Canadian Real Estate Forum Magazine - Spring Issue 2015 by Real Estate Forums

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SPRING 2015 / ISSUE 68

MONTRÉAL’S SUCCESS HINGES ON ITS ECONOMY Invisible cranes taking over Montréal’s midtown Logistics hub creates industrial magnet Capturing land value for transit funding

INNOVATION & CREATIVITY KEY TO GAINING COMPETITIVE ADVANTAGE IN VANCOUVER Vancouver: in a class of its own The core is the clear winner in this cycle Diverse economy gives Vancouver advantage over western competition

‘CAPITAL’ 24/7 IDEA PUTS EDMONTON ON REVITALIZATION TRAIN Investors need to embrace downturn; acquire while they can Resilient Alberta ready to respond to oil’s decline Downtown Edmonton: The place to be as investment brings city core alive WWW.REALESTATEFORUMS.COM

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MORE OPPORTUNITIES MORE EXPERIENCE MORE RESULTS MORGUARD

77 Bloor Street West | Toronto, ON /((' *ROG ([LVWLQJ 2I多 FH %XLOGLQJ 6WUDWHJLF 5HSRVLWLRQLQJ

76; 05& | 76; 057 81 | 76; 05* 81

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SOMETIMES, YOU DON’T SEE THE FOREST FOR THE TREES

For years, Alberta has been struggling with worker shortages, out-of-whack salaries and ballooning construction costs. Maybe this rejigging in the marketplace will ﬁnally put an end to the strain placed on its resources; as being the fastest-growing economy in the country sometimes isn’t as great as it’s cracked up to be. All Edmonton need do is look to Montréal for rebound inspiration.

George Przybylowski Vice President, Informa Canada

Mark Stephenson Vice President, Informa Canada

So, with this in mind, this spring’s forums will help you trek through the investment growth in Montréal, Vancouver and Edmonton, and navigate to the fertile lands beyond.

At the Vancouver Forum, we will touch on how B.C. has become a hotbed for Asian investors and what that means to the changing real estate landscape, as well as what signiﬁcant trends are emerging for the year ahead.

What is good for the goose isn’t always good for the gander - for example, a low Canadian dollar in an oil-price downturn may be perfect for the import-and-export haven, Vancouver, but this low dollar plays havoc with Edmonton’s economy.

Again, whilst B.C. is reaping the harvests of a rising American dollar, Edmonton, on the other hand, is striving to out-manoeuvre a drought. Seeking opportunities amid the downturn, to integrating project delivery, to repositioning the capital city to be more than an oil town, we will seek to identify opportunities that may now be ripe for the picking.

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Just consider the turmoil this city has overcome in recent years; from allegations of corruption, to mayoral resignations, and a high unemployment rate - to endeavouring to make changes with minority government – is it any wonder investors were timid in treading through Quebec’s trees? Look at how a stable government, coupled with clear developmental rules, has set Montréal up for revitalization. All one need do is look to Laval, the South Shore and the Island to see the real estate industry heating up, as more and more projects come to fruition. It is no consequence that this year’s spring forums will all be about geo-tracking and helping to get you on track to where you need to go in the year ahead! ■ 3

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MONTREAL QUEBEC CITY OTTAWA TORONTO EDMONTON CALGARY VANCOUVER PROFESSIONAL DEVELOPMENT, MANAGEMENT AND ASSET MANAGEMENT SERVICES.

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CONTENTS

3 Sometimes, you don’t see the forest for the trees.

8 The Altus Report: Charting the best course through misty waters 2014

409 381

2013

2012

402

2014

186

2013

125

2012

152 450

2014

388

2013 2012 ial

429 428

2013 481

2012 ment 2014

59 Property transactions by asset class

370

2014

144

2013

185

2012

218

62 Energy efficiency trending the right way: REALpac 64 Real property investment certificate: The future standard in real estate education About Informa BRINGING KNOWLEDGE TO LIFE Businesses, professionals and academics worldwide turn to Informa for unparalleled knowledge, up-to-the-minute information and highly specialized skills and services. Our ability to deliver high quality knowledge and services through multiple channels, in dynamic and rapidly changing environments, makes our offer unique and extremely valuable to individuals and organizations. www.informacanada.com ©2015 Informa Canada Inc. Disclaimer: The views, opinions, positions or strategies expressed by the authors and those providing comments are theirs alone, and do not necessarily reﬂect the views, opinions, positions or strategies of Informa Canada.

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The Canadian Real Estate Forum Magazine is published three times annually. Editions coincide with key Canadian Real Estate Forum and associated markets:

Will Morris, President George Przybylowski, Vice President Mark Stephenson, Vice President

Spring: Montréal • Vancouver • Edmonton Fall: Ottawa • Calgary Winter: Canada-wide • Global

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Concert Properties

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Informa

Broccolini Construction Inc.

De Grandpré Chait

JLL

FCT

Canadian Urban Limited 68 (OBC) Canderel Colliers International

4-5 47

First National Financial LP 67 (IBC) Fonds immobilier de solidarite FTQ

RealNet

REALpac

RENX

KingSett Capital

Republic Funds

Miller Thomson LLP

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Morguard NAIOP Edmonton

35, 56, 57, 66

2 (IFC) 52

Canadian Real Estate Forum / SPRING 2015

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MONTRÉAL

VANCOUVER

EDMONTON

14 Thank you to our sponsors

28 Thank you to our sponsors

42 Thank you to our sponsors

16 Montréal’s success hinges on its economy

30 Innovation & creativity key to gaining competitive advantage in Vancouver’s hot market

44 ‘Capital’ 24/7 idea puts Edmonton on revitalization train

18 Invisible cranes taking over Montréal’s midtown Location key to success of historic site project 20 Low rates, big moves in Montréal Montréal sees residential rental renaissance 21 Logistics hub creates industrial magnet 22 South Shore reaps beneﬁts of Montréal’s construction zones Residential market robust 24 Low dollar, low oil prices, a plus for Quebec economy Sainte-Catherine to get major makeover 26 How to thrive amidst the retail revolution: Diversify, differentiate and deliver City core needs back-to-basics strategy 27 Capturing Land Value for Transit Funding

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32 Investing in U.S. Markets: Rental rates are your best bet Successful successions stretch out over a decade or more 34 British Columbia to lead Canadian economy Lower Mainland a mecca for re-imagined retail 35 ‘Going Shopping’ is Alive and Well 36 Vancouver Investors Aim High 37 Tips for a successful partnership with First Nations groups: Listen ﬁrst Vancouver: In a Class of its Own 38 Need mortgage debt for your real estate development or project? Vancouver rental housing market continues to boom 39 City a clear winner in this cycle

46 Technology revolutionizes oil market Edmonton’s downtown revitalization forges ahead – for now 48 Edmonton keeping storm clouds at bay Investors need to embrace downturn; acquire while they can 49 Downtown Edmonton: the place to be Continued investment brings city core alive 50 REITs that survive will be those with equity to snap up opportunities Edmonton downtown core full of promise 52 Resilient Alberta ready to respond to oil’s decline 54 Strathcona County plants growth plans 55 Opportunities still abound for sound real estate projects

Diverse economy gives Vancouver advantage over western competition 40 Low dollar boosts Vancouver’s GDP, growth forecast 7

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THE ALTUS REPORT

CHARTING THE BEST COURSE THROUGH MISTY WATERS

By Sandy McNair

For the early morning boater in the autumn mists, the perspective shifts quickly from familiar to uncomfortable to dangerous and back and forth. Canada’s commercial real estate markets have become increasingly misty, also shifting quickly from familiar to uncomfortable to dangerous and back and forth, for most all industry participants. At this moment the signals are mixed with both familiar and unique indicators. We have previously seen and survived oil at $43 and the Canadian dollar at 78 cents U.S. Prime at 0.75% and 10-year Canada bonds at 1.3% may or may not be dangerous, but they are certainly unfamiliar. Business and consumer confidence and the outlook for GDP growth are softening across Canada, albeit unevenly. This softness contrasts with improving confidence and outlooks for growth in the U.S., a lonely significant bright spot globally. New Dynamics and Market Drivers For almost a decade, new supply of office and retail space has spiked with the frequent result that existing buildings are being vacated in favour of the new buildings. Traditionally new supply is sustained by incremental demand. However, the continuing investment appeal of commercial real estate and the resulting pressure to place capital has been combined with some

occupiers’ flight to quality, and is making this new supply cycle unique. Many of the industry’s leading and largest investors have displayed a new but now decade-long preference for new supply development rather than being one of a large number of bidders for existing prime assets if and when they become available for purchase. Office building occupiers flight to quality has often been motivated by their battle for talent and their desire to more intensely use less but better space while benefitting from newer designs and technology that increase density, personal control and comfort while reducing operating costs per square foot, occupancy costs per employee and the building’s environmental footprint. Simply put, for some occupiers, new office buildings have important advantages that are not available to them in most existing buildings. Some new office buildings and their mixed-use, 24-7 neighbourhoods have acquired a positive image, vibe and momentum that goes beyond simply being close to transit and other amenities. Although tough to measure these attributes are very important to some occupiers in their approach to their battle for talent.

Canadian Real Estate Forum / SPRING 2015

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Downtown Office Inventory by Year Built Millions of square feet. As of January 2015. • Source: Altus InSite

4.8%

Built pre-2000

Built since 2000

Currently Under Construction/ % of Existing Inventory

1.3% 7.5%

9.9% 35.2%

40 30

13.6%

9.2% 12.0%

0.6%

7.2%

18.8%

7.1%

10 0

Vancouver

Edmonton

Calgary

Toronto

often ﬂawed. Isolating the facts from the noise is just the start. Determining how to convert the relevant facts into useful predictions and actionable plans is mission critical for all investors, managers and their advisors. What is the best course to take to achieve your objectives, given the current and emerging risks? Digging into the new supply numbers, each downtown ofﬁce market has a material proportion of the total inventory built since 2000 (shaded green in the adjacent chart) and varying additional new supply that is currently under construction (shaded red).

More Performance Indicators and Predictive Metrics Traditionally the commercial real estate industry has anchored many decisions on a relatively small number of performance indicators, including availability, vacancy, change in occupied area (absorption), new supply, asking face rents and perhaps net effective rents.

The details do matter and vary widely from market to market and from building to building. The city wide results are different from the downtown results and the Class A market will vary as will the appropriate set of chosen peers. Even more so than before, digging into the details is essential to generating informed advantage and out-performance.

With the signiﬁcant and perhaps persistent new supply being paired with softening or declining net demand, relying on only the traditional gauges may be unwise and needlessly risky. If better, more focused and relevant information was available to help chart a wiser course, wouldn’t that have appeal? With that in mind, here is an overview of a few key predictive metrics that some industry participants are beneﬁting from:

Returning to the early morning boater in the swirling autumn mists, isolating the accurate information from the ﬂawed perceptions and imagined facts or patterns can be very difﬁcult but essential. Today’s commercial real estate participant is being forced to confront very similar challenges. The information is incomplete, delayed and all too

Tenant Renewal Intentions Retaining tenants within a building or a portfolio is not the only route to out-performance, but it is arguably the lowest risk approach. Operational excellence can and does lead to superior levels of tenant retention within a building and a portfolio. Fifteen years ago, few occupants could identify the management ﬁrm, yet today brand awareness, value and loyalty are real assets. The true power of assembling a portfolio of properties is not

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Ottawa

Montreal

driven by economies of scale but rather by competencies of scale. The most relevant and valuable competency is the ability to achieve high levels of tenant retention within the building and portfolio at rents that are above market. To identify, monitor, shape and improve tenants’ referral, recommendation and renewal intentions, portfolio, asset and property management teams choose to move beyond mere satisfaction to focused and predictive information. Doing so enables these portfolio, asset and property management teams to understand their progress and key opportunities relative to both credible industry norms and ranked confidential peer comparisons. Obsolescence Mitigation New and nearly new buildings (those built since 2000, but in most markets since 2007) have been engaged in a successful battle with the existing buildings including those previously (and perhaps currently) viewed as top-of-market bank and other towers. The existing (pre-2000) buildings have been unwillingly donating tenants to the new and nearly new office buildings. The result has been significant pockets of availability and pain in the existing buildings. Looking at the eight downtown Class A office buildings with the most available space as a single group, the availability rates are: Vancouver 25.5%, Edmonton 26.6%, Calgary 21.5%, Toronto 24.2%, Ottawa 13.7% and Montréal 32.5%. This compares dramatically to the rest of the downtown Class A buildings that as a group have availability rates of: Vancouver 6.2%, Edmonton 3.5%, Calgary 4.0%, Toronto 7.9%, Ottawa 3.1% and Montréal 8.0%.

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As the buildings that are a under construction are completed and lease up, the pressure on the existing (pre-2000) buildings will intensify resulting in increased vacancy and lower rents for some of them. However, the pain will not be evenly felt. The differences in ownership, management, physical plant, image, environmental footprint and location have

become more signiﬁcant and meaningful to occupiers. Ofﬁce space is no longer viewed as a commodity with uniform appeal and pricing. New and important metrics and differentiators are being created and becoming more transparent, accepted and relied upon. The differences are becoming stark with a widening gap between concurrent winners and losers. The never-ending battle with obsolescence has become even more urgent and intense driven by the acceleration of new supply

making operational excellence more urgent and intense. Many commercial real estate participants are busy working on many of the right initiatives for the right reasons without beneﬁting from a clear picture or ongoing performance metrics and their leading indicators. Since no team is blessed with inﬁnite resources, operational excellence requires making informed choices – picking priorities. The table below, a preliminary checklist of sorts, is intended to generate discussion and help you pick some priorities and take action.

Charting Your Course to Operational Excellence Key Attribute

Impact on Operational Excellence

Taking Action

Environmental Footprint and Leadership

Several years ago this moved from fringe to mainstream. Your buildings’ appeal and management brand value are being improved or impaired based upon the perceived level of your engagement and progress. Opportunities to improve are plentiful. Some older buildings do generate great results.

If you haven’t already, install the meters, do the audits and dig into the data to, normalize it, identify your options, pick priorities, take action, measure, communicate and continuously improve. Success will involve both engineering and culture.

Tenant Retention Intentions

Tenants’ intentions to stay or move away from their current building or management ﬁrm vary widely, but over the past decade some management ﬁrms have made excellent, measurable progress.

Market leaders identify, monitor, shape and improve their tenants’ referral, recommendation and renewal intentions by moving beyond mere satisfaction to focused and predictive information so they can understand their progress and key opportunities relative to both credible industry norms and ranked conﬁdential peer comparisons.

Communication Channels

Doing the right things for the right reasons and generating strong results but keeping most all of it a secret will not generate optimum outcomes. The quality, awareness, use, satisfaction and recommendation of your communication channels is a key leading indicator to achieving high levels of tenant retention.

Engagement (effective communication) both internally and externally requires commitment, consistency, creativity, time and energy. As an example, the awareness, use, satisfaction and recommendation of your dispatch functions can be measured and improved.

Maps and Gauges

The landscape and your position in it is constantly shifting. New supply, ownership changes, management ﬁrm mergers, occupier strategies, large leasing transactions and new leaders all generate changes that impact your performance. The differences in performance vary widely and are becoming broader. The averages are dangerous, so having real time access to speciﬁcs within a widening set of peers and threats is essential.

Establish information flows and management levers that move beyond availability, vacancy, new supply and change in occupied areas (absorption) to include tenant retention intentions, communication channel effectiveness along with relevant credible benchmarks. Establish and update property-specific plans and strategies that include communication initiatives, service refinements and capital appropriations.

Canadian Real Estate Forum / SPRING 2015

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No matter how skilled our boater is, avoiding storms is always wise. In fact, an excellent skill is in knowing how to read the leading indicators that a storm is approaching. For commercial real estate industry participants often the worst storms occur when leasing velocity slows or even goes dead quiet.

Being Safe During Storms No matter how skilled our boater is, avoiding storms is always wise. In fact, an excellent skill is in knowing how to read the leading indicators that a storm is approaching. For commercial real estate industry participants often the worst storms occur when leasing velocity slows or even goes dead quiet. Inducing occupiers to move when they really don’t want to move can require painfully low rents combined with higher inducements. Correspondingly, when leasing velocity is

Retail – Similar but Different An enormous wave of investment has been and continues to be made in expanding many of Canada’s most productive regional shopping centres and other retail formats. The list is long and likely involves more than $10 billion in incremental investment. Investors and managers of retail assets are making these investments aware of the pressures from consumers for an evolving combination of digital and physical presence and experiences. These

accelerated or accelerating, often so is the opportunity to increase rents. However as the gap between market leaders and market followers widens, increased velocity will not be a friend of the passive assets in the market-follower category.

expansions are also occurring in the face of disposable and discretionary incomes that have largely ﬂat-lined. Similar to investors in Canada’s ofﬁce markets, investors in retail assets appear to understand that the status quo will not result in a desirable outcome and that the gap between leaders and followers may be stark.

Leasing velocity is a dynamic influenced by multiple international, national, provincial and local market factors. Leasing velocity shifts sharply and will respond quickly to changes within each market, submarket, portfolio and asset. Key drivers of leasing velocity include: changes in business and consumer confidence; forecasted changes in GDP growth rates locally, nationally and internationally; changes in occupiers’ workplace strategy, design and density; continuing lease-up of office building under construction; the volume and timing of lease expiries especially for larger occupiers within the next three to five years; increasing focus on tenant retention initiatives and their measurement; shifting C-suite culture and management best practices; financial pressure to reduce operating costs per square foot and occupancy costs per employee; urbanization, intensification and migration to and from downtown, midtown and suburbs; momentum and the fear of being left behind in the battle for talent; and decisions by developers to start construction of more office towers.

Contradictory signals are plentiful and are likely to become even more so. Like that early morning autumn boater, the sun is shining, the waters are calm and yet the slow, swirling mists results in intermittently poor to terrible visibility. To reduce risk and succeed, the boater and the commercial real estate decision maker needs to be very well informed, have access to tools that generate real time information as well as have a steady hand with a clear head and a focused plan. ■ Sandy McNair is the President of Altus InSite, a division of Altus Group. Since 1997 Altus InSite has conducted more than 1.8 million tenant satisfaction surveys for many of Canada’s leading commercial building owners and managers. sandy.mcnair@altusinsite.com www.altusinsite.com

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Canadian Real Estate Forum / SPRING 2015

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MONTRÉAL’S

SUCCESS HINGES ON ITS ECONOMY Sylvain Cossette Executive Vice President and COO, Cominar REIT

“We’re a lot more focused today on making Montréal more attractive,” observed Cominar REIT Executive Vice President and COO, Sylvain Cossette. “The foundation of Montréal’s real estate market is a prosperous economy. The stronger it is, the stronger the real estate market here will be.” The challenge, said Cossette, is that Montréal must aggressively vie with cities around the world for investment. “Everyone wants to attract the best and the brightest,” he said, “so it’s a very competitive landscape. You have to approach it just as if you were trying to develop a clientele.” Cossette welcomed efforts by Montréal’s new mayor Denis Coderre to prime the pump by meeting investors abroad and by aggressively promoting commerce in concert with Montréal International CEO Dominique Anglade. “Montréal went through several years of soul-searching,” Cossette acknowledged. “Now, there’s a new sheriff in town.” Fortune favours the prepared The timing couldn’t be more opportune. The vigorous rebound in the U.S. economy, coupled with the softening Canadian dollar has swiftly made Montréal a more competitive place to do business than it has been for years. The upsurge has already boosted demand in the industrial sector, which is unlikely to abate. It could also

help to fill new office space added last year through the conversion of industrial to lofts. On the residential side, the shift to smaller-footprint condos means that urban-core retail needs a long-term rethink to boost sales per square foot. “We’re looking ahead to 2025 and even 2035,” Cossette said. “Despite the shift to electronic commerce, downtown dwellers increasingly will need places where they can interact.” “Demographics will play a growing role,” he added. “Making Montréal a friendlier place to live and encouraging immigration is a critical success factor.” The city already has a deep pool of underused intellectual capital at the ready, he noted, and continues to churn out talented graduates apace. “We have to capitalize upon our tremendous educational wealth,” Cossette urged. “It’s a magnet; McGill is as revered as an Ivy League university as Harvard, Yale and Princeton, and University of Montréal has an outstanding reputation. Likewise, the cultural dynamics here are extraordinary.” Cossette even sees the city’s aging infrastructure as an asset. “It’s our future. It’s our potential,” he explained. “Wherever there are challenges, lurks opportunity. That’s where we will build new foundations and develop new expertise in engineering and financial services. The opportunities are there. We simply have to start seeing them as such.” ■ Robert Frank

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INVISIBLE CRANES TAKING OVER MONTRÉAL’S MIDTOWN

André Plourde President, Groupe Immobilier For the first time in almost 25 years, an unprecedented amount of office construction is taking place in Montréal’s downtown, commissioned by the private sector.

and early 2000’s, and tenants were moving in solely on the incentive of generous tax credits,” says André Plourde, President of Groupe Immobilier (Montréal, Québec). “The inventory of existing Class A buildings is aging, and even though landlords are finding ways to update them, a company like Deloitte or Rio Tinto prefers a brand-new, sophisticated LEED-classified space.” While new office towers for Deloitte, Manulife and Aimia are generating excitement, Plourde says it’s important to keep it in perspective. “When you add them all up, you’re still below 1.5 million square feet, which is nothing compared to other major Canadian centres.” Plourde, more bullish on the periphery of downtown than the core itself, says a significant development is the major retrofit of former industrial buildings in midtown neighbourhoods, such as Mile-End and Park Extension.

“The last downtown ofﬁce construction was in the late 1990’s

“I like to call these projects invisible cranes. Too massive to be converted into residential units, these buildings are reinventing themselves and attracting banks and

LOCATION KEY TO SUCCESS OF HISTORIC SITE PROJECT

The mixed-use development of over one million square feet is located a block away from the waterfront and will be anchored by the iconic Chateau Viger, designed by the same architect who oversaw the Banff Springs Hotel in Alberta and Chateau Frontenac in Quebec City. “In addition to the accessibility and amenities found in the area, another key element is the history of the site and the beautiful architecture that surrounds us,” says Anthony O’Brien, senior managing director at Jesta Group.

Anthony O’Brien Senior Managing Director, Jesta Group

It’s all about location, location, location when it comes to ensuring the success of Jesta Group’s Gare Viger project in Old Montréal. 18

“The third element is the changing demographics in the area; you have people who want to live closer to the core of the city with access to retail, residential, parks and ofﬁce space, all within one urban campus.” O’Brien cautions that building in the Montréal market is not the same as building in New York, Chicago or Toronto, where a condo project might sell 500 units in a weekend. “Our market is smaller so you have to be more careful to design to absorption with

“Midtown locations are also well served by the metro and epitomize the live, work, play and learn ambiance. At the end of the day, it’s about attracting and retaining talent and giving them the best environment possible.” knowledge-based industries like gaming and special effects,” he says. Pricing is one aspect of the attraction – taxes and operating costs range between $6 to $8 per square foot, compared to +/-$25 per square foot for a downtown core, Class A building. “These types of industries want to be more generous in space allocation. Midtown locations are also well served by the metro and epitomize the live, work, play and learn ambiance. “At the end of the day, it’s about attracting and retaining talent and giving them the best environment possible.” ■ Barbara Balfour

“Our market is smaller so you have to be more careful to design to absorption with each component of mixed use, to make sure it doesn’t take 25 years to build out.” each component of mixed use, to make sure it doesn’t take 25 years to build out,” says O’Brien. “We actually went after the office market first; our objective was to lease 40 thousand square feet in eight months, but we’ve now leased all 100 thousand square feet. “The first phase was renovating the existing buildings which we have completed, and our second phase will be the new construction of the office and residential tower. All together, we will have 250 thousand square feet of office and 300 thousand square feet of predominantly rental residential space.” ■ Barbara Balfour Canadian Real Estate Forum / SPRING 2015

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fondsimmobilierftq.com

CENTRE DE DONNÉES DE M ONTRÉAL

ICI, L’AVENIR SE CONSTRUIT. INVESTIR ET BÂTIR ENSEMBLE Le Fonds immobilier de solidarité FTQ, en partenariat avec des leaders du secteur, réalise des projets immobiliers rentables, créateurs d’emplois et socialement responsables depuis plus de 20 ans. C’est en participant ﬁnancièrement et stratégiquement à leur succès que le Fonds immobilier contribue à l’émergence d’une vision moderne du développement urbain qui sait FAIRE TOURNER L’ÉCONOMIE D’ICI.

BUILDING A BETTER FUTURE WORKING TOGETHER TO PROMOTE ECONOMIC GROWTH For more than 20 years, the Fonds immobilier de solidarité FTQ has been strategically investing with other real estate leaders in profitable and socially responsible flagship projects that create jobs. Collaborating toward the success of its partners, the Fonds immobilier is helping define a more modern approach to urban development, with a view to DRIVE QUÉBEC’S ECONOMY.

PA R T E N A I R E / PA R T N E R :

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LOW RATES, BIG MOVES IN MONTRÉAL

Armand Desrosiers Managing Director of RBC Capital Markets Real Estate Group

High demand and sparse supply make for a healthy market, and Montréal real estate investors are reaping the beneﬁts. And low interest allows for trading at premium prices. Institutional investors are selling their non-core properties and

MONTRÉAL SEES RESIDENTIAL RENTAL RENAISSANCE

Normand Bélanger CEO, Fonds Immobilier de FTQ

Years of emphasis on condominium construction downtown have created a void in residential rental development, according to Normand Bélanger, who has found that ﬁlling this gap has proved lucrative. 20

“Pension funds now have money available for both core investments and opportunistic investments. At the same time, private investors benefit from the low interest rate environment, where you can borrow long term money in the 3% range.” those that no longer fit their strategy. Ivanhoé Cambridge, for example, sold their 1.5 billion$ portfolio to Cominar last year. “It enabled Cominar to strengthen their retail platform and to keep diversifying outside of the province of Québec,” says Armand Desrosiers, Managing Director of RBC Capital Markets Real Estate Group, which represented Cominar in the transaction. Other high-profile deals in 2014 included the Saputo family’s acquisition of 50% interest in the Sun Life building from Ivanhoe Cambridge, and Oxford Property Group’s acquisition of a 50% freehold interest in Quartier DIX30™. “Pension funds now have money available for both core investments and opportunistic investments,” Desrosiers says. “At the same time, private investors benefit from the low interest rate environment, where you can borrow long term money in the 3% range.”

“People want condo-like amenities, but are unwilling to plunk down $300,000 to get it,” observed the Fonds Immobilier de solidarité FTQ CEO. “That’s very interesting for developers and builders. Indeed, during the past 24 months, residential rental has dominated the most proﬁtable transactions.”

He expects to see further large-scale transactions this year. “We may see non-core assets trading,” he says. “For the core assets, we will see partial interest trading, as investors want to diversify.” Meanwhile, developers are extremely active in both Montréal and Québec. One project of note is Griffintown, where First Capital Realty is in the process of acquiring two mixed-use properties from Devimco. The newly revitalized neighbourhood “is now very sought after by investors,” Desrosiers says. Mixed-use projects abound today as developers join forces to offer retail, office, condominium and senior housing. “As a result of the increase in land values, developers have to find ways to maximize the best use of their projects,” Desrosiers says. ■ Michelle Morra-Carlisle

“It’s a very attractive asset for investors who are highly liquid but unwilling to undertake the sort of risk associated with development.”

Bélanger has fashioned a winning formula with a seven-year investment horizon. “We develop for up to two years then spend up to five years filling the project,” he explained. “Once stable, it’s very attractive to investors who are highly liquid but unwilling to undertake the sort of risk associated with development. They will easily acquire 1,500 units at a go – and are willing to pay a premium to do so.” Off-island also offers ample opportunity, he said. Logistics hubs in Contrecœur and Valleyfield are spurring large-scale industrial development there. To the north is Quebec’s third-largest city, Laval, whose population and economy are growing faster than the province. It will overtake Quebec City for the number two spot within a decade or so.

Bélanger is about to start work there, together with Montoni, on a large, multi-purpose development near Laval’s big Place Bell project; facing the Montmorency subway station it will house ofﬁces and condos and possibly a modern hotel. The infusion of new space has softened the downtown ofﬁce market, though. “Owners will have to trim their rents to remain attractive,” Bélanger acknowledged. “However Montréal remains well-positioned. We have a newly elected mayor who is doing very good work and have a stable provincial government for the next four years.” ■ Robert Frank Canadian Real Estate Forum / SPRING 2015

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“Logistics are crucial when industry decision makers determine where to locate. Our new intermodal terminal will strongly influence their deliberations.”

Santa Fe opened its Joliette, Illinois, intermodal terminal Houfek described how businesses are looking for increased efficiencies by locating distribution centers, warehouses and manufacturing sites close to intermodal terminals, to take advantage of the cost-savings and capacity benefits of intermodal rail. It’s not enough these days to build a better widget. Today, products have to show up precisely where and when they’re needed – at the right price. Transferring containers from trucks to trains for the long haul achieves an unbeatable efficiency gain. A single train can carry up to 280 containers, eliminating the need to employ a comparable number of trucks.

LOGISTICS HUB CREATES INDUSTRIAL MAGNET CSX’s new intermodal terminal in Salaberry de Valleyﬁeld has helped move Montréal’s logistics locus westward.

Ryan Houfek Assistant Vice President, Marketing, CSX Transportation (CSXT) Intermodal

The facility provides shippers a seamless cross-border freight transportation solution with access to CSX’s 21,000 mile network that serves over 40 terminals across the eastern U.S., all major East Coast ports and connects to major rail carriers. “The terminal is an enabler for industrial and commercial real estate,” observed CSX Transportation (CSXT) Intermodal Assistant Vice President, Marketing, Ryan Houfek. Examples of the economic development beneﬁts of intermodal facilities include the industrial park being developed near the Central Florida Intermodal Logistics Center in Winter Haven, Florida; and similar industrial growth after Burlington Northern

www.realestateforums.com

The efficiency benefits are accompanied by Rotterdam-like rigor and expansive connectivity made possible by CSX’s Northwest Ohio intermodal hub. The hub facility expands the connectivity of intermodal rail and increased the destinations shippers are able to ship to and from the Valleyfield terminal. “Nowadays intermodal rail gives shippers secure access to capacity, expanded reach into more markets and cost-saving opportunities,” Houfek explained. “Logistics are crucial when industry decision makers determine where to locate,” he added. “The new intermodal terminal will strongly influence their deliberations.” Houfek credited the city and the provincial government for helping to prime the pump for the project. “The public-private partnership was pivotal,” he said. “Without it, the Valleyfield terminal wouldn’t have happened.” ■ Robert Frank 21

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SOUTH SHORE REAPS BENEFITS OF MONTREAL’S CONSTRUCTION ZONES

Michel Bouchard Executive Vice President, Redbourne Group Being on the brink of revitalization is causing renewed vigour in Montreal’s downtown but the constant hum of construction is turning many renters to look at other alternatives such as Mid town, Laval and the South Shore

to set up their businesses and residence, says Michel Bouchard, Executive Vice President of the Redbourne Group. “We are looking at several years for completion of the Champlain Bridge and Turcot interchange and it is going to be a bit painful,” he says. We will also have to deal with the refurbishing of Sainte-Catherine Street “Once all of these (developments) are done, I think it will signiﬁcantly improve the access to downtown, and will improve the business environment for all businesses The last few years were pretty difﬁcult due to limited growth, fewer job creation, rationalization of large space users, additional competition coming from new projects, 2 provincial and one municipal elections in a short time frame, etc., - in other words the perfect storm. These factors brought people to look for lower rental costs in well-located and well maintained properties. This is why Redbourne has elected to modernize some of their outskirt properties which will be close to 100-per-cent leased out by year-end. “In August 2014, Redbourne bought a complex on the South Shore ( Complex Metro Longueuil) that is directly linked to the subway; it falls exactly into what we call

work, live and play,” he says. This Complex is also subject to a capital reinvestment and offers a potential for expansion. The direct link to transit downtown and close proximity to major amenities makes Complex Metro Longueuil “a home run,” adds Bouchard. So, while downtown prepares to churn out more condos to meet increasing demand for shorter commutes, the burbs are also positioning themselves in the same live-work-and-play vein to attract renters wanting an escape from the traffic commotion, he says. “More and more people look for locations where play, live and work are in close proximity. This is why areas such as the South Shore, Laval, Terrebonne and Saint-Therese have gained in popularity and have seen significant developments”, says Bouchard. Bouchard however believes that the large infrastructure investments (new hospitals, new bridge, etc.) coupled with a more favorable economic and political environment, and improved access to downtown via new and more efficient transportation facilities will positively impact the downtown market in the mid-term. ■ Karen Petkau

RESIDENTIAL MARKET ROBUST

Marc Hétu Vice President, CBRE A growing population that is shifting toward the downtown core and rising business conﬁdence will ensure that the wind remains in the sails of Montréal’s residential real estate market. “We’re in a very healthy position, which augurs well for investment,” said CBRE Vice President Marc Hétu. “Demand is high, interest 22

“Demand is high, interest rates are low and we’re witnessing widespread enthusiasm to a degree that we haven’t seen in years.” rates are low and we’re witnessing widespread enthusiasm to a degree that we haven’t seen in years.” While owner-occupiers remain the biggest group of condo buyers, investors are now snapping up anywhere from 15-30 per cent of supply, mostly in the downtown core. Parents of students have also become eager buyers in proximity of Montréal universities. Seniors, who will make up a quarter of Quebec’s population by 2031, are also making the move downtown. “At the moment there are just over 12,000 units under construction,” Hétu reported. “If there are 3,000 delivered every year, that’s very healthy, so long as immigration and population growth remain steady.” With a 3.4 per cent vacancy rate and most of Montréal’s stock of 1960’s purpose-built long overdue for a makeover, rental development remains a viable option.

“Those buildings cost a lot to maintain,” he noted. “Investors will pay signiﬁcantly higher prices or capitalization rates for new construction, which has a lower operating cost. To remain competitive, owners of older properties have had to up their game with improvements. This has improved the overall quality of Montréal housing stock.” The unwillingness of investors to weather the capitalization rate and interest rate risks that it entails has dampened rental development, though. “It remains a very risky option,” Hétu acknowledged, “but there’s very strong demand from private and institutional investors for the handful of quality apartment assets, particularly for new construction. Consequently, those who have proved willing to undertake the risk have earned premium prices and done tremendously well.” ■ Robert Frank Canadian Real Estate Forum / SPRING 2015

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LOW DOLLAR, LOW OIL PRICES, A PLUS FOR QUEBEC ECONOMY

François Dupuis Vice President and Chief Economist, Desjardins

Following some difﬁcult years of rebalancing, the global economic environment is improving. As a result, we can expect numerous economies to achieve real GDP

SAINTECATHERINE TO GET MAJOR MAKEOVER

Isabelle Lebrun Project Director, City of Montréal

Montréal is about to embark on a massive overhaul the province’s biggest commercial and retail thoroughfare, Sainte-Catherine Street, which already commands some of the highest retail rents in Canada. “The project, which began with a plan to revamp the city’s century-old underground infrastructure, will 24

growth slightly above capacity. For example, in the euro zone, after rising 0.9 per cent in 2014, real GDP growth should be around 1.5 per cent in 2015. On the other hand, China's economy should continue to slow in 2015. Overall, global GDP is expected to accelerate a little from 3.5 per cent to 3.7 per cent this year. In the U.S., improved consumer conﬁdence, the drop in gas prices and solid job creation should allow real GDP to advance 3.2 per cent in 2015 after 2014's 2.4 per cent rise. The Federal Reserve should start to raise its key rate by the end of the year. The drop in oil prices will have a slight net negative impact on Canada's economy. Therefore, following the 2.5 per cent growth seen in 2014, real GDP is forecast to rise just 2.0 per cent in 2015. Oil prices should stay close to where they are in the coming months, but should start to show a lasting rise toward the middle of the year. Energy-producing provinces will see anaemic economic growth in 2015. However, low oil prices, the weak Canadian dollar and the lively U.S. economy will inject

some strength into the Quebec and Ontario economies. Many factors could change the outlook for 2015. These include the recent weakness in emerging economies, which may not be able to repeat the role of driver they have played in the last few years. The focus is also on Europe, where geopolitical risks could disrupt the economy. Canada's economic growth could be more heavily affected by a steeper and more long-lasting drop in commodity prices, especially oil. Also, the comeback by non-energy exports could run out of steam while, in manufacturing, the acceleration in investment could take some time to materialize. The situation in the real estate market remains worrisome. The housing sector could therefore correct more quickly and chaotically. In Quebec, the main downside risk involves the contribution from consumers, with a lot of hope resting on business to solidify growth. For the ﬁnancial markets, further periods of elevated volatility could occur as the international context remains highly uncertain. ■

“Montréal business people and residents want improvement that preserves Sainte-Catherine’s signature ambiance, which they are very attached to.” entail bringing the artery into the 21st-century,” said Project Director Isabelle Lebrun. Montréal envisions making Sainte-Catherine more cyclist- and pedestrian-friendly – including for the mobility-reduced – with green spaces where passers-by can linger. To balance its business dynamics and festive vibrancy, the city also intends to conﬁgure stretches that it can transform into pedestrian malls and then reopen to trafﬁc at will. More reliance on mass transit will mean a net reduction of the number of street parking spots. “There is no intention to completely eliminate street parking at this point,” reassured Lebrun. “Other solutions are possible. We also plan to facilitate delivery, since many stretches of Sainte-Catherine aren’t served by back alleys.” The city is currently contemplating four scenarios, which it will disclose in May. In the meantime, it’s consulting stakeholders.

“Montréal business people and residents want improvement that preserves Sainte-Catherine’s signature ambiance, which they are very attached to,” she emphasized. In addition, Montréal is consulting its internal stakeholders. “We’ve met with city departments like economic development, and sat down with blue collar workers to explain what we hope to achieve and to get their input,” Lebrun explained. “The collaborative spirit fosters buy-in, which will help ensure we complete the project on-time in 2019. The first phase will overhaul 0.67 km from Bleury to Mansfield; the second, 1.53 km from Mansfield to Atwater. “The city will take great pain to avoid disrupting day-to-day business aboveground, while construction is under way,” Lebrun promised. ■ Robert Frank Canadian Real Estate Forum / SPRING 2015

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HOW TO THRIVE AMIDST THE RETAIL REVOLUTION: DIVERSIFY, DIFFERENTIATE AND DELIVER

The internet has forever changed shopping. That has created huge opportunity for savvy retailer real estate investors. “Target’s closure represents a great opportunity,” said Cushman & Wakeﬁeld’s upbeat Vice President Julie Martineau. “It will force owners to diversify their malls.” People are tired of the standard, cookie-cutter malls that have permeated North America. “Everywhere it’s the same experience,” Martineau observed. Instead, what people want is excitement. “They need to diversify,” she added. “Adding residential, ofﬁce and entertainment enlivens a mall.” Revolutionary new centres keep shoppers inside longer, pushing up sales.

Julie Martineau Vice President, Cushman & Wakefield

CITY CORE NEEDS BACKTO-BASICS STRATEGY

“Dix30, south of Montréal, is a mini-city where people can go to a theatre, grab a bite and shop,” Martineau enthused. “It’s a friendly ferment of activity, alive with amenities like outdoor ﬁreplaces and indoor parking. Other malls need to emulate that.”

Montréal urban planners and real estate developers need to move swiftly to plug some long-term gaps, advised Richard Hylands. Flourishing condo construction has made it easy to reside downtown, but the modern 26

It helps that most Montréal shops are street front. The lower rent attracts the diverse range of retailers that the new, younger demographic demands. “It has breathed new life into locations like Sainte-Catherine, Sherbrooke West and Victoria Village,” noted Martineau. “They’re booming! I go there to savour the experience. The concepts. The little shops.” As for malls, the future is in click’n’pick. “You have to invest in customer service,” Martineau urged. “Shoppers prefer to pick up online from you, rather than stand in line at the post ofﬁce. That’s a huge cross-selling opportunity.” “I never thought that 80% of my business would be retail,” she concluded. “I love it.”

City core shopping habits are also shifting with the inﬂux of younger residents who value experience over square footage.

■ Robert Frank

infrastructure needed to sustain the ﬂood of inmigration simply hasn’t been built.

Renovate, replace or remove Hollow-out is another risk that Montréal needs to address without delay.

“If you can’t live and work in the city core, it won’t work in the long run,” cautioned Kevric’s President. “Toronto has woken up, and Montréal needs to do likewise.” “Not one new school has been built downtown,” he observed. “Everyone agrees that we need them. We need parks, police and ﬁre stations too. The question is: Who will pay?”

Richard Hylands President, Kevric

“They prefer a small community feel,” she said. “Montréal has those unique neighbourhoods. Unlike most cities that empty in the evening, it remains vibrant. You don’t have to drive anywhere to have fun.”

Toronto belatedly responded to short-sighted downtown condo development by investing its land development revenue in an infrastructure fund. For Hylands, it’s like pulling a page from the past. “Once upon a time, urban planners set aside land for schools, parks and churches. Places for families,” he recalled, “and the institutions that turn districts into communities. Far-sighted developers realized that they had a stake in residents remaining downtown.”

“During the ﬁrst two months of this year, we’ve seen more activity in Mile End than in all of 2014,” Hylands reported. “It’s easier to develop there than downtown, which is dominated by older B- and C-class buildings. The capitalization rates in the city core makes it hard to justify development.” “That risks making Montréal uncompetitive,” he said. “Without enormous capital injections, everyone will ﬂee to modern buildings in the suburbs, turning the inner city into a ghost town of empty buildings.” Hylands suggested that the city reverse this trend by supporting renovation to LEED standard – the way that it already does for new construction. “It’s incredible how mixed-use LEED buildings end up consuming way less energy than our estimates,” he enthused. “They use almost no energy.” ■ Robert Frank Canadian Real Estate Forum / SPRING 2015

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CAPTURING LAND VALUE FOR TRANSIT FUNDING

Daniel Toutant President, COSIME There was a time when what governed the design and alignment of large transportation projects was purely transportation. Cities today view a much larger picture and add in the urban development component at a very early stage. The idea is that housing built close to a transit station will attract new residents, who want that proximity to transit. www.realestateforums.com

Daniel Toutant is President of COSIME, the company that is acting as owner’s representative for the Agence métropolitaine de transport in the Montréal subway extension project. “Nowadays, more and more people are aware of the importance of developing something that will generate urban development and that is in line with PMAD (Plan métropolitain d’aménagement et de développement) which favours the creation of transit oriented development,” he says. He adds that the interesting part is financing the transit. One way is through land value capture, which collects the rise in local land values that the new transit generates and uses this money to finance the infrastructure. The Hudson Yards Redevelopment Project in New York operates on such a finance deal, where the Bloomberg Administration is leveraging future development revenues in exchange for financing. This is one financing option that COSIME is exploring for Montréal’s subway extension. Exactly how it will be accomplished remains to be seen, but Toutant intends to have discussions at the industry level.

“Land value capture collects the rise in local land values that the new transit generates and uses this money to finance the infrastructure.” Of course, this idea would have to be brought back to Montréal scale where land value is not the same as in London, New York or Hong Kong. Toutant is optimistic. “To a certain extent we can consider this means to favour development and ﬁnance the infrastructure,” he says. “To preserve the future, we are making sure to create opportunities.” ■ Michelle Morra-Carlisle 27

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INNOVATION & CREATIVITY KEY TO GAINING COMPETITIVE ADVANTAGE IN

VANCOUVER’S

HOT MARKET

Avtar Bains President, Premise Properties

Thinking outside of the real estate box is one of the key ways developers can stand out in the Vancouver marketplace, says Premise Properties president Avtar Bains, especially when they are dipping their feet into the city’s waters for the first time. It is not uncommon to get 10 or 15 bids on any single asset that is placed onto the market, creating a difficult environment for newcomers to stake a claim and existing developers to retain it, he says. “It appears right now that every product type is running on full cylinders and that is creating such an over-demand, under-supply scenario that it is difficult for people to grow their portfolios in this environment, so where is your segue into the marketplace when it is a jump-ball on every deal? That’s when people have to be creative,” says Bains. “So, you look at joint ventures, you look at buying half the property, you look at development situations, you look at issuing debt – you have got to be creative to get capital out in this environment and still feel comfortable that if and when interest rates increase, you still have some protection.”

A low oil price and Canadian dollar translates to a robust economy for an export-import province such as Vancouver, adds Bains. “The worse things get outside Canada, the more attractive we become as a safe haven for capital,” he says. In fact, B.C. is projected to have a 2.7 per cent growth in the economy this year – a 2.3 per cent increase year-over-year from 2014. When combined with an across-the-board demand for all asset classes – from industrial and retail to office – developers need to put on their future-thinking caps in order to stand out and prosper, he says, which in Vancouver often means turning to connectivity. “If you have an office, residential retail or even an entertainment building that’s in close proximity to Vancouver’s excellent rapid transit system, it will typically enjoy less vacancy as well as higher rents and employee retention,” he says. New office construction in Vancouver’s downtown will free up a lot of office space in older buildings, says Bains, which will leave the owners of said buildings with the arduous choice of repositioning to remain competitive or cave to market pressures and reduce leasing rates. ■ Karen Petkau

www.realestateforums.com

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INVESTING IN U.S. MARKETS: RENTAL RATES ARE YOUR BEST BET

Richard Weir Executive Vice President, Bosa Development Corp. While there is no shortage of highly sophisticated investment opportunities in the U.S., it’s not so easy for Canadian investors to pursue them these days.

SUCCESSFUL SUCCESSIONS STRETCH OUT OVER A DECADE OR MORE

David C. Bentall Founder, Next Step Advisors

Transition at the top works best when the new guard shares the reins for a while, counseled David C. Bentall. “You don’t need to pass the baton,” the founder of Next Step Advisors explained. “Forming an intergenerational season of partnership is a natural process that unfolds gradually over time.” 32

“The recent depreciation in the Canadian dollar makes it more difficult for Canadian investors not already in the U.S.,” says Richard Weir, Executive Vice President at Bosa Development Corp. “The market is highly competitive for Tier 1 class assets and has been for quite a while. Even a few years ago, core assets were not cheap – they were trading at good value, but not at the sort of discounts the Canadian market perceived they would be. “We see a lot of opportunity in the U.S., but institutions are by far the largest players in core markets. Buyers are aggressive, deal terms are very challenging and short escrows are the norm.” So far, retail has seen the strongest growth in rent and the strongest decline in vacancy rates. Improvements in the office market are starting to show as well, says Weir, although they are very city specific. “San Francisco is a very tight office market and rents are high. Southern California continues to see double digit office vacancy and lower rents, though

The most successful leadership changes eschew abrupt changes of the guard, Bentall reported. Instead, a team approach ensures that the decision making balance shifts slowly over time, as the elder generation evolves toward statesman, mentor and networking roles. “Tom Foord’s retirement from Kal Tires was a non-event for the $1.2 billion family ﬁrm,” he noted. “For 12 years, he had shared authority with his executive team. By the time that he left, they were so comfortable working together that Tom simply needed less of a voice.” Strategize systematically and talk it through Bentall cited a study of some 18,000 American ﬁrms that dispelled the myth that all you need for a successful shift is a written succession plan. “Instead, it pinpointed three bellwethers for successful transition,” he explained. “Corporations with a formal strategic planning process tended to do better; their boards included a majority of independent directors; and families met regularly.” The approach bridges the young’s tech-savvy and older family members’ experience. “It’s a crucible that gives everyone a chance to air their views,” Bentall said. “They all get

“If you believe that the recovery in the US is on solid footing, what you’re betting on is more the strengthening of that recovery and improvement of rental rates, than a further fall in cap rates.” we do see vacancy rates beginning to trend downwards. “If you believe that the recovery in the U.S. is on solid footing, what you’re betting on is more the strengthening of that recovery and improvement of rental rates, than a further fall in cap rates.” While Weir acknowledges the many similarities between the Canadian and U.S. investment markets, he notes some key differences as well. “U.S. markets are far more litigious; if you want to be active in them, you must be mindful of their legal climate. ■ Barbara Balfour

a voice and a chance to talk through and determine what works and what doesn’t. Regular, open dialogue also serves as a safety valve for emotion by creating a channel for communication and education.” He noted that some ﬁrms that he has counseled have even engaged spouses in the communication process. “It helps to keep immediate family connected,” Bentall suggested. “They get to see how plans are made and learn why the business has reached important decisions.” Finally, he urged the current generation of corporate leaders to pursue new challenges during and after the transition. “Don’t retire. Change gears,” Bentall recommended. “Spend every day striving for a goal; a new, fresh way to make a difference. When I turn 60, I will be working because I want to – not because I need to.” A proliferation of options beckon in athletics, culture, mentoring, outside directorships, philanthropy and travel, he concluded. “Those who are most successful in making the transition resist retirement and choose a life where they’re contributing daily and engaged.” ■ Robert Frank Canadian Real Estate Forum / SPRING 2015

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BRITISH COLUMBIA TO LEAD CANADIAN ECONOMY

Benjamin Tal Deputy chief economist, CIBC World Markets The economic stars have aligned for British Columbia this year. “Expect to see strong growth here,” forecast Benjamin Tal. “British Columbia is taking over the lead from Alberta, which is now the laggard. We see the Canadian economy growing by 2.1 per cent, and B.C. by 2.5 per cent or so.” CIBC World Markets’ deputy chief economist underscored that British Columbia is the only province with

LOWER MAINLAND A MECCA FOR RE-IMAGINED RETAIL

a balanced budget. The weaker Canadian dollar also helps British Columbia more than any other province and will likely continue to do so, he said. The rebound in the American economy also augurs well. “Clearly the Bank of Canada doesn’t intend to increase interest rates anytime soon,” Tal observed, “plus British Columbia is well-equipped to take advantage of awakening U.S. consumption. The American housing market is moving in the right direction, pushing up demand for products like wood.” Vancouver’s economy will likely outpace the province as a whole, Tal predicted, with more people expected to arrive than will decamp during 2015. “Net migration remains positive,” he said, “and sensitivity to the value of the Canadian dollar means that it will do well during the coming year.” Those factors should stimulate job creation, which will fuel demand. Despite the strong economy, British Columbia has not yet seen much inﬂation, Tal said, so it is unlikely to experience much upward pressure on prices until 2016 or 2017. While he acknowledged that there is an element of oversupply in the real estate market here, he did not see signiﬁcant cause for concern.

to the rest of Canada and, as a result, is well-placed to become a true outlet centre for retail, says Scott Lee, Principal & Director of Northwest Atlantic (B.C.) Broker Inc. And prime examples of this new direction are MacArthur Glen’s new project in Richmond and a hybrid outlet centre with Ivanhoé Cambridge’s Tsawwassen Mills near the ferry terminal, he says. “MacArthur Glen is aiming toward luxury brand names in an outlet concept, while Ivanhoé Cambridge is providing a mix of tenants in an enclosed outlet format anchored by Bass Pro Shops,” explains Lee.

Scott Lee Principal & Director, Northwest Atlantic (B.C.) Broker Inc.

With its lack of developable, affordable and permissible land to develop, Vancouver’s Lower Mainland is unique when it comes 34

“I believe both projects have the opportunity to be successful, given the limited supply of available land in the lower mainland.” Likewise, densiﬁcation along Metro Vancouver’s Skytrain line has created an optimum area for mixed-use projects such as PCI Development Group’s Marine Gateway, which combines retail, ofﬁce and residential space.

“Expect to see strong growth here,” forecast Benjamin Tal. “British Columbia is taking over the lead from Alberta, which is now the laggard. We see the Canadian economy growing by 2.1 per cent, and B.C. by 2.5 per cent or so.”

“Given what we are seeing in the economy and with interest rates low, there is nothing to trigger something happening anytime soon,” he reassured. “The market will be tested when interest rates rise, but British Columbia is well-positioned to withstand it.” Vancouver and the province as a whole also have little to fret about as China shifts from overwhelming reliance on its manufacturing sector toward a growing service sector. “China is becoming less commodity intensive,” Tal said, “but the slowdown there won’t have a huge impact. Growth of 7 per cent is not going over a cliff. What might be lost will be more than offset by growing demand from the U.S.” ■ Robert Frank

“I believe this project will be truly successful because of the complete harmonious integration between the retail and ofﬁce component of the project with the Skytrain Station,” Lee says. Other such projects include Anthem Properties and the Beedie Group’s redevelopment of Station Square that will transform it from a shopping centre into a vertical community of ﬁve residential towers with retail space and the Bentall Kennedy’s redevelopment of the Canada Post Building on West Georgia Street, which will give residents “something to be very proud of,” he says. As a result of Target pulling out of Canada, there will be few new large-scale retail developments in the year ahead, he says. “The retail market will also need time to absorb the new inventory coming onto the market as a result of the large number of retail projects currently under construction on the Lower Mainland.” ■ Karen Petkau Canadian Real Estate Forum / SPRING 2015

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‘GOING SHOPPING’ IS ALIVE AND WELL

Jennifer Podmore Russell Real Estate Advisory Leader, Deloitte Large retailers, including Target and Sony, are closing stores across Canada. Is this the end of non-virtual shopping? Not according to Deloitte, whose recent study, The Consumer Evolution: Changing Behaviours Trigger New Business Models found that stores can still drive trafﬁc, only in new ways. www.realestateforums.com

“Retailers are either opting to or being pushed to revise their strategy,” says Jennifer Podmore Russell, Real Estate Advisory Leader for Deloitte. Deloitte found that the “connected consumer” is the central driver of these changes. Today’s shoppers expect their customer account, loyalty program, gift cards and other channels to seamlessly interact, and they want access to the latest payment methods and technologies. “There is still a very signiﬁcant role for bricks and mortar as a channel for retailers,” Podmore Russell says. “It’s just that the complexity of the channels, and the need to integrate mobile, e-comm and bricks-and-mortar together to give the consumer a consistent experience, is changing the dynamics in the market.” When retailers fail to generate trafﬁc, Deloitte interprets that as inadequate brand management and failure to connect and engage with consumers. Among those that are getting it right, Podmore Russell lists Nordstrom, BestBuy and Lululemon, because they continually evolve their brand with the consumer.

One consequence of online shopping, according to the study, is that parcel deliveries are increasing at unprecedented rates. This raises new questions: How much inventory to keep in stores? How to manage that inventory? How much space do we really need? Will parcels be shipped from stores or a central branch? “In the next few years, landlords will need to stay ahead of this growing focus of customer experience,” Podmore Russell says, “while being ﬂexible enough to accommodate the needs of the retailer.” ■ Michelle Morra-Carlisle 35

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VANCOUVER INVESTORS AIM HIGH

Michael Kitt Executive Vice President, Canada, Oxford Properties

“Vancouver has always been a constrained market with limited core trades. But if you can find a way in, our view is that the long-term outlook is very strong across all asset classes.”

The city of Vancouver, viewed through the macro lens of a savvy real estate investor, is considered one of the best bets in North America over the long term. Any short-term bumps in the road should be viewed as opportunities to place a bet, for ﬁnding these opportunities has been the challenge. “Vancouver has always been a constrained market with limited core trades,” says Michael Kitt, Executive Vice President, Canada, Oxford Properties Group. “But if you can ﬁnd a way in, our

view is that the long-term outlook is very strong across all asset classes.” He bases that assessment on several factors, starting with the combination of its natural geographical constraints and the high visibility of long term population growth. What also makes Vancouver attractive for long term investors, he explains, is that the city continues to build momentum through investment in infrastructure and culture. And although it is already considered one of the densest cities in Canada, many opportunities to intensify remain. Today, amid high competition from overseas investors, Vancouver is in the enviable position of being a market that is attractive

to new capital but has a lack of product for sale. This has pushed values up but the lack of trophy product for sale has made it more of a balanced market where local players can have an impact. “You see a number of trades and development opportunities, which are too small or complicated for the typical institution, but are very successful.” That lack of core investment product together with population growth and positive economic trends are contributing to a high level of development activity, a cycle that promises to continue. The one question people are asking for 2015, Kitt says, is how the market will absorb the new ofﬁce stock being delivered. “The new space will eventually be absorbed and any softening is simply a temporary adjustment. Overall, the steady level of new development is indicative of a positive healthy, long-term trend for the city.” ■ Michelle Morra-Carlisle Canadian Real Estate Forum / SPRING 2015

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TIPS FOR A SUCCESSFUL PARTNERSHIP WITH FIRST NATIONS GROUPS: LISTEN FIRST

Stefan Moores President, The Castlemain Group

After more than 15 years working in the private sector, Stefan Moores made the transition to working exclusively for First

VANCOUVER: IN A CLASS OF ITS OWN

Tsur Somerville Director, UBC Centre for Urban Economics and Real Estate

Tsur Somerville’s advice to real estate investors exploring the Vancouver market is this: “Don’t bother trying to apply conventional metrics to it. The Vancouver market deﬁes all www.realestateforums.com

Nations groups four years ago. He cannot stress enough the value of getting to know communities on an individual basis. “Generalizations are a mistake; not all First Nations are the same,” says Moores, a former developer and the founding partner and president of The Castlemain Group, one of Canada’s leading advisory firms to First Nations. “The term ‘social license’ is often used, yet few can define how it can be achieved. Working with First Nations takes this a step further: it’s the epitome of social and community license, and starts with earning trust, learning about priorities, understanding how decisions are made, and reflecting those preferences in your plans in a genuine way.” Contrary to some opinions, doing business in First Nations communities can in fact be a very efficient and less bureaucratic process than dealing with some local governments, says Moores, who adds that they can contribute significantly to proposals. However, Moores cautions against entering dialogue with a pre-defined view of success.

“Working with First Nations… starts with earning trust, learning about priorities, understanding how decisions are made, and reflecting those preferences in your plans in a genuine way.”

In some cases, Bands may have different views of success than developers do. One may value conservation, another may prefer jobs and training opportunities, and a third may be looking primarily for economic return. Given these unknowns, the most effective course is actually quite simple: Listen ﬁrst. “In working with dozens of communities and organizations over the past few years our ﬁrm has rarely come across a group that, when approached at an early stage in a respectful, open-minded manner, was not open to exploring the possibilities of a project in a constructive way.” ■ Barbara Balfour

“I think our models of single-family housing just don’t work for housing in Vancouver, which looks a lot more like a Manhattan or a Hong Kong than it looks like a Winnipeg.”

conventional metrics.” The Vancouver market, he explains, is comprised of several different markets that operate quite independently of one another. Real estate is seeing a real stratiﬁcation in the Vancouver market between lower end and very high-end properties. Many workers, for example, live in suburban townhouses, not in single-family homes. “I think our models of single-family housing just don’t work for housing in Vancouver, which looks a lot more like a Manhattan or a Hong Kong than it looks like a Winnipeg,” says Somerville, who is Director of the UBC Centre for Urban Economics and Real Estate. “You can’t look at single family house prices and do the equation.” He also compares the Valley, with its more traditional brand of supply and demand, to the city, where

people are buying condos as investments that they may or may not rent out. From Somerville’s perspective, the current focus is on the inﬂow of capital from China, predominantly in Vancouver’s upper-end residential market. “It will be interesting to see the dynamics in that market, particularly for non-trophy properties, because it’s hard to see the pension funds selling their trophy Canadian assets,” he says. Somerville advises investors to prepare for an eventual up-tick in interest rates, which would be a stressor on pro formas in terms of cap rates. “I think investors have to think about how they’re going to see the world with rising interest rates and what that’s going to mean to capital values,” he says. ■ Michelle Morra-Carlisle 37

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NEED MORTGAGE DEBT FOR YOUR REAL ESTATE

“As long as the Canadian economy will be a little fragile, and it will be because of the oil-dependent part of the country – we won’t see much upwards pressure on interest rates, as the government will keep them low to offset the price of oil. “ The increased availability of money-seeking mortgages (compared to other asset classes) in today’s market means money ﬂow into real estate loans will be strong in 2015. “It’s been my experience so far this year that among the life companies, pension funds, private investors and banks – there’s a surplus of capital competing in the market that has to get out there and ﬁnd a home,” says Pete Morrish, Principal at Canada ICI.

Pete Morrish Principal at Canada ICI

“For the remainder of 2015, the money supply will be quite strong, and I’m optimistic about the future – I don’t see any strong inﬂationary issues.” Morrish adds he has not seen any negative effect on Vancouver real estate from current oil prices - it’s probably the opposite, he says. “As long as the Canadian economy will be a little fragile, and it will be because of the oil-dependent part of the country – we won’t see much upwards pressure on

VANCOUVER RENTAL HOUSING MARKET CONTINUES TO BOOM

Al Poettcker President and CEO, UBC

“We saw some signals that interest rates were going to increase before the oil prices plummeted. People were worried about the impact of that but for now, it’s clear sailing.” Morrish also predicts that with in migration numbers to BC and especially Vancouver continuing to be strong, the housing market will continue to do well. “In terms of residential construction, experienced borrowers with a strong track record in this marketplace with some level of presales will be financed first. “In terms of underwriting, things will be as strong as last year; the only caveat will be on the permanent side, in terms of where rates could be five years from now and the resultant stress testing lenders may apply.” ■ Barbara Balfour

“Today, more so than in the last couple of decades, we’re witnessing a very attractive market for rental residential developments.” With current proposals to build 1,000 new affordable residential rental units in the city of Vancouver in the next few years, there’s no question that the formerly niche market of rental housing is booming. “I think it will continue to be very well subscribed,” says Al Poettcker, President and CEO of UBC Properties Trust. “Today, more so than in the last couple of decades, we’re witnessing a very attractive market for rental residential developments. “During the last 12 years, we’ve built about 900 rental units at UBC. When we first got started in 2002, we were one of a few developers building rental housing, but today it’s become a very substantial activity.” Residential rental projects in Vancouver have for decades, benefited from low vacancy rates and a stable rental rate environment thanks to the influx of immigration and domestic migration. Historically considered a safe investment, purpose-built rental housing has been

interest rates, as the government will keep them low to offset the price of oil. “

driven more recently by very favourable interest rates, says Poettcker. “Some rental housing today is built solely because it is required as part of a much larger development project – we call that an entitlement incentive,” says Poettcker. Whether they’re in retail, office space or residential, rental property assets in all income categories are popular projects to invest money for return. “But because existing rental properties are also expensive to purchase in today’s market, it would not make sense to knock them down and rebuild, unless you can significantly add to the density – which means you would need planning consent,” he says. “Today’s investors in residential rental properties are, for the most part, interested in growing the incomes through refurbishments and other refinements.” ■ Barbara Balfour Canadian Real Estate Forum / SPRING 2015

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CITY A CLEAR WINNER IN THIS CYCLE

Mark Chambers Executive Vice President, JLL

“If history repeats itself, 2016 should be a year of decreasing vacancy rates and stabilization after the construction boom.”

DIVERSE ECONOMY GIVES VANCOUVER ADVANTAGE OVER WESTERN COMPETITION

Remco Daal President and COO, Bentall Kennedy (Canada) LP Vancouver is holding up well and the city’s economic train shows no signs of slowing, says Remco Daal, president and chief operating ofﬁcer of Bentall Kennedy (Canada) LP. “From a economic perspective, Vancouver isn’t Calgary,” he says, noting while its diverse economy www.realestateforums.com

When the frenzy of new office construction comes to completion in just over a year, with more than 2.2 million square feet of space on the market, the winner is clearly the city of Vancouver. “We have over two million square feet of new product improving our skyline and building inventory, which is long overdue,” says Mark Chambers, Executive Vice President at JLL. “We are also going to see these buildings generate thousands of jobs. I think sometimes we spend too much time looking for the negative, but in this cycle it is hard to find a clear loser.” As companies look for ways to attract the best talent, and use their offices as a branding tool, the new inventory on the market offers them exactly that opportunity. “There has been an interesting diversity in tenants who wanted to move to the new towers,” says Chambers. “2015 is a bit of a musical chairs year as shuffles and

may experience weakening commodity prices, “it is offset by strong manufacturing and trade that will benefit from a lower dollar going into 2016.” There is significant infrastructure planned for the area, he adds, pointing to the 240-million Port Mann water supply tunnel under construction under the Fraser River; the $1.8 billion upgrading of the Vancouver Airport, which includes a $213 million terminal expansion and a McArthurGlen Designer Outlet; and the Great Northern Way Campus on the east side of Vancouver’s Main Street area, which will turn “the flats” into a neighbourhood for arts-and-tech students, complete with restaurants, galleries, breweries, coffee shops and limited residential. When it came to commercial office space, Daal was cautious “ “We’ve got more than 3.1 million square feet of new office under construction in Greater Vancouver and over a million and a half of that delivered downtown this year, and that is 7 per cent of the inventory, which is not insignificant.” He noted that as more new inventory comes to fruition on the office marketplace, he expected tenants would continue to trade up and take advantage of some softening in rates thru the market adjustment. “Vancouver got some much needed new

relocations take place. If history repeats itself, 2016 should be a year of decreasing vacancy rates and stabilization after the construction boom. “More construction could be possible in the future, although it remains to be seen what it would take from a vacancy rate and lease rate perspective to go ahead with building a tower.” Technology has deﬁnitely been a driver in the market and seems to be continuing, says Chambers. “LNG would be a market bonus if the demand arrived, but developers are not banking on it. “Developers also want to see some diversity in tenant mix, as industries can change quickly, as we have learned in the past. I have been through a couple of cycles myself, and none of them were expected.” ■ Barbara Balfour

“We’ve got more than 3.1 million square feet of new office under construction in Greater Vancouver and over a million and a half of that delivered downtown this year, and that is 7 per cent of the inventory, which is not insignificant.”

supply, but this market will need a few years to adjust to it” he said. In contrast, Daal described the industrial sector as solid and improving. “The sector is ﬁrming up and I expect that this will continue as the low dollar allows tenants to beneﬁt from improved U.S. trade”, he said. In the residential space Daal noted strong fundamentals. “Affordability challenges make renting far more economical than buying and there are a growing number of people that are choosing to rent” he said. Purpose built rental was described as “An area of opportunity for those that can execute well.” ■ Karen Petkau 39

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LOW DOLLAR BOOSTS VANCOUVER’S GDP, GROWTH FORECAST

Scott Coates Managing Director, KingSett Mortgage Corporation

As a falling and flattening yield curve and low oil prices cause some Vancouver retail and institutional investors to pause, the real estate sector is in a prime position to forge ahead, says Scott Coates, managing director of KingSett Mortgage Corporation. Land and prime-location buildings continue to be a costly venture in Vancouver’s core, he says, while mixed-use is continuing to be the trend of the times, as well as urban city-centre intensification. Smaller-format retail centres are also replacing mega stores, as retailers anticipate more consumers will shop online in the future, adds Coates. “I think for 2015 and 2016, office (real estate) will remain a concern in most of the Big 6 cities across the country,” he adds. Local players who understand the city’s market have dominated capital flow in Vancouver, which Coates anticipates will increase for 2015-2016. While much of Vancouver’s investment capital has often come from Asian investors, particularly China, that may change in the short term. 40

“I think that intuitively, there could be a slight retraction in capital from China into the (Vancouver) market.”

“I think that intuitively, there could be a slight retraction in capital from overseas into that market,” he says, pointing to the Chinese economy continuing to reduce its stand up paddle (SUP) growth as a cause. And despite the constant threat of rising interest rates, a low Canadian dollar has trickled a positive inﬂuence onto B.C.’s GDP, which rose from 2.3 per cent last year to a forecasted 2.47 per cent this year. The result, says Coates, will be slight increases in population and employment. This bodes well for KingSett reaching its target mortgage loan allocation of 15 per cent in Vancouver, he adds, noting it is currently at 7.5 to eight per cent. ■ Karen Petkau Canadian Real Estate Forum / SPRING 2015

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Canadian Real Estate Forum / SPRING 2015

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‘CAPITAL’ 24/7 IDEA PUTS

EDMONTON

ON REVITALIZATION TRAIN

Cory Wosnack Principal, Avison Young

Edmonton may be an oil town, but it’s a young person’s oil town, where young professionals are prepping to make their marks on the province’s ever-optimistic economic future. One need only look to the already-underway downtown revitalization as proof, says Avison Young Principal Cory Wosnack. “The developments unfolding in the downtown core are largely focused on accommodating the needs of a younger generation,” he says. “I like to think of it as live-educate-work-play.” Post-secondary institutions such as NorQuest College and MacEwan University are expanding their facilities and student populations by 50 to 75 per cent in the next 30 months, and numerous residential towers are under construction focusing on younger professionals, he adds. “The three new ofﬁce towers being built in the core are accommodating the needs of employers who are redeﬁning their culture with a more effective work environment, largely driven by the behaviours of how a younger generation can maximize their time in the workplace,” explains Wosnack. www.realestateforums.com

The move is toward a true 24/7 experience, he adds. “Rather than a singular use that can often be one dimensional, EAD (Edmonton Arena District) is leading the way in creating a neighbourhood that becomes activated at alternate times of the day,” says Wosnack. “When the residential towers are emptying, the office towers are filling up. When the workday ends, the entertainment and hospitality components amp up. There will be energy on the streets throughout the day and on weekends, which rarely happens when a single-use development is constructed.” Low oil prices may have put many of the deals under a microscope but they haven’t stalled them, he adds. “Transactions involving new developments require all parties to see this region through a long-term lens, Wosnack point out. “Investments in the city involving new developments, be it infrastructure based or commercially based, require a strategic long-term approach. Had there not been confidence in this region back in 2009, post-global economic crisis, we would not be witnessing the developments that are underway at the current time.” ■ Karen Petkau

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TECHNOLOGY REVOLUTIONIZES OIL MARKET

Andrew Leach University of Alberta’s Enbridge Professor of Energy Policy Alberta started 2014 in such a strong position that it is still expected to grow in 2015, despite the advent of revolutionary technology that sent oil prices reeling. “Is Alberta’s economy growing as quickly as was expected?” Andrew Leach asked rhetorically. “The answer to that right now is no. It nonetheless still holds a rather enviable position among Canadian provinces.”

EDMONTON’S DOWNTOWN REVITALIZATION FORGES AHEAD – FOR NOW

Tom Redl CEO, Chandos Low oil prices may be turning the Canadian dollar downward but in Edmonton, industry insiders are predicting the capital city of

“Growth projections might have dipped from 5 per cent to 2 per cent,” acknowledged the University of Alberta’s Enbridge Professor of Energy Policy, “but Alberta has full employment and no government debt to speak of, as well as very high personal wealth and income levels.” The billion-dollar question for real estate developers is what impact will this have on land and building-supply prices? Alberta’s commercial and residential real estate investors also want to know how much this will stem inmigration. Massive oil sand investment has so much momentum that Alberta will be spared massive layoffs, Leach predicted. “These projects have very long timelines,” Leach observed. “But people are declining to build future projects. It’s hard to justify new mining investment. If oil prices fall further, they won’t meet most companies’ investment thresholds. If you believe in higher longer-term oil prices, though, then that’s no longer the case.” While those who bet on consistently high growth could ﬁnd themselves overextended in land holdings or new developments, those stresses also represent opportunities for real estate investors.

Supply side shock Leach sees the shift as more structural than cyclical. “It’s technology,” he explained. “Five years ago, U.S. oil production was declining. Thanks to shale oil, it’s now up four million barrels a day over those lows. During that period, oil sand production grew more than Saudi production.” Saudi producers saw no point in responding to the surge in supply by throttling output, the way that they had hitherto done to dampen demand volatility. “If the price went back up, more U.S. product would enter the market, keeping the price low, so Saudi Arabia would still end up selling less,” he explained, scotching the myth of an oil price war. “The question everyone has about the U.S. shale oil market is: ‘Is it sustainable?’ The model works well – as long as prices hold up.” Meantime, a weaker dollar has boosted Canada’s competitiveness, helping to offset the downturn, albeit by eroding Canadian’s purchasing power. “Oil has a much smaller impact on GDP than most Canadians realize,” reassured Leach. “It’s not a strong negative, nor is it evenly distributed across the country.” ■ Robert Frank

“If oil stays low, there is a high correlation between the drop of oil and a drop in commercial building permits.” oil-dependent Alberta to continue gushing out heavy activity, especially in the construction industry – at least for the remainder of this year. “(The forecast for) 2015 looks, ﬁne as it is mostly backlog that will carry the construction through the year,” says Chandos CEO Tom Redl. “If oil stays low, there is a high correlation between the drop of oil and a drop in commercial building permits.” Which is why the industry is concerned about delays going into 2016, he adds. Up to $4.8 billion worth of unprecedented construction is predicted to occur in the city centre by 2020. Expansions already underway involve the LRT system, Royal Alberta Museum, MacEwan University and NorQuest College.

In addition, three new areas are either nearing completion or are planned to begin construction within the next few years: Arena District, which includes a new $605 million 18,641-seat Rogers Place – the new home of the Oilers, along with several office, retail and residential towers; Quarters Development, with its $27.2 million Armature pedestrian friendly park and open space, a $45 million mixed-use Hyatt Hotel and a $30 million Artists Quarters, with 64 studios, offices and residential units; and Rosedale, which will turn West Rosedale into an urban village along the river. Currently, there isn’t a significant worker shortage, he adds, so while the pool may expand from sector-flipping oil patch workers, the industry is looking for quality rather than quantity. ■ Karen Petkau

Canadian Real Estate Forum / SPRING 2015

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EDMONTON KEEPING STORM CLOUDS AT BAY

Eric Slatter Vice President Retail, Brokerage, Colliers Macaulay Nicolls While many are looking at the barometer to see if a there is a storm brewing in Edmonton’s retail sector, there is one analyst who thinks it may just be a light shower on the horizon instead of pending downpour. “To date, we have not seen a major change in purchasing behaviour, or a related effect on retail real estate in Edmonton,”

INVESTORS NEED TO EMBRACE DOWNTURN; ACQUIRE WHILE THEY CAN

Alex Thomson Vice President, Investments, Triovest

says Eric Slatter, Vice President Retail, Brokerage, Colliers Macaulay Nicolls. “If the price of oil remains suppressed, we would expect to see this eventually taking a toll on consumer conﬁdence, and eventually retail sales.” But no one is mouthing the “R” word quite just yet, he adds. “I would say certainly not,” says Slatter. “There seems to be a cautious optimism about a timely turnaround, and/or moving toward a more balanced retail real estate market.” With sub two-per-cent vacancies over the past few years, it leaves a lot of margin for the market to remain balanced and healthy, he adds. “There is a sentiment of ‘why waste a good crisis?’”

Six months of negativity does not undo all the strides made in Alberta’s and its capital city’s economic mainframe, especially when the province will probably still be the leading new-job creator despite the low oil prices, says Alex Thomson, Vice President, Investments for Triovest in Edmonton. “One of the statistics that people forgot about very quickly was that in 2013, 45 per cent of all new jobs created in Canada were created in the province of Alberta,” he says. “We have some room for correction or adjustment that other provinces wouldn’t.” The province did slip from No. 1 to No. 3 as the fastest growing economy in the country this year, but “our unemployment levels are low; real estate vacancy rates are low; house prices are still up from ‘08 levels, so we have some room.” There hasn’t been much softening in the marketplace in Edmonton as of late, adds Thomson.

The market will likely remain unchanged for the next six to nine months, notes Slatter. “If oil was to continue declining, then we may expect to see a decrease in rental rates,” he adds. “However, this would be coupled with decreased construction costs for landlords. “I would expect that we continue to see active tenants in the market and a minor change to vacancy.” But if the downturn does continue, he speculates a slight increase in vacancy rates, as well as a decrease in rates, similar to 2009, when oil dropped below $40 per barrel. ■ Karen Petkau

“So, even if we produce half of the jobs we did prior to the downturn, I wouldn’t be surprised if we would still be in good standing to producing the most new jobs in the country,” he says. Now is the time to learn the market and make acquisitions, because “the lesson we learned from ‘08-’09 is that the economy bounces back and when it does, it bounces back really quickly.” Investors need to embrace this cycle as much as the rest, he adds. “All those good habits we are supposed to have – reporting to our clients, or staying on top of workloads, or building our team, or personal-skills development –this is a great time to be able to do some of those things and evaluate, a little bit, how the company should be moving forward,” says Thomson. “And it is tough to do that when you are going ﬂat out all the time.” ■ Karen Petkau Canadian Real Estate Forum / SPRING 2015

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DOWNTOWN EDMONTON: THE PLACE TO BE CONTINUED INVESTMENT BRINGS CITY CORE ALIVE

With the upcoming Royal Alberta Museum, a world-class arena, and a new centre for arts and communications to add to MacEwan University’s downtown campus, there’s absolutely no question that the downtown core is Edmonton’s most exciting market right now. “With all this happening, we believe there’s going to be a huge shift in the downtown core which will truly contribute to the live, work play environment,” says Bradley Gingerich, Senior Vice President at CBRE. “We’ve already seen a population shift. The new buyer is an urbanite who wants to live downtown and be able to walk to where they live, work and play. They don’t want to stay in the suburbs or buy a car – in fact; we just saw a car share service enter our market.

Bradley Gingerich Senior Vice President, CBRE.

“All the pieces are ﬁnally falling into price. The oil crash is untimely but ultimately I think we will build through it. We haven’t seen an immediate effect from oil prices – this has occurred more in small centres like Cold Lake and Ft. McMurray. “Right now the music is still playing; builders are still building and buyers still buying. Will

www.realestateforums.com

“Right now the music is still playing; builders are still building and buyers still buying. Will someone turn off the music? Has it already stopped and no one has noticed yet? It’s hard to say.”

someone turn off the music? Has it already stopped and no one has noticed yet? It’s hard to say.” While downtown high rise construction previously excluded purpose built rental, developers are now building projects speciﬁcally for rentals around the core, says Gingerich, who adds that all the investment in the downtown is creating new jobs. “Five years ago we just came out of the ﬁnancial crisis and while Alberta was in good shape, downtown development was on a pause. Now, we have a fair bit of growth and the downtown is increasingly more exciting.” ■ Barbara Balfour 49

! CREF Spring 2015 2015-03-24 9:22 PM Page 50

REITS THAT SURVIVE WILL BE THOSE WITH EQUITY TO SNAP UP

Darin Rayburn CEO, Melcor REIT.

In order for REITs in Western Canada to emerge from the current economic downturn, they will have to be in the position to take advantage of buying opportunities without resorting to seeking new equity, says Darin Rayburn, CEO of Melcor REIT.

EDMONTON DOWNTOWN CORE FULL OF PROMISE

Rob Blackwell Vice President, Leasing and Acquisitions, Aspen Properties

“Being competitive and entrepreneurial will certainly help you in this market.” 50

“The difference between the haves and the have-nots are those who have dry powder on their balance sheets and can react quickly versus those that have to go back to the equity markets to raise the money,” he says. “This isn’t our first rodeo. This is not the first time we have gone through this and it is definitely not the last time we will go through this.” Melcor REIT is specifically designed for growth, says Rayburn. “How that growth looks may change based on how the market is – but there are opportunities, and we continue to look for third-party opportunities in the market to acquire,” he says. “And, we are also doing what many other REITs are doing; we are looking at existing sites and trying to add density, also doing some of our own development to get that internal growth.”

There are many reasons to feel good about Edmonton in the long term, especially its downtown core, says Rob Blackwell, Vice President of Leasing and Acquisitions at Aspen Properties. “There’s a massive amount of construction in the arena district, and the transit system and amenities are getting better every day. All these developments are going to hopefully drive demand as tenants who are not currently downtown now will want to be,” says Blackwell. History has shown little correlation between oil prices and Edmonton absorption in the downtown market, says Blackwell. “We own almost one million square feet in Edmonton and not one tenant is directly in the energy business. Oil prices will affect the industrial side, and will certainly impact the government as their revenues are reduced. This is a huge driver of the Alberta market and carries a signiﬁcant footprint in downtown

There are strong opportunities to be had in Western Canada’s retail sector, especially in respect to adding onto current components, as on the purchasing side, prices are not expected to drop any time soon. “The elephant in the room will be the Edmonton ofﬁce market,” he says. “I wouldn’t build a building on spec right now, I would be leasing.” Instead of seeking brand-new industrial complexes, opportunities will arise on the secondary side, with large-bay industrial cutting into mid-bay industrial. “There are opportunities out there. You just really need to be on the ground and aware and be able to act quickly.” ■ Karen Petkau

office space so the impact will be felt – just much differently than it would be in Calgary. “Vacancy rates will rise; rental rates have already dropped in anticipation of that from where they were. There might be a little more softening, but the spot price is different than the future price as the vacancy is still two to three years away.” Over the next two to three years, about 15 per cent of the total downtown office inventory will be built. “That’s about 15 years of absorption in a market that has historically absorbed less than 100 thousand square feet in the financial core – this will be a challenge for anyone who owns an office building and all the older properties that will have to compete with new double A class developments. “Being competitive and entrepreneurial will certainly help you in this market.” ■ Barbara Balfour Canadian Real Estate Forum / SPRING 2015

! CREF Spring 2015 2015-03-24 9:22 PM Page 51

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! CREF Spring 2015 2015-03-24 9:23 PM Page 52

RESILIENT ALBERTA READY TO RESPOND TO OIL’S DECLINE

“During 40 years of economic forecasting, I have repeatedly witnessed Alberta’s resilience and ability to rebuild. That makes me optimistic on a five-year basis.” from last year, when Alberta recorded 3.5 percent growth.” The ﬂood of new oil supply means spells cutbacks for Alberta business investment, exploration and development. Production, which produces cash ﬂow, will be spared though. “Edmonton housing buyers are already wary,” Jestin reported. “In four months, the market went from boom to very cautious.”

Warren Jestin Chief Economist, Scotiabank Warren Jestin doesn’t downplay the adjustment ahead for Alberta – but he sees a solid silver lining. “There will be very little growth this year; maybe 0.5 per cent and perhaps 1.5 percent next year,” predicted Scotiabank’s Chief Economist. “That’s a big change

Whither shale? New extraction technology has poured an ocean of American shale oil into the market. Alberta’s fate rests greatly on how the ensuing price plunge plays out among developers south of the border. “At current prices, we inevitably will see big cutbacks there,” Jestin forecast. The worst shocks are likely over. Though oil prices will remain quite soft for the next few

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years, they probably won’t dip much further. “We anticipate an average price of $65 in 2016,” Jestin said. “A lot will hinge on U.S. shale oil development. At current prices, we will inevitably see big cutbacks. Will they settle below $80 or gradually rise above that threshold? We’re optimistic that prices will rise – but don’t expect $90-100 oil anytime soon.” Serendipitous timing The good news is that Alberta is extremely well-positioned to absorb the shock. Edmonton, like Calgary, will take a significant hit, but has more support as the seat of government. It has diversified, so strong sectors like education and technology will take up some of the slack. Alberta’s solid balance sheet is another huge plus, although the provincial government has already announced impending cutbacks. Canadian dollar could not have picked a better time to slide, though. While Jestin expects the Canadian dollar to remain volatile, he sees little bounce-back beyond the 80¢ level. The result? Alberta oil, priced in American dollars, will help shore up straining balance sheets. It will also perk up British Columbia and boost Ontario’s manufacturing sector. Coupled with record-low interest rates, a stronger U.S. economy than we have seen in many years will help Alberta to weather the storm well. “Edmonton will definitely see consolidation during the next two years,” Jestin acknowledged. “Obviously, absorption will be weaker and there will be a significant shakeout of weaker businesses, if this environment continues through this year and next.” Ultimately, though, the sky is not falling. “The commercial market and property owners have deep pockets, and are in strong hands,” he reassured. “During 40 years of economic forecasting, I have repeatedly witnessed Alberta’s resilience and ability to rebuild. That makes me optimistic on a five-year basis.” ■ Robert Frank

Canadian Real Estate Forum / SPRING 2015

! CREF Spring 2015 2015-03-24 9:23 PM Page 53

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STRATHCONA COUNTY PLANTS GROWTH PLANS

Gerry Gabinet Director, Strathcona County Economic Development and Tourism

“At Strathcona County, we have identified the need for more industrial and residential zoned land for the past four years.” Living next to a growing giant takes a lot of creativity to avoid being stepped on. For Strathcona County, that means turning to multi-ﬂoored, mixed-use retail and residential developments, as well as strategizing for future growth. “At Strathcona County, we have identiﬁed the need for more industrial and residential zoned land for the past four years,” says Gerry Gabinet, Director, Strathcona County Economic Development and Tourism, as the county’s response for Edmonton’s increasing demand for industrial and residential land. One of the major projects that emerged from deliberations was the formation of an Industrial Land Strategy, he says. The Strategy addresses many of the concerns that rose because of the capital city’s demand for industrial and residential land, including regulating non-industrial uses on industrial lands, introducing agri-industrial and limited-scale industrial

uses in agricultural areas, investigating the potential to re-designate and zone lands and planning for future growth. There are several new residential development areas underway, he says, as well as two major urban centres awaiting county approval. When asked if the county is looking to new trends to relieve some of the stress for land, Gabinet was quick to reply, “Yes! We have been working with Centre in the Park, located adjacent Strathcona County Hall, which will incorporate multi-ﬂoor, mixed-use retail and condo on six acres (2.4 hectares) of land,” he says. “And we are looking at other developments in Sherwood Park, as well.” There are more than $5 billion in industrial projects, as well as 300 single-family and 650 multi-family units, planned in the county for the remainder of 2015, going into 2016, he says. ■ Karen Petkau Canadian Real Estate Forum / SPRING 2015

! CREF Spring 2015 2015-03-24 9:23 PM Page 55

OPPORTUNITIES STILL ABOUND FOR SOUND REAL ESTATE PROJECTS

Brandon Kot Managing Partner, Canada ICI

Plunging oil prices aside, it’s still too early to panic about the future of real estate valuation in Alberta, says Brandon Kot, Managing Partner of Canada ICI. “Whenever oil dips below that $50 per barrel threshold, there’s a shock period that sinks in and everyone gets reactionary,” says Kot. “However, not enough time has passed for the market to make objective decisions.

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In terms of availability of capital, Kot believes lenders are starting to re-price their loans with a stronger focus on appropriate risk-adjusted returns. While there wasn’t much differentiation between lending terms on an A- asset, compared to an A+ asset last year, the margin will widen out this year, he says. “Risk will be priced more appropriately and different forms of capital will enter the market to play a bigger role. Conventional lenders have done the lion’s share of the lending throughout the last cycle; their www.realestateforums.com

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“Even in a sluggish economy, if you’ve got a strong track record, sponsorship and market acceptance of your product, you’ll get financing.” terms will tighten up as a result of perceived market risk, which will create a void for what borrowers are traditionally used to. “There will be opportunities created out of this slowdown. At the end of the day, real estate gets ﬁnanced on the basis of

fundamentals. Even in a sluggish economy, if you’ve got a strong track record, sponsorship and market acceptance, you’ll get ﬁnancing.” ■ Barbara Balfour 55

! CREF Spring 2015 2015-03-24 9:23 PM Page 56

SPRING 2015 / ISSUE 68

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! CREF Spring 2015 2015-03-24 9:23 PM Page 57

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! CREF Spring 2015 2015-03-24 9:23 PM Page 58

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! CREF Spring 2015 2015-03-24 9:23 PM Page 59

PROPERTY TRANSACTIONS BY ASSET CLASS GREATER TORONTO AREA 2014 vs. 2013 & 2012

Type

Volume (#)* 2014

ICI Land

409

Percent Change Percent Change Percent Change 450

Percent Change Industrial

Apartment

Hotel Percent Change Percent Change

71% $2,761

$2,052 35%

$1,654

$1,626

$272

1,972

$13,564

2% $592

-54%

-7%

182% $13,445

283

$210 $13,812 -3%

Recent Transaction

255 75

267

152 450

2014

388

2013

Land Sectors

370

2012

ICI Land Res. Lots Res. Land

429

2014

428

2013

Retail

Address: 339 Queen Street East Toronto

144

Apartment 2014

Sector:

Municipality:

481

2012

Hotel

$1,383

125

2012

Industrial

-20%

186

2013

Retail

$2,847

-35%

402

2014

-31%

$2,362

$1,078

200%

$797

$2,275

$2,048

218

381

2012

$2,535

$546

-26%

1,827

409

2013

370

-15%

2014

$3,025

481

1,974

152

-11%

-24%

Total

$2,068 -1%

185

$572

-22%

$2,049

33%

428

144

Percent Change

-18%

$2,829 -57%

388

429

Percent Change

2012

$1,206

$2,695

-41%

16%

2013

31%

125 49%

Retail

$1,338

402

186

267

-5%

30%

Ofﬁce

2014 11%

381

2012 -4%

Res. Lots

2IĆFH

255 11%

Res. Land

Land

2013

283

Percent Change

Value ($M)

Transaction date:

2013

185

2015-02-17

2012

218

Price:

2014

Price/sf:

2013 2012

$10,000,000

$303

7 $0.0B

$0.5B

$1.0B

$1.5B

$2.0B

$2.5B

$3.0B

$3.5B

*Asset Sales $1M and Greater

Published on February 26, 2015 ®

www.realnet.ca ®

! CREF Spring 2015 2015-03-24 9:23 PM Page 60

PROPERTY TRANSACTIONS BY ASSET CLASS GREATER CALGARY AREA 2014 vs. 2013 & 2012

Type

Volume (#)* 2013

2012

2014

2013

2012

104

$504

$498

$430

$584

$706

ICI Land Percent Change

Res. Land

Percent Change 69

Percent Change Percent Change

96 18%

Apartment

Percent Change 9 483

Percent Change

$51

$738 -63% $590

6% $187

-35%

441

$464 -60%

$35 44%

$3,187

-10%

$84 -58%

$3,135 2%

$4,815 -35%

Recent Transaction

2013

2012

46 69

2014 46

2013

2014

113

2013

2012

105

Sector:

/DQG 6HFWRUV

2012

Retail

ICI Land

Address:

5HV /DQG

802 - 818 16th Avenue S.W.

Municipality: Calgary

$SDUWPHQW 2014

Transaction date:

2013

2015-01-28 47

2012

Price: $22,750,000

2014 9

Price/sf:

2013 6 2012

-34%

$625

2014

$1,599

$277

104

2012

+RWHO

$254

20% 398

100

2013

47 -2%

21%

2014

$654

-9%

50%

Total

$435

105

Percent Change

-49%

57%

46 41%

Hotel

,QGXVWULDO

61 -25%

$909

$1,053 -33%

113

16% $460

27%

-28%

50%

Industrial

5HWDLO

-21% 33

-30%

Retail

76 32%

Ofﬁce

2IĆFH

17%

100

Percent Change

Land

Value ($M)

2014

$563 5

$0M

$200M

$400M

$600M

$800M

$1,000M

$1,200M

$1,400M

*Asset Sales $1M and Greater

$1,600M

Published on February 26, 2015 ®

www.realnet.ca

! CREF Spring 2015 2015-03-24 9:23 PM Page 61

PROPERTY TRANSACTIONS BY ASSET CLASS GREATER VANCOUVER AREA 2014 vs. 2013 & 2012

Type

Volume (#)*

ICI Land

2013

2012

2014

2013

2012

730

654

752

$1,345

$1,263

$1,280

623

$2,425

159

$520

Percent Change

12%

Res. Land

681

Percent Change 247

Percent Change 426

Percent Change

9 2,642

Percent Change

$191

2,584

2014

$838

$796 5%

$406

$596 -32%

$68

$6,765

$17 302%

$5,804 17%

730

$675 75%

180%

-2%

$5,615 3%

Recent Transaction

654

623

$1,180

26%

2,533

$472 -10%

60%

539

2012

752

247

2013

221

2012

159 426

2014

550

2013

Sector:

/DQG 6HFWRUV

444

2012

Apartment

ICI Land

2014

437

2013

465

Langara Gardens

2012

489

Municipality:

Address:

5HV /DQG

Vancouver

112

$SDUWPHQW 2014

Transaction date:

2013

2015-01-17

112

2012 +RWHO

$510

681

2013

,QGXVWULDO

112 -14%

2014

$846

-5%

13%

Total

$928

489

Percent Change

-9%

-21%

96 17%

Hotel

444 24%

$1,778

$426 22%

465

112

Percent Change

5HWDLO

39%

-6%

Apartment

-1% $1,622

50%

550

437

Percent Change

2IĆFH

-13%

-23%

Industrial

221 12%

Retail

Land

-13% 539

26%

Ofﬁce

Value ($M)

2014

Price: $101,857,500

Price/unit:

2013 8 2012

$328,043 (adjusted) 5

$0.0B

$0.5B

$1.0B

$1.5B

$2.0B

$2.5B

$3.0B

$3.5B

*Asset Sales $1M and Greater

Published on February 26, 2015 ®

www.realnet.ca

! CREF Spring 2015 2015-03-24 9:23 PM Page 62

activity related to energy measurement savings as well as actual performance improvements at the building level.” “REALpac also found the continued acceptance of benchmarking performance over time is a testament to the heightened knowledge and level of sophistication organizations are bringing to the management of their assets’ resource use.” So what’s it say? A key ﬁnding in the report is that normalized energy use over the past three years fell from 27.7 ekWh/ft2/yr (equivalent kilowatt-hours of energy use per square foot of building area per year) in 2011 to 25.5 in 2013. The 2013 result is actually slightly higher than the prior year but trendlines are more important, noted REALpac’s Julia St. Michael, the association’s director of research and sustainability.

ENERGY EFFICIENCY TRENDING THE RIGHT WAY: REALPAC Although individual buildings and properties are routinely singled out as energy-saving superstars, it has been difﬁcult to get a clear picture as to how Canadian commercial real estate is proceeding generally in terms of running buildings more efﬁciently.

By Paul Brent

First published in Property Biz Canada hosted at RENX.ca

Average Actual and Normalized Energy Use Intensity, Canada-wide, by Year Average Energy Use Intensity in ekWh/ft2/yr 32

The 2014 Energy Benchmarking Report, Performance of the Canadian Ofﬁce Sector published by the Real Property Association of Canada (REALpac) in February provides a national view of the industry’s energy conserving achievements by amalgamating the data from a sample of 350 buildings across the country. The report covers the years from 2011-13 and identiﬁes “the growth of interest and 2011 Actual Energy Use 2011 Normalized Energy Use 2012 Actual Energy Use 2012 Normalized Energy Use 2013 Actual Energy Use 2013 Normalized Energy Use

31.0

31 30

29.6

29.5

29 27.7

28 27 26

25.5

25.0

25 24 23

“The direction is pointed correctly and fluctuations even in the best performing buildings will be seen over time.” The improving trend bodes well when it comes to REALpac reaching its long-term goal for office buildings to achieve an energy consumption target of 20 equivalent kilowatt-hours of energy use per square foot of building area per year (20 ekWh/ft2/year). In 2009, when it first set that goal, it hoped it would be achieved by 2015, also known as the “20 by ‘15” energy reduction target. Progress slower than hoped for Progress may be slower than hoped for, but it is happening. “The top 25% of all buildings is getting better over time. At one time some people may have thought that the top buildings were performing at their max (in terms of energy efficiency). What we are seeing here is the top buildings continually improve as well,” said St. Michael. The report shows that in 2011, just 13% of buildings in the survey operated at or below the 20 equivalent kilowatt-hours mark. Two years later, 24% of the participating buildings hit that mark, a significant improvement over a short period. (The first year REALpac conducted its survey (2009), just 7% of buildings operated at 20 equivalent kilowatt-hours or below).

22 21 20 2011

2012

2013

“More buildings out of the whole population are performing better every year,” said St. Michael. Canadian Real Estate Forum / SPRING 2015

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“Some of the buildings that aren’t performing as well can hopefully gain some inspiration from the fact that there is a lot to be done and it is possible – and seems to be possible for more and more buildings over time.” REALpac does not collect data on what building operators are doing to reduce their energy efﬁciency, but the association does have a pretty good idea what is going on building by building. “Anecdotally, just looking over the past couple of years, building operations have been a large focus but it is not just that,” she said. “We are seeing many more collaborative efforts and activities with tenants and landlords: Race to Reduce initiative, tenant engagement, surveys. It has really blossomed.

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“It is not just that people are doing the same old thing. They are doing more, and more and more.” Not just shiny and new The office building boom in cities such as Toronto and Calgary should also help the industry reach the 20 by 15 goal, be it 20 by 20 or 20 by 25, but St. Michael said we should not be counting on new, hopefully more energy efficient, towers to bring the average up. She noted that reports out of New York, where the building stock is considerably older, plus REALpac’s results on energy use versus age of building, shows that older buildings can do a lot to improve energy efficiency. “Definitely the ones being built today and to green buildings standards, should perform better, but I think that there is a tremendous opportunity for the existing building stock to up their game. “Depending on the kind of data that you look at, and if you dig deep, building operations and ongoing best practice management of the building can probably have a bigger impact than if it is new or old.” The details The 2011 Survey results show 371 office buildings with data for the calendar year 2011 while the 2012 and 2013 surveys have 277 and 279 buildings worth of data, respectively, which indicates a decrease in participation. REALpac takes heart, however, as “the individual building metrics and Canada-wide trends illustrate new effort and enthusiasm for energy consumption measurement, monitoring, and improved performance.” With five years of data under its belt, and next year’s coming this summer, REALpac hopes it can tease out more information from the data.

REALpac is also working on a water-usage benchmarking survey that is also related to building performance. ■ www.realestateforums.com

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“It would be great to do a little more of a deeper dive on year over year same building trends to see if we can get some clearer relationships out of it,” she said. “We would like to look deeper into the Green Building Certiﬁcation section and like I said we haven’t done any statistical analysis in any of our [data]. I think that we could add a little more rigour now that we have more data.”

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! CREF Spring 2015 2015-03-24 9:23 PM Page 64

REAL PROPERTY INVESTMENT CERTIFICATE: THE FUTURE STANDARD IN REAL ESTATE EDUCATION

Edward Byers Manager, Professional Development & Events, REALpac

In 2010, REALpac identified the industry need for a real estate education option that was time-efficient, easily adaptable to new and emerging trends, and guided by Canada’s commercial real estate leaders. As a result, the REALpac Professional Development Institute was born. Its continued success stems from REALpac’s ability to secure first-class instructors and attract true industry-expert speakers, and its initiative to constantly evolve the program to suit the particular needs of our industry. The strength and caliber of professionals who drive Canada’s commercial real estate industry have pushed the Association to expand its offerings and introduce the new Real Property Investment Certificate (RPIC) program consisting of six, two-day courses that solidify commercial real estate fundamentals in its core courses, and allows for personalization through the elective options. The RPIC program is intended to allow industry professionals the ability to focus on how each department is intertwined to better understand the industry in its entirety. The main goal is to cultivate well rounded professionals by offering cross-competency integration. Participating in 6 courses allows participants to better understand senior decision making that impacts all areas of a company. 64

The four anchor courses have been carefully selected and determined by industry leaders to provide a robust overview of the various commercial real estate dynamics and functions. Candidates who have completed these courses will come away having built a stable foundation on which to continue developing their career and roles for their companies. The core courses include: • Capital Markets & Investing • Finance & Investment in Commercial Real Estate • Valuation in Commercial Real Estate • Real Estate Law To complete the certificate and allow for personalization, candidates will have their choice of two elective courses among five courses of different specializations. The elective options include: • Lending in Commercial Real Estate • Commercial Real Estate Asset Management • Real Estate Development • Real Estate Leasing • Sustainability in Commercial Real Estate The Real Property Investment Certificate allows industry professionals to broaden their base and advance their career and company. “Canadian real estate companies need a cost-effective way to train their people and ensure those making real estate decisions have a baseline of knowledge to make the best decisions”, said Michael Brooks, CEO of REALpac. Small class sizes offer plenty of time for networking and collaboration among peers, guest speakers and top tier faculty. REALpac’s unique professional development offerings will facilitate and fast-track professionals who are transitioning into new roles, enabling effective succession planning and ensuring baseline knowledge for all staff. REALpac has high expectations for the program. Brooks continued: “REALpac’s new national Real Property Investment Certificate program delivers on all counts and is poised to become a Canadian benchmark. In a country without masters programs devoted to commercial real estate, and few MBA’s with a real estate

specialization, this is the solution to comprehensive continuing education needs in our industry.” Students will come from a variety of fields within the industry and have different levels of experience. The program will explore different sectors to help better understand how each functional area relates to the participant and their current role. All courses will be 2 days in length (9am-5pm) held at Ryerson University (Ted Rogers School of Management) in Toronto. Courses are taught through a mix of lecture and case study methods, utilizing instructors who are leaders in the classroom and who are pushing boundaries within the industry. Each instructor will provide a landscape of existing benchmarks, reporting standards in the industry and how these methods and approaches are implemented within different companies. Each course will be offered once a year with multiple offerings of the same course occurring if there is demand. For over forty years, REALpac has remained the voice of Canada’s commercial real estate industry through its intelligent approaches to industry issues, influential reach domestically and internationally, and informative reporting to its members. The Association is energized and eager to further influence our sector through the Real Property Investment Certificate program. Whether just entering the industry, transitioning roles, or seeking further understanding of different disciplines, REALpac’s new certificate program will give you the tools you need to succeed and continue to advance Canada’s commercial real estate industry. For more information and to enroll, visit: realpac.ca > Professional Development > Real Property Investment Certificate Program ■ Edward Byers, Manager, Professional Development & Events, REALpac, ebyers@realpac.ca, 416-642-2700 x221. Canadian Real Estate Forum / SPRING 2015

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