Canadian
SEPTEMBER 2009
APARTMENT INVESTMENT R
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P
O
R
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Taking the pulse of the apartment market Source: CMHC
2009
2008 5% 4 3
Halifax
Quebec
Montreal
Ottawa
Saskatoon
Calgary
Edmonton
Vancouver
0
Victoria
1
Toronto
2
• The new normal? • Tenant retention 101 • Apartment marketing goes digital September 16, 2009 Metro Toronto Convention Centre
Your CMHC experts for today’s market
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Publishers’ Letter
Turning the corner QUEBEC APARTMENT INVESTMENT CONFERENCE February 2010 CANADIAN APARTMENT INVESTMENT CONFERENCE September 2010
Except for a few especially hard-hit cities like Windsor, Ont. the multi-res vacancy rates held fast in the 2 percent range during the recession and even now as the housing market is coming back to life and normal is the new normal.
For more information on the Conferences, check our website at www.realestateforums.com
Contents Publishers’ Letter
3
Everyone likes “multi-res” – with good reason
4
Tenant retention 101 (simple stuff, but often overlooked)
6
The “new normal”???
10
Caveat emptor rules on both sides of commercial property transactions 14 Calgary’s condo conversions collapse 16 It takes a lot of energy to conserve energy 18 Apartment marketing going, going, gone digital
CANADIAN APARTMENT INVESTMENT REPORT Frank Scalisi Director of Sponsorship and Advertising Sales Phone: 416-512-3815 Email: fscalisi@mmart.com MERCHANDISE MART PROPERTIES, INC. Christopher G. Kennedy President MERCHANDISE MART PROPERTIES CANADA, INC. Steven Levy Senior Vice President
www.mmpicanada.com ©2009 MMPC Expositions ULC.
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T
HERE IS ALWAYS THE POSSIBILITY THE SLOW recovery might be shattered by events we can’t predict, but for now it seems to be holding. This Canadian Apartment Investment Conference once again has a roster of some of the best informed, most experienced and articulate speakers in the industry and we’re delighted to be able to present them at this forum. They will tell you about the vacancy rates, if investment interest in multi-res properties is returning, whether this is the right time to develop apartments, all about retrofitting your buildings and making them “green”, how smaller portfolios can become bigger portfolios, government regulations and how more novel marketing techniques can make a difference in sales and income. But it shouldn’t be them talking to you in a vacuum. You have the rare opportunity of asking them for answers to questions they might not think of, and asking is the only way of finding out. The conference is bound to be valuable for you, and all the more valuable if the audience participates enthusiastically.
This conference and the others we present during the year may look as if it wasn’t too difficult to produce, but take our word, it requires the effort of many people – those from the apartment industry who advise us on the topics and speakers, our staff who work at it for months and the external resources who add other dimensions. We couldn’t do it without them and they have our thanks. We are also grateful to the advertisers in the magazine and our sponsors, whose support make the difference between a merely good conference and a great conference. Our warmest welcome to all of you.
Laura Aaron
George Przybylowski
Senior Director MMPI Canada laaron@mmart.com
Vice President MMPI Canada gprzybylowski@mmart.com
Everyone likes “multi-res” – with good reason By Albert Warson
The multi-res or rental apartment real estate asset class across Canada is so stable, so indifferent to recessions, so favoured by investors and so essential for roughly a third of the national population who otherwise wouldn’t have places to live, that it rarely makes the news.
R
ENTERS CAN’T MUSTER A DOWN PAYMENT on a house or condo, nor could they manage to keep up the mortgage payments. “Home ownership” sounds heart-warmingly comforting – as long as the mortgage on the property doesn’t go into default. It doesn’t get much worse than being forced out of what you believed was your home. There would likely be far more families looking for a place to live if it wasn’t for the “shadow market” of investor-owned units in condos which they rent. About 10 percent of the total condo population in Toronto are in fact said to be tenants in investor-owned units. Developers try to avoid losing money, and that’s what usually happens when they try building apartments – except perhaps in small cities where the land is relatively cheap and there is enough demand.
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Canadian Apartment Investment Report / SEPTEMBER 2009
Even if some developers devised an ingenious formula for financial success, they still need financing and are just as vulnerable to a credit crunch as any other developer. They are in fact only now starting to find bankers’ tight grip on loans beginning to relax. CMHC’s participation as a mortgage lender and insurer also lends more certainty to such enterprises. The proof of apartments’ value in the housing mix is a more or less constant vacancy rate over recent years, across Canada, and with few exceptions brought on by local circumstances. Those rates, identified in reliable CMHC surveys, have tended to hover in the 2 percent range for years, although there are local blips and such wild swings as the jump to 14.6 percent in Windsor, Ont. last year as the auto sector fizzled.
Tyler Seaman
Mark Kenney
Rosewell Gardens in midtown Toronto represents a new generation of rental apartment buildings. Set among two acres of gardens, the property features 8 and 9-foot ceilings, and individually-controlled air-conditioning and heat, among other attractions.
“Multi-res investment markets in Ontario, Quebec and Atlantic Canada were relatively unchanged since the global real estate credit crunch last fall,” says Tyler Seaman, vicepresident, global property investment, Oxford Properties Group Inc., Toronto. “The operating fundamentals for the multi-res sector across Canada haven’t been hit as hard as other asset classes, and look as if they will be even better for owners this year.” Out west there was little change in multi-res markets in British Columbia, but a “discernible” change in Calgary, he adds. That somehow doesn’t sound right, but it appears a really hot rental apartment market over the past two years was cooled by a combination of falling oil prices and developers converting apartment rental buildings into condos. Scale also has something to do with the general success of the apartment building industry. Toronto-based Canadian Apartment Properties Real Estate Investment Trust (CAPREIT) owns and operates 29,000 apartments in rental properties from Vancouver to Halifax, For the first six months of 2009, its operating revenues rose 4.5 percent to $164.2 million, compared to $157.1 million for the same period last year. The results reported in CAPREIT’s most recent quarterly statements showed percentage gains one might think
modest, but for that industry they are solid. The REIT is in fact second only to Calgary-based Boardwalk REIT for portfolio size and income. Mark Kenney, CAPREIT’S chief operating officer, describes it somewhat more lyrically as a “fully-internalized, growth-oriented investment trust owning freehold interests in multi-unit residential properties, including apartment buildings, townhouses and land lease communities located in or near major urban centres across Canada”. How does CAPREIT do it? Kenney’s answer sounded more logical than unusual: “effective marketing strategies, knowing the demographics of your buildings’ neighborhoods, how to appeal to that demographic, advertising on the Internet or in publications, contacting local employers to make sure they know about your building…all contribute to strong tenant retention and occupancy. You can rent more easily with satisfied existing residents in a competitive market,” he says. Isn’t that so obvious, so fundamental operationally, that it goes without saying? he was asked. “Yes, it is fundamental,” he replied, “but it’s the execution that is key, whether it works or doesn’t.” CAIR
Albert Warson is a freelance writer/editor specializing in real estate development-related subjects. Canadian Apartment Investment Report / SEPTEMBER 2009
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Mark Kenney
Rick Ellis
Tenant retention 101 (simple stuff, but often overlooked) Experienced rental apartment building managers are taught to think of their residents as a single community, rather than individual occupants. To complicate their professional lives, some units are emptied by residents who have a baby, decide to buy a house, get posted to a job elsewhere, or find a better deal in another building. Regardless, resident managements are expected to quickly fill vacant units with rent-paying residents. The question is how, beyond effective maintenance?
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Canadian Apartment Investment Report / SEPTEMBER 2009
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WELL, CERTAINLY NOT BY OLD-FASHIONED thinking. Mark Kenney, chief operating officer, Toronto-based Canadian Apartment Properties Real Estate Investment Trust (CAPREIT), with 29,000 apartments in rental properties from Vancouver to Halifax, says multi-res building managers are aware of such concepts – communications, for example, but may not always be able to effectively implement them. He says their apartment managers routinely circulate information, arrange meetings with residents, and survey how they feel about, such tenant-relations disasters as the deafening noises, and whirling dust when the time comes to remove and replace balcony panels. It would be surprising if such practices weren’t long established at more sophisticated apartment properties, but from what Kenney says it isn’t universally applied. “We ask residents how they actually perceive us, not
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CAPREIT hosted a barbecue for about 500 residents at its White Oaks community, Whitby, Ont. in July. The town mayor and some councilors served hot dogs and local police and fire fighters joined the annual festivities. Children 4 to 12 years of age were invited to share the fun.
Kenney’s disillusionment with slack management practices is shared by Rick Ellis, president, Ellis Consulting Group, Dallas, Texas, which provides consulting and marketing services to the multires sector across North America. His clients include apartment building owners who plan to convert them into condos, and more generally advising landlords on ways to increase occupancy and reduce turnover. “We advise clients on how to make sure their leasing promises are fulfilled beyond residents’ expectations. We put things in place they can maintain. Unfortunately, these services start out well” he says, “but then they run out of energy and enthusiasm and disappoint residents who regard it as lackluster performance.” CAIR Albert Warson
how we think we’re being perceived. We put on barbecues, parties and other social events for residents. We also can’t assume they know how they will be affected by what we’re doing, nor deny them an opportunity to react. Landlords fail by not keeping residents informed,” Kenney says. And by not bringing them together several times a year to make them feel much less isolated.” Nevertheless, management and some tenants are bound to disagree about some issues, and if they can’t sort it out, they can take their dispute before a provincial landlord and tenant tribunal to settle. Kenney says the provincial government and city of Toronto “have created an adversarial relationship between landlord and tenants because of their legislation.” Competition would have taken care of their dispute, he says, i.e. if residents didn’t like the apartment management’s policies, they could find a more suitable place. But that still leaves disputes over rent payments, deposits and other financial differences to settle. Turning to the provincial tribunal to resolve such differences, Kenney says, “is a big, big mistake. We wouldn’t do that to recover rental arrears. “It’s a wrong, very costly [presumably legal and related costs] way to do it. Far better to get a resident to realize they can’t afford their apartment and to move into one they can afford as soon as possible. We help them realize their circumstances.” Legislation, he adds, doesn’t adequately deal with residents’ problems. “It can’t be done by the owner’s policy, but rather one-on-one [discussion] with residents instead,” he says.
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Canadian Apartment Investment Report / SEPTEMBER 2009
Chris Milne
C
HRIS MILNE SAYS YES, LENDERS ARE STARTING TO thaw out from the warmth of the revived housing market in Canada, which came out of its winter-long hibernation around Easter this year and into what he calls a “new normal” environment – one that is much more attuned to the reality of what buyers can afford and a more realistic level of housing production. “The pace of housing sales and production in 2007 was unsustainable,” says Milne, vice-president, real estate lending, eastern Canada, Scotiabank, Toronto. “More units were delivered than there were buyers for them, notwithstanding high levels of immigration and household formation. Buyers were scared to death and disappeared in November [last year], but all that changed around Easter weekend. Now we’re going back into to a more normalized supply and demand balance.”
The “new normal”??? Is this the time for apartment developers to climb out of their foxholes and start building again? Does it make sense for them to approach lenders for construction loans when they were flash-frozen only last fall?
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Canadian Apartment Investment Report / SEPTEMBER 2009
Milne is responsible for new construction loans in Ontario (outside Toronto) and Quebec, and commercial mortgages across Canada. He recalled the hectic volumes of new construction in 2007, before the financial crisis blanketed the world last fall and when construction loans almost dried up. The criteria for loans at the time, he recalls, became so tight developers didn’t even bother to apply. That’s changing, says Milne. Lenders have relaxed somewhat and are once again considering condo deals, in a more positive environment encouraged by stock market gains and much-restored buyer confidence. His bank in fact had a record June and July for home purchase loans. “The market is back for developers, with projects coming off the shelves as the home building industry starts up again, especially in Vancouver, and a little bit in Toronto,” Milne says.
At one point during the lending and development hiatus, developers in Ottawa and Toronto considered alternatives to condos and thought about building multi-res apartments, but when the market started to revive over the summer they went back to more profitable condo development. “The economics of multi-res are tough even at the best of times. Land is so expensive it doesn’t make economic sense, unless the proposed projects are in, for example, southwestern Ontario, in cities like London and Kitchener-Waterloo, where land is cheap and the condo market isn’t overheated.” And the timing? It’s not a better or worse time to build apartments. Nor is it opportunistic right now, although land is available in smaller communities, he says. But any developer heading back into development will no doubt remember their frustration over the “nightmarish” experience of waiting an inordinately long time for municipal approvals so they could proceed with their projects. Milne attributes the delays to the amalgamation of cities, which was supposed to speed up and otherwise improve the development process.
There is some confusion about which planning department to take development applications to, he says, but the greatest frustration is over the time it takes to get anything approved. And fees to consultants to try to hasten the process adds to the cost. What about mixing condo and rental units in the same building? Milne doesn’t believe that’s a good idea, that it detracts from the value because people wont pay as much for a condo if there are less costly rental units in the same building. They can be on the same site, but in separate buildings. He cited Minto’s Prince Arthur condo development on Avenue Road near Bloor Street, and its furnished apartment rental building at Bay and Yorkville Streets, a few blocks apart. Both are extremely successful, he notes, but neither one would have worked if they had been combined in the same building. And yet many condos have a small percentage of renters living in units investors bought in the same building to build value at the sublessor’s expense. It doesn’t have to be a cats among pigeons kind of scenario. CAIR Albert Warson
Legal counsel from a business perspective
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Canadian Apartment Investment Report / SEPTEMBER 2009
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INFORMATION TO BUILD ON!
Canada’s Leading Annual Real Estate Conferences
Hear informative speakers! Stay up-to-date on the latest trends! Make personal contacts!
Be Sure to Take Advantage of Our Upcoming Events! Be Sure to Take Advantage of Our Upcoming Events!
Ottawa Real Estate Forum October 6, 2009 • Hampton Inn Ottawa Ottawa Real Estate Forum October 6, 2009 • Hampton Inn Ottawa
Calgary Real Estate Forum October 21, 2009 Calgary RealConvention Estate Centre Forum Calgary TELUS October 21, 2009 Calgary TELUS Convention Centre
CALGARY REAL ESTATE LEASING C CALGARYOctober RONFERENCE EAL ESTATE LEASING 22, 2009 C ONFERENCE Calgary TELUS Convention Centre October 22, 2009 Calgary TELUS Convention Centre
Toronto Real Estate Forum December 1 - 3, 2009 Toronto Real Estate Forum Metro Toronto Convention Centre South Building December 1 - 3, 2009 Metro Toronto Convention Centre South Building
Global Property Market December 1, 2009 GlobalConvention Property Market Metro Toronto Centre South Building December 1, 2009 Metro Toronto Convention Centre South Building
Montreal Real Estate forum March 23, 2010 • Fairmont Queen Elizabeth Montreal Real Estate forum
September 15, 2009 Metro Toronto Convention Centre North Building September 15, 2009 Metro Toronto Convention Centre North Building
September 16, 2009 Metro Toronto Convention Centre North Building September 16, 2009 Metro Toronto Convention Centre North Building September 17, 2009 Metro Toronto Convention Centre North Building September 17, 2009 Metro Toronto Convention Centre North Building
February 2010 Fairmont Queen Elizabeth, Montreal February 2010 Fairmont Queen Elizabeth, Montreal
March 23, 2010 • Fairmont Queen Elizabeth
MONTREAL REAL ESTATE LEASING CONFERENCE March 24, 2010 • Fairmont Queen Elizabeth MONTREAL REAL ESTATE LEASING CONFERENCE March 24, 2010 • Fairmont Queen Elizabeth
edmonton Real Estate Forum May 4, 2010 • Shaw Conference Centre edmonton Real Estate Forum May 4, 2010 • Shaw Conference Centre
vancouver Real Estate Forum May 13, 2010 • Hyatt Regency Hotel vancouver Real Estate Forum May 13, 2010 • Hyatt Regency Hotel
March 3, 2010 Metro Toronto Convention Centre North Building March 3, 2010 Metro Toronto Convention Centre North Building
April 27, 2010 Metro Toronto Convention Centre North Building April 27, 2010 Metro Toronto Convention Centre North Building
Sponsorship and advertising opportunities available. Contact Frank Scalisi at fscalisi@mmart.com or 416-512-3815
www.realestateforums.com
Sponsorship and advertising opportunities available. Contact Frank Scalisi at fscalisi@mmart.com or 416-512-3815
09-05209-052
For details on these conferences and to register online visit For details on these conferences and to register online visit www.realestateforums.com
Caveat emptor rules on both sides of commercial property transactions Nobody in their right mind would buy an older house without a professional sweep to check for deficient roofs, leaking basements and windows and other lurking structural problems. Nobody in their right mind would try to palm off their house to a potential buyer without the same physical investigation to prove the integrity of both the property – and themselves – as vendors. Would you buy a used house from this vendor?
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Canadian Apartment Investment Report / SEPTEMBER 2009
David Bloomstone
A
NOTHER ERA OF FRENZIED PROPERTY ACQUISITION HAS just passed by – until the next round of overheated real estate comes around. The demand is still there but it’s been moderated while prices and cap rates fluctuate. Also not nearly as hurried now that a more cautious, more orderly process has settled in – where sellers are more up front about their property and potential buyers take their word for it but have their own inspections nonetheless. What, then, do commercial property vendors do to primp their product for maximum market exposure and hopefully bring in many serious buyers with the financial means to clinch a deal? David Bloomstone, vice-president and director, commercial brokerage realty group, TD Securities, Toronto, does exactly that on behalf of sellers “to best position their property before they go to the marketplace. “They must do a building condition report on the roof, windows, balconies, underground parking garage and other vulnerable parts of the building. They are then able to find out what they need to spend to fix these deficiencies, or at least be able to tell a prospective buyer what to expect in the short term. That allows the seller to be able to handle any price adjustment a buyer might be expecting as they do their due diligence,” Bloomstone says. There may be a difference in the renovation cost estimates compiled by the two sets of building engineers, which is where Bloomstone’s experts come in. “We’re all about full disclosure. We don’t want anyone to waste their time [not to mention money] by being unaware of issues affecting the property and what kind of capital is required in the near term. “We provide advisory services to the seller, to maximize the price and negotiate the sale on their behalf. If an owner has an engineer’s report indicating repairs will cost $1 million and the buyer has one which says $1.2 million, we have to reconcile the cost of those two assessments. “We start with an environmental report on the presence of asbestos, underground storage tanks, chemicals that have leached into the soil from, for example, dry cleaning facilities, and other sources of soil contamination,” Bloomstone says. Lenders – pension funds, public real estate companies and others – obviously also need to know exactly what could happen down the investment road. “After all, they could be financing a project that will need costly repairs in the future, sometimes not that far off, and must therefore determine what the challenges might be. Buyers should do their own underwriting and review of the property as well.” By the time all the different parties have investigated the condition of the property and its site for contamination, the owners would have a road map of what needs to be fixed and the price, even if the conclusions vary somewhat. You wouldn’t buy a used car without an independent mechanic looking under the hood. Sort of the same thing in the commercial property world. CAIR Albert Warson
David Bloomstone has some useful advice for buyers in the market for commercial property, to avoid serious financial risks, although there are no guarantees. He is vice-president and director, commercial brokerage realty group, TD Securities Goup, Toronto. He was thinking of a 200-suite apartment building on the market, but with $3 million worth of deferred maintenance work which would have clearly affected the purchase price. Not exactly an irresistible opportunity, although CMHC shared some of that cost to cover some of the repair and laid on more CMHC insurance coverage. The buyers obviously had to put more money into their offer because of the repairs. They would not have covered the whole $3 million and the deal would have died. The point? You can’t ordinarily pass along repair costs of that kind of magnitude, or even less but still daunting, and get out of deducting some of it from the sale price. Also, make sure the revenue stream is sustainable, analyze all the costs and expenses, to keep them in line, make sure there are no municipal work orders against the property and look at existing financing on the property which can be assumed or discharged. Consider the debt on the property and its physical condition, check on any environmental issues and the sustainability of cash flow. It gets easier once you’ve done it a few times.
Canadian Apartment Investment Report / SEPTEMBER 2009
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Calgary’s
condo conversions collapse 2008 might well be called the Year of Rental Apartment Building Conversions to Condos in Calgary. That’s when they shot up to an estimated 90 per cent of transactions in that residential asset class. By this year they shot down to practically nothing. The market had become saturated with them in a city where people tend to prefer to live in their own single family home or townhouse with some space around it and not in a cramped rented apartment. It may have become a booming city awash with corporate head offices and more on the way, but the spirit of the open range and nights under starry skies, lives on.
T Tim Sommer
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he net effect of that sudden rise and fall of conversions, says Tim Sommer, vice-president, investment sales, capital market group, Cushman & Wakefield LePage Inc., Calgary, was “that cash flow buyers, specialty buyers and housing societies were virtually priced out of the market”. Didn’t anyone notice that the stock of rental apartments was reduced and left fewer choices for people who can only afford to rent because they can’t afford to buy a condo or house? (There were in fact some 10,000 units turned into condos over the past 10 years.) “There was some discussion about it, but nothing came of it,” Sommer says. “The economy takes care of that”, by which he means everyone finds the housing they can afford, depending on employment opportunities and the health of the local economy. Finding a decent apartment was a problem in 2005 and 2006, he acknowledges, so the provincial government doubled the notice required to vacate
Canadian Apartment Investment Report / SEPTEMBER 2009
tenants, to give them six months to find another place if the landlord wanted to regain their apartments. Although the vacancy rate for rental apartments in Calgary is rising marginally, there are still enough of them to accommodate the demand. Investors have also created an additional 46,000 rental units added to the stock by way of investor rentals. Because Calgarians have a propensity to own, rather than rent, the city in fact has the highest home ownership rate and likely the lowest per capita stock of apartments in Canada. The condo market is slow right now, and as such projects have been put on hold. Sommer says he doesn’t know of any conversions going on right now. Why? Because there aren’t as many people moving to Calgary at this time, and in fact there are more people leaving the city because of a lack of employment opportunities. With condo conversions slowing down, cash flow
buyers are returning to the Calgary market, Sommer says, and are looking for 5 to 6 percent cap rates for prime innercity properties and 6 to 7 percent for secondary or suburban properties. “CMHC is still the dominant lender, but there are also local Alberta-based lenders, and even some banks looking at apartment financing because of the increase in cap rates in the province. Institutional investors would like to get into this market, but the availability of institutional type product is in short supply in Calgary. The expectations of vendors in terms of pricing is also discouraging,” he says. Moreover, institutional buyers aren’t able to find product or the cap rates don’t make sense to them. On the other hand, credit unions, which have a stronger client base in western Canada, have always been active lenders. Sommer noted the example of a “housing society”, similar to a credit union, buying the Sundial Apartments in downtown Calgary at a cap rate of about 5 percent. A drop-in centre, supported by the provincial government and donors, bought the grade level retail part of the building. A drop-in centre? Yes, there is room in the Calgary real estate market for small organizations who provide housing for those who have a terrible time finding a place to live. It’s not all oil wells and expensive steak houses. CAIR
Calgary Condo Conversions from Rental Source: CMHC 2,000 1,750 1,500 1,250 1,000 750 500 250 0 1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Calgary CMA Apartment Vacancy Rate (%) Source: CMHC 5 4 3 2 1 0
1995
1996
1997
1998
1999
2000
2001 2002
2003
2004
2005
2006
2007
2008
2008f
Albert Warson
CB Richard Ellis Limited National Apartment Group Canada’s leading Multi-Residential Real Estate Group. Please visit our website at www.cbre.ca/nag-canada or contact us to learn more about how we can help you. Vancouver :: David Ho 604 662 5168 david.ho@cbre.com Calgary :: Grant Potter 403 750 0528 grant.potter@cbre.com ::
Harvey Russell 403 750 0525 harvey.russell@cbre.com
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Waterloo Region :: Nick Holzinger* 519 744 4900 ext 227 nick.holzinger@cbre.com London :: Kevin W. MacDougall* 519 673 6444 x240 kevin.macdougall@cbre.com
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Canadian Apartment Investment Report / SEPTEMBER 2009
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Canadian Apartment Investment Report / SEPTEMBER 2009
It takes a lot of energy to conserve energy
Tom Chessman
There are so many green building and energy conservation programs, so many incentives and grants piling up around the country these days that it is entirely possible to miss some of them. Tom Chessman, project manager, private multi-building sector, energy efficiency office, City of Toronto, doesn’t think everybody needs to be up to speed with all the incentive programs, only aware of them. Otherwise all the layers of programs could be confusing.
P
ROGRAM TORONTO, FOR EXAMPLE, IS A GOOD one to know, even just the highlights, because it is designed to advise owners of about 1,000 buildings in the City of Toronto no higher than 10 stories, also 5,468 apartments in condo buildings and 179,000 apartment units in rental apartment buildings. If the benefits of the program can be demonstrated, it is a large enough sample or constituency to validate the effort. Green roofs? Chessman says the city’s green standard program is more important because “it is designed to encourage developers to build more efficient buildings. They want to build a cheaper building and walk away. They’re not really worried about ongoing operating costs. The green standard is an effort to raise the bar, in terms of what is required for a base building, promoting efficient design and providing incentives as well.” The city is trying to communicate with anyone who would benefit, notably property management companies with competent managements, encouraging them to implementing all those techniques. They don’t have to do it alone either, because many investment companies hire companies to perform that function, Chessman says. “I suggest building owners look beyond a simple
retrofit, especially when they qualify for incentive programs that offer other measures to assess different options,” he says. Such as? “Whether lighting, variable speed drives (which pump air into buildings and their corridors to equalize the pressure with the outside pressure to get rid of smells, and need less power), or other pieces of equipment which can benefit from lower energy consumption capability such as carbon monoxide monitors, space cooling, chillers and insulating variables.” There is still a lot of hand holding required for people who own and manage these buildings and who are faced with a whole spectrum of new technologies. The message has been brought to large building owners and managers, the early adopters who joined the market for new products, who want to be on leading edge. The messengers are now down to small buildings and small investors, who generally have no interest in these issues, he says. “In the 1980s people couldn’t believe anyone would pay $20 for an [energy efficient] light bulb. The market was very immature in terms of what energy costs were. They were buying light bulbs for $1. That’s obviously changing quickly.” CAIR
Albert Warson Canadian Apartment Investment Report / SEPTEMBER 2009
19
CANADA’S LEADING
REAL ESTATE FORUM Magazine Strategic Information for Real Estate Executives
Turbulent Economic Times Require Targeted Marketing to Influential Real Estate Decision-Makers • The Canadian Real Estate Forum magazine is an official conference publication building on the powerful brand and strong awareness that the Forum has across the country. • This unique magazinestyle publication disseminates information that will be discussed at the Forum in a high quality print W to a targeted group of senior real estate executives that includes everyone attending the conferences as well as to a much broader national audience. • Three issues per year. Spring issue (Edmonton, Montreal, and Vancouver), Fall issue (Calgary and Ottawa), Winter issue Toronto Real Estate Forum. As a result, this one of a kind program enables your corporate message to reach over 5,000 key real estate executives and professionals across Canada. • The magazine has a strong shelf life by offering high quality articles and analysis on the major themes and topics examined at a conference along with comments and insights from leading experts and well-known practitioners. • There is no other national business magazine that is specifically targeted at all the key Canadian real estate decision-makers who are active in office, industrial, retail and multi-unit residential sectors across the country. This is the unique element that the Canadian Real Estate Forum offers you – an opportunity to reinforce your marketing message to a very exclusive audience at a very affordable rate. R
Okay, Saskatchewan has potash, oil and gas, uranium, wheat, the Saskatchewan Roughriders
Non-Residential Building Permits
and a lot of wide open, unspoiled and uncluttered spaces. But the fact that Saskatoon is at the top of a list of Canadian cities for growth in GDP this year, according to a study recently prepared by the Conference Board of Canada, needs a credible explanation.
250
OTTAWA (millions $)
200
150
100
Mario Lefebvre
50
0
92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07
As for the Board’s Metropolitan Outlook-Autumn 2007study of GDP growth in Canadian cities this year, he says the disparity between economic growth in cities west of Winnipeg and east is a first for the Board. Of 13 metropolitan areas, the top seven were west of Ontario. The others were in Ontario and east. Ottawa ranked number 10 but the general consensus is that Ottawa is one of those “steady as she goes” kinds of cities, growing at a rate of 2.5 to 2.75 percent year after year. The cities with the fastest-growing GDPs in Canada, according to the Board’s study of the country’s largest census metropolitan areas, are out west, and the percentages of growth, are shown as follows:
hile Saskatoon has little if anything to do with Ottawa and Calgary (except hoping to lure its workers back from Alberta) the Board’s study is a reminder that nothing can be taken for granted. But first to Ottawa, Mario Lefebvre, director, Metropolitan Outlook Service, The Conference Board of Canada, Ottawa, says the city’s high-tech sector, concentrated in Kanata, is recuperating well from a meltdown in the late 1990s and early 2000. Housing starts are trending down but will still hit 6,000 housing units this year, not, he says, “like a record 10,500 units in 2004”, but nothing to be embarrassed about.
6
Ottawa’s 2.2 percent GDP growth this year, compared to 2.8 percent last year, is not “recordbreaking, but not a catastrophe either”. The public administration [federal, provincial and municipal civil servants] sector represents 20 percent of the city’s economy, and although it is shrinking, Lefebvre says it “won’t break the bank with respect to overall activity. “Population growth has been steady year after year over the past 10 to 15 years,” he says. “The [local] economy is more services-oriented. Consumers are still spending quite a bit. Real estate and retailing is strong, and we expect the public administration to pick up the pace,” Lefebvre says.
Canadian Real Estate Forum / FALL 2007
Residential Building Permits OTTAWA (1999-2008)
160 140
120 100 80
60 40
20
92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07
Housing Starts OTTAWA (1999-2008)
11,000 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000
99
Saskatoon Calgary Winnipeg Edmonton Regina Vancouver Toronto Quebec City Halifax Ottawa-Gatineau Montreal Hamilton
4.7% 4.4% 3.7% 3.6% 3.5% 2.9% 2.7% 2.6% 2.5% 2.3% 2.1% 1.3%
00
01
02
03
04
05
06
07f
08f
Source: Metropolitan Outlook Service, The Conference Board of Canada
It doesn’t sound like too much of an explanation, but the Board notes that Saskatchewan’s lower cost of living and strong overall economic performance is expected to attract much larger numbers of inter-provincial migrants and therefore stimulate home building to its highest level since 1983. “Ottawa-Gatineau is experiencing a modest economic slowdown this year,” the report says,”due to the end of the federal government’s hiring spree and sluggish activity in the construction sector,” CREF Albert Warson
Canadian Real Estate Forum / FALL 2007
7
EXPOSURE TO KEY PEOPLE IN THE REAL ESTATE INDUSTRY Canadian Real Estate Forum subscribers include senior executives of the real estate industry from: • Public and private real estate organizations • REITs • Pension Funds and pension fund advisors • Banks, trust companies, life insurance and other financial institutions • Corporate real estate executives among Canada’s 500 largest companies • Federal and provincial governments • Brokers, law firms and other intermediaries
For More Information Contact Frank Scalisi
MMPI Canada 10 Alcorn Ave. Suite 100, Toronto, ON, M4V 3A9 Tel: 416-512-1215 • Fax: 416-512-1993
at fscalisi@mmart.com or 416-512-3815
mmpicanada.com
realestateforums.com
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www.pmexpo.com Canadian Apartment Investment Report / SEPTEMBER 2009
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Apartment marketing going, going, gone digital
Steve Ramphos
Remember a time when you were much younger and people used to scan newspaper “apartment for rent” columns to find a place to live? Fast forward to today, where people looking for a place to rent automatically reach for their laptops or desktops, to go online and search for apartments in the neighborhood they prefer. They are able to quickly, depending on the vacancy rate, find a specific apartment that would suit them and at the rent they are prepared to pay. They may eventually turn to classified ad newspaper sections or free rental publications, but usually as a last resort.
Y
OUNG PEOPLE (SAY ARBITRARILY UNDER 50) PREFER that route to finding apartments and the variables of their location, price, availability, etc. Larger apartment buildings often have their own web sites with a lot of detail about what’s available, and when. Steve Ramphos, co-founder and president, District Realty Corporation, Ottawa, says his company is going deeper into outer space by developing software which will take potential renters on a video tour of an apartment they are marketing, much like office building owners promoting office space have been doing for many years. “The system we hope to introduce soon will connect all 75 of the apartments we manage in the Ottawa area. The cost of the new system will be pro-rated among the individual buildings who use it. We paid the development costs
upfront,” he says. “We have to make our web sites interactive so that younger renters are free to do their own searches. We don’t think the market will be tight forever.” With less than a 1 percent apartment vacancy rate in downtown Ottawa and 2.5 percent on the city’s edges, the competition is brisk and hits on the web sites are frequent. District Realty is a full-service real estate company and commercial real estate brokerage doing about $100 million a year, .By becoming a full-service company, it became involved in all aspects of the real estate industry – not only buying and selling property, but managing and maintaining it as well. The company, for example, sold Russell Gate apartments in Ottawa with 500 units in a pair of 19-storey apartment buildings. It sold in April for $40 million to a Boston investor. CAIR
Thank you to all our Sponsors and Advertisers! REACH A CAPTIVE NATIONAL AUDIENCE! For more information on how you can advertise in Canadian Apartment Investment Report, contact: Frank Scalisi at fscalisi@mmart.com or 416-512-3815 realestateforums.com ADVERTISER
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Canadian Apartment Investment Report / SEPTEMBER 2009
11 17 9
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ADVERTISER
MMPI Canada TD Canada Trust
PAGE #
12, 20, 21 24 (OBC)
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