Reserve will raise official interest rates in the near future, and thus bring to an end

— John Arnoldi, director, Colliers International

TORONTO | Colliers International’s GTA Rapid Public Transit Infrastructure report finds a relationship between the success of commercial real estate and its proximity to rapid transit, as businesses are now demanding their offices be close to accessible, rapid public transit systems. “Simply put, the message to developers, landlords and businesses is very clear,” says John Arnoldi, Colliers International’s director in Toronto. “The GTA office markets with more than 60 per cent of their total office space within 400 metres or walking distance of rapid transit have a higher average rental rate and lower average vacancy rates than the rest of the GTA. Employees have spoken: they want to work within walking distance of where they can take transit to – they no longer wish to drive.” The report was an extensive analysis of office leasing and transportation within the GTA, and presented initial findings of Colliers’ larger analysis of the unique relationships that exist between the current/future rapid public transportation infrastructure within the GTA and the commercial real estate industry. Findings predict future transit projects could increase competition within the office leasing and investment landscape in the GTA, particularly in the untapped GTA West (Airport Corporate Centre) and around the Don Mills/Eglinton area. Results show office buildings within walking distance to rapid transit have continually experienced steady positive absorption, and office markets near rapid transit are seeing higher asking rental rates, lower vacancy rates and faster pre-leasing cycles. Most important to building owners is office tenants’ willingness to pay higher rents for office space close to rapid transit. This is a notable bottom line reality owners and landlords must begin to pay attention to in the next decade. This report also shows while office space that is accessible to rapid public transit is performing well, partially because demand is outpacing supply, the message to developers is that office leasing tenants and commercial real estate purchasers are continually increasing their demand for properties within the GTA that are close to rapid public transit. With two rapid transit projects under construction and five more proposed, competition in attracting companies within different office markets should increase, as the supply of rapid transit will become available in markets currently without access. DECEMBER 2015 JANUARY 2016

building.ca

nearly seven years of ultra-loose monetary policy, will have severe implications for many emerging markets that have become accustomed to cheap foreign capital,” said Danny Richards, lead economist at Timetric’s Construction Intelligence Centre (CIC). “Indeed, a return to more normal levels of the cost of borrowing in advanced economies, particularly the U.S., will result in capital flowing out of emerging markets and contribute to a further weakening in their currencies.”

New Projects LSR GesDev and Sotramont to build Arbora in Griffintown MONTRÉAL | LSR GesDev and Sotramont are building a residential and com-

mercial development in Montréal’s Griffintown. The project, called Arbora, includes three eight-storey buildings with a total of 434 condo, townhouse and rental units, with main floors home to commercial spaces varying in size from 1,000 to 10,000 square feet, for a total of 35,000 square feet. With a Arthaus and Arts Court Ottawa development total surface area of 597,560 square feet, Arbora is expected to become the world’s largest residential project featuring a cross-laminated timber (CLT) solid wood structure. Additionally, by aiming for more than 40 per cent green space, and sustainable features including superior airtightness, water-saving plumbing fixtures, building acoustics designed to ASTC 55 standards and a high-performance air exchanger, it will the first real estate project in Griffintown to target LEED Platinum certification. Moreover, to keep its environmental footprint to a minimum, Arbora is sourcing the wood from Nordic, a Chibougamau-based company

that manages the boreal forest sustainably with the Cree Nation. The land on which Arbora will be built was previously held by Grifdor Holdings, a real estate subsidiary owned by Aldo Bensadoun. Grifdor chose to partner with LSR GesDev and Sotramont to create a real estate project strategically located across from what will be Griffintown’s largest park and close to ÉTS. The overall investment has been assessed at $130 million. Rental units should be ready as of fall 2016 and the condos and townhouses will be complete in fall 2017.

DevMcGill reveals brand and team behind condominium component at Arts Court Ottawa

Arbora

OTTAWA | Montréal-based DevMcGill announced “Arthaus” as the brand name of the residential condominium component of Arts Court Ottawa, a mixed-use development project in Ottawa’s Byward Market, and a joint venture of the City of Ottawa, DevMGill, The Ottawa Art Gallery, Group Germain (building the Le Germain hotel in Ottawa) and the University of Ottawa. The project team includes Régis Côté, Barry Padolsky Associates Inc./KPMB Architects in joint venture and interior designer U31 of Toronto. The 23-storey Arts Court will double the size of the Ottawa Art Gallery and include a café, a 64,000-sq.-ft. theatre built as a separate structure adjacent to Arbuilding.ca

MENTS

DEVELOP10

thaus, operated and programed by the University of Ottawa, plus Ottawa’s first Le Germain Hotel, which will occupy the lower floors with approximately 100 private residences beginning on the 15th floor. The condominium — DevMcGill’s first residential project outside of Montréal — is already under construction with completion and occupancy expected for 2017.

PEOPLE IN THE NEWS Julia Gersovitz awarded the 2015 Gabrielle Léger Medal

Julia Gersovitz

MONTRÉAL | FGMDA founding partner, Julia Gersovitz, has been awarded the 2015 Gabrielle Léger Medal for Lifetime Achievement in Conservation in Canada by the National Trust for Canada. The committee recognizes Julia’s contribution and adds that “Mrs. Gersovitz is known among her peers for her thoughtfulness, tenacity and generous spirit as well as for the impeccable standard of her work. She is an inspiration to conservation professionals throughout Canada.” An award-winning architect and architectural historian, Gersovitz has over 40 years of experience in the field of heritage conservation working with private and public clients. Early in her career, she worked on projects such as the Maison Alcan in Montréal, which, according to the RAIC, helped change the way Canadians perceive their built heritage. Other iconic Canadian historic buildings in her portfolio include: the West Block of Parliament; Toronto Union Station; and McGill University Arts Building.

ACQUISITIONS

Bromont launches new Faubourg 1792 project MONTRÉAL | Bromont Real Estate is

introducing Faubourg 1792, billed as the region’s first Novoclimat 2.0-certified neighbourhood, and covering an area of 20 hectares in the heart of Bromont Village. Developed in association with Blouin-Tardif Architecture and interior design by Cyr-Cathcart, Faubourg 1792 will feature 300 condos, townhouses, semi-detached homes and duplexes surrounded by 3.5 kilometres of multipurpose trails connected to the natural attractions of this region. Bromont Real Estate is the developer behind the “One City, Six Dwellings” residential real estate projects, which include Val des Irlandais, Bagot, Prés Verts, Versants Boisés, Côte Est and now Faubourg 1792.

DECEMBER 2015 JANUARY 2016

Faubourg 1792

Cion Corp. acquires Coulter Building Consultants

TORONTO | Cion Corp., an Ingenium Group company that provides technical services tailored to the property and facilities management industry, has acquired Coulter Building Consultants Ltd., a Burlington-based group of consulting engineers and building scientists. The new name of the amalgamated companies will be Cion|Coulter. Kim Coulter will remain active as president of Cion|Coulter with a focus on business development and growth. To date, Coulter Building Consultants has concentrated its operations in the Burlington, Oakville, Hamilton, and Niagara regions, and the new company will operate from offices in Burlington and Toronto. As specialists in the assessment and problem correction of multi-unit residential, commercial, institutional and recreational properties, Coulter Building Consultants works with owners and property managers to address unique problems in the design, maintenance and rehabilitation of existing buildings and structures.

planningAlliance and regionalArchitects join to form SvN TORONTO | planningAlliance and regionalArchitects have joined and are now SvN. “For the past four decades, our integrated team of architects, planners, community developers and urban designers has helped to shape the built environment in Canada, and around the world,” said partners Drew Sinclair and John van Nostrand. “We’ve revitalized industrial waterfronts, developed new forms of affordable housing, designed vibrant neighbourhoods, and promoted the economic development of both rural and urban regions. We’ve reached beyond the traditional boundaries of architecture and planning to address the complex social, economic and environmental challenges unique to each community.” b building.ca

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MARKE T Spotlight: Construction

“These findings suggest that unionized workers are encouraged to report injuries, including injuries that don’t require time away from the job,” said Dr. Ben Amick, a senior scientist at the Institute for Work & Health and co-lead investigator on the study with fellow senior scientist Dr. Sheilah Hogg-Johnson, who is chair of the Department of Health Policy & Management at the Robert Stempel College of Public Health and Social Work at Florida International University in Miami. “At the same time, these reporting practices enable construction unions to better identify and proactively manage workplace hazards that lead to injury.” When researchers eliminated the effects a firm’s size has on its overall rate of Unionized construction workplace injuries, they revealed that unionized firms still reported 14 per cent fewer firms see fewer costly, serious injuries, says study injuries requiring time off work, and eight per cent fewer musculoskeletal injuries. (Data for critical injuries could not be measured when controlling for firm size.) In the journal article, the scientists discuss other factors that might explain the union safety effect. These include more robust specialized apprenticeship, upgrade and safety training requirements for union members; programs and practices that more effectively identify and reduce construction work hazards; a safety net that allows union workers to report accidents without fear of repercussions; ongoing skills training programs that provide a foundation for safer skilled work throughout one’s career; and a more effective role for unions in influencing government regulations designed to improve workplace health and safety. The study was funded by the Ontario Construction Secretariat (OCS), and looked at seven years of injury claims data for unionized and non-unionized firms employing more than 1.5 million full-time-equivalent workers. The TORONTO | A new study by the Institute for Work & Health, study was conducted in Canada but has direct implications titled “Protecting Construction Worker Health and Safety for the industry in the United States where 74,950 construcin Ontario Canada: Identifying a Union Safety Effect” and tion workers suffered “lost-time” injuries in 2010, according published online in the Journal of Occupational and Envito statistics collected by the National Safety Council. Lostronmental Medicine, reports evidence that unionized contime injuries consist of on-the-job injuries serious enough struction firms in Ontario are safer than non-union firms. The to keep workers from doing their jobs, requiring expensive study, which examined Workplace Safety and Insurance Board workers’ compensation lost wage reimbursements. (WSIB) claims data between 2006 and 2012 from more than Workers’ compensation payments totalled more than US$ 61.8 billion in 2012, according to the most recent available 40,000 construction firms across Ontario, shows that uniondata from the U.S. Social Security Administration. Historically, ized workers reported 23 per cent fewer injuries requiring the construction industry accounts for approximately 15 per time off work than non-union workers. This is the first peercent of overall workers’ compensation payments on an anreviewed Canadian study to examine the occupational health nual basis. So the “safety effect” described by the study repand safety benefits of unions in Ontario’s industrial, commerresents billions in potential savings on workers’ compensacial and institutional (ICI) construction sector. The study was based on 5,797 unionized and 38,626 nontion expenditures for the industry when construction firms union construction firms in Ontario and found that although employ unionized workers. overall workers’ compensation claim rates were higher in conProject results highlight challenges faced by women struction firms that employ union workers, most of these in the Canadian construction industry claims consisted of less costly, less serious medical-only The Canadian Association of Women in Construction (CAWIC) claims, which do not incur lost wage reimbursements. In parhas completed Phase 1 of the Level Best Women’s Advanceticular, workers at unionized firms were 17 per cent less likely to ment Project, and while women in the industry are optimisexperience musculoskeletal injuries (injuries or disorders aftic, gender inclusivity continues to be a work in progress. fecting mobility, especially muscles, tendons and nerves) and Phase 2 of the Level Best Project is now underway and will 29 per cent less likely to suffer critical injuries (injuries with the focus on developing specific and targeted recommendations potential to place workers’ lives in jeopardy) while on the job. for industry stakeholders to increase entry, retention and proDespite filing fewer claims resulting in critical injuries and motion of women into leadership roles within the industry. time off work, unionized workers did report a greater total With input from employer partners (who, as of November number of “no lost time” claims — incidents that did not re2015, report that they employ a total workforce of about sult in lost wages, productivity, or disability or impairment.

The Safety Effect

DECEMBER 2015 JANUARY 2016

building.ca

10,000 workers) and female participants during the research phase, the Level Best team has delivered a comprehensive needs assessment of industry women targeting Ontario, Alberta, and Newfoundland/Labrador. Key challenges and obstacles have been identified, effectively highlighting the various issues faced by women in the industry. Some of the most commonly reported challenges include lack of appropriate personal protective equipment, inadequate washroom facilities, difficulty sourcing mentors, and substantive issues sustaining a positive work environment with male colleagues. That said, an overwhelming proportion of the female participants (94.44 per cent) believe they have the potential to have a successful career in construction and 85.19 per cent would recommend working in construction to other women. In addition, 86.67 per cent

Greatest number of deaths due to construction

of employer partners would be prepared to pay for tools to increase hiring, retention and advancement of women at their organization, if the cost was reasonable. The results of this assessment demonstrate that, while there is still significant work to be done to improve inclusivity and promotion of women in the industry, women are optimistic about career advancement, and their employers are looking for ways to support them accordingly. In this next phase, through collaboration with industry stakeholders, the Level Best team will develop specific, measurable and realistic actions. CAWIC invites further support from industry stakeholders, a construction employer or a female working in construction during this critical phase. The input of industry insiders is key to generating practical, tangible solutions. b

Great Wall of China (220-206BCE)

Estimated deaths

Suez Canal

1,000,000

(1869)

Estimated deaths

120,000

1 2

Panama Canal (1880-1914)

Estimated deaths

White Sea Canal

25,000

(1931-1933)

Estimated deaths

12,000

Burma-Siam Railway (1943)

Estimated deaths

106,000

Karakoram Highway (1978)

Transcontinental Railroad

Estimated deaths

1,300

(1869)

Estimated deaths

1,200

Erie Canal

(1825)

Estimated deaths

1,000

Source: YourTradeBase

9 Kolyma Highway (1830s)

Estimated deaths

Aswan Dam (1960-1970)

Estimated deaths

500

1,000

LEGAL of Construction Lien operated to remove a registered construction lien from the title on which it had been registered… simple, right? In the eyes of the Land Registry Office, there is no normative value to be ascribed to a Discharge of Construction Lien — the Discharge of Construction Lien is not seen as being necessarily a discharge of the construction lien by court order. Indeed, it might be a release of the construction lien by the claimant, or it might be that the construction lien is being vacated because the operative lien has Ontario set to change the registranow attached to some alternative security other than the tion protocols for construction liens land (typically a bond, hence the term, “bonding-off”). The in 2016 Land Registry Office read nothing into the Discharge of Construction Lien other than the fact that the construction lien By Jeffrey W. Lem is to be removed from the registered title. The construction law bar, however, did not see the issue as that simple. InThere are some fairly subtle practice changes coming your way in the new stead, lawyers familiar with construcyear if you are in any way connected to construction lien practice in Ontario. tion liens interpreted the Discharge of For several years now, conflict has arisen between construction lawyers and Construction Lien quite literally as exthe fine men and women who operate Ontario’s Land Registry Offices, not so plicitly referring only to a removal of the much over how to get construction liens registered on title (more on this later), construction lien from title as a result of but more over how to get construction liens off of title when no longer needed. a court order discharging the construcThere are a million reasons why a construction lien might need to be registered tion lien. This would, presumably, not against title, but only three general reasons why a construction lien, once registered, be an issue if the construction lien was would thereafter need to be removed from the registered title. Firstly, the contractor in fact being removed from title as a re(and, for the purposes of this article, this could be a subcontractor, sub-subcontracsult of a court order discharging the tor, or any other lien claimant), for whatever reason, signifies that the construction construction lien (or, practically speaklien has been released, presumably because the contractor has been paid, but there ing, if the construction lien was being may be other reasons why the contractor no longer needs or wants the lien — the exreleased by the lien claimant) but it beact reasons a contractor elects to release the construction lien are irrelevant to the came problematic when the construcLand Registry Office — it is sufficient for the Land Registry Office to know that the tion lien was being removed from title contractor no longer wants to have the lien on title to the owner’s property. because it had been vacated because it Alternatively, the construction lien might, for whatever reason, be discharged was bonded-off. When bonded-off, the by court order, presumably because there is some invalidity to the construction construction lien comes off of the land, lien or the contract — again, the exact reasons a construction lien is discharged but remains a valid lien against that apby a court is irrelevant to the Land Registry Office; it is sufficient for the Land A store on West proved substitute collateral. The conRegistry Office to know that the court doesn’t think that the lien should be there Street in Goderich, struction law bar was concerned that, and orders that the construction lien be discharged. Ont.’s historic downtown before theconstruction lien might be vacated by court order, presumably by calling it a “discharge” of the conFinally, the tornado hit (above), struction lien, it might be interpreted as because the owner has posted a bond, letter of credit or other security satisfacthe damage (right), meaning that the lien itself no longer tory to the court to stand as alternative security in lieu of the original construcand in August 2013 (below) after Again, the town’swhy a court decides to vacate a construction lien is irrelevant to exists (whether on the land or as against tion lien. rebuilding efforts. any other collateral), hence, the objecthe Land Registry Office — it is sufficient for the Land Registry Office to know tion from the construction law bar to the that the court orders that the construction lien is effectively vacated. use of an instrument called a “Discharge The highlighted relevant verbs, “released,” “discharged” and “vacated,” are at of Construction Lien” when used in the the heart of this running debate, which has troubled the construction law bar context of a court order that merely infor some time. The Land Registry Office’s only perspective is that of land registended to vacate the construction lien. tration. This is, for the most part, a binary process for the Land Registry Office At the prompting of the construc— to the Province’s land registration staff, a construction lien is either on the tion law bar, there has been a proliferatitle or off the title — why a claim gets registered on title or why it comes off is tion of attempted “fixes” to the use of irrelevant to land registration staff. the Discharge of Construction Lien Up until now, the province’s electronic land registration system allowed one when in fact the construction lien was specific way of removing a construction lien from registered title, and it was only being “bonded-off.” The province’s called a “Discharge of Construction Lien”. To the Land Registry Office, a Discharge

New year, new lien practices

DECEMBER 2015 JANUARY 2016

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Land Registry Offices started seeing bizarre court orders explicitly ordering the Land Registrar to use alternatives to the prescribed Application to Discharge Construction Lien causing unnecessary grief to the Masters who have to issue such court orders and to the province’s land registration staff who have to process such court orders when really they were expecting a simple Discharge of Construction Lien. Well, those days of semantic strife are effectively over. After extensive consultations with the province’s construction law bar and the Court Masters who deal with construction liens, ServiceOntario is introducing a new document type to the electronic land registration system called, fittingly, an “Application to Delete Construction Lien” which will replace the “Discharge of Construction Lien.” The hope is that the new term “Delete” will be relatively agnostic and will not imply a discharge when in fact the construction lien was only bonded-off. Of course, real estate and construction law lawyers will still need to read the complete instrument to see if the construction lien was in fact discharged, vacated, or released, but at least the title of the document will no longer mislead practitioners into believing that the construction lien was fully discharged when in fact it was only bonded-off.

While this change to Teraview is expected to bring peace on the “construction lien coming off” front, there will also be changes to how construction liens come on. Ontario’s land registraJeffrey W. Lem is tion system boasts an electronic regisEditor-in-Chief of the tration rate of well over 99 per cent. Real Property Reports Guess what documents make-up some and the Director of Titles of the remaining one per cent of docufor the Province of ments that remain capable of registraOntario. The opinions tion in paper format in many Land expressed in this article Registry Offices across the province? are personal to the You guessed right if you proffered author and not “construction liens.” You also guessed attributable or referable right if you predicted that the Director to the government of of Titles be phasing out this practice, the Province of Ontario. and instructions have been issued to every Land Registry Office that still accepts construction liens in paper form (or transcribes them electronically on site) to eliminate these practices as soon as possible. Welcome 2016! b

COLD COMFORT

It’s time Canadian cities embraced their “true north” character, and all the seasons that go with it. By Rhys Phillips “Mon pays ce n’est pas un pays, c’est l’hiver” (My country is not a country, it is winter).

This evocative opening line by Quebecois singer/songwriter Gilles Vigneault resonates with many Canadians. While such pan-Canadian appropriation may not sit well with the author’s sovereigntist allegiance, the second verse promises faithfulness to his father’s inclusive home built in “the white ceremony where the snow marries wind” such “That one will come from the other seasons / To build next to it.” Unfortunately, despite the song’s romantic sentiment, conventional urban planning continues to omit consideration of both the needs and opportunities of cold weather urban environments. An imported summer bias permeates the profession and this has distorted how Canadian cities are perceived and planned. Although the Winter Cities Movement, with deep roots in Canada, has been advocating change for over 35 years, the application of a “winter lens” remains at best marginalized, at worst ignored. Indeed the profession has contributed significantly, along with the media, to a national attitude to winter as a burden, as a problem to be endured and literally externalized.

DECEMBER 2015 JANUARY 2016

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“We have always designed for summer conditions, it has been the kind of default position,” says Sue Holdsworth, an urban planner and Winter City Coordinator for Edmonton. When asked if the planning profession is addressing winter in cities, the answer by Simon O’Byrne, a vice president at Stantec and a major contributor to both Edmonton’s and Saskatoon’s progressive approach to winter, is quick: “it is not.” As an example, the 2011 progressive official plan for Canada’s coldest winter city, Winnipeg, starts well, stating that the prairie city “is a winter city, a sunshine city and a river city. The diversity of weather we experience, along with our topography, creates unique planning and development opportunities and challenges.” Yet winter disappears from the rest of the document and all images save one are from the height of summer. At best, interest is picking up again with a new generation of planners and city officials, says Patrick Coleman, a Michigan-based architect instrumental in the Winter Cities Movement almost since its inception. Yet after over three decades at least tangentially on urban planning’s radar, “a robust evidence base for [winter] design principles is missing,” indeed, “is dated and rather sporadic,” writes British architectural researcher David Chapman, who has spent considerable time exploring how far-north Swedish cities handle winter. Perhaps Chapman is right, more research will add new considerations and evolving technologies to build better winter cites. There is, however, already enough evidence and knowledge for a sophisticated urban planning approach that not only makes winter more “tolerable,” but also makes it a dynamic, healthy and creative season that contributes to quality of life in the urban environment. While the earlier Winter Cities Movement faltered, cities like Edmonton and Saskatoon are again embracing the fourth season.

Why Addressing Winter in the City is Important How we perceive and experience winter is crucial for most Canadian cities. First, of course, is the basic idea that the urban environment should and can be a much more pleasant place to live during what is a significant portion of the year. Second, but closely tied to this idea, is the economic implications of the creative economy based on city states whose prosperity depends on attracting an increasingly sophisticated urban workforce. “Winter cities can no longer afford to appear lifeless for a quarter of the year,” writes Jay Walljasper of Projects for Public Spaces. “A vital local culture…all year long… is essential for a dynamic, prosperous community.” Third, winter can be the Achilles heel for a healthy city (Building, December 2014 – January 2015). Evidence reveals, for example, that decreased activity typical in winter increases the average body mass index. Lower levels of socialization in winter also intensify isolation, taking a toll on mental well-being, says occupational therapist Robin Mazumder. Fourth, an aging population and demands for greater accessibility for persons with disabilities, when combined with poor and unsafe winter travel conditions (rather than cold itself), increases risks. Even in the much tougher accessibility law environment of the U.S., says the Centre for Inclusive Design, there has been a lack of interest in pursuing climate responsive design. Enhanced and safer connectivity through improved winter walkability, secure winter cycling and accessible transit are required. Finally, and not incidentally, both the ballooning municipal costs associated with winter servicing engendered by typical urban sprawl patterns and the demand for sustainable urban design contributes significantly to the need to change our winter city experience. But what is a Winter City? The Winter Cities Movement has defined a “winter city” as simply one in which the average temperature in January is below zero. But the level of severity around this norm varies significantly. Above this standard, cities like Vancouver, Copenhagen and many other European cities (oft-cited for their extensive winter proLRT Station gramming), certainly experience extended daytime twilight and long nights, raw moisture-laden temperatures and occasional snow and ice. Toronto and Helsinki are similar but with colder averages and more snow and ice while Winnipeg, Edmonton and Québec City have longer and much more intensely cold winters. Ottawa falls in between the last two groups. But not only does the length and severity of winter conditions vary significantly, each city region has its own unique mix of defining elements such as snowfall, freeze/thaw, wind, darkness, sun/overcast and geography. In terms of the latter, for example, water and how it is present can play a vital role. Authenticity, or responding appropriately to each city’s unique climactic conditions, sense of place and cultural references is vital, while the challenges, opportunities and appropriate responses to winter conditions vary significantly. 1

Visit building.ca for a more detailed history of the Winter Cities Movement in Canada

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The Frozen North: Myths and Urban Legends But there are also myths and urban legends about even Canada’s coldest cities that lead to poor planning decisions not based on evidence. These can be grouped into three myths: severity; discomfort; and a reverse winter bias. In terms of severity, the word that comes up most frequently in interviews and in articles is “outlier.” Simply put, this means that we tend to define our winters by the relatively rare outlier days in which the winter weather is most extreme. Edmonton Councillor Ben Henderson, a leader in that city’s Winter City Movement, as well as Coleman and O’Byrne, all hammer home this point. Henderson and O’Byrne even met with local Edmonton media to encourage less emphasis on extremes and more on averages and means. A review of scientific weather facts for Canada’s coldest cities supports their argument. For example, Ottawans often refer to -30˚C winter temperatures, yet on a yearly average the city does not record a single low of this severity, while Edmonton records but three. Even in Winnipeg, the average daytime temperature for December, January and February is -9.3˚C while in Edmonton it is -4.4˚C, temperatures that can even support an outside “patio culture.” The second myth is that temperature defines the winter city. In fact, wind constantly tops the list of negative comfort factors along with perceptions of safety related particularly to ice and slush (therefore, walkability). A 2009 study, for example, found that these factors kept middle-aged and older people indoors while cold temperatures had little impact. It is a point made by Holdsworth who has examined Oulu, a far north Finnish city with a remarkable 26 per cent winter cycling level. As O’Byrne notes, “If it is a blue sky and -15˚C with no wind and the sun is in your face it can be surprisingly comfortable to be out for an extended period.” Finally, the very moniker “Winter City” distorts reality. Most Canadian winter cities exist in strong four-season enDECEMBER 2015 JANUARY 2016

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vironments, frequently with hot summers (dry or humid) and pronounced spring and fall swing seasons. (It is also usually forgotten that many southern cities suffer summer conditions that make outside living equally problematic.) A related perception is the notion of a single “winter season.” Supported by Finland’s approach, Holdsworth and Henderson say winter is best understood as four sub-seasons that include: late fall; the festive season; cold/dark winter; and early spring. Canadians, say those interviewed, do December’s festive season really quite well, underuse the swing seasons and struggle with January and February.

Three-Focus Strategy for Better Winter Cities Revitalizing the quality of life in winter cities requires three focuses: attitude; programming; and the built environment. Attitude: Every fall it starts. An avalanche of commercials and advertisements of cars smacked by vicious winter weather, families huddled away in weather-reinforced homes and winter-rescued people escaping to bucolic Caribbean resorts. Survive, hunker down and escape. What is required, argue those advocating for vibrant liable winter cities, is change — some say a return — to an attitude of embracing rather than simply enduring winter. The intensive consultation process underlying Edmonton’s rethinking of winter was also about changing minds about winter. “There is a big culture shift that has to go with this,” says Henderson. “We had a long conversation with the public on what they wanted to see and that in itself challenged everyone to rethink what they thought about winter and created excitement in itself.” Not incidental was a realization that public parks had to be reconsidered as not just summer-only places. As such, their programming and the services provided — food and drink, trail maintenance, warming huts and lighting — also became an issue.

1-2: Impulse is a series of giant illuminated and sound-producing seesaws on Montréal’s Place des Festivals, designed by Lateral Office/ CS Design/ EGP Group as part of this winter’s Luminothérapie. 3-4: The Winter Stations design competition saw five temporary structures built on Toronto’s beach last winter. Snowcone, by the Ryerson Department of Architectural Science was one, made of coloured and solid acrylic panels. 5-6: Sling Swing, by U.K.-based WMB Studio, was another, meant to evoke summer deckchairs.

out to be badly corroded. There is an overwhelming consensus among theorists and professionals alike that successful winter city urban form should be mixed-use with density and connectivity (walkable, transit-oriented and cycling) linked by engaging and interactive streets, alleys, parks and public spaces. Architecture, shaped perhaps by form-based zoning, must engage the street, respect prevailing weather conditions, and enrich the pedestrian experience. All these components must be attuned to a place’s “authenticity,” respecting geography, culture, and light conditions. Only within this context can the unique implications of a winter city climate be successfully addressed. An early step might be a radical re-think of covered pedway systems and even an exploration of their dismantling. But once outside, attention to how urban morphology impacts our experience of winter conditions is of primary importance.

Programming: Québec City, blessed with an intimate, pedestrian-oriented historic core now rapidly expanding outside the city walls, has long understood the importance of programming for winter. Conversely, O’Byrne and Henderson argue, Edmonton (and they could add cities like Winnipeg and Ottawa) focus on developing intensive, continuous summer programming. “For a long time,” says O’Byrne, “we put all our money into summer festivals and made sure we kept our summers busy in terms of program activities. But we don’t put nearly enough time into wintertime.” Such programming must be varied, last over weeks not days and be exterior-oriented, overlapping and authentic.

Wind: As noted earlier, wind is perhaps the most problematic variable in cold cities. In response, streets and pathways, preferably with short blocks, need to be laid out to deflect prevailing winds. Building form with setbacks must be designed to minimize micro-wind “storms” at street level. Problematic perhaps for Canada, building heights should be limited (perhaps using Helsinki’s seven storey maximum as a model). Understanding how the built environment and wind impact on drifting snow is also important. At a smaller scale, transit shelters, evergreen trees, other landscaping elements, patio wind screens, sidewalk canopies and strategically placed wind screens can ensure the wind effect is significantly reduced.

Visit building.ca to read how Edmonton is melting hearts and minds

Temperature: Without wind and with proper clothing, temperature is less a factor than sometimes believed but by no means inconsequential. Heated transit shelters, fire pits in public spaces, patio heaters and quilt throws, attention to outdoor furniture materials, mid-block pedestrian crossings to shorten trips, warming huts and hot beverage kiosks in public parks are some examples to reduce the impact of cold temperatures. Some cities even support winter fashion shows to encourage smarter approaches to dressing comfortably. Built form must maximize sun exposure and create warmer micro-climates. In Saskatoon, O’Byrne’s team has proposed turning the core’s wind protected narrow alleys into warmer animated commercial arteries. Like in many European cities, he says, “narrow alleys …capture warmer air and keep it close to the ground for better pedestrian comfort.” In addition, outdoor electric heaters can add both “sparkle and warmth.”

A Built Environment for a Four Season Healthy City Like a house renovation, realizing the optimum winter city is enhanced if one can start with good bones. Yet like so many renovations, the underlying structure of many cities turns

Snowfall: Snow and the automobile have been treated as natural enemies, and when designing cities the latter has been the victor. In addition to understanding building-defined snow drifting and protection for entrances, street design,

The Built Environment: In many ways, changing attitudes coupled with more intensive programming may be the low-hanging fruit for fostering the winter city. It is probably no coincidence that the waning of the Winter City Movement took place at the same time it was moving away from creating interior “protected” winter environments to the argument that the car/traffic engineer-dominated approach to urban form is a major barrier to enjoying the winter city. Similarly, its re-emergence is taking place at a time when an increasing number of Canadian cities are rethinking urban design and the role of the car, whether the focus is the healthy city; the 18-hour creative city; transit-oriented development; sustainability; municipal costs or the winter city. Indeed, goes the argument, there is a real synergy among these objectives even if the planning profession has come late to the table.

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Inspired by a 1955 Looney Tunes cartoon, “The Hole Idea Now in Technicolor” by Toronto-based Weiss Architecture & Urbanism won the International Warming Huts Art & Architecture Competition in Winnipeg, and was built in time for the start of the city’s skating season in January 2015. The large vaulted space functions as a refuge while the colourful array of holes on the snow’s surface brighten the wintery landscape.

7-8:

says Coleman, needs to be rethought to accommodate storage without obliterating sidewalks, cycle routes and public spaces. Clearing pedestrian and cycle routes must receive higher priority. Oulu, for example, guarantees bike trails are plowed by 7:00am using a plow that creates two tracks to accommodate cyclists and skiers. Stantec’s City Centre Plan for Saskatoon proposes a complete restructuring of 21st and 23rd Street, two key arteries originally designed to be wide enough for a horse drawn wagon to do a U-turn. Now, traffic lanes will be greatly reduced to permit a linear park with sheltered laneways and bike paths along with space to receive the plowed snow. These year-long public spaces will unite a cultural district, showcase the historic Delta Bessborough and provide animated winter gathering spaces. Freeze/Thaw: As outlined above, concerns about safety play a central role in whether or not people venture outside in winter. Cities like Ottawa and Edmonton that experience frequent freeze/thaws are particularly vulnerable to ice and slush. While street awnings can help, Montréal is in the process of introducing heated sidewalks on rue Sainte-Catherine, and this winter, Edmonton is piloting an extended “ice street” to allow commuting by skating as is done on Ottawa’s Rideau Canal. One major design problem with many Canadian street corners is their propensity to cause water and slush to gather precisely at crosswalks during thaws. Light/Darkness: The winter season is cold, but sunlight can also be in short supply with extended dusk-like periods and intense darkness at night. First, this means the built DECEMBER 2015 JANUARY 2016

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environment must be structured to maximize sunshine, particularly relevant in cities like Edmonton with many sunny winter days. Second, attention to night lighting — made economical by low energy LED — can transform the city in winter into a beguiling wonderland while enhancing safety. Montréal’s Luminothérapie program of interactive, light-based winter art installations is an example of using light to draw large crowds outdoors and downtown. In Edmonton, a crowd-funded project turned its High Level Bridge into an ever-morphing, now-permanent light sculpture, and as the city’s draft winter design guidelines point out, “snow accumulation during extended darkness reflects light and brightens the outdoors. The darkness is an opportunity to showcase northern creativity.” Edmonton’s creative lighting strategy is almost ready for approval. Colour: Like light, colour has the ability to enliven the winter landscape as images of St. John’s, Reykjavik, Copenhagen, Stockholm, Kulusuk in Greenland, and Norway’s Longyearbyen and Alesund attest. All are on one or more lists of the most colourful places in the world. As Edmonton’s winter design guidelines advises, “Use contrasting or saturated colour palettes on building façades to highlight pedestrianscaled building massing, entrances and improve the visual interest of streets.” Lighter colours on south façades, it adds, help to reflect light into the street. Geography/Landscape: Specific geographies can have a significant impact on all of the above elements. Building in tune with rather than bulldozing natural protection and retaining or re-establishing native vegetation like evergreens are required. Water in particular can play a crucial role in animating the winter city, Ottawa’s Rideau Canal skateway being the best Canadian example, as well as Winnipeg’s Assiniboine River with its internationally renowned yearly design competition for warming huts. Landscape architecture must also carefully respond to use in winter conditions including such attributes as frozen water fountains. Edmonton is promoting a winter garden program similar to the summer Cites in Bloom program.

At the Tipping Point? Urban design in general may be reaching a significant tipping point as cities wrestle with unsustainable costs, a radical shift in economic models and changing demographics. For Canadian cites, a key to realizing a more livable, sustainable and prosperous urban environment lies in a more finely-attuned awareness of the needs of a winter city. It is clear that to do so successfully requires a blend of attitude change, strong programming and perhaps most difficult, a decisive change in how we design our built environment. b Visit building.ca to read extended conversations with: Simon O’Byrne; Sue Holdsworth; Patrick Coleman; Ben Henderson

Photography by: Ulysse Lemerise, OSA / Remi Carreiro / Eamon MacMahon / Leif Norman

Build bold.

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By Andrew Warren

opportunities

Changing 26 22

It’s a time of transition for the Canadian real estate markets, but it’s not a time for pessimism. Across the country, opportunities abound—only they’re not necessarily the same ones that have driven the markets’ growth in recent years.

he story of Canadian real estate this year is one of shifting economic fortunes and changing real estate trends. The decline in oil prices has caused a sharp slowdown in the Calgary economy, the Edmonton economy also is trending downward, and the long-term impact on the local real estate market remains to be seen. At the time of writing, the Canadian economy has had a second quarter of minor decline — largely a result of the impact of oil in Alberta. Yet these low energy prices — and the low Canadian dollar — are improving the prospects for manufacturing, transportation, warehousing, and other sectors across the country, especially in eastern Canada. As economic power returns to the east, investors and developers are turning their attention to new opportunities in faster-growing Toronto and some parts of Montréal. VancouAUGUST SEPTEMBER 2013 2016 DECEMBER 2015 JANUARY

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ver is the exception in the west, as it retains the top real estate investment spot. This year’s top-ranked property subsectors reflect the changing nature of Canada’s real estate market. Warehouses, fulfillment centres, and neighbourhood shopping centres are among the top-ranked this year. Each is a classic defensive play in times of slower economic growth, and even minor negative economic growth — yet each of these sectors is also ideally positioned to capitalize on periods of stable domestic consumer demand and increased exports, especially to the United States. In our view, to interpret this as a sign of firms “battening down the hatches” in preparation for an economic storm would be to miss the larger point — which is that opportunities are changing, but they still exist. We see other signs of real estate players responding positively to changes in their markets and identifying new growth opportunities. Investor interest in medical office and health care properties is perking up as an aging baby boomer generation makes increasing demands on the health care sector. As the rise in housing prices continues to outpace Canadians’ income growth, especially in markets like Toronto and Vancouver, more and more people are choosing to rent — permanently, in some cases. Even some retirees are opting to rent after they sell their homes, rather than buy a smaller home. Developers are keen to meet this growing demand with new purposebuilt rental units. However, some of our interviewees expressed concern with the number of purpose-built rental projects announced in Toronto, citing concerns with whether the numbers really do work yet. Mixed-use developments with residential and retail real estate space have also grown beyond a trend and have become a requirement in and around Toronto and Vancouver. Caution and prudence characterize today’s Canadian real estate players. Many of our survey respondents suspect that Canada’s real estate markets

AVERAGE HOME SIZE BY COUNTRY AUSTRALIA

are due for a breather after so many years of economic and real estate expansion — and they’re acting accordingly. Some are slowing their acquisition efforts in Canada, and focusing their attention on existing holdings and opportunities in the United States and other foreign markets. Landlords are concentrating on bringing in new tenants — and extending the leases of existing ones. In Calgary, industry players are settling into a holding pattern as they wait out the current downturn, avoiding rash action. Calgary and Edmonton — and, to a lesser extent, Saskatoon — aside, the outlook for Canadian real estate remains generally stable. Condominium sales remain solid, and single-family homes continue to do well despite affordability worries. The boom in office construction in recent years is giving rise to some oversupply concerns, at least in the near term. And industrial property across much of the country is poised for growth in the current export-friendly environment. Without a doubt, Canada’s real estate market is undergoing important shifts — but it would be wrong to take a pessimistic view of the current environment. Opportunities may be changing, but Canadian real estate players should remain confident that good opportunities exist across the country.

2,305 ft2

UNITED STATES

2,165

CANADA

1,950

DENMARK

1,480

GREECE

1,360

FRANCE

1,210

GERMANY

1,175

SPAIN

1,045

JAPAN

1,020

Emerging Trends in Canadian Real Estate

“The real estate market in Canada has nine lives. Every time a correction should have happened, something else goes wrong locally or worldwide and causes a distraction.” Caution Rules as Firms Position Themselves for the Next Business Cycle

How long can Canada’s real estate market continue to grow? It’s a question many in the industry are asking these days. The Canadian economy and real estate market have grown consistently or stayed stable in the seven years since the global economic downturn, and the 13 years leading up to it. Some respondents suspect a downturn is coming — sooner rather than later. It’s a line of thinking that is convincing real estate companies to adopt a more prudent, defensive position. With competition for high-quality properties intensifying, large real estate players are slowing their pace of acquisitions in Canada; while they opt to wait and see where the Canadian market is heading, they are looking to the United States and elsewhere for opportunities. Some companies, including real estate investment trusts (REITs), are culling non-core property holdings to capitalize on high valuations and raise capital for redevelopment or intensification projects. Landlords are working to sign tenants to longer-term leases. And most companies are taking the long view when it comes to their business strategy. However, this heightened level of caution appears to be driven by pragmatism, not pessimism. True, respondents are concerned about the impact of low energy prices on western Canada’s markets. While many feel that U.S. and European economic performance is less than ideal, others see opportunities in those markets as well as in South America. Few seem to believe that these wider economic factors will cause significant problems for their business. More than anything else, it seems that respondents believe that the Canadian market is due for a breather.

SWEDEN

895

ITALY

870

UNITED KINGDOM

820

CHINA

650

RUSSIA

615

HONG KONG

495

Liquidity Everywhere, but Nothing to Buy

While there’s a lot of liquidity in the Canadian market, there isn’t much to invest it in. Respondents talk about the severe lack of high-quality product available for purchase now, given the current cost of capital. Prized, top-tier Canadian properties are increasingly in the hands of pension funds, institutional investors, and REITs, building.ca

FORECAST NET MIGRATION, 2015–2019 INTERCITY

INTERPROVINCIAL

CALGARY EDMONTON VANCOUVER

Source: Conference Board of Canada

INTERNATIONAL

WINNIPEG HALIFAX OTTAWA/GATINEAU TORONTO MONTREAL SASKATOON -100,000

100,000

200,000

300,000

400,000

500,000

which, in some cases, are selling their Tier 2 assets to help fund the purchases. As a result, transaction volumes have picked up for secondary assets and value-added plays. While this creates a steady supply of product, respondents point out that the properties often are older and require investment to suit current market needs.

ern Canada. Respondents believe that Toronto-area industrial development, especially distribution centres, may be boosted by the U.S. dollar. Should U.S. firms choose to capitalize on the stronger U.S. dollar to hire skilled Canadian staff, the office sector, especially suburban office properties located near or on transportation hubs, may also benefit.

Office Leasing: Yield Is King, but the Rules Are Changing

Lower Oil Prices Have Mixed Impact on Canadian Real Estate

With so little top-tier product available, respondents are The sharp drop in oil prices has led some to speculate that maximizing their existing holdings. Yield is king, and comeastern Canada will regain its position as Canada’s economic panies are focused on attracting new tenants to existing office engine. However, the impact of the energy sector downturn properties — and extending the leases of existing tenants — in on Canadian real estate — in Alberta and elsewhere — is just order to generate stable income. Yet respondents say that starting to be felt. leasing itself is changing, in part as a response to tenants’ Oxford Economics’ May 2015 report, Canada: The Negaown business challenges. Instead of 10- to 15-year leases, tive Impact of Lower Oil Prices, forecast a 20 per cent drop in respondents say that tenants want leases of 10 years or less. energy sector investment this year, and indeed Canadian Tenants are also reducing space per employee, and some energy companies have postponed or shelved many projects tenants are sharing offices, or opting for value over high-end, in light of business conditions. Yet on the real estate side, inluxury amenities. Respondents report that it is becoming vestors appear to be biding their time. There are little to no increasingly critical to engage the tenants’ human resourlarge real estate purchases or sales taking place in Alberta, ces groups and others in organizations to secure new leasing. although firms are putting space up for sublet. Alberta’s exSome tenants are declining traditional property manageperience with boom-and-bust cycles has taught companies ment services like cleaning, choosing to engage their own, that sometimes the best strategy is to simply hold. often less costly, suppliers. Elsewhere, low energy prices may prove a boon to certain sectors and their related real estate markets. Canada’s weaker currency should make the country’s non-energy exports more competitive. If gas pump savings Stronger U.S. Dollar a Source should materialize, this too could boost business and consumer spending, potof Mild Optimism entially benefiting retailers, among others. This could, in turn, drive activity in Economic uncertainties in China and industrial, office, and commercial real estate, especially in the east. Europe have Canadian firms once again looking to the United States to drive growth. It’s not without risk, of course: Foreign Investment: Canada Retains Its Allure the U.S . recovery is not especially strong, Global investors continue to see Canada as a safe haven for their capital, and the and many U.S . trading partners are not lower Canadian dollar only adds to the allure. Many respondents expect foreign investment to continue to flow into Canadian real estate — not only into traditional growing. The U.S . dollar’s relative strength could well benefit Canadian markets like Vancouver, Calgary, and Toronto, but also into Montréal and even Sasreal estate markets, particularly in eastkatoon, where interest in farmland and development land is rising. DECEMBER 2015 JANUARY 2016

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FOREIGN DIRECT INVESTMENT IN CANADA

Foreign investors face numerous hurdles in entering the Canadian market. As a result, they are determined to ensure that they realize a good return on their investments. Interest in hotel and office properties is rising, and observers expect that foreign investors will soon turn to Canadian health care real estate, especially as the U.S. health care real estate market matures. However, like their institutional counterparts, foreign investors are also finding that premium opportunities are expensive and in short supply, and it remains to be seen whether this will cool their interest in the Canadian market. It is equally unclear what impact the slowdown in Canada’s energy sector will have on foreign investment.

2004

2014

Sources: CommSec, Reserve Bank of Australia, United Nations, U.S. Census Bureau.

49.4

64.1

34.3

29.0

5.0

11.7

4.0

1.7

0.2%

While developers are building condominiums and mid-density products like stacked townhouses to meet municipal and provincial urban density demands, it is getting harder for developers to build affordable housing in the urban centres that people covet — which could have consequences for Canada’s urbanization trend. Developers and builders believe that several issues are pushing housing prices up and potentially out of reach for many prospective homebuyers. Land prices continue to rise, and many believe that provincial government policies are a key factor: greenbelt legislation in Ontario and British Columbia, for example, is limiting land supplies in an effort to promote urban densification. In addition, lengthy approval processes and significant development charges also are limiting supply and driving up costs across the country. And then there are the construction costs themselves, which continue to rise. Affordability issues could potentially change urbanization trends, some argue. One respondent sees homeowners selling their homes, moving further out from the core to a less expensive house, and banking the remaining equity. Expansion of the regional transit systems across major urban areas may make it easier for people to buy more affordable homes further out from the core; one respondent remarked that within a few years, self-driving automobiles could have a similar impact, by making lengthy commutes less of a burden. The longer-term impact on development in the core, however, remains to be seen. Of course, a rise in interest rates could make housing even less affordable than it is currently and drive more significant changes in real estate markets.

0.7

Housing Affordability Concerns on the Rise

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UNITED STATES

EUROPE

ASIA / OCEANA

LATIN AMERICA

As concerns over housing affordability grow, a rising number of Canadian households are choosing to rent rather than buy. It’s a trend that is expected to continue and create new opportunities across the country. Attitudes about renting have changed, respondents note. Renting is no longer seen only as a temporary step on the road to homeownership, but as an alternative. Today, we are seeing the rise of permanent renters — a new demographic in many Canadian markets, especially as a growing proportion of the population cannot assemble the down-payment for a new home. This is not new in Montréal, but is relatively new in other cities. Changes to lending rules, which have effectively doubled minimum down-payments, have not helped, and rising house prices just add to the challenge. Faced with a choice between long commutes from suburbs or renting in the urban core, more and more people are opting to rent. But that is not the only reason that renting is on the rise. Some older homeowners are often opting to sell their homes and cash out, moving into high-end or luxury rental units and keeping the proceeds from the sale for spending. Luxury apartment units aimed at baby boomers and retirees could be increasingly popu-

OTHER

Rise of the Renters

lar in the years to come, noted one respondent. Offering flexibility, high quality, and low maintenance, rented luxury units will provide a comfortable bridge between homeownership and retirement homes. With housing affordability likely to remain an issue for some time, rentals are expected to continue to be in demand. These properties offer investors steady income and stable cash flows; in the current environment, that is an attractive proposition. Respondents expect to see more condos redeveloped into rental properties; they also expect to see more purpose-built multi-unit rentals come on stream, since the current, aging stock of multi-unit residential is not well suited to the demand for high-quality rental units. Further cap-rate compression for multi-residential product in eastern Canada is making a compelling case to build rather than buy. Some observers, however, have raised concerns about new players entering the multi-residential market and competing with established players; multi-residential is a unique segment, and new players may find themselves facing greater-than-expected challenges. Suburbs Resilient in the Face of the Urbanization Trend

The urbanization trend remains strong in Canada, but respondents dismiss suggestions that the suburbs are in decline. Every day, noted one commenter, people choose to exchange their small urban spaces for larger suburban living quarters. Suburbs around the Greater Toronto Area are also becoming more expensive due to government policies, immigration, and higher demand. Respondents believe that major investments in transit infrastructure, especially in and around the Greater Toronto Area, will make the suburbs more attractive to a wider group of people. And as demand drives housing prices higher and higher in the core, they expect to see a growing number of people choose more affordable homes in the suburbs. Moving to the suburbs does not necesDECEMBER 2015 JANUARY 2016

Source: Pembina Institute, Fast Cities: A Comparison of Rapid Transit in Major Canadian Cities, September 5, 2014.

RAPID TRANSIT INFRASTRUCTURE UNDERWAY Figures are for infrastructure funded or under construction. Investment is in 2014 dollars.

investment (C$ billion]

Length of rapid transit lines (km)

TORONTO

$14.00

59.2

MONTREAL

.42

14.0

VANCOUVER

1.55

11.0

CALGARY OTTAWA

.80 * 2.13

25.0 12.5

sarily mean resigning oneself to a lengthy commute, either: many successful suburbs enable people to live, work, and play without having to travel all the way downtown, and the growing trend of working from home also reduces commute times from the suburbs. Some people, in fact, may be choosing where they live first, based on affordability, and then choosing where they work, rather than the other way around. In terms of commercial real estate, though, developers acknowledge that suburbs need more services, better tax incentives, and lower operating costs to compete with the downtown core. Technology Creates New Opportunities and Challenges

E-commerce, cloud computing, mobile, and data analytics are just a few of the technologies that continue to reshape the way that people live and work each day. In the process, they are creating new opportunities — and challenges — for Canadian real estate players. Respondents noted numerous ways that technology is changing how they do business. They’re harnessing the power of data to make better business and marketing decisions and improve their financial reporting. They’re using technolog y to improve how they design and build new developments and share knowledge across their enterprises. Some are using remote monitoring technology to deliver superior property management services to their tenants. And one respondent even noted that Google Maps allows potential investors, tenants, and buyers to view a building — and its surrounding neighborhood — well before making a visit in person. Many respondents spoke of the way technology is changing the real estate needs of their retail tenants. Retail is evolving rapidly: e-commerce and a multi-channel approach to engaging consumers become vital to retailers’ success, and this is changing how they think about their physical space requirements. Many are rethinking the role of the store, and finding that smaller formats are all that is needed to serve consumers who are likely to view in person and buy online later. One respondent remarked that some retail tenants aren’t looking for stores as much as storerooms — places to store their goods and package them for shipping to online purchasers. The shift to a multichannel, e-commerce-driven retail model is about logistics more than anything, according to another respondent; as this changes how retailers move their products, it will also change how they look at real estate. Distribution facilities will become just as vital as physical shops — if they aren’t already. This will change how real estate players develop — or redevelop — their retail properties. It’s not just retail that is changing, either. Respondents are also coming to terms with how technology is changing the office real estate segment. Office workforces are flexible, nimble, and highly mobile; workflows and document man building.ca

* Canada’s federal government has pledged C$1.53 billion for the LRT Green Line. Source: “Tories Announce $1.5B for Green Line LRT Project.” July 24, 2015. The Calgary Herald.

agement are increasingly digital and cloud- based. As a result of these shifts, office tenants are looking for smaller spaces — not in an effort to cut costs, but rather to adopt a more modern approach to what the office should be. Traditional offices — and even cubicles — are giving way to bench-style desks that support several workers and even more screens of various shapes and sizes. File rooms are disappearing; closets, drawers, and cupboards are being replaced by lockers. Property owners are discovering that these changes in office space needs are driving up costs for office design, construction, and infrastructure. Renovating an office to suit a tenant is no longer just a matter of moving some walls around: as office densities rise and per-worker square footage drops, big investments in air conditioning, heating, washrooms, and other facilities are often needed. Some believe the real estate sector is underestimating the cost impact of these technologydriven changes. As well, the increasingly critical role of technology in tenants’ businesses is matched by their growing dependence on a stable supply of electricity. Outages are no longer a temporary inconvenience; they can bring a company’s business to a complete and costly halt. Landlords report that their commercial tenants are demanding that they guarantee uninterrupted power, including immediate backup supplies in case of outages. Some tenants want these promises written into their leases.

Expected Best Bets for 2016 Retail in mixed-use developments. Mixed-use projects combining condominiums, offices, and retail space are still going strong in most Canadian urban centres. And as people continue to move closer to the core (at least, those who can afford to), demand for retail and other amenities is rising. Retailers are eager to meet the demand with smaller, innovative store formats — which bodes well for developers with space to lease. Destination retail remains a solid play. While the need for retail in the new core developments gets much of the attention, respondents also see strong opportunity in destination retail. Consumers eager for a bargain — or an outstanding shopping experience — have proved more than willing to make the trip to outlet malls and regional shopping centres. Eastern Canada industrial property, especially distribution. The growth of e-commerce and shifting consumer behaviors is compelling companies to improve their supply chains and achieve ever-shorter delivery times. As a result, demand for industrial buildings and land that is suited for distribution centres is rising, particularly in eastern Canada. Suburban properties and industrial campus developments are attracting investor interest, since moving away from the urban centre provides better transportation access. Redevelopment of older properties. Respondents expect to see significant investment in the redevelopment of older buildings in the years to come. Companies are eager to upgrade their properties to keep pace with new developments coming on stream, to address tenant demands, and to capitalize on the trend toward multi-use building in the urban core. In the west, bargain hunters are on the prowl. Investors will be keeping a keen eye on companies whose exposure to western Canadian real estate puts them at risk. We may see more consolidation among REITs, as well as more activity by investors keen to acquire valuable assets at a discount by targeting troubled REITs and other companies. Condos and rental apartments are still a good bet. The market for condominiums remains solid in many parts of the country, particularly in Greater Vancouver and the Andrew Warren serves Greater Toronto Area, especially as single-family home prices as the Director of Real continue to rise. Yet it’s not all about condos any longer: as Estate Research for many Canadians opt to rent, demand for rental apartments PwC. The Emerging also is growing. Trends in Real Estate Suburbs await an exodus from the core. As it gets 2016, a joint harder and harder to find affordable housing in Canada’s publication between urban cores, frustrated homebuyers will start looking furUrban Land Institute ther afield. Investors and developers are keen to welcome and PwC, can be found them back to the suburbs. b at pwc.com building.ca

The

green

New studies show tangible benefits from improved sustainability performance across the North American commercial real estate sector By Peter Sobchak

•M ore property companies and funds report on sustainability: 707 companies and funds, representing US$2.3 trillion and 61,000 assets;

he Global Real Estate Sustainability Benchmark (GRESB), an industry-driven organization that measures the sustainability performance of real estate portfolios, released its 2015 data and industry report, based on an assessment of 707 property companies and private equity real estate funds, representing 61,000 assets and US$2.3 tril- • B etter environlion in asset value. Among its findings, mental performthe report documented a three per cent ance: on averreduction in greenhouse emissions in age, the sector 2014, a 50 per cent increase in on-site achieved a 3.04 renewable energy generation, and a per cent reduction 19 per cent improvement in overall in GHG emissions, environmental, social and governance 2.87 per cent (ESG) performance. reduction in The GRESB believes that the global energy consumpproperty industry is at the heart of critic- tion, and a 1.65 al global issues that include resource per cent reduction constraints, climate change, and ur- in water use; banization, but that the industry is also positioned to design and operate build- • G rowth in ings more sustainably such that they renewables: can provide solutions to these challen- on-site renewable ging issues, while also creating value for energy generareal estate investors and shareholders. tion of 445GWh, The 2015 Report provides new data an increase from showing that the global real estate sec- 296GWh in 2014 DECEMBER 2015 JANUARY 2016

building.ca

tor is increasingly integrating ESG considerations into corporate policies and business strategy. Critically, the data also shows that policy and strategy are backed by actual implementation of energy and water efficiency programs, and demonstrable improvements in sustainability performance. North American REITs and private equity funds slightly trailed the global market, with an average sustainability score of 44 compared to the global GRESB average of 46. With North America facing a long-term challenge in preparing for changing climate conditions, there is an acute need to understand and manage climate-related risks to individual properties and entire portfolios. The 2015 GRESB results indicate that the North American companies and funds are taking action to address climate risk and resilience. They show 88 per cent of participants reported having sustainability policies and a growing fraction of these policies include specific provisions addressing climate risk (36 per cent) and resilience (26 per cent). Severe and prolonged drought across western North America has also brought attention to the importance of water conservation and sustainable water supply management. As a result, 86 per cent of North American property companies and funds implemented water efficiency improvements for standing investments within the last four years. “The 2015 GRESB Report and data show that the global property industry is taking sustainability issues seriously, making them a core part of business strategies,” says Chris Pyke, COO of GRESB. “In North America, this is reflected in portfolio-wide efforts to save energy, conserve water, and

Source: Journal of Portfolio Management, September 2015

Report Highlights:

Highlights of the findings include: •N et effective rents, including the cost of tenant incentives, average 3.7 per cent higher in LEED-certified properties in the U.S. than in similar non-certified ones; •R ent concessions for LEED and BOMA BEST buildings in Canada are on average four per cent lower than in similar non-certified buildings; • Occupancy rates during the period were 18.7 per cent higher in Canadian buildings having both LEED and BOMA BEST certification, and 9.5 per cent higher in U.S. buildings with ENERGY STAR certification, than in buildings without certifications; •T enant renewal rates were 5.6 per cent higher in Canadian buildings with BOMA BEST Level 3 certification than in buildings without that certification; •T enant satisfaction scores were 7 per cent higher in Canadian buildings with BOMA BEST level 3 and 4 certification than in non-certified buildings; • Energy consumption per square foot was 14 per cent lower in U.S. LEED certified properties than in buildings without certification. b

Rental and occupancy trends 2004-2013 60

.95 .90

.85 40

.80 .75

.70 20

.65

Occupancy rate

Green office buildings deliver higher income and value One underlying message of the GRESB Report is not only that the global property industry is taking note of sustainability issues, but that improved property performance is strongly correlated to green building certification, a fact vividly illustrated in a new study of Bentall Kennedy’s North American office portfolio, conducted by Dr. Nils Kok of Maastricht University in The Netherlands (who is also a board member of GRESB) and Dr. Avis Devine of the University of Guelph in Ontario. The research, published in the September 2015 issue of the Journal of Portfolio Management, analyzes 10 years of financial performance data across a Bentall Kennedy-managed office portfolio totaling 58 million square feet, (34 million square feet in the U.S., 24 million square feet in Canada). By examining a large North American portfolio with consistent data across multiple market cycles, the results provide compelling evidence that buildings with sustainable certification outperform similar non-green buildings in terms of rental rates, occupancy levels, tenant satisfaction scores, and the probability of lease renewals. The study of nearly 300 office properties across North America included

lease-level data such as rents, rent concessions and lease renewal rates, as well as building-level information such as occupancy rates, tenant satisfaction scores, energy and water consumption, and green building certifications.

Rent (dollar/sq.ft)

enhance resilience. The recent gains across the commercial real estate sector are impressive, yet in absolute terms, the sector’s environmental impact remains significant and more work remains to be done.”

.60

.55 0

.50 2004

2005

2006

2007

2008

2009

Canada sample rent U.S. sample rent Canada sample occupancy U.S. sample occupancy

2010

2011

2012

2013

LEED CS & BB LEED EBOM &BB BB LEED CS No certification

Tenant satisfaction survey 7

1 heating

air conditioning

HVAC outside business hours

summer humidity

winter humidity

recycling environment

recycling comprehensiveness

recycling glass/plastic/ metal

recycling composting

recycling e-waste

V I E W Walk With Joy ULI Toronto’s Executive Director believes old legislation can mean a new Renaissance By Richard Joy

2016 marks the 10-year anniversary — and legislative review — of the passage of the City of Toronto Act (COTA), a charter-like, home-rule, legislative milestone that acknowledged that Toronto, as Canada’s largest and most economically important city, requires powers that measure up to a major global city. It was a significant event that grabbed front page headlines, a “mission accomplished” moment for Toronto’s Mayor David Miler, his highest first term priority. Everyone understood that it was the start of a new civic chapter in the city’s evolution. A decade later COTA might be lucky to be considered a footnote. Little of anything approaching the transformative promise of the nowmost-empowered city in Canada transpired. The fate of COTA may have been sealed by its denouncement by many in the legal and academic community. On first inspection COTA was a near carbon copy of its predecessor, the old province-wide Municipal Act. Save for the flowery preamble and some minor new taxing powers, it did not even deliver the ability to levy a hotel tax, one of the few specific powers that Miller sought. But this interpretation of COTA’s limitations overlooks its great triumph. The lens through which to understand the Act’s reforms is not the specific powers transferred to it. Rather, it is the broad and deliberately undefined authority it confers. COTA is the furthest break yet from the old constitutional paternalism of sharply defined prescriptive powers that spell out in black and white what the city can or cannot do. It is deliberately grey. Broad permissive powers were the solution to the conundrum facing the city when Mayor Miller marched up Queen’s Park demanding a new city charter. In Dalton McGuinty, he found an unprecedentedly compliant Premier who was willing to give Toronto sweeping new powers. But the city had to answer one question: what powers did it want? Save for a few examples of a minor nature (like the unfettered authority to implement speed bumps), Toronto did not really have an answer. So a different approach was pursued. The city came to the conclusion that it could not and should not fully anticipate what specific powers it needed. The future is uncertain. Powers required for today’s reality likely won’t DECEMBER 2015 JANUARY 2016

building.ca

serve tomorrow’s. In 2006, Airbnb wasn’t even a concept and the driverless car was science fiction. It was decided that within the broad spheres of municipal jurisdiction, the city could enact any power that served its interests. Any power! The province maintained a veto (deliberately hard-touse, requiring it to go back to the legislature to exercise), but the City was handed in effect blank cheque authority to manage its affairs and control its destiny. The shackles were cut. So why did we not experience an urban Renaissance over the past decade? The most obvious reason is that no one got the memo. Few civic leaders came to understand the potential of COTA, elected or not. The buzz killers in the city’s legal department stifled intrepidness. Conditioned on narrow interpretations demanded by the old Municipal Act, the municipal legal community balked at the fuzziness of broad and undefined powers of COTA. Mayor Miller is to blame, too, as COTA was his file and not shared across council. Only he knew of its intended potential. On retirement he left no political leadership legacy. No Richard Joy is Executive one on council, then or now, seems to Director of ULI Toronto. understand its power. Previously, he served as Mostly it is all of us. Despite numerVice-president, Policy and ous attempts to stoke civic innovation Government Relations at and creativity over the years, few serithe Toronto Board of ous big ideas have come forward. Even Trade, and was the ‘disruptive’ third party innovations, Director of Municipal like Uber, have caused council to reflex Affairs and Ontario to old ways of thinking about how to (Provincial Affairs) at run our city. Global Public Affairs. Two mayors and four city councils Follow him on Twitter later it is time to recapture the excite@RichardJoyTO or email ment of a decade ago. It’s time to at Richard.Joy@uli.org dream about new approaches to economic development, poverty, the environment, urban mobility, and land use, the secrets of which are likely found in an old piece of legislation passed a decade ago. b

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