Building April May 2017

real estate development

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construction

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architecture

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Disrupted Mobility How current transportation paradigms are being upended.

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LIFE AFTER THE BACK COVER…

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READ > What to expect for Vancouver’s 2017 housing market David Allison prognosticates on residential development in the Lower Mainland.

67 02

FEATURES

11 > An Uneven Road /

There are many bumps ahead for Canadian cities facing an age of imminent and rapid transportation disruption. By Andrew Sobchak

EXPLORE > Banksy in Toronto Menkes and Johnson Chou at once save a Banksy from Toronto’s relentless condo-ification while underscoring the ephemerality of street art.

EXPLORE > OIIQ Angus Technopôle Lemay designs a new building for the Ordre des infirmières et infirmiers du Québec (OIIQ) better suited to their needs.

CONTENTS

22

16 > Show and Tell /

Consulting the public on a project is a legal requirement, but cleverly encouraging engagement and leveraging consultation can help push a project forward. By Shannon Moore

20 > Let’s Get Together /

Collaboration key to reducing the impact of risk in the construction industry. By Steve Jones and Donna Laquidara-Carr

22 > Share and Share Alike /

Unfamiliar to most yet touted as one of the fastest-growing CRE sectors, is coworking just hype? By Rhys Phillips

IN EVERY ISSUE

5 > Editor’s Notes 6 > Market Watch 8 > Legal 28 > Site Visit 30 > Viewpoint

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Volume 67

02 Number Editor / Peter Sobchak Art Director / Roy Gaiot Assistant Editor / Shannon Moore Legal Editor / Jeffrey W. Lem Contributors /

Steve Jones, Richard Joy, Donna Laquidara-Carr, Rhys Phillips, Andrew Sobchak

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Get on the Trolley

“Change is the law of life.” That particular iteration of a well-worn phrase is attributed to John F. Kennedy, but we hear countless variations of it all the time these days. Economic, technological and social changes are recurrent themes in a world that appears, more than ever, to be susceptible to dramatic shifts. The concept of change is familiar, but today’s pace of change is leaving many scrambling for safety and stability.

Change can be a disruptive force to everything around us, but if you want to profit from change you need to not just understand it but embrace it. “The ability to pivot quickly, profoundly, and effectively might be the most important core competency for individuals and organizations to acquire who hope to prosper in the new economy,” says Shane Cragun, co-author of Reinvention: Accelerating Results in the Age of Disruption. “It’s no longer enough to change when you have to. Leaders must change before they have to, and they must enable their organization to surf the incoming global shockwaves with intelligence, agility, strength, and command.”

Emerging innovations are already disrupting the real estate market in various ways: the impact of Airbnb on hotels (a topic we will cover in more depth in the next issue); Alibaba, Shopify, Amazon and e-commerce are changing the face of retail; Fintech, 3-D printing and changing workplace environments such as coworking (examined closely in this issue); and a future of urban mobility that is becoming more connected, shared and autonomous.

That last point is perhaps the most exciting. Some forecasters are expecting millions of driverless vehicles to be on our roads within the next five years. Even Uber CEO Travis Kalanick sees their future in self-driving vehicles, and that potential is incredible. “Drivers kill over a million people annually, making the road unsafe for other drivers, bicyclers, and pedestrians. Self-driving cars see better using multiple cameras, lasers, and lidar. Self-driving cars are totally focused on driving; don’t text, bounce to music, drive after drinking, smoke dope, or get distracted,” says transportation columnist John Addison. “When I listen to debates about autonomous vehicles, I am reminded of similar debates 10 years ago about electric vehicles. EVs were predicted to add massive congestion, use nothing but coal power, eliminate jobs, and cause recessions by reducing petroleum demand. None of these alarming forecasts happened.”

The speed of technological innovation is significant along with the potential reach of these transformations. How can we adapt to these emerging technologies? How can real estate owners prosper in an age of constant disruption? It starts with how you look at it. At the Urban Land Institute Toronto’s 2015 Symposium, Airbnb’s country manager for Canada, Aaron Zifkin, said, “The term ‘disruptive’ drives me nuts,” preferring, instead, the more encouraging ‘innovative’ to describe the platform’s offerings. Amy Erixon, principal and managing partner of Avison Young’s Global Investment Management arm, echoed that sentiment at last December’s Real Estate Forum when she said that she doesn’t see technology as “disruptive” but instead as a “solution meeting an unmet need.” And those perspective shifts are significant. “It’s vital that leaders understand that success in the age of disruption requires significant shifts in world views, approaches, skills and behaviours,” says Kate Sweetman, co-author of Reinvention.

As the CBRE 2017 Real Estate Market Outlook neatly puts it, “A faster pace of change also means a greater frequency of opportunity, [and] as the pace of change accelerates, there will be more wins and losses to go around.” The question is: what side do you want to be on?

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

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MARKE T Spotlight: Construction

Ontario construction industry expects growth in 2017 despite slow provincial economy

The economic outlook for Ontario’s construction industry is positive and confidence is up across the province, according to findings from the 2017 Construction Confidence Indicator, conducted by the Ontario Construction Secretariat (OCS). With a score of 60 out of 100, the Construction Confidence Indicator reveals a majority of Ontario’s construction firms expect to conduct more business this year than last.

“Increased construction activity is always a good sign for the overall economy and things are decidedly looking better for Ontario in 2017,” said Sean Strickland, CEO of the OCS. “We’re seeing a couple of possible explanations for the boost in optimism like investments in major infrastructure projects across the province and an improved economy south of the border.”

According to detailed regional data, Central Ontario is the most confident with a score of 62, followed closely by the GTA

with 61. Northern Ontario reports the lowest confidence with a score of 57, however optimism has improved since 2016, with significant investment being made in post-secondary education facilities in Northern Ontario including projects at Laurentian University, Canadore and Confederation College.

“Ontario’s economy beat the national average increase in real GDP growth in both 2015 and 2016 and we expect 2017 will mark the year Ontario was the fastest-growing province,” said Dawn Desjardins, Deputy Chief Economist of RBC. “Fiscal stimulus and consumer spending will be key supports in 2017 and will likely lead businesses to pick up the pace of investment activity as the year progresses.”

On the national side overall, one should be encouraged by the fact that Canada’s GDP is forecast to grow at 2.1 per cent for the next two years on a modest expansion of exports and increased business investment, as reported in the CBRE 2017 Real Estate Market Outlook. Other positive indicators for the economy, according to the Outlook, include the stabilization of oil prices, up from cyclical lows, which will alleviate some pressure on oil producers and increase rig counts at faster rates.

Only 3.7 per cent of the $125 billion that the federal government has earmarked for infrastructure spending has been allocated and stronger economic growth in the U.S. is expected to increase demand for Canadian goods and commodities.

However, downside risks are also mounting on the economic front, says CBRE. While full-time employment has recently increased there has been a long-term trend towards precarious, part-time employment. There is a persistent lack of innovation and excess capacity on the manufacturing front, in addition to record-high household debt levels and increasing protectionist language from our major trading partners.

Trump Card The Construction Confidence Indicator analyzes expectations of growth across five construction sectors — industrial; commercial; engineering/civil; institutional; and highrise residential. The results show that across Ontario in the non-residential sector, contractors expect to see the most

$12.7B

$12.2B

$12.0B

recession $10.9B

$11.9B

APRIL MAY 2017

$11.9B

$11.7B

stimulus

$9.4B 2008

$11.7B

2009

2010

2011 building.ca

2012

2013

2014

2015

2016

Source: Statistics Canada, CANSIM Table 026‐0003

Y‐axis has been modified to show variation in data

Ontario’s Total ICI Permit Values

growth in the engineering/civil category with 43 per cent of respondents anticipating “significant growth” in 2017. Expectations for “significant growth” in this sector are highest in Eastern Ontario at 57 per cent.

Contractors expect the high-rise residential sector to be a stronger performer in 2017. Overall across Ontario, 45 per cent of contractors anticipate “significant growth” in this sector. Kitchener-Waterloo leads the province in highrise residential optimism with 63 per cent of contractors anticipating “significant growth,” most likely a direct spinoff from the construction of new light rail transit.

Despite the boost in overall confidence, nearly half of the 500 contractors surveyed report they expect the Trump Presidency to have a negative or harmful effect on Ontario’s economy and construction industry. This sentiment is most acute in Windsor-Sarnia where 59 per cent of respondents believe Trump’s government will harm Ontario’s economy.

Alternatively, opinion in Hamilton-Niagara appears polarized with 40 per cent of firms forecasting the Trump Presidency will have a positive impact on Ontario’s economy and 44 per cent predicting a negative effect. Three common sources of concern include increased construction material costs, nega-

tive impact on the manufacturing industry and decreasing investment in projects due to economic uncertainty.

The Construction Confidence Indicator also looks at em­ ployment trends. This year’s survey shows an 11 per cent increase in apprenticeship employment in the unionized construction sector over the past two years, while the nonunionized sector has only seen a three per cent increase (83 per cent of unionized firms employ apprentices compared to 49 per cent of non-union firms).

An almost unnoticed increase in land transfer tax on ultra-high-end residential real estate and almost all commercial real estate transactions greeted Ontarians as 2017 was ushered in. Unlike in British Columbia, foreign buyers were spared the pain of a big land transfer tax hit, but the slack is spread, predominantly, to commercial real estate deals throughout the province.

Overall, the Indicator illustrates that Ontario’s construction sectors are experiencing a stable investment outlook with modest growth in the non-residential sector, an expected slowdown in residential activity, and major project activity will be sustained by infrastructure projects including transportation, transit and energy. b

THE TRUMP EFFECT THREE MOST COMMON CONCERNS:

• L ess investment in projects due to economic uncertainty; • Increasing costs for construction materials; • Harm to Ontario’s manufacturing industry.

42 Negative/Harmful

Ontario

Windsor / Sarnia

42%

59%

32 Positive Overall, 42 per cent of contractors expect America’s 45th President will have a negative or harmful effect on Ontario’s economy and construction industry. building.ca

Concerns about Trump are highest in the Windsor/Sarnia area, where 59 per cent of respondents expect the economy to be harmed.

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LEGAL Clearing the Smoke With new legislation on the way, what landlords and tenants should know about the law and cannabis dispensaries.

By Daoust Vukovich LLP

With hundreds of cannabis (marijuana) retailers already operating across the country and Canada’s legal pot industry valued in the billions, a growing number of landlords and tenants want to get in on the action. However, the relatively recent introduction of (and changes to) laws regulating medical production and sale of cannabis, coupled with the federal government’s commitment to legalize non-medical cannabis, has created some uncertainty among the public regarding the legality of these so-called “dispensaries.” Allow us to clear the smoke.

The Law Possession of cannabis, including its preparations and derivatives, is a criminal offence under Canada’s Controlled Drugs and Substances Act. The prohibition has been in place for almost 100 years. Anyone engaging in a cannabis trade remains exposed to criminal sanction, unless expressly excepted under the legislation.

The Access to Cannabis for Medical Purposes Regulations exempt two categories of persons: (1) producers licensed to grow cannabis by Health Canada, and (2) individuals authorized by their health care professional to use cannabis for medical purposes (and such individual’s designated grower, if any).

A store West At on this time, there are 40 licensed producers operating cannabis grow ops Street in Goderich, from industrial locations and selling their product exclusively via mail/delivery Ont.’s historic downtown before the to Canada’s approximately 100,000 prescription-carrying individuals. Currently, tornado hit (above), this is the only legal way to buy or sell cannabis in Canada. the damage (right), “dispensaries” offering cannabis for sale at retail are not licensed producand The in August 2013 (below) after the town’s ers.

These businesses are criminal. Interestingly, many dispensaries have brandrebuilding efforts. ed themselves with a medicinal-like image, in some cases requiring that the customer have a consultation on-site to verify their medicinal need for cannabis.

These features do not change the illegal nature of the trade. As the law stands now, these dispensaries are no more legal than meeting a drug dealer in an alley.

Enforcement The current legislative climate has put local law enforcement in a difficult position. Legalized sale of cannabis has been promised by our Prime Minister. It may therefore seem to be a complete waste of public resources to criminally charge and try dispensary operators, if imminent legalization means the charges may never lead to a conviction. On the other hand, police and municipalities can’t stand idly by while communities complain about retail “pot shops” selling APRIL MAY 2017

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an array of unregulated cannabis products in a legal vacuum. To date, police have raided dozens of dispensaries across Canada. But many operators seem undeterred, in some cases reopening the very next day.

In an effort to regulate these budding businesses pending legalization, municipalities have utilized their bylaw powers. Toronto, for example, has laid charges for failure to comply with zoning and business licensing bylaws, threatening fines and closures. Vancouver and Victoria have taken a different approach, introducing bylaws that regulate the location and operation of these illegal businesses.

Landlord and Tenant So what does this mean for a landlord approached by a tenant intending to operate a cannabis business? The landlord should first determine whether the tenant is a licensed producer. A complete list of licensed producers is available on Health Canada’s website. If the tenant is a licensed producer, then provided the producer complies with its license, there is no issue with the legality of the tenant’s grow-op. The landlord will then want to address several factors typically considered when leasing premises for industrial use, including: insurance, utilities, restoration, etc.

When leasing to a licensed producer, a landlord should also consider security, given the particular risk of robbery that grow operators face.

If the tenant is not a licensed producer, then its proposal is to use the premises for criminal activity. The proliferation of dispensaries indicates that some landlords have nevertheless been willing to lease premises for this purpose.

They are gambling that local authorities will not strictly enforce cannabis prohibition laws while the federal government is actively pursuing legalization.

There is no guarantee that current laws will not be enforced pending legalization. There has been no indication that dispensaries now operating will be allowed to continue when legalization

takes effect. To the contrary, one of the federal government’s principal expressed objectives of legalization is to “establish and enforce a strict system of production, distribution, and sales”. The dispensaries are illegal today, and may remain illegal after the legalizing legislation comes into force.

If a landlord is prepared to roll the dice, they should consider the following: (1) municipalities may issue zoning and/or licensing infractions, which may result in charges being laid against the landlord; (2) dispensaries have been the victims of robberies, in some instances at gun point, but operators typically don’t call the police out of fear that they will attract criminal charges; (3) insurance may be jeopardized as a result of criminal activity being conducted in the premises; and (4) in extreme cases, the provincial government may, pursuant to the Civil Remedies Act, seize the building being used for unlawful activity.

Some landlords may be receptive to a tenant intending to use the premises for an “alternative medicine shop” or “compassion pharmacy.” Describing the use clause innocently will not change the effect of an actual illegal use. Most commercial leases require that the tenant comply with all laws and bylaws. On the basis of such a provision, a landlord should be entitled to terminate a tenancy if the tenant is il-

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legally trading in cannabis. Even after legislation, a “compliance- with-laws” provision will prohibit the tenant’s sale or distribution of cannabis if it is not in accordance with whatever regulations are enacted. To prohibit cannabis sales altogether, however, may ultimately require an express prohibition in the lease.

Residential Tenancies With the passage of the Access to Cannabis for Medical Purposes Regulations, prescription-holding individuals are once again permitted to grow cannabis for personal consumption. Before planting the seeds, an individual has to register with Health Canada. Notably, registration does not require the landlord’s consent. This makes many residential landlords uncomfortable, as growing cannabis, albeit legally, may lead to several problems for the landlord, including: odours wafting to adjacent units, increased electricity consumption and fire hazards from grow lights, mould issues from warm temperatures and humidity, security concerns, and more.

Some have argued that residential landlords’ concerns are overblown, since a typical medicinal user is only permitted to grow a handful of plants indoors at any given time. (Tell that to the Coquitlam, B.C. landlord who spent $135,000 remediating mould and repairing damage to the building’s electrical system caused by her prescription-holding tenant’s growop.) In Ontario, a landlord cannot terminate a residential lease solely because the tenant is legally growing medicinal cannabis. Refusal to enter into a lease with someone because of their “dependency on a drug” is a prohibited form of discrimination under the Canadian Human Rights Act. The Liberal government is expected to release proposed legislation imminently, providing for cannabis to be legalized by Canada Day 2018 … stay tuned! b

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N A EVEN UN OAD R There are many bumps ahead for Canadian cities facing an age of imminent and rapid transportation disruption.

HANKS TO HEADLINE-GRABBING TACTICS, slick branding and a David-versus-Goliath narrative, Uber gets a lot of attention. Their techforward solution to the age-old problem of getting around has resonated strongly with By consumers, but the reality is advances in perAndrew sonal transportation have been disrupting citSobchak ies for over a century. In the past 10 years alone, car sharing, electric vehicles and a resurgent bicycling culture have all been leaving their mark on the Canadian urban form. Uber didn’t invent disruption, they just made it cool.

But for those who manage transportation and plan cities, Uber is something else entirely. The disruption of the transportation sector in the next 10 years — from ride hailing to ride sharing to autonomous vehicles — is effectively embodied by Uber’s business plan, creating a useful shorthand and case

$241 million spent on peer-to-peer ride services in Canada during the 12 months ending October 2016: • Average spending by Canadian user is $122 per year • 7% of the Canadian population used peer-to-peer ride services during the study period

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ty inspections, this is how the taxi industry gained purchase despite a widely variable consumer-facing product. Sharing economy platforms like Uber instead rely heavily on ratings (between passengers and drivers) and create trust directly with the consumer, circumventing and diminishing the role Ride hailing: Welcome to Canada…sort of of government entirely. The sharing economy “fundamentally changes how a company can build up trust very quick“We got hit upside the head,” says Scott McKeen. The Counly in a market,” says Ted Graham, an innovation expert and cillor for Edmonton’s downtown Ward 6 was one of eight one of Canada’s first UberX drivers. “Not two years prior it councillors to vote in January 2016 in favour of a controwould have taken a huge brand, lots of lobbying muscle and versial bylaw to allow ride-hailing services to operate in the patience to get through some of the red tape to get estabcity. Edmonton’s Vehicle for Hire Bylaw 17400 was the first lished in the city.” In Edmonton, Uber customers lobbied on “Uber-friendly” bylaw in Canada and permitted app-based Uber’s behalf. ride hailing services to legally operate in the city. It was Uber’s strategy levers pent-up consumer demand against passed at a time when the San Francisco-based start-up was the resolve of elected officials. Their calculation has always rapidly mobilizing in Canadian urban markets and plowing been that the cost of operating temporarily — some say illegalthrough any regulatory opposition. In the weeks prior to the bylaw vote, the City tried unsuccessfully to stop Uber with ly — in any municipality to build up this demand is less than a court injunction, then a sting operation of drivers which the effort required to change regulations, as Graham notes, yielded 70 tickets, most of which remain unpaid. “When through a normal course of lobbying and marketing. Addict somebody comes in and thumbs their nose at your regulathe consumer and they will do the work for you. The challenge tions,” says McKeen, “you tend to be a little put off by that, but in Vancouver was the members of the PTB are appointed, not it’s not like we didn’t know it was coming.” elected, and relatively immune to public pressure.

The story of Uber in Edmonton is indicative of how the After over a year of consultation with other municipalcompany finds footholds in cities around the world: they arities and stakeholder groups, their plan looks remarkably rive; taxi industry erupts; local authorities threaten sanclike Edmonton’s Bylaw 17400. Both the plan and the Bylaw tions; Uber leaves; public cries out; Uber returns to a favorensure consistent safety and licensing standards for taxis and companies like Uber, while reserving cab stands, phone- and street-hailUber arrived in Vancouver and Toronto in 2012 as part of the ing for taxis. All companies can then company’s first North American expansion. Over five years later, compete openly for the app-based hailthe B.C. stalemate may end as ridesharing has become a provincial ing market (the B.C. plan includes a $1 election issue. Todd Stone, B.C.’s Minister of Transportation and million provincial grant to help the Infrastructure announced on March 7 all forms of ride hailing and taxi industry build an app to compete ridesharing would be legalized by the 2017 holiday season if his with Uber). “Uber could not set up outLiberal Party gets re-elected this spring. side Rogers Place after an Oilers’ game and start picking up people,” says McKeen. “Part of the market was left for able regulatory environment as authorities try to balance the fervor of the taxi cabs but mostly we said, ‘Let the comlobby and the demand of consumers. In Vancouver, North America’s largest city petition begin.’” without ridesharing, the story was the same except Uber did not return following their self-imposed exile. The regulation of the local taxi and limousine industry, as Uber would find out, was not Vancouver’s rite alone. Regulation fell instead to Ridesharing: Driving to less the Passenger Transportation Board (PTB), an independent six-person tribunal The effects of ride hailing in Canadian operated at arm’s length from the provincial government and mandated to intercities have largely been policy-based, pret B.C.’s Passenger Transportation Act. The Board believed Uber was a limo serbut are not expected to be as impactful vice. Uber disagreed. The Board threatened Uber’s drivers with license forfeiture. on operations and the built form as Uber left town and waited. And waited... ridesharing and autonomous vehicles The secret to Uber’s formula is, ironically, trust. Historically, consumers have are estimated to be. In Canada, Uberrelied on the benediction of municipalities to determine what was good and what Pool — the service which allows more services were allowed to operate in a city. Through licensing, permitting and safethan one unacquainted passenger to

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study to examine. The response of Canadian cities to Uber’s ride hailing and sharing so far has been mixed, but some are using these diminutive early ripples as training for the waves of change autonomous vehicles are expected to bring.

4.97 billion Estimated number of hours Canadians spend in their vehicles each year.

APRIL MAY 2017

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Uber services are currently offered in: The UberPool service, along with platforms like Airbnb, is a harbinger of the sharing economy. Gómez-Palacio believes the UberPool service at the vanguard of the sharing economy as a whole is building toward a profound impact on the urban built form. He suggests the vision of a city of the fuAlberta: ture may closely resemble the cities of Calgary Québec: Edmonton our past. “The sharing economy today Ontario: Gatineau Hamilton revisits society from 100 years ago,” he Montréal Kingston Québec City says, suggesting only in recent decades Kitchener-Waterloo have cities lost their way by gravitating London Niagara Region too far toward privatization with subOttawa urban sprawl. “We traded big parks for Toronto backyards; train stations for two-car Windsor garages. But the pendulum is swinging back to the shared use of things without having to own them.” share a trip and its cost — is only available in the Greater In a cyclical turn, an urban world of less ownership also Toronto Area, but widespread adoption and optimization energizes potentially disruptive technologies. As Graham of the platform algorithm could liberate space in existing notes, Uber and Airbnb succeed because they build trust rights-of-way. with a consumer base without the endorsement of municiNumerous studies released in 2016 alone, including from pal regulation. Where cities previously organized people MaRS, the OECD’s International Transport Forum and MIT, around a shared interest such as public transit, their role emphasize the substantial positive effect ridesharing can as organizer is being replaced by disruptive technology have on urban congestion and air quality. The MIT study, companies. This has some municipalities unnerved and released in December by the Computer Science and Artifiothers excited about the opportunity for redefining governcial Intelligence Laboratory, studied the taxi industry in ment at its core. To realize the positive potential of an UberNew York City. If taxis transitioned to ridesharing vehicles, Pool service, both with society and with the urban form, taxi congestion would be reduced by around 75 per cent, acgovernments need to find ways to direct the disruptive cording to their models. Transporting more people at once energy appropriately. required fewer trips, allowing 3,000 taxis to service 98 per The municipal government will always serve a key role, cent of the ridership demand with an average wait time of Gómez-Palacio says, through the creation of policy which only 2.7 minutes. 2,000 taxis could service 95 per cent of the can accelerate or retard progress toward the vision of a demand compared to the 14,000 cabs dense, sharing city. But, he notes, they can also lead as providers of many servicurrently scouring city streets for sinces related to the sharing economy. “In order to have these technologies work you gle-fare riders. need to have the digitization, the sharing of big data and often municipalities are For Antonio Gómez-Palacio, princiin a great position to enable those things.” pal of Toronto-based urban planning When asked to identify a municipality welcoming in this new era of the city, and design firm DIALOG, increasing Gómez-Palacio points to Toronto who has dedicated staff and substantial resourthe efficiency of cars on the road means ces to investigating opportunities with the sharing economy and vehicle automore capacity coming on stream. “There mation. “They have launched an internal department to really figure this one out,” is going to be more room on the road,” he says. “Up to now, it has focused on creating enabling policies, thinking through he says. “Some cities will use that room implications on built form and retooling the way they provide services so they can to do other things like increase the embrace and use the technology to do the things they really want to do.” sidewalks, take out a lane of traffic in favour of transit or cycling trails, but some won’t do it and will squander that opportunity and it will result in more cars coming on the road.” $65.6 billion Estimated cumulative benefits of automated vehicles in Canada: • Collision avoidance: $37.4B • Time value: $20B • Fuel savings: $2.6B • Congestion avoidance: $5B

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es could come down; and parking lots could become parks.

“If you own parking lots in any city,” adds Gómez-Palacio, “the land value of those lots is starting to change. Even formally awkward sites for development, because it was hard to get parking into them, become developable. The land valuation of a lot of real estate is going to change quite drastically and readjust to what you can [now] do with the land.”

Gómez-Palacio believes the “automation of everything that moves” should prompt any organization in the distribution business, including cities, transit authorities and private enterprises, to seriously “rethink their business and delivery models.” He also notes, “I work with both public and private sector developers who are starting to ask, ‘how do I [design] my buildings differently, am I going to need the same amount of parking or drop-offs of buildings.’ The garbage loading portals might look completely different once you have an automated garbage truck coming to pick up the garbage.”

Rathwell and Gómez-Palacio are also both aware of the dark side of autonomous vehicles. Rathwell cites a 2015 Canadian Automated Vehicle Centre of Excellence estimate that over a million people in Canada drive a vehicle for a living and are at risk of losing employment when autonomous vehicles arrive in full. Automated vehicles, Gómez-Palacio notes, could also easily mean the proliferation of vehicles on the road and congestion if not controlled properly. “All of a sudden everyone in the household can have a car – children, seniors, the dog.

Even goods can be moved around in individual vehicles.” As with ridesharing, the momentary potential for reclaiming urban space from the car needs to be realized, he says, or it will be consumed once again by the technology. “If we think about it right we — Antonio Gómez-Palacio, principal, DIALOG can increase the quality of life and dethe country for autonomous vehicles (AVs) in the Canadian urban space. “Most crease the infrastruc­ture and dedicate communities didn’t have any official position on AVs, but all had at least one more space to pedestrians and cycling person on staff keeping an eye on the topic, trying to understand the implicaand all the things we want to do in our tions for their city,” he says. The anxiety of municipalities largely centred on the rights-of-way and public spaces.” arrival timing of AVs and the widely variable ownership models. “When you exWith so many variables and potentend those two issues,” Rathwell says, “you can start to think of specific issues, tially perilous outcomes, Rathwell recfor example parking.” ommends his clients reverse enginRathwell sees a myriad of automation-related parking possibilities: demand eer the urban future they want. “Cities may decrease in some neighbourhoods if AVs are driverless and can be sent should get a group of bright people and workshop through a variety of futures,” away to remote or less-expensive parking options; congestion in other neighhe says, “assessing what each scenario bourhoods could increase drastically if they offer those remote or less-expencould mean for planning, policy, opersive parking options; streetscapes may substantially change if they need to ation and built form. Preferred scenaraccommodate parking; a city’s parking revenue could dry up; parking garagCoupling the shared economy with automation is when Gómez-Palacio believes it “all becomes really interesting.” He notes about half of public and private clients he speaks with are worried about the coming changes and are looking to fend them off. The other half are more positive about how new technologies can impact the city, but he cautions about the adaptation to new technologies. “If we look at the 1940s, 1950s and 1960s when cars started to come on stream very strong, a lot of cities were redesigned to accommodate this technology. We’re at the same risk right now.” Instead, he advocates cities consider the next suite of disruptive technologies as tools to “deliver the cities we want.”

“One of the things we are trying to do is create environments that are walkable, focused on health and well-being,” he says.” So, the question is, ‘how do autonomous vehicles allow us to do that better and in bolder ways.’ We really need to be looking at the automation of not just cars but buses and trains and planes and boats and delivery vehicles and garbage trucks as these will all start to have huge transformative effects in our cities and our lifestyles.”

Ottawa-based transit and urban mobility specialist Sean Rathwell agrees. Over the past three years he and his colleagues at Dillon Consulting were gauging the anticipation of transportation, transit and urban planners across

‘‘If you own parking lots in any city, the land value of those lots is starting to change. Even formally awkward sites for development, because it was hard to get parking into them, become developable.’’

2021: The year Ford announced it will market a driverless taxi.

Source: Statistics Canada, February 2017; Canadian Automated Vehicles Centre of Excellence; Uber, March 2017; Automated Vehicles: The Conference Board of Canada, 2015.

Autonomous vehicles: Opportunity honking

14

2026: The year Uber announced it will offer commuter services in small, electric aircraft which take off and land vertically.

P 26 APRIL MAY 2017

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16

SHOW AND TELL Consulting the public on a project is a legal requirement, but cleverly encouraging engagement and leveraging consultation can help push a project forward.

P

By Shannon Moore

ublic engagement and consultation in the building industry is nothing new. For decades, community members, activists, opponents, protesters, politicians and potential stakeholders have shown interest in projects, offering support to push an initiative forward or expressing concern to stop it in its tracks. In sharing their plans, companies have long sought to connect and communicate with the public, improving their proposals, garnering support, and putting worries at ease.

In today’s changing landscape, however, businesses and organizations must find innovative solutions for achieving and maintaining the interest and support of those whose lives will be affected by the projects.

Burlington: Utilizing Staff The City of Burlington, Ont., recently unveiled its 2015-2040 Strategic Plan, an initiative aimed at controlling sprawl, supporting jobs, improving transit, and encouraging healthy lifestyles among its inhabitants. The Plan “takes on the challenging issues of today and tomorrow, seizes current and future opportunities and helps Burlington prepare for the next 25 years,” according to the website.

Over the course of its development, the Strategic Plan was shown to residents, community groups, city council staff and local businesses in an attempt to gain valuable insight and feedback, and to encourage active participation in City initiatives. “It’s about improving efficiency, maximizing resources, applying creative consulting methods to reduce costs, and strategizing to apply mutually beneficial consulting partnerships,” says Michelle Dwyer, Coordinator of Strategic Initiatives with the City of Burlington. Over the course of one year, the City made 176 changes to its draft plan based on the feedback heard.

APRIL MAY 2017

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transportation infrastructure taxes economics government housing health care environment

MOST IMPORTANT LOCAL ISSUE % of York region respondents

%

17

50 40 30 20 10 0

Photos courtesy Knightsbridge Source: Fall AnnualofEconomics Survey

2009

In order to achieve its outreach goals, the City of Burlington engaged the public in traditional yet reliable ways: through phone surveys; community events; open houses; city hall meetings and more. However, the feedback process was strengthened as soon as attention was paid to the City’s internal team.

“When we looked at our staff, we realized that more than 50 per cent of them not only work in Burlington, but live here as well,” says Dwyer. “They spend a considerable amount of time here, and many wanted to have a voice in the decisions that impact them.” Dwyer says that every engagement opportunity planned for the public was mirrored with its staff. “Each level in the organization was able to help us identify priorities and envision what Burlington will look like in 25 years,” she says.

In addition to sharing ideas in meetings and through surveys, the City established corporate teams of volunteers in its various departments to “give the staff a sense of ownership in the Strategic Plan,” says Dwyer. “These teams not only helped in the decision making process, but showed a vested interest in

2010

2011

2012

2013

2014

2015

making sure that the Plan and all of its goals were brought to life as a result of their work.” Groups included the Engagement and Communication Team (in charge of creating and revising draft documents); Data Synthesis Team (compiling data and identifying trends and priorities); Ambassadors and Facilitators Team (acting as champions for the Strategic Plan, both internally and externally); and more. The City also organized Strategic Snacking Sessions with its teams, where food was used to bring staff together and encourage a casual, collaborative discussion on progress and pitfalls.

Ultimately, by engaging and utilizing its staff, the City of Burlington was able to make significant progress towards the revision and completion of its 25-year plan. As Dwyer notes, incorporating staff in the consultation and engagement process helped them to “feel a sense of ownership, knowing that they were a part of making the Strategic Plan a success.”

LRT Station York: The Power of Politicians

By 2041, the Regional Municipality of York in Ontario is expected to house 1.8 million people and accommodate 900,000 jobs. In order to support its population and employment growth, a Transportation Master Plan was created to “establish the vision for transportation services, assess existing transportation system performance, forecast future travel demand and define actions and policies to address road, transit and active transportation needs in York Region by 2041.”

Similar to the City of Burlington, York Region utilized its internal staff in order to move projects forward. However, it also leveraged the power of local politicians to help spread the message to the public on the Plan’s initiatives and goals.

“Our politicians are our champions,” says Tamas Hertel, Senior Transportation Specialist with the Regional Municipality of York. “They have the biggest following and the biggest influence in our community.”

To involve its politicians, York Region set up an advisory task force consisting of 10 members of regional council led by its regional chairman and CEO. “We brought in industry experts from around North America to provide presentations to this task force on industry best practices and evolving transportation trends,” says Hertel. Using this knowledge, the politicians were able to communicate directly with the public on the critical issues facing the Plan and offer guidance for the development of adequate solutions. “Transportation is increasingly the number one issue for our residents,” says Hertel. “We can’t drag our feet anymore.” Using the voice of politicians, York Region was able to efficiently fine tune is Transportation Master Plan and move it towards completion. building.ca

population employment

YORK REGION POPULATION GROWTH

1,800,000

2041

1,600,000

POPULATION

EMPLOYMENT

million

thousand

1.8 900

1,400,000

18

1,200,000 1,000,000 800,000

2015

600,000

1.16 578

400,000 200,000 0

1971

2081

1991

2001

2011

2021

2031

2041

ledge our neighbours in the communities where we operate, and encourage meaningful dialogue along the way.”

Trans Mountain Expansion Project: Managing Opposition

The Hook

More often than not, individuals welcome new projects especially if they promise amenities or changes that entire communities can benefit from. But what happens when people are passionately opposed to a proposal? For example in 2016 when concerned Ottawa residents joined together to protect the Central Experimental Farm, a national historic site, from development after the Liberal government announced plans to transfer 60 acres of land to the Ottawa Hospital for the construction of its new campus. Or when plans were revealed for a new highway connecting Hamilton to Fort Erie, Ont., and grassroots organizations in the Greater Toronto Area fought to educate the public on the destruction that the freeway would cause to the otherwise untouched Niagara Escarpment.

How do companies and organizations deal with push-back and handle public pressure that aims to end a project? “It is important to find a way to navigate that environment,” says Lexa Hobenshield. “It’s about encouraging people to share their concerns” and “seeking solutions for mutual benefit.”

Hobenshield has had to traverse the waters of opposition as External Relations Manager with Kinder Morgan Canada, the largest energy infrastructure company in North America and whose Trans Mountain Pipeline project received Federal approval in December 2016. The project will twin an existing pipeline in operation since 1953 and, where practical, lay another pipeline along the route from Edmonton to Burnaby, B.C. “The existing pipeline supplies most of the Vancouver area with gasoline and fuel for vehicles, as well as Washington State refineries with oil for their local markets,” says Hobenshield. “The $7.4 billion Trans Mountain Extension pipeline project will triple the capacity of our existing pipeline and introduce 980 kilometres of new pipe, 12 pumping stations, 19 new tanks and more.”

Though Hobenshield advocates its potential for positive change, the pipeline project has, unsurprisingly, been met with strong opposition. Hobenshield says the best way to avoid controversy while remaining respectful is to distinguish between activists and opponents, and to plan your discourse accordingly.

Activists, she says, are protestors who typically travel to different sites, are generally well-funded and extremely organized. They carry out their work “on any given day, on any given construction site, anywhere in Canada.” she says. “They aren’t necessarily there to protest our project, but rather the gas and oil industry in general.” Opponents, on the other hand, seek to educate others using anti-pipeline materials. “They write articles, share their thoughts, and have conversations with our team,” she says. “While we don’t seek to engage with activists, we work hard with our opponents to find common ground.”

Ultimately, both activists and opponents are common and while some are more open to conversation than others, it’s important to address all concerns and respect the reality that many individuals can be affected by such change. “Opinions along the pipeline are extremely diverse,” says Hobenshield. “It’s important to acknow-

These case studies represent only a small fraction of projects that have used engagement and consultation to their advantage. In reality, however, there are a number of unique ways to leverage outside input. Karim Mamdani, president and CEO of the Ontario Shores for Mental Health Services, argues that a comprehensive stakeholder strategy is key to advancing a consultation plan.

Likewise, Sara Cappe, managing director of Public Affairs and Agency at Maru/Matchbox, stresses the importance of engaging the younger generation. “Millennials can be very challenging to bring into the mix,” she says.

“It’s important to make them feel valued and feel like their contribution is important.” Cappe says that the best way to engage millennials is to reach out to them digitally, ask a lot of questions, and circle back with feedback where relevant.

Ultimately though, public participation will almost always act as a domino effect to strengthen proposals and ensure that a project is given the attention it deserves; and despite a heap of best practices, Dwyer lists a single approach to ensure interest and support from your peers. “A piece of advice: Make sure you have a story to tell,” she says.

“People want to know why they should care about a project. Having a story — a hook, if you will — is incredibly important.” Without it, all other engagement initiatives will fall short. The most effective approach in public engagement and consultation is to make people want to participate and care. b

APRIL MAY 2017

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20

LET’S GET TOGETHER

Collaboration key to reducing the impact of risk in the construction industry

By Steve Jones and Donna Laquidara-Carr roperly managing risk in the construction industry can have a major impact on project cost, schedule and resource use, potentially offering significant savings, according to a new Dodge Data & Analytics study. Produced in partnership with Alliant and supported by e-Builder and Procore, the Managing Risk in the Construction Industry SmartMarket Report reveals the top construction risks, their impact on the industry and the benefits associated with using specific risk evaluation and mitigation strategies. One clear finding that emerges from this data is that the industry’s growing focus on collaboration may be an important step toward reducing construction risk.

The report reveals that building owners, general contractors and trade contractors in North America all experience a high impact from the risks they face, with three quarters reporting that they have experienced a dispute or claim in the last five years. The claims faced vary between the three players: about one third of owners find that claims arising from construction defects are both the most frequent and the costliest; just under half of general contractors report that subcontractor default, termination or failure claims have the highest frequency and cost for their organizations; and over one third of trade contractors report that they frequently experience warranty issues, but only about a quarter report that they are the costliest claims they face. Roughly the same percentage see claims arising from construction defects as having the highest cost impact.

These vastly different experiences suggest that while risk takes a toll on the industry as a whole, the top issues and the best measures to control them are very different for owners, general contractors and trade contractors.

P

Top Construction Risks The study examined the variety of risks encountered in the construction industry.

For example, owners are most concerned about operational risks, such as planning or scope changes, schedule changes and cost escalation. Contractors are more focused on risks associated with contract term and procurement of labour, especially in the tightening job market.

The increased tendency for owners to shift project risk to contractors is the top driver for increased use of risk management practices by over half (59 per cent) of contractors. That trend is also noted by three surety experts from Ace Surety, Zurich and Liberty Mutual Safety who were interviewed for the report. Importantly, these experts also agree that this increased risk can be mitigated by construction firms who understand and implement controls for risk. This risk management knowledge is likely to become increasingly important in gaining a competitive advantage in the future, as the trend of shifting risk and seeking one source of accountability is likely to continue to grow.

Most Effective Evaluation and Mitigation Practices General contractors and trade contractors agree that formal brainstorming with the project team, and expert input from internal resources, are the two most effective risk evaluation strategies. They further report that a regular meeting with the full project team, focused on developing a plan to manage risk is among the top risk mitigation strategies.

APRIL MAY 2017

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Disputes and claims that have the greatest impact GENERAL CONTRACTORS

OWNERS

RANKED FIRST FOR MOST COSTLY DISPUTES/CLAIMS

RANKED FIRST FOR HIGHEST NUMBER OF DISPUTES/CLAIMS

31 %

TRADE CONTRACTORS

36 %

CLAIMS ARISING FROM CONSTRUCTION DEFECTS

18 % 26 % 25 %

27 % 27 % 13 %

WARRENTY ISSUES

17 %

9%

38 %

26 %

18 % 44 % na 11 % 9% 5% 7% na 13 % 2% 5% 3%

SUBCONTRACTOR DEFAULT, TERMINATION OR FAILURE

PROFESSIONAL LIABILITY, DISPUTE OR CLAIM

GC DEFAULT, TERMINATION OR FAILURE

PROJECT FINANCING FAILURE

7% 8% 15 %

19 % 41 % na 14 % 11 % 11 % 10 % na 20 % 4% 6% 2% 5%

OTHER

7% 15 %

Increased collaboration reduces risk

agree

55 %

OWNERS

GENERAL CONTRACTORS

strongly agree

neutral

36 %

47 %

disagree

3% 6%

44 %

2% 7% 21

TRADE CONTRACTORS

44 %

47 %

Source: Dodge Data & Analytics 2017

There is wide agreement among the survey participants that these evaluation strategies help to increase reliability in overall project performance. General contractors also find that formal brainstorming helps improve project safety and schedule, and increase client satisfaction; trade contractors believe it reduces the cost of construction.

Owners report that having input from internal experts is important to help improve project schedule. In fact, getting this input to owners may improve their schedule expectations, because it helps them develop a more grounded understanding about how long a construction project will take.

The top risk mitigation strategies yield similar benefits. Again there is wide agreement that both top strategies —regular meetings with the full project team focused on risk, and developing a plan to manage it — increase reliability in the project overall. Owners also recognize that regular meetings help maintain the intended level of project quality, while general contractors report that it improves project schedule and safety. Trade contractors agree about the impact on safety, and they also see a reduction in cost associated with these meetings. Improved safety is also a top benefit noted by contractors associated with developing a risk management plan.

The most frequently cited benefits of these efforts — increased reliability, improved safety and improved schedule — directly impact the reputations of contractors and their relationships with clients. Dedicating time and resources to these strategies has a major impact on project and company performance, and the strategies themselves are neither complicated nor costly.

Importance of Collaboration to Reduce Risk It is notable that formal brainstorming and regular team meetings are the most collaborative among the variety of practices industry players can undertake. 91 per cent of owners, general contractors and trade contractors agree that increasing collaboration reduces risk, with delivery systems that encourage teamwork the second most important driver for increased use of risk management practices.

5% 4%

These findings consistently reveal that early team integration carries multiple benefits, from project quality to innovation and improving project budget and schedule. Being able to address all these factors reduces risk.

However, the report also suggests that these strategies are not necessarily being put into use early enough to support a fully integrated project. Only owners report that formal brainstorming and regular meetings of the full project team occur at a high level before the bidding and construction phases of individual projects. A low percentage of contractors report being involved in either of these activities during the predesign or design stages, suggesting they are not being sufficiently included. As contractors are typically the most well-informed about how to anticipate and mitigate many risks, the report clearly demonstrates a need to engage this group earlier to fully realize the benefits of these strategies.

Despite the strong evidence of benefits, the industry still struggles with adopting and integrating formal project delivery methods. The SmartMarket Report examines the challenges associated with collaboration and integration, including the research findings on integrated project delivery conducted by the University of Minnesota. Renee Cheng, a professor of architecture who led the research project, indicated that non-contractual approaches to integration are often less effective. “The collaborative culture actually grows from some of the discussion you need to have to set up the stakes, accountability and consequences in an Integrated Project Delivery (IPD) agreement,” according to Cheng’s research.

The SmartMarket Report reinforces the call to action for industry transformation around integration and collaboration. The high frequency of claims and disputes will continue to take a toll until the industry embraces good risk management. DoSteve Jones is Senior ing this will be essential, both on the Director, and Donna level of using specific, effective risk Laquidara-Carr is evaluation and mitigation practices, Director of Industry and in the way project teams are formed Insights Research at and interact throughout the project Dodge Data & Analytics. lifecycle. b www.construction.com

Most effective risk evaluation and mitigation strategies EVALUATION STRATEGIES

FORMAL BRAINSTORMING WITH TEAM

MITGATION STRATEGIES

REGULAR MEETINGS WITH FULL PROJECT TEAMS FOCUSED ON RISK

54 %

EXPERT INPUT FROM INTERNAL RESOURCES

57 %

32 %

DEVELOPMENT OF A PLAN TO MANAGE RISK

building.ca

42 %

22

SHARE AND SHARE ALIKE

Unfamiliar to most yet touted as one of the fastest-growing CRE sectors, is coworking just hype?

By Rhys Phillips

I

In 1963, folk singer and future Nobel Laurette Bob Dylan famously sang, “the times they are a-changin’.” He was wrong. The Sixties up until the 1990s marked the triumph of the age of analogue communication, fossil fuels and the internal combustion engine organized around a capitalist socio-economic system.

But in the opening decades of the 21st century, the times really are changing, although the full social and economic implications of this digital revolution, combined with renewable energy and what is called the distributive chain, is hardly settled. Indeed, this uncertainty even underlies the almost Luddite popularism currently unsettling the politics of advanced economies. The nature of work and work relationships in this “third industrial revolution” are but a couple of crucial unknowns hotly debated.

A component of this debate is whether coworking office models reflect the ultimate office environment for the disruptive knowledge economy or is it simply an interesting but ultimately niche real estate market already reaching maturity. On the one hand, Forbes magazine declared in 2013 that coworking spaces would make traditional office space obsolete over time. Three years later, Contract magazine dubbed coworking “a workplace paradigm shift.”

AUGUST APRIL MAY SEPTEMBER 2017 2013

building.ca building.ca

Similarly, Bisnow, an online commercial real estate news blog, headlined an article in its last November Toronto addition, “Coworking is Chang­ing the Face of the Office Around the World” and quoted one source as predicting a market penetration of up to 15 per cent.

A second Bisnow article headline declared, “Co-working places are taking off in Toronto” with 39 coworking providers offering 80 different locations throughout the city.

On the other hand, Coworking: A corporate Real Estate Perspective (2016), a detailed analysis by HOK /CoreNet Global, provided a more dispassionate real estate focus suggesting the coworking market is approaching maturity and foresaw a modest maximum penetration rate of two to four per cent. Interestingly, in March, Bisnow reported that New York-based coworking giant

About the Centres ($ fig ures U.S.) GETTING STARTED

8.3

$98K

MONTHS BEFORE OPENING

AVERAGE INVESTMENT

6.1

23

AVERAGE # OF MEMBERS IN THE 1ST WEEK

THE BUILDINGS THEY OCCUPY

55% 64% 77%

WERE VACANT 6+ MONTHS BEFORE MOVING IN

ARE LOCATED IN COMMERCIAL BUILDINGS

ARE IN AN URBAN LOCATION

THEIR SIZE

75

AVG. # OF MEMBERS PER SPACE

64

49 % OPEN SPACE

AVG. # OF DESKS PER SPACE

9-10

18 % PRIVATE OFFICE

17 % MEETING SPACES

AVG. STAFF

8% 9% EVENT SPACES

OTHER

MISCELLANEOUS

Examples of coworking (TOP TO BOTTOM): The Seedworks, Hamilton, Ont., designed by DPAI Architecture Inc.; Verkspace, Toronto; Acme Works, Toronto.

Photos: Revelateur Studio; CoWorking Toronto.

WeWorks was having difficulty filling spaces in its Washington D.C . locations, while the Vancouver Sun reported that same month that the company leased seven floors in Vancouver’s Bentall III tower in a bid to attract 1,500 people to what it refers to as a “community of creators.” So, are coworking offices the wave of the future or merely an interesting but inevitably limited niche market? Or, is it a model somewhere in-between whose work environment impact will reach beyond its market share?

Coworking Defined Coworking, closely tied to the emerging digital/knowledge economy, is considered a relatively young concept. The HOK study cites 1999 as its origin while others opt for 2005 with the purported first location opening in San Francisco. Media attention has focused on cutting edge independent coworking spaces with the web full of articles on “the five or 10 best coworking spaces in (fill in the Canadian city).” Conversely, Regus, a US$20 billion-valued Belgium-based corporation, introduced its first coworking spaces into its more traditional international office network in 2010, says Canadian executive

62%

48%

62

$42K

WANT TO EXPAND (2016)

NEWS MEMBERS IN 2015

MONTH AVG. LEASE

AVG. MONTHLY INCOME

vice president Wayne Berger. This March, Regus opened its 100th Canadian coworking location in Calgary with more planned. World-wide, coworking magazine Deskmag reports in a 2017 survey that there are now 13,800 locations servicing almost 1.2 million “members.” While growth rates have fallen as the base numbers rise, expected 2017 increases are predicted to be 22 per cent and 41 per cent respectively.

But what exactly is a coworking space? How does it differ from traditional shared or hosted office space that has existed for decades? Is there “authentic” coworking spaces grounded in a new work/social movement or do they represent simply the addition of a real estate sub-sector serving an emerging niche demand?

The answer is usually both, but weighted to one or the other depending on whom you ask. Jean-Yves Huwart of the Brussels-based Social Workplaces conferences defines co­ working in a single word, “open.” He means not just spatially but as a welcoming, managed environment where “you can show up any time and propose yourself to become a coworker…. [such] spaces also create a proper identity and thus a sense of belonging that is the root of the creation of communities.” Traditional shared offices, while not excluding interbuilding.ca

About the Coworkers

OVER HALF OF

18 > 39 AGE

40 > 59 60+

24

2012

2014

GENDER

38%

GOING CORPORATE?

2016

2012

action, tend to have a much more static environment, he adds. Christine Andrews, speaking for Coworking Toronto, a collaborative instrument for 15 “genuine” independent coworking spaces, passionately emphasizes principles that seek to redirect the cultural/economic dynamic of work.

“Within a true coworking space, the priority is placed on the people, not the physical space….Community, collaboration, accessibility, sustainability and openness [are the values]. We believe that everyone’s creativity and productivity are enhanced by the other members within the community. Coworking owner/operators actively encourage and some curate their communities to attract members open to collaboration.”

Yvonne Woodley, manager at The Seedworks in Hamilton, Ont., the city’s first coworking space, also cites flexibility and community but includes the practical importance of providing a well-managed space handling some (although not all) administrative hassles.

The HOK study defines coworking as “computer-supported collaborative work…[where office spots] are largely open [80 per cent opt for non-enclosed work spaces], collaborative, collegial and fun.” But Robyn Baxter, vice president and regional leader of Consulting for HOK’s Canada practice, is more circumspect, preferring to say the definition is evolving in what is not a mature industry. Still, she adds, “there is a notion of a place to go to work when you don’t have another place to work, where you have the amenities including the social aspects of work.” But the one point on which many agree is that coworking is premised on a flexible membership model, not fixed lease arrangements. But even on this point, there is significant variation in how memberships work, whom the target members are and what membership provides.

In what we might ironically call the “classic model,” co­ working locations are largely urban-based, providing a managed work environment that is open with unassigned desks or work spaces. Opinions are almost unanimous about the importance of good, even fun and funky design that carries over into generous, interactive communal spaces. These latter spaces reflect the view that most coworking locations (although not all, says Andrews) ensure extensive programming promoting networking, collaboration, social interaction and even skill enhancement events. For Huwart this is key: “Providing human-focused connections, interesting events, social moments, fun, [and] networking is what gives value nowadays… but don’t underestimate flexibility to scale up or down easily.” Flexibility usually includes 24/7 use. There are limited shared services although the core role of digital technology in underpinning coworking means Ethernet and WiFi come standard.

As makeshift coworking spaces evolved to dedicated locations, the economics of coworking, says Baxter and the HOK APRIL MAY 2017

THE LARGER THE CITY, THE OLDER THE COWORKER

building.ca

study, reflected a period of relatively low commercial rents, especially for industrial legacy structures or B-level office buildings. This supported modest initial financial outlay.

Thus the majority are still modest independents (although Deskmag’s survey found only 41 per cent are profitable solely on the basis of their business operation) with owners often driven as much by a desire to connect and improve both their own and other independents’ working environment than by a quest for a healthy return on investment.

Initially, coworking spaces were the haunt of a younger male demographic, operating as IT freelancers, entrepreneurs and start-ups, says Andrews, while Huwart suggests freelancers in general remain the sector’s bread and butter. But this ideal profile has rapidly morphed into a much more polyvalent sector. Variation in business models, services on offer, user profiles and available membership types are all evolving.

First: What are the Emerging Business Models?

INDEPENDENTS: The leading force in coworking has been independents driven by commitment to a new collaborative work environment for freelancers, small entrepreneurs, start-ups, non-profits and even artists, all facilitated by low entry costs. While favourable lease rates have played a role, many like The Seedworks in Hamilton and Coworking Toronto participants own their own spaces.

INDEPENDENTS COLLABORATING: A growing trend has been the development of collaborative arrangements between independents. We could call this the Home Depot vs. Home Hardware model as independents band together to share members, programming, recruitment, and so on, in the face of increasing penetration by larger corporations. Such is the Coworking Toronto model. An ambitious initiative is the Coworking Visa Map curated by Vancouver’s independent Network Hub. It offers a “coworking visa” that allows members of one space to use another around the world free for up to three days.

THE ORGANIC SPREADERS: Some successful independents are spreading through “organic” growth. For example the Net­ work Hub, says co-founder Jay Catalan, emerged from a desire to create coworking space both for themselves and other similarly situated workers. Now with locations in Richmond, Whistler (boasting the world’s only ski-in coworking space), Nanaimo, Vancouver, New Westminster and soon Calgary, growth has come less from corporate expansion than from community requests and invitations to expand.

CORPORATE GIANTS: While some independents are uncomfortable applying the term coworking to large firms like Regus, ServCorp or WeWork, others such as Huwart and Baxter see larger corporate expansion as inevitable. WeWork,

COWORKING MEMBERS ARE NOW EMPLOYEES (vs. freelancers or entrepreneurs) EMPLOYEE FREELANCER ENTREPRENEUR* OTHER 2014

2016

* INCLUDING THEIR

WHAT THEY DO

27 % 15 % 5% 7%

CONSULTING PR, MARKETING, SALES DESIGN (graphic, web, product, games)

WHERE THEY WORKED BEFORE

HOME OFFICE TRADITIONAL OFFICE COFFEE SHOP OTHER

EMPLOYEES

for eample, has reached a US$16 billion evaluation. Regus’ Berger sees definite consolidation but believes there is still room for both models, although he warns that the other side of low entry requirements can create volatile maintenance costs. “The difficulty,” says Woodley, “is keeping [spaces] filled because by nature use is flexible….you get the situation where you have eight or nine desks free again [but] your costs are fixed.”

CORPORATE AND BUILDING OWNER ADD-ONS: Two different but related models include corporations that attach coworking spaces, sometimes as “lost leaders,” in their own offices and building owners who set aside coworking-type floors.

With the first, companies see it as a way to encourage networking and collaboration with start-up innovators, often by including their own workers in these spaces. Building owners see it as a way of using empty space or as providing a benefit to their lease companies. “I think you are going to see more landlords with some type of co-working space that is open both to businesses in the building and to the public,” predicts Baxter.

THE DISRUPTORS: Finally, there is a host of other “disruptors” operating at the edge of the coworking sector. Of course the ubiquitous coffee bistro remains relevant, as anyone who has tried to find a seat to just drink their cappuccino can attest. But some hotels are upscaling their traditional business suites as well as using underused restaurant/event spaces with coworking options. Libraries, community centres, colleges and universities are also emerging as players in the coworking market, and Bisnow reported on Toronto’s first condomunium with coworking space last December.

Thanks to Deskmag for providing this data. More: deskmag.com

IT (software engineer, web developer)

Second: as the British would say: “What’s on offer?”

While the services and attributes outlined above remain relevant, particularly the generous scope for collaboration and interaction, there has been a broadening of services. Availability, however, varies by location. Provision of practical services such as high-quality printers, reception services and mail handling are increasingly common. While The Seedworks does not provide reception, for example, Woodley reports it is frequently raised by perspective members.

In a bit of back-to-the-future, the original tightly packed work table with computer connections has expanded to frequently include individual desks (including assigned rather than first-come/first-served) with small storage capability, private phone booths, meeting rooms and enclosed offices.

In Hamilton’s The Cotton Factory, its large open space is dotted with enclosed glass boxes that offer defined space for four-person organizations.

WeWork offers free beverages (including beer!) but also helps members, according to Forbes, save US$200 on healthcare, and through Amazon Web Services save on first-year

25

web hosting. Fee add-ons provide access to conference rooms, phones, and mail service. Regus offers similar services but with a broader offering of 3,000 sites worldwide including a network of 800 coworking-type airport lounges.

Third: So, who uses Coworking?

Freelancers, consultants, entrepreneurs, small businesses and non-profits moving away from the dining room table, home office, garage or noisy coffee shop remain the staple for coworking. Business travellers, both international (Deskmag’s survey found 32 per cent of users work abroad at least three weeks annually) or those whose work is largely away from the office are also taking advantage of coworking in preference to hotel rooms or coffee bistros. The widening range of available memberships has helped these mobile workers.

Frequently, independents target specific sectors. Woodley, for example, reports each of Hamilton’s three independents focus on different clientele. Her members tend to be older professionals; Co-motion’s members are younger and in more tightly packed spaces with a stronger party atmosphere; and The Cotton Factory cater to arts-related operations and non-profits. Alex Konrad, in a 2014 Forbes U.S. survey, listed Hera Hub as running three locations dedicated exclusively to women entrepreneurs and Breather as focusing on hourly rentals.

But the biggest shift has been corporations placing their employees into external coworking spaces. While many agree this sector has and will be crucial, there is a significant divergence as to why. A majority still see freelancers and start-ups as a growing component in today’s economy. Not so fast, cautions the HOK study. In fact, it reports this sector’s share of the workforce has actually declined for some decades. Instead, the contingent workforce marked by often short-term contracts and frequent changes in employers is the power growth sector. Coworking memberships permit corporate employers to minimize facility costs for contract employees and those hired for time-limited projects. But companies also place employees into coworking to facilitate networking and to participate in what is often a highly creative and innovative environment.

Finally: Memberships are Evolving Many coworking locations started with month-to-month memberships providing users more flexibility than standard lease agreements. While the original model focused on un­ assigned “hot desking” spaces, most monthly memberships now include reserved individual desks and even closed offices.

Packages offering a certain number of user-days per month are common. Increasingly, “daytrippers” can pay a daily fee for a seat and Ethernet connection. WeWork’s most basic membership is a simple fee permitting utilization of any location building.ca

26

for a daily or hourly fee. From there, it offers location-based hot desking, individual desks and private offices. Since 2008, Regus’ Businessworld membership provides travelers access to any of its services worldwide.

Many coworking centers emerged in a time of high unemployment and low rents. But 54 per cent of coworkers will leave a specific location in less than a year. High turnover and tenant instability challenge coworking centres to maintain profitability, as they are vulnerable to market conditions and new competitors. To attract members, coworking operators use social media (80 per cent, particularly Facebook, reports Deskmag), community building (78 per cent) and events for potential members (62 per cent) among other techniques. A significant number, 21 per cent, use the Coworking Visa Program. Woodley reports her daily users are often responding to promotion pamphlets at Tourism Hamilton and the city’s Small Business Centre and, significantly, through word-ofmouth. Andrews and others also say apps like Liquidspace, Sharedesk, Happy Desk, Breather and Rally are increasingly important recruitment tools. Regus has its own booking app.

Growth and Challenges The HOK study concludes that coworking penetration will mature at two to four per cent; those in the business suggest perhaps 15 per cent. One difficulty in predicting accurately, however, is what exactly defines coworking, given rapidly expanding parameters of ownership models, services, users and memberships. While Deskmag reported location growth in 2016-2017 reaching a new high with over 300,000 new memberships, it also found 63 per cent of locations surveyed believe the number of existing spaces was “just right” while 14 per cent said “too many.” Only 23 per cent believed there were “too few.” This said, 67 per cent of coworking operations surveyed plan to expand.

“Although coworking space makes up less than one per cent of the world’s office space, it represents an important workforce trend and highlights the strong desire of today’s employees to have workplace choices, community and flexibility,” said Kay Sargent, report author and director of WorkPlace at HOK. “Driven by demand factors, including next-generation work styles and the desire for real estate portfolio agility, C-suite executives from human resources, operations, real estate and finance are increasingly interested in how coworking affects their work practices and policies, and how they need to design, manage and operate their workplaces.”

Most of those interviewed also note that Canadian demand is very localized with secondary markets including smaller cities and even the suburbs exhibiting the greatest growth potential. Operators in larger markets, however, may face rent squeezes as leases expire, concludes the HOK study. This will give a competitive advantage to those who own their own facilities. Ultimately, the dramatic changes taking place in the labour market, the work environment and the nature of work APRIL MAY 2017

building.ca

itself makes predicting coworking’s share difficult. While strictly defined, it may be a relatively small player in the office real estate market, however, if the concept remains fluid and evolving the consensus is its flexibility and commitment to creative, collaborative work environments will penetrate deeply into more traditional offices. b

P 14

ios can lead you to identify the kinds of policies or guidelines necessary to put in official plans to manage progress as it evolves.”

Rathwell believes cities need not restrict their visions to only as hands-off regulator. They could choose instead to develop mobility as a service (MaaS), and operate as an “aggregator of transportation” much like large communication companies aggregate telephone, internet and television services.

“I might want a mobility package that provides me with a transit pass, access to car share and bike share in urban areas plus intercity car rental because I don’t own a car – all for a certain fee per month. Others might want parking or cabs and some bike share on the weekends,” he says.

“Cities need to step back and consider, ‘What roll do we play in this area? Do we actually build such a system and innovatively bring these things together, or do we franchise or license somebody to provide such a service, or do we let the marketplace take care of it and our job is to provide the public transit element and nothing more? All are valid options.”

The uneven road ahead “Innovation is offering something new; disruption is offering something new that challenges what was there in the past,” says Gómez-Palacio. In Canada, ride hailing is here, ridesharing is growing and some estimate that in five years autonomous vehicles will have a significant presence in cities. The road to a shared, connected and automated transportation future will be bumpy (on March 25, Uber temporarily suspended on-road testing of its AVs in the U.S. after a significant crash in Arizona), but the opportunity to redefine cities and the governments which manage them is great.

“In my mind, it is a very exciting time,” says GomezPalacio. “But it was the same with the advent of cars [in the twentieth century]. Some cities were really destroyed by it and grew in ways that were clearly unsustainable. The same thing is going to happen now. Some cities did not get entirely distracted by it and used vehicles as a way of moving forward.

They really figured it out.” b Visit building.ca to learn how General Motors Canada can be a model for municipalities looking to move from being disrupted to becoming the disruptor.

special feature

Before

After

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LED STREET LIGHTS SAVE THE CITY OF HAMILTON $700,000 ANNUALLY

By The Communications Bridge

F

or the City of Hamilton, Ont., energy management and environmental responsibility are top priorities.

In an effort to reduce maintenance costs and help improve safety with well-lit streets, the city decided to investigate a new street lighting solution for its aging high-pressure sodium (HPS) fixtures. Although there are more than 40,000 street lights citywide, Hamilton wanted to target a specific, 10,000-fixture area that had the highest energy-consuming lights in the city, and began investigating LED lighting for its long life and greater energy savings, trialing several manufacturers’ products to find the best solution.

Working with Tymat Solutions, who represents GE Lighting’s roadway lighting, the city researched alternatives to HPS light fixtures. “We tested nearly 500 light fixtures in the past year to find the best solution for the city’s roadways,” said Gord McGuire, Manager of Corridor Management with the City of Hamilton. “We’ve seen great improvements in LEDs over the past few years and felt it was the right time to retrofit the city’s lights.”

The Solution GE Lighting was awarded the phased LED retrofit program, and its Evolve LED street lights were installed by Enersource in the 10,000-fixture area. “Our experience working with GE was excellent, with top-of-the-line delivery, which put us in great shape to stay on track and complete the installation on time,” said George Matai, Senior Manager of Operations, Enersource. “Installation was easy and we had little to no issues with the fixtures.”

All of the lights were designed to meet the local sidewalk and road conditions, pole spacing and heights, and road classifi-

cation. The design process led to a series of different GE fixtures being used across the city. “One significant benefit of working with GE included the ability to create a custom fixture,” said McGuire. “For areas where we had issues with pole spacing or not meeting lighting requirements, GE worked with us to find the proper solution.”

Not only is the city installing new lights, but Hamilton will also begin a trial this summer of GE’s LightGrid wireless outdoor lighting control system. City staff is eager to learn about LightGrid’s features, specifically energy metering, GPS inventory and overall controllability and dimming. The trial will run at least six months with the goal of expanding beyond the initial units.

Results “We’ve had a lot of great feedback from citizens and council members. They’ve said the quality of lighting on the roads and sidewalks has drastically improved, making citizens feel safer at night,” said Mike Field, Project Manager, Street Lighting & Electrical at City Of Hamilton. Officials plan for the city’s overall conversion to LED street lighting to be completed by the end of October, which is expected to save the city up to $700,000 in annual energy costs while delivering savings of more than 6.9 million kilowatt hours (kWh) of energy per year, which is enough to power 720 homes each using 800 kWh per month. Along with major savings for the city, seeing GE’s facility in Hendersonville was a bonus for the customer. “We are encouraged to see GE making investments in their manufacturing facility,” said Field. “By controlling and manufacturing every component of the light, it lets us know GE is invested and will be around for a long time.”

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S I T E

Photography by James Brittain

Balancing Act

Clockwise from above: Planning for Canon Canada’s new headquarters building begins with the most public program spaces on the lower levels, and more private, secure program on the upper levels; The building is set back on the site to create a formal garden space at street level; A large central atrium space with an expansive skylight inter-­ connects all levels of the building, with shared meeting rooms and collaboration areas placed around the perimeter.

APRIL MAY 2017

building.ca

A new office building in Mississauga celebrates Canada’s natural environment while paying tribute to its Japanese roots.

By Shannon Moore The new Canon Canada headquarters by Toronto-based Moriyama and Teshima Architects delicately balances its Japanese influence with its Canadian context and home. The four-storey, 176,000-sq.-ft. office building was designed to mirror the company’s values of technical precision, order and innovation through an appreciation for openness and light.

Custom glass fins line the building’s triple-glazed windows and define its exterior envelope, which appears to float above a recessed back of black Québec-sourced granite.

Inside, visitors and workers are led along an internal promenade lined with formal plantings native to the Brampton site, highlighted by cherry trees that pay homage to the company’s Japanese roots. Further in, privacy and collegiality are balanced in an open plan, with offices oriented around a central atrium.

“The building grew out of Canon’s values of simplicity, symmetry and Japanese minimalism: very clean and orderly with lots of natural light in the interior,” says Brian Rudy, partner at Moriyama and Teshima Architects. “We realized fairly quickly that a minimalist aesthetic was appropriate to what Canon was trying to achieve.”

Numerous sustainability strategies aimes at a LEED Gold certification include daylight sensors that control brightness of LED lighting and the level of automated roller shades; mitigation of heat island effects through the use of a white roof and paving; high efficiency mechanical systems including heat recovery; solid end walls; and more.

The building’s exterior glass fins are frosted, helping to reduce solar heat gain while offering a practical solution to the building’s position at a 45-degree angle to the sun. Lastly, the building is set back on the site to create a formal garden space at street level and to hide surface parking, providing staff with an unobstructed view of their natural surroundings.

“We tried to express Canadian values in the openness of the design; placing the building back from the street, surrounding it with a park, bringing green into the atrium and introducing wood and natural stones,” says Rudy.

Inside and out, the project paints a picturesque backdrop for a company whose environmental and sustainability values are ingrained into their corporate philosophy. Through the integration of a warm, minimalist palette of materials and a strong connection to the surrounding landscape, the Canon Canada headquarters manages to reflect both its Japanese background and its new Canadian home. b building.ca

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30

V I E W Walk With Joy ULI Toronto’s Executive Director believes we may be having “a regional moment” with the birth of Toronto Global.

By Richard Joy

In the wake of the urban-suburban division story associated with Premier Wayne’s denial of Toronto Mayor John Tory’s proposed ‘416’ road tolls, a glimmer of positive regional coordination may be emerging. Recently, the GTA’s political and business leadership launched the region’s only cross jurisdictional municipal agency: Toronto Global. The headline narrative is the creation of a foreign investment promotion office, especially timely against the backdrop of growing global protectionism. But it was the display of regional coordination that was the bigger story. For the first time in a decade, after two decades of false starts, tenuous roots of metropolitan regionalism may be taking hold.

The importance of this cannot be understated. The foundation of so many of our greatest public policy challenges sits on the fractured foundation of balkanized and parochial municipal jurisdictions that for years have not been given — or taken — the opportunity to find common cause. Our leaders have known for decades that the region requires stronger coordination across such areas as mass transit and arterial roads, economic development, regional planning, water and sewage, garbage, smart-city information technology, the environment, policing, licensing and more.

The historic misstep of the civically searing experience of the amalgamation of Metro Toronto in 1998 froze all thinking of further governance reforms for a generation. We’ve had to live with the insanely lopsided governance where half the regional population is in one, massive, single-tiered, city government (Toronto), and the other half in over two dozen, two-tiered municipalities (the ‘905’).

In the same period our metropolis has grown at a rate faster than any other in North America. And the weight of this growth is collapsing our capacity to deliver an economically competitive and liveable region. The lack of regional municipal structures of any kind means we are unable to APRIL MAY 2017

building.ca

mount a serious challenge to such vexing issues as traffic gridlock, declining economic prosperity, and social inequity. The good news is that the solutions to these challenges have been well-studied and documented. Where we lack in action we have over-compensated in meetings, planning and reporting. We are not starting from scratch.

Of all of the advice we have been given over the past two decades, perhaps none is more essential than the 1996 report of the GTA task force led by Anne Golden. Golden provided urgent direction to the regional governance crisis of 20 years ago, a crisis that is only that much greater all these years later. Golden observed that city regions — more so than provinces or nations — are increasingly the economic jurisdiction where global competition takes place. But to compete, city regions require a level of organization and coordination on the range of services and responsibilities (as identified above). Today, of the 11 areas she cited for such coordination, the Toronto region is only marginally organized in maybe three: transit, planning and economic development (via the new Toronto Global). And two of these are provincially led initiatives, not municipal: Metrolinx and the Growth Plan for the Greater Golden Horseshoe.

It is an alarming fact that not a single municipally elected politician in the GTA wakes up with a responsibility to think or act regionally. Their only duty is to serve their local municipality. And not surprisingly, we are seeing more and more evidence of parochialism. When our mayors do get together informally they do so to advance local interests or stand against bigger regional interests, like arresting the rate of urban sprawl.

As the 2018 municipal elections Richard Joy is Executive approach, we need to demand bigger Director of ULI Toronto. thinking from our current and future Previously, he served as municipal leaders.

But we can’t expect Vice-president, Policy and to see this under the current strucGovernment Relations at tures of governance across the region. the Toronto Board of This must be both a bottom-up and a Trade, and was the top-down process of structural renewDirector of Municipal al. And this means we need to engage Affairs and Ontario all the provincial parties, who are also (Provincial Affairs) at vying for election next year.

Global Public Affairs.

The timid rise of Toronto Global Follow him on Twitter must not stand as an exceptional mo@RichardJoyTO or email ment.

It is an opportunity to find more at Richard.Joy@uli.org common ground to progress our many shared regional priorities. Strong globally competitive regions stand together to be more than the sum of their local parts. It’s finally time for the Toronto Region to step up to this challenge. b

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