CPM Fall 2023

VOL. 38 NO. 3

FALL 2023

Editor-in-Chief Barbara Carss barbc@mediaedge.ca

Publisher Sean Foley seanf@mediaedge.ca

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editor’snote

THE LINK BETWEEN impulsiveness and negative outcomes is generally well documented, but complacency can also be hazardous. Risk management specialists regularly confront the myriad ways humans let down their guard, fail to recognize threats or convince themselves that festering problems are insignificant.

Professor Robert Gifford, a behavioural psychologist affiliated with University of Victoria’s School of Environmental Studies, has dubbed these traits the “dragons of inaction”. Despite our billing as rational beings, he suggests we lean more toward rationalization or finding ways to justify actions that don’t make sense and aren’t in society’s best interest.

During a recent online presentation sponsored by the research institute, Net Zero Atlantic, Gifford discussed dozens of those dragons as they pertain to climate-related risk. That includes a tendency to downplay threats that are perceived to be distant in either proximity or time, and to tune out messages or urgings that we hear repeatedly, particularly if they involve something that we’re reluctant to face.

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The diverse range of extreme weather events unfolding throughout Canada in recent months should be dispelling the notion that climate risk is a concern for faraway places or the distant future, but it might also make it appealing to detach ourselves from ominous reality (at least momentarily) with our eyes closed and heads under the covers. The recommended option, of course, is to shake off that temptation and channel anxiety in more productive directions.

The Canadian commercial real estate industry could have some advantages in that effort since many of its most prominent motivators — pension funds and other institutional investors — have an entrenched culture of taking the longterm view. Plotting how their assets will perform 10, 20 or 50 years in the future is something that most of them have been doing anyway.

In this issue, we report on the climate risk matrix that the Intact Centre on Climate Adaptation recently introduced to help commercial real estate operators and investors identify pressing physical climate-related threats and effective responses. It’s promoted as a user-friendly tool for benchmarking asset resilience, which could also aid in interpreting or compiling evidence for some of the more complicated reporting approaches that have been collectively labelled “ESG alphabet soup”.

The matrix additionally aligns with the aspirations of the Canadian government’s national climate change adaptation strategy, which was released this summer. We explore some of those details and targets in this issue.

Turning to other areas where vigilance is advised, we highlight tips for bolstering cybersecurity of building automation systems and dissuading property crimes. We also look at fire risks related to rooftop solar photovoltaic installations.

Barbara Carss barbc@mediaedge.ca

Focus: Protection, Mitigation & Recovery

6 Flexing for Climate Flux: Canadian government’s finalized national adaptation strategy aims to boost resilience.

8 Benchmarking Preparedness: New guidance charts climate-related threats to commercial real estate.

12 Fraught Connections: Rooftop safety audits raise alarm about wiring and workmanship of solar photovoltaic installations.

16 Sloppy Subverts Smart: Building automation systems can be a portal for nefarious purposes.

18 Crafting a Credible Risk Story: Insurers value active efforts to protect against property crime.

20 Hush Tactics: Hearing conservation programs address workplace noise.

Articles:

22 HR Pressure Points: Commercial real estate employers in competitive hunt for skills and aptitudes.

26 Inside Look: Real-time monitoring opens up operational insight.

30 Same Old, Same Old: Ontario retains 2016 assessed values for 2024 property tax year.

34 Development Discount: Enhanced GST rebate promised for new purpose-built rental housing.

38 Fundamentally Techy: Canadian markets offer a combo of lures for firms and workers.

42 Transition Template: BOMA Canada to draw lessons from its net-zero pursuit.

Departments

3 Editor’s note

EDMONT ON 2023

FLEXING FOR CLIMATE FLUX

Canadian Adaptation Strategy Aims to Boost Resilience

CANADA’S newly finalized climate change adaptation strategy sets out objectives and attaches mid- to near-term targets for five key action areas: disaster resilience; health and well-being; nature and biodiversity; infrastructure; and the economy and workforce. Collectively, they encompass a broad sweep of human, natural and structural assets to be reinforced for a wide range of increasingly extreme and volatile climate-related possibilities.

“Although climate change affects communities differently, it is undeniable that our new climate reality is affecting us all,” asserts Canada’s Minister of Environment and Climate Change, Steven Guilbeault. “In the context of recordbreaking wildfires across the country, record hurricanes like Fiona and record floods in British Columbia, this strategy is needed now, more than ever, to establish a shared vision of our future.”

While infrastructure may be the most obvious adaptation concern for commercial

real estate, other elements of the strategy have implications for risk management, building operations, development lands and the industry’s many professional services. For example, hazard mapping and insurance contingencies fall under disaster resilience; cooling and air filtration align with health and well-being; urban tree canopy is prioritized in nature and biodiversity; and the responsive expertise needed across real estate’s property management, operations, leasing/brokerage and investment functions is embedded in the economy and workforce.

In his introduction to the strategy, Guilbeault calls it “a whole-of-society blueprint” for identifying climate-related vulnerabilities and preparing to respond, but it contains many aspirational components earmarked for yet-to-be-confirmed delivery agents. The federal government has set out its own list of 73 measures to guide and prompt adaptation in a companion plan, while the strategy calls for complementary provincial/territorial efforts and suggests

roles for municipal governments, Indigenous communities, the private sector and nongovernmental organizations.

“By working together, we can mitigate, prepare for, respond to and expedite recovery from emergencies as we continue to strengthen our resilience,” urges Bill Blair, Canada’s Minister of National Defence and former Minister of Emergency Preparedness.

The federal government reports it has invested about $6.5 billion in climate change adaptation since 2015. That includes a $2 billion injection of funding committed in November 2022 when the preliminary version of the national adaptation strategy was released for consultation.

The final version, released in late June, comes with some tweaks to the government’s initial slate of 68 action measures, including added emphasis on: infrastructure and related codes and standards; supply chain issues; resilience to wildfires; flood risk awareness; and health impacts of extreme heat.

CONVINCING PAYBACK ON INVESTMENTS

Improved resilience of the built environment is one of the strategy’s fundamental goals. That’s connected to: upgrades to critical public infrastructure; policies and regulations to govern the performance and location of buildings; and rules or enticements to shape private investors’ decision-making.

Near-term targets include ensuring that climate change resilience is factored into all new federal infrastructure funding programs by next year, and incorporating resilience considerations into the National Building Code, Canadian Highway Bridge Design Code and Canadian Electrical Code by 2026. Among the broader objectives, the strategy envisions that public and private asset managers will come to rely on a range of guidance about climate change risks and resilience considerations in their development, acquisition, repositioning and dispositioning plans.

The federal government highlights seven initiatives related to climate resilience in the built environment. The Disaster Mitigation and Adaptation Fund (DMAF) to support infrastructure upgrade projects, and the National Trade Corridors Fund, which more specifically applies to airports, ports, railways and transportation facilities, account for a large chunk of the promised spending. As well, there are funds targeted to infrastructure, facilities and capital maintenance in Indigenous communities.

Other funding is allocated for research and pilot projects “to integrate and accelerate the uptake of climate resilience in building and infrastructure design, asset management tools, guides, codes and standards” and for the development of standards to support wider understanding and uptake of climate change resilience in building and infrastructure design.

The National Research Council and the Standards Council of Canada are tasked with developing “practical and targeted guidance” related to mitigating flooding risks, along with “interactive knowledge products” and training for municipal building officials, design professionals and procurement teams.

The strategy cites the Canadian Climate Institute’s estimates that $1 invested in climate change adaptation yields up to $15 in avoided expense related to climate change impacts. Notably, the benefit-cost ratio for the implementation of climateresilient building codes is pegged at 12 to 1, equating to a 1,100% return on investment.

“Adaptation actions are cost-effective and

a positive investment for today and for the future. Climate change adaptation is essential and will generate many benefits, including spurring innovative solutions, technologies and jobs that can help minimize damages to communities, retain ecosystem services, reduce economic shocks to supply chains, sustain livelihoods and maintain social cohesion and, most importantly, save lives,” the strategy states.

IMPLICATIONS FOR COMMERCIAL REAL ESTATE

Looking at other climate adaptation objectives and targets potentially of interest to the commercial real estate sector, the adaptation strategy envisions development of, or updates to, at least 200 flood hazard maps, prioritizing “higher risk” areas, by 2028. The timeline for getting wildfire prevention and mitigation plans in place is set farther out — at 2030 — since that initiative would depend on the provinces/ territories designating high-risk communities, but it’s suggested that at least 15% should be implemented two years before that date.

Other major objectives in the strategy’s disaster resilience category focus on insurance and an overhaul of the Disaster Financial Assistance Arrangement program, which sees the federal and provincial governments step in to help cover uninsurable losses sustained in natural disasters. That’s exploring mechanisms to encourage relocation away from vulnerable zones. As well, the government is developing an online portal, which will draw on flood modelling and hazard mapping to help users gauge their risk exposure.

The adaptation strategy targets 2027 as benchmark year for getting a significant majority of at-risk businesses and economic sectors on board with resilience planning and implementation. By then, it foresees that 60% of businesses located in coastal regions will have embraced adaptation actions and 80% of “highly exposed” businesses will consider impacts of climate change in both their existing operations and future plans.

Commercial real estate is not identified as part of the latter group, which taps the agriculture, fisheries, energy, mining, transportation and tourism sectors. However, drilling down to real estate’s multidisciplinary workforce, 70% of the members of “relevant professional associations” are counselled to likewise “have the capacity to apply climate change adaptation tools” by 2027 and to convey the importance of climate change adaptation to their clients.

The adaptation strategy also includes indicators for monitoring and evaluating progress. Many relate to the preparedness of infrastructure, agricultural productivity or conservation and resilience of natural resources.

However, residential landlords and developers could also be in line for scrutiny through indicators tied to the health and well-being action area. These would measure the percentage of households with cooling systems and the percentage of households with nearby access to parks or green space.

CAPACITY BUILDING AND ENABLING RESEARCH

To launch work, the Canadian government has issued a call for proposals for capacity building and research projects. Proponents can receive funding to cover up to 60% of projects related to: guidance and resources for the professional services that will be pivotal in steering climate change adaptation; economic and behavioural change analyses; monitoring and evaluation approaches; and adaptation issues specific to the mining, forestry or energy sectors.

“The impacts associated with climate change — intensified wildfires, devastating flooding, more powerful storm systems and others — are being felt in every region of Canada,” says Canada’s Minister of Energy and Natural Resources, Jonathan Wilkinson. “The National Adaptation Strategy makes important investments. This call for proposals supports this vital work.”

Businesses, industry and professional associations, academic institutions, nongovernmental organizations, Indigenous governments, communities and associations, and provincial/territorial and municipal governments and their associated agencies are eligible to apply. Territorial government and Indigenous proponents will qualify for funding to cover 100% of project costs.

Up to $15 million will be disbursed to the chosen proponents, with a minimum allocation of $150,000 per project. Projects can commence beginning January 1, 2024 and must be completed by December 31, 2026. Submissions to the call for proposals will be accepted until September 22, 2023.

More information about the National Adaptation Strategy can be found at www.canada.ca/en/services/environment/ weather/climatechange/climate-plan/ national-adaptation-strategy.html

BENCHMARKING PREPAREDNESS

New Guidance Charts Climate-Related Threats to Commercial Real Estate

COMMERCIAL REAL ESTATE is a showcase sector for climate-related impacts and the practicalities of risk management. Recently released guidance for investors and owners/managers highlights likely physical threats, recommended safeguard measures and key questions for gauging the preparedness of assets.

The University of Waterloo’s Intact Centre on Climate Adaptation has developed six industry-specific climate risk matrices to inform financial market participants in their decision-making and to encourage asset owners/managers to evaluate their holdings. These are presented in user-friendly chart form meant to be compatible with what’s characterized as an “ESG alphabet soup” of assessment and reporting frameworks many industries are now juggling.

“Fulsome disclosures must not only identify risks, but also identify what measures need to be implemented to reduce those risks and, in so doing, allow institutional investors to meet their duty as

fiduciaries,” submits Kathryn Bakos, Managing Director of the Intact Centre and co-author of its new report on integrating climate risk analysis into institutional investing.

This comes as costs mount from a lengthening sequence of severe natural events, and a growing cast of regulatory bodies call for more and better response strategies. Data from the Insurance Bureau of Canada (IBC) shows that insured losses due to extreme weather surged from an average of $250 to $450 million per year in the period from 1983 to 2008 to an average of about $2 billion annually over the subsequent 14 years.

The Fort McMurray wildfire accounted for the majority (70%) of the chart-topping $6 billion in insured losses in 2016. However, $3.1 billion in weather-related claims in 2022 — the third highest amount for any year thus far — are considered a more insightful harbinger because they arise from multiple events occurring nationwide.

“Climate change models predict geographically dispersed impacts, and that is what Canada is experiencing,” the report observes. “Extreme weather, driven in concert with a changing climate, will continue to evolve and become increasingly severe over time, thus generally rendering greater costs across industry sectors. Market participants and stakeholders must, therefore, be vigilant and cognizant of the increasing potential for severe weather to impact investments over time.”

MODEL FOR ACTION

Commercial real estate was chosen for an illustrative climate risk matrix — along with: electricity transmission and generation; property and casualty insurance; banking/ residential mortgages; hydroelectric generation; and wind electricity generation — for its fit with the Task Force on Climaterelated Financial Disclosure (TCFD) definition of sectors that are well placed to serve as models for broader industry. Those

are sectors in which severe weather events can significantly disrupt operations and/or damage assets, but which generally have the expertise to understand potential business impacts and available means to mitigate risk.

Commercial real estate also provides the template for the report’s case study of the returns on investment in climate change adaptation. It models three scenarios — no adaptation; early adaption; late adaptation — for impact on rent income and share price, and concludes that early adapters will be in the best position to protect and enhance asset value.

“Laggards will bear the full financial consequences of the pricing-in of climaterelated market-level impacts,” it warns.

The climate risk matrices are promoted as tools to help investors and associated financial market participants benchmark investees against standard thresholds of preparedness. Meanwhile, companies using the matrix to drive the process of identifying and mitigating climate risk should glean

RESILIENT HOST CITIES SHIELD PROPERTY VALUES

Abundant water resources and a low-carbon electricity grid are two key attributes earning Toronto, Montreal, Ottawa and Winnipeg favourable ranking as resilient bases for commercial real estate. A new report from CBRE Econometric Advisors identifies the four central Canadian cities among 10 North American markets where property values are best placed to withstand the physical and transitional risks of climate change.

Researchers assessed 66 markets on 10 factors related to: vulnerability to extreme weather events and negative environmental conditions; the cost of achieving greenhouse gas emission reductions as a percentage of total building value; and measures in place to support climate change adaptation and mitigation in the commercial real estate sector.

The top 10 are listed alphabetically with no further differentiation by merit and also include Austin, Boston, Denver, New York, San Franciso and Washington D.C.

“Physical and transition risks can affect buildings, directly or indirectly, by having an impact on the markets with which the assets interact,” the report maintains. “Cities that can demonstrate climate resilience are likely to benefit from a halo effect on property values and will attract more occupiers that are challenged to meet their own net-zero goals.”

All 10 cities have set targets to achieve either net-zero or carbon neutral status in the period from 2040 to 2050 and eight have implemented building performance standards. While perhaps posing a near-term cost for developers and building owners/investors, these are considered positive factors from a transition risk perspective because they should drive emissions-reducing initiatives and leave a smaller percentage of total assets exposed.

As well, all 10 cities have gained more renewable energy supply over the past five years, suggesting a concomitant reduction in energy-related emissions.

The four Canadian cities stand out for their predominant reliance on renewable electricity supply — at 99% in Montreal and Winnipeg and 94% in Toronto and Ottawa — and relative insularity from physical climate risk. Building damage in Toronto, Ottawa and Montreal is judged most likely to occur from flooding, winter storms and tornadoes or severe thunderstorms, while drought and wildfire are added to that list of probable hazards in Winnipeg.

Nevertheless, water capacity is considered sufficient to meet demand in all four Canadian cities. They also register a stable or decreasing number of heating degree days over the past five years, whereas there has been an increase in cold weather necessitating heating, with associated greater emissions output, in many of the U.S. cities.

San Francisco, New York City and Austin all carry “relatively high” risk for building damage due to natural disasters. Although San Francisco’s arguably most ominous threat — earthquake — is not directly tied to climate, building owners/managers are advised to be particularly wary of extreme temperatures, hail, lightning and tornadoes in Austin and strong winds, heat waves, coastal flooding and hurricanes in New York.

Air pollution is singled out as one of Toronto’s challenges, but the city is praised for its growing share of LEED-certified commercial buildings — although falling short of the percentages that New York, San Francisco, Boston and Washington boast. Toronto, Montreal and Ottawa also earn mention for various incentives and programs to support climate initiatives.

The North American City Sustainability Study 2023 can be found at www.cbre.com/ insights/reports/north-american-city-sustainability-study-2023

results that can also inform TCFD or other initiatives such as the Sustainability Accounting Standards Board (SASB) or the Carbon Disclosure Project.

“Relative to the physical risks of climate change, the outstanding challenge for market participants is to: 1) identify which extreme weather events have the highest probability of affecting individual industry sectors/sub-sectors; and 2) assess whether potential investee companies have implemented appropriate actions to mitigate extreme weather risks specific to sectors/ sub-sectors,” the report states.

In developing the matrices, Intact Centre researchers surveyed experienced senior managers in each of the six sectors —

ensuring representation from Canada’s eastern, central, western and norther regions — for their rankings of the most common climate-related threats and most severe impacts on their business operations, and their insight on riskmitigation measures for those impacts.

As well, the matrices draw on resources from organizations such as ISO, Standards Council of Canada, National Research Council, Canadian Standards Association, Sustainability Accounting Standards Board, Global Reporting Initiative, and the International Electrotechnical Commission Standards.

Feedback from 13 institutional investors, which collectively hold $2 trillion in assets

under management, also helped shape the final format — in particular their request for more detail in the risk reduction section of the matrices.

“The financial community should lead the way in developing climate risk matrices. There is no point in talking about TCFD, Sustainability Accounting Standards Board (SASB), ESG or any other combination of letters, if, at the end of the day, this stuff doesn’t translate into action that lowers the risk profile of the investable universe,” reflects the report’s other co-author, Blair Feltmate, Head of the Intact Centre.

PRIORITY PERILS

The climate risk matrix for commercial real estate identifies floods and windstorms as the top two perils in a list of prevalent climate-related hazards that also includes wildfires, extreme heat, ice/hail/snow loading and thawing permafrost.

Flooding comes with an ominous legacy of property/equipment damage and destruction, subsequent mould infestations and business disruptions, and also brings potential health and safety risks for building occupants. Meanwhile, windstorms can severely damage or propel the liftoff of

roofing, carry debris that can break windows and other fragile structural features and drive water into buildings.

In total, the CRE matrix lists 16 risk-reduction measures across the six categories of climate threats. Of these, top priority is given to placing critical infrastructure for HVAC, electrical and communications systems above expected flood levels or at least flood-proofing equipment where it cannot be feasibly elevated, and to reinforcing roofing with additional fasteners at the perimeter and corners.

Among the recommended measures, some involve capital outlay, such as improvements to building foundations to protect against thawing permafrost or installing higher-resistance glass (windstorms), thermal imaging cameras (loading), water sensors (floods) or HEPA filters (wildfires). However, others are tied to emergency planning, such as ensuring procedures are in place to respond to floods or extreme heat, or maintenance, such as keeping sites, including roofs and gutters, clear of combustible materials or proactively removing ice and snow from roofs.

To guide investors, the matrix includes a key performance threshold for each of the six climate-related risks with a suggested

question to pose to asset managers. For example, to address flood risks the question is: Are HVAC, electrical, communication systems and server rooms elevated or otherwise flood protected? To address wildfires it is: Does the HVAC system have capacity to cleanse smoke from the air? Senior CRE managers provided input in setting the thresholds for acceptable performance.

The risk matrix for electricity transmission and distribution targets the same six climate-related threats, but places the most emphasis on wildfire, which arcing from powerlines can trigger, and snow/ice loading, which can topple lines and towers. Risk matrices for the industries providing residential services focus on five threats — floods, wildfire, hail, wind and snow/ice — with the highest priority tied to floods and wildfire.

The complete report, Transitioning from Rhetoric to Action: Integrating Physical Climate Change and Extreme Weather Risk Into Institutional Investing, can be found at www.intactcentreclimateadaptation. ca/integrating-physical-climate-change-riskinto-institutional-investing.

the risk of costly emergencies by preventing buildup, while also helping to ensure your drain covers function properly without seizing

FRAUGHT CONNECTIONS

Rooftop Solar Photovoltaics Spark Safety Advice

By Barbara Carss

ROOFTOP solar photovoltaics can help real estate owners/managers lower energy costs, boost operational resiliency and meet ESG commitments, but proponents of the technology caution that it also packs a potentially lethal electrical charge. Vigilant maintenance and risk management are critical for what is, in essence, a power plant affixed to a highly valuable asset.

Clean Energy Associates (CEA), a consultancy providing project management, engineering and technical services for solar, green hydrogen and energy storage systems, is sounding the alarm after safety audit data from more than 600 rooftop solar PV installations worldwide revealed a disconcerting magnitude of fire hazards. Just 3% of audited sites were completely clear of safety concerns, while nine of the 10 most prevalent issues surfaced in more than one quarter of the inspections.

“This is frightening: one, for your buildings; and two, for the industry,” Chris Chappell, CEA’s Senior Director of Engineering Services, asserted during an online presentation earlier this summer. “These things are happening on your roofs right now.”

Canada is among the 14 countries in North America, Europe and Asia-Pacific where the safety audits were conducted. Nearly half the examined installations — 49% — were improperly grounded in some places, posing risks for on-site personnel and compromising equipment performance, while 47% of the installations sported cracked or soiled modules, creating shock and fire hazards in addition to diminishing operational performance.

WIRING AND WORKMANSHIP

A large share of the identified risks relate to connectors — or the wiring and cabling connecting the modules, racking and inverters — of which there may be hundreds or thousands in a rooftop installation. Faulty connectors could be the source of arc flashes, an opening for water infiltration or an ignition source should they overheat, melt and drop down onto the roof ballast.

Chappell and his colleague Ankil Sanghvi, CEA’s Engineering Manager, cited examples of all those occurrences during the presentation.

“The 10 most common items that we found, these are not equipment-related per se. These all have to do with workmanship,” Chappell maintained. “The modules, inverters and racking are all integrated with wires and it’s these little things that are the biggest issues that we see on sites.”

Sloppy or perilous practices include: pairing the positive and negative sides of connectors from two different assemblies; placing wiring over sharp metal edges that can inflict damage as they expand and contract in fluctuating temperatures; and over-torquing connectors or other kinds of aggressive handling that can cause cracks in components.

Manufacturers’ specifications typically state the required type of DC connector, but safety auditors found that instruction had been flouted at 41% of the sites they examined. Connectors were improperly installed in about the same portion (40%) of systems.

“These connectors are UL listed and come as an assembly. You can’t cross and mix parts, but it happens a lot, more

times than not, because the threads [from different assemblies] are the same,” Chappell explained.

“This is a big no-no. We have seen, a lot of times, connectors burning because of crossmating,” Sanghvi concurred. “With all DC connectors, please follow the manufacturer’s manual very closely and please make sure that you are using the right tools while assembling the connectors.”

HOTSPOTS AND HIDDEN HAZARDS

In some cases, lurking fire hazards should first become evident through a drop in power output. For example, damaged, soiled or shaded modules can cause a mismatch in voltage that will result in underperformance and can also lead to hotspots where one cell is operating at a higher temperature than those surrounding it. Such hotspots could potentially ignite nearby organic material and/or cause the backside of the module to melt, increasing the risk of arc flashes.

Shading could occur if modules are crowded too closely together. Natural elements — including wind, hail, lightning and animals — and on-site personnel could cause other types of damage. In the latter case, Sanghvi chides some marketers for misleading messaging.

“We see module manufacturers advertising their modules by walking on them and showing people: Look how strong they are,” he recounted. “Every time they walk on the module, they break the cells.”

“Those cracks are going to grow and grow and grow,” Chappell added. “Tell the teams up on your rooftops: Do not walk or kneel on the modules.”

CEA’s safety audit data shows hotspots detected on modules at 31% of the inspected sites. As well, hotspots were recorded in enclosures encasing solar batteries at 19% of sites. That’s in part attributed to improper termination of wiring to enclosures, which was found at 40% of the audited sites.

Sanghvi recommended infrared scans as part of the maintenance schedule with scans of all enclosures at a maximum interval of six months. As part of daily operational oversight, he suggests keeping watch for “inconsistencies” with connectors and obvious damage like cracks and broken pieces.

Nevertheless, potential hazards are often difficult to detect through cursory visual scrutiny and impossible in some cases. For example, he recalled physically opening an enclosure during one field inspection and finding some questionable splices.

“A lot of these decisions are made on the

side by a technician or an electrician,” Sanghvi reflected. “For this particular site, no one knew the splices existed in this box. No one knew there was something bad going on in this box. Luckily, we found this before it became a major incident.”

TIMELY REMINDER FOR NEW DEVELOPMENT

Vigilant safety monitoring programs could be particularly important for building owners/managers who acquire rooftop solar PV systems through a transaction and have had no input into its design and installation. In any case, some aspects of that process can become murky through the chain of contractors and sub-contractors involved. For new installations, Chappell sketches out some basic parameters.

“What you want to do is control your installers with design,” he submitted. “In your notes and your design drawings, you want to tell everyone: This type of connectors is acceptable; cross-mating is not. Then you meet with that EPC (engineering, procurement and construction) and you reiterate: Do you understand?”

A risk management reminder is timely as jurisdictions throughout North America and around the world encourage new solar PV installations in an effort to increase renewable supply and promote distributed energy resources (DERs) that can help alleviate demand pressure on the electricity grid.

In Ontario, for example, a regulation was enacted last year to permit thirdparty net metering, freeing prospective clients — such as commercial and multifamily landlords and condominium corporations — from upfront capital investment and ongoing operating costs.

This aligns with the Ontario government’s vision to tap into an estimated 10,000 megawatts of DER capacity, as outlined in the clean energy plan it released earlier this summer.

“Eligible third-party ownership arrangements now include leasing, renting and financing options with energy service providers as well as power purchase agreements with a licensed thirdparty generator, making rooftop solar and other DERs accessible to more Ontarians looking to better manage their energy costs,” it states.

8 STEPS TO DECARBONIZATION

The road to net zero

Decarbonization has become an essential objective for organizations striving to reduce their carbon emissions. But for those just setting out, the path forward may seem daunting.

While the benefits of making a positive impact on the environment are well known and documented, decarbonization strategies must be multi-layered with strict, ambitious targets if an organization hopes to significantly reduce their carbon footprint.

And it’s no longer a matter of choice, but a necessity.

“Everyone has a responsibility to do their part in the face of climate change, particularly property owners and facility managers dealing with large, aging assets,” said Kelly Christensen, Manager, Strategy & Pursuits, Energy & Sustainability. “Pursuing decarbonization strategies that take into account everything from building construction through to operations and end-of-life is the best, and only way forward.”

As global efforts to decarbonize the world’s cities, communities, buildings, and facilities pick up speed, the 2021 Canadian Net-Zero Emissions Accountability Act provides

a framework for Canada’s commitment to achieving netzero emissions by 2050. But meeting the critical targets set out in the Act won’t be possible unless each organization commits to decarbonization goals of their own.

For those embarking on this complex journey, here are eight recommended steps:

1. Establish a carbon footprint baseline.

Every decarbonization journey begins with a baseline year and calculation of an organization’s scope 1 and scope 2 emissions. As a multi-trade service provider, Black & McDonald can support this important first step by determining the methodology for your baseline calculations and collecting your company’s emissions data.

2. Set reduction targets.

Once your carbon footprint baseline is established, it’s time to set attainable carbon emission reduction targets that align with local government policies. Black & McDonald recommends adhering to guidelines such as the Net-Zero Standard, which promotes science-based emission reduction targets.

3. Maximize carbon emissions reductions.

This step involves identifying your organization’s highest-emitting assets and equipment and replacing them with lower-emitting alternatives. Typically, equipment powered by fossil fuel sources are the highest polluters. Transitioning to electrically powered alternatives, such as electric vehicle fleets and low carbon HVAC systems can significantly reduce emissions.

4. Incorporate energy optimization strategies.

Optimizing energy consumption in your facility can be achieved in numerous ways. This includes enhancing your building envelope through measures like improved insulation to reduce heat loss/heat gain and decrease the strain on the building’s HVAC system, adding automated controls to optimize indoor conditions to reduce operating costs, and commissioning and recommissioning.

5. Take advantage of renewable energy.

Renewable energy sources offer an indefinite amount of energy while releasing virtually zero carbon emissions. Integrating a renewable energy source on site will substantially reduce energy costs and emissions while enhancing the resiliency of the facility. Black & McDonald has the expertise and supplier relationships needed to determine the most cost-effective mix of renewable energy sources to meet your facility’s specific requirements.

6. Purchase green energy.

Opting for green energy, generated through 100% renewable sources, is another effective way to decrease carbon emissions. Black & McDonald can facilitate conversations between your organization and local green energy providers to initiate this process.

7. Reduce Scope 3 emissions.

Once you have successfully reduced scope 1 & 2 emissions, it’s time to tackle the more complex Scope 3 emissions. Scope 3 emissions typically occur outside of the organization’s primary site of work and may involve changes in employee

behaviour or supply chain changes. Scope 3 emission sources that can be targeted include: business travel; employee commuting; waste generation; material transportation; end-of-life treatment; and more.

8. Utilize carbon offsets.

In cases where reducing emissions becomes challenging due to limitations in funding or available technology, purchasing carbon offsets is a viable option. Carbon offsets or carbon credits act as a counterweight against your organization’s carbon footprint baseline. Black & McDonald can guide you through the purchasing process and consult on the most suitable carbon offsets that align with your organization’s goals.

“At Black & McDonald, our mission is to provide a path to successful decarbonization and net-zero energy for our clients and our operations,” said Christensen. “We embed energy conservation and sustainability best practices into all our business activities, applying innovative solutions to everyday projects, operations, and facilities. Through our commitment to sustainability and integration of cutting-edge technologies, we help our clients seamlessly make the shift to clean energy sources while maximizing the value of performance data generated by assets, people, and processes.”

To learn more about how Black & McDonald can help you on your decarbonization journey, visit www.blackandmcdonald.com

SLOPPY SUBVERTS SMART

Building Automation Systems can be a Port for Nefarious Purposes

THE DRIVE TO make office buildings smarter has made it easy to do everything from control the temperature to reserve a conference room with a few taps on a smartphone, but these efficiencies have increased cyber risks. Commercial real estate owners and asset managers should recognize the distinctions between the hardwired or cloud-based enterprisewide information technology that powers email and other fundamental office systems and the operating technology that controls a building’s systems and mechanical processes.

Cybersecurity vigilance and advances have helped to safeguard information technology and communications, but the operating technology in smart buildings typically don’t come under the purview of IT departments to the same extent. Instead, the vendors of the smart technologies often provide most of the operational oversight.

“Building owners might think: This is great. My tenants and property man-

ager can run everything in my building from their phones,” says Jason Lund, Managing Director of property management technology at JLL. “But that means someone can hack you and run it from a phone.”

Once a system is hacked, cybercriminals can manipulate heating, ventilation and air conditioning (HVAC) systems, infiltrate sprinkler systems and exploit smart access technology, such as intelligent credentials and contactless building access. Cybersecurity analysts estimate that 57% of IoT (Internet of Things) devices are vulnerable to attacks of medium-to-high severity. Routers, smart access technology, remote-monitored climate systems, smart lighting controls, smart thermostats, occupancy sensors, webcams and smart TVs could all be potential ports of entry.

The following steps can bolster security.

• Hardwire buildings: build infrastructure such as internal routers, hardwired

cables and closed-circuit IoT devices to secure building automation systems (BAS) systems.

• Segregate BAS and subsystems: place your automation on different systems to reduce vulnerabilities. For example, badge reading software should be kept separately from lifesafety systems, such as fire alarms and security monitoring. Keep BAS technologies on another network from the building’s guest and tenant networks.

• Consult and invest: Cybersecurity companies specialize in installing systems that make cyber-attacks more challenging, such as hardware boxes that add layers to building access systems. Advanced identification and access management technology scan for unauthorized access to technological systems and flag vulnerabilities.

• Secure supply chains: Anyone with access to BAS systems — third-party HVAC vendors, remote security monitors or life safety system technicians

— should follow their client organization’s internal cybersecurity measures. In addition, organizations should have a protocol to manage the security of externally sourced components and keep their software updated.

• Educate building tenants and property managers: Human error is the weakest link in the security chain. It takes everyone working together, from facility management to information technology to infrastructure, to embed cybersecurity into the operational framework. Educate the property management team and others on what they can do to prevent cyber-attacks.

• Discuss cybersecurity with insurance providers: Cyber-crime insurance is still relatively new and the building’s insurance policy may not cover a cyber breach. Not all insurers have determined what a cyber liability insurance policy should look like or include, and some providers require additional riders for Cyber-crime events.

The preceding article is adapted from the JLL report, Cybersecurity in the Era of Smart Buildings . For more information, see the website at www.us.jll.com/en/views/ cybersecurity-in-the-era-of-modern-buildings.

RANSOMWARE DISRUPTION RIPPLES OUTWARD

Real estate was relatively unscathed in the growing number of ransomware attacks perpetrated in Canada last year. A new report and threat assessment from the Canadian Centre for Cyber Security (known as the Cyber Centre) identifies 19 sectors targeted between January 1 and December 31, 2022 and estimates real estate was victimized in about 3% of reported incidents.

The hardest hit sectors were manufacturing, which suffered 18% of the attacks, and business and professional services, which accounted for another 14%. Eight other sectors each absorbed a larger share of the grief than real estate, while construction, finance and energy and utilities likewise experienced 3% of the attacks.

Nevertheless, impacts on victims’ business operations typically have fallout beyond the extorted party. The Cyber Centre — which provides advice to the Canadian government as part of its Communications Security Establishment — ranks ransomware as the most pervasive and disruptive cyber-crime in Canada currently.

The compromise of business email accounts, allowing perpetrators to pfish or send out phony communication such as invoices or requests for personal information, is also highlighted as a common and financially damaging cyber-crime. However, it is categorized as “less technical” and more reliant on social engineering than ransomware, which encrypts victims’ data and makes it inaccessible.

The report projects cyber-criminals will increasingly take up “big game hunting” directed at critical infrastructure, perceiving that they will be more likely to score a big payout.

“We assess that organized cyber-criminal groups will almost certainly continue to target critical infrastructure providers, including organizations in Canada, in medium-sophistication attacks to try to extract ransom, steal intellectual property and proprietary business information and obtain personal data about customers,” it states.

Of interest to the commercial real estate and facilities management sectors, the report also underscores potential threats to operational technology (OT).

“The disruption or sabotage of OT systems in Canadian critical infrastructure poses a costly threat to owner-operators of large OT assets and could conceivably jeopardize national security, public and environmental safety and the economy,” it warns.

The complete report from the Canadian Centre for Cyber Security can be found at www.cyber.gc.ca/en/guidance/baseline-cyber-threat-assessment-cybercrime.

CRAFTING A CREDIBLE RISK STORY

Insurers Value Active Efforts to Protect Against Property Crime

By Drew Fenton

CITY CENTRES are growing busier again as pandemic anxiety wanes. That includes a pickup in criminal activity after Ontario recorded the lowest property crime rate in more than 50 years in 2020.

For real estate owners and operators — especially those who manage high-rise condos in urban locations — the property crime rate is the one to watch. Although nonviolent crime is down slightly across the province, the rate hasn’t dropped enough to alleviate all concern.

Experts agree that organized crime is rising across Canada, and no one is even certain how many groups exist. Law enforcement struggles to prevent and prosecute those crimes, but property owners and operators are left to foot the bill — an expensive proposition in today’s uncertain economy.

Common areas in condo towers offer many potentially lucrative lures for criminals, including vehicle parking, storage lockers and bicycles, all conveniently housed under one roof. Effective security to protect these belongings, as well as their owners, goes a long way toward protecting the overall building, particularly when insurance coverage is no longer the simple proposition it once was.

Nor should property owners assume their buildings will be safe because they feel the neighbourhood is safe. They will need to take other steps to protect themselves and their buildings. Risk mitigation practices and appropriate insurance coverage should

work together as a single system to protect property owners.

The following steps are recommended:

Assess the Property

A thorough risk assessment will reveal any weak links and problematic issues, from great to small. Remember, even buildings in terrific neighbourhoods can be the focus of criminals. The risk assessment identifies improvements that building owners and operators can take to reduce the threat of crime, especially when it comes to increasing security.

Train Employees

The most important component of building security is employee and resident safety. While building staff typically aren’t security professionals, they should be trained to ensure safety in case of a crime on the premises. If necessary, condo corporations and property managers may want to hire extra security services, particularly if the building is in an area where law enforcement cannot respond quickly.

Bulk Up

The illusion of a bigger building footprint can deter criminals. Add high-intensity LED lights in public areas and make sure there is sufficient outside lighting. Expand building security systems to include cameras in all public areas. Perform regular maintenance on all security measures already in place, including locks, alarms, generators and backup systems.

Take Advantage of Technology

High-tech solutions can support building safety in a variety of ways. High-rise buildings benefit from electronic key cards and other barriers to entry. Visible security cameras and alarms discourage criminals, while silent alarms protect building staff. As well, video surveillance and analytics software will help to provide a record that can be used to support a claim after the fact.

Secure Real Estate Crime Insurance

Many property owners rely on their general liability (GL) insurance to cover them in the event of a crime, but there are limits to what GL can cover. In fact, it only covers third-party bodily injury and property damage. Anything related to a crime must be covered by real estate crime insurance (CI). Property owners should determine a maximum allowable crime loss and ensure their CI coverage is commensurate with that amount.

All of these tactics, taken together, tell a risk story to the underwriters. Increasing safety and security, demonstrate that a property is a “good” risk and is key to securing appropriate insurance coverage.

Drew Fenton is the Ontario Real Estate Practice Leader for Hub International. For more information, see the website at www.hubinternational.com/en-CA.

DELIVERING

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DELIVERING QUALITY SERVICE AND SOLUTIONS FOR OVER A CENTURY

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Raymond Carmichael established this company in 1922. Spanning four generations, Carmichael has nurtured passionate engineers, technicians, systems designers, and technical advisors whose collective goal is to support our valued clients.

HUSH TACTICS

Hearing Conservation Programs Address Workplace Noise

NOISY WORK ENVIRONMENTS are defined as those in which workers must raise their voices in order to be heard beyond an arm’s length of distance. Although occupational health and safety regulations vary across Canada’s provinces and territories, generally, the threshold for allowable daily noise exposure is 85 decibels (dB) of continuous noise in an 8-hour period, which would be equivalent to listening to a hairdryer, a blender or a vacuum cleaner from 9 a.m. to 5 p.m.

That period is based on a consistent noise level of 85 dB, but workers could also reach or surpass the limit through shorter durations of exposure to a louder environment. Health and safety advocates warn that prolonged up-close exposure to noise in the 85 dB range can cause permanent damage to cilia in the inner ear, while sounds in the range of 110 dB or greater can cause instantaneous hearing loss.

Hearing conservation programs can significantly reduce the incidence of noise-induced hearing loss, preserving workers' auditory health and preventing related health issues like tinnitus and increased stress levels. Eight of 13 jurisdictions (excluding New Brunswick, Nova Scotia, Ontario, Quebec and Yukon) mandate such programs where workers are exposed to noise levels in excess of the allowable thresholds, and all except Nova Scotia, Ontario and federally regulated workplaces prescribe hearing tests for workers subject to specified noise levels or in specified work environments.

CSA Standard Z107.56 for the measurement of noise exposure recommends that employers conduct a noise assessment when noise in the workplace hits 80 dB, or similar to the din of a busy downtown street. This is also the first step in any hearing conservation program, using devices such as sound level meters and personal dosimeters to determine the magnitude of exposure in different areas and job roles.

Regular audiometric testing is a critical component of these programs. It involves baseline and periodic assessments of employees' hearing abilities to detect any changes over time. By tracking changes in hearing thresholds, employers can identify early signs of hearing loss and take appropriate actions. Although

existing hearing loss cannot be cured, the data from audiometric testing can be used to identify candidates for follow-up and counselling; determine trends; make decisions on control measures; and motivate employees to use protective equipment.

One of the primary objectives of workplace hearing conservation programs is to control noise at the source. Substituting equipment with quieter alternatives or implementing engineering controls, such as sound insulation or equipment modification, helps reduce noise levels and minimize employee exposure.

Administrative controls involve implementing policies and procedures to limit workers' exposure to excessive noise. This may include limiting the duration of tasks in noisy environments, implementing a job rotation to reduce cumulative noise exposure and scheduling rest breaks in quieter areas.

When noise levels cannot be adequately reduced through engineering and administrative controls, employers must provide suitable hearing protection, such as earplugs or earmuffs. Workers must be trained in the proper use, fit, maintenance and care of personal protective equipment (PPE). Employers should also post signs in areas where sound levels exceed 80 dB, providing information about the decibel range and instruction about the appropriate PPE.

Education and training should be provided to workers on the hearing conservation program, including controls in place to reduce exposure. Workers should be aware of the risks associated with elevated noise exposure and the long-term effects of noise-induced hearing loss.

Training should also include the safe use and limitations of hearing protection, covering all elements listed in standard CSA Z94.2 for Hearing protection devices – Performance, selection, care, and use. The education and training should be provided at regular intervals, at least once every two years or when conditions change.

The preceding article has been provided by the Canadian Centre for Occupational Health and Safety. For more information, see the website at www.ccohs.ca.

SMART(er)INTERACTIONS

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HR PRESSURE POINTS

Employers in Competitive Hunt for Skills and Aptitudes

By Barbara Carss

HUMAN CAPITAL is proving challenging to procure across all functions of commercial real estate. Employers are pressed to fill new kinds of positions and to bolster tech savviness throughout their organizations, while facing labour shortages and a highly competitive market for certain skills.

Some industry insiders with career-long insight on hiring and staff development see opportunities in new recruiting methods that technology helps to enable, but also call for an “old school” approach of bringing aboard trainees and investing in on-the-job mentoring and learning. Speaking during the REMI Show in Toronto earlier this year, Cheryl Gray, a retired senior executive and past president of the Institute of Real Estate Management (IREM) who now provides consulting services to industry clients, suggested that employers may have unrealistic or outdated perceptions of the pool of potential job candidates, particularly when the current market is unlikely to serve up a wealth of experienced applicants.

“It’s disconcerting when I hear, ‘We really can’t find someone for this position,’ and then I look at the criteria and it says they want five years’ experience,” Gray said. “If you can’t find experience, look for talent, look for attributes.”

“I know lots of people who are looking for building operators and eight months out from the opening, they still haven’t filled the position,” concurred Terry Flynn, another industry consultant who has recently retired from a managerial role with a large real estate company. “Bringing in apprentices or trainees might be more expensive for an organization initially, but they could be the future of your company.”

Joining the discussion from a facilities management perspective, Hilary Green, Director of Change Management with Scotiabank’s workplace centre of excellence, explained how her department has tapped into the bank’s vast networks for recruitment and liaison with academic institutions. For years, thousands of students have cycled

through its other business departments as interns or in co-op placements, with many later attaining permanent employment. However, corporate real estate, which is a small department in the context of the bank’s overall operations, was slower to participate in those programs.

“Now we have anywhere between 10 and 15 students a semester come in. They get to see and try out different aspects of real estate and that’s proven successful for us,” she recounted.

SKILLS LEARNABLE, VALUES ENTRENCHED

There has also been more emphasis on recruiting internally, from other bank departments, recognizing that many key skills are shared with other professional pursuits and/or can be fine-tuned for real estate project management through on-the-job learning. Extending that philosophy further, Scotiabank’s HR team has turned to “intake without resumes” in the recruitment of post-

secondary students and others in their early career stages.

“There’s a tool they’re using that really just surveys for what kind of a person you are, what your values are and how that might align with the organization,” Green explained. “That’s presuming that, if you’re coming in at entry level, certain hard skills can truly be taught.”

Property management has traditionally been a career requiring flexibility, in which generalists with a range of organizational, budgeting and people skills can thrive. Meanwhile, building operations is increasingly demanding a comfort with technology and digital applications that an injection of younger workers could bring.

The industry’s ongoing efforts to provide more opportunities for under-represented groups should fit well with companies’ needs for skills and their talent acquisition strategies. Flynn urged more outreach to Indigenous youth in particular.

BUILDING TRADES IN IMMIGRATION EXPRESS QUEUE

Skilled building trades qualify for the express lane to permanent residency under new guidelines for Canada’s immigration application system. The category-based selection process is targeting prospective immigrants with either French language proficiency or work experience in one of five designated occupational fields.

“Everywhere I go, I’ve heard loud and clear from employers across the country who are experiencing chronic labour shortages,” said Sean Fraser, Canada’s then Minister of Immigration, Refugees and Citizenship, when the program was announced in June. “These changes to the Express Entry system will ensure that they have the skilled workers they need to grow and succeed.”

The system was already in place to manage applications for permanent residency from skilled workers who have entered Canada through either federal or provincial nominee programs. The new rules scope the field further, giving priority to specific categories of arrivals, which are to be established annually with input from public consultations.

In addition to French speakers and building/construction trades, health care workers, STEM (science, technology, engineering, mathematics) professions, transport workers, and agriculture and agri-food workers have been tapped for 2023. The Express Entry system assesses immigration candidates on a points-based system and extends invitations to apply for permanent residency to the top-ranked candidates approximately twice per month throughout the year.

PROMINENT SPONSORS JOIN GLOBAL DEI SURVEY

An expanded list of prominent sponsors has signed on for the 2023 global survey of diversity, equity and inclusion (DEI) in commercial real estate, more than doubling the initial slate of seven participating organizations two years ago. The survey coordinator, Ferguson and Partners, collected data from July through to September 22, 2023.

Canada’s REALPAC, which counts many of the country’s major real estate companies, investment managers and institutional investors among its members, is one of the survey’s seven founders. That group collectively represents the employers of hundreds of thousands of commercial real estate professionals worldwide, and includes industry associations such as the Urban Land Institute (ULI), which also has chapters in Canada, the Pension Real Estate Association (PREA) and the U.S. National Association of Real Estate Investment Managers (NAREIM).

Some of the leading industry associations now joining in to urge their members to undertake the survey include: the European Public Real Estate Association (EPRA); CoreNet Global; the Open Standards Consortium for Real Estate (OSCRE International); and the Royal Institution of Chartered Surveyors (RICS). However, all real estate companies are welcome to respond to the survey, regardless of whether they are affiliated with one of the 15 sponsors.

The 2023 survey also marks a switch from annual to biennial data collection. Results are scheduled to be released in January 2024, after which the next survey period will commence in the summer of 2025.

– REMI Network

– REMI Network

“I don’t think our industry has done as well as it could have to help them see this could be a great career,” he reflected.

Gray applauded the concept of intake without resumes, and noted the evolving social dynamic that has made employers more aware of how they appear to prospective employees.

“I think people place a lot of emphasis on what a company does and stands for,” she said.

That also flows through to the labour practices of suppliers and contractors. ESG (environmental, social, governance) mandates and regulatory requirements in countries like the United Kingdom are prompting building owners/managers to weigh this consideration in their procurement and contracting due diligence, including how it might factor into low bids.

“If you re-tender a janitorial contract, maybe you can find some cost efficiencies, but, certainly, the efficiency I wouldn’t recommend is for contractors to pay their people less,” Flynn reiterated. “They are at poverty levels now in some contracts.”

ESG DEPARTMENTS GROWING

Looking to other human resources challenges building owners/managers are encountering, Flynn underscored the need for expertise and training to keep smart and green buildings performing as designed. Similarly, a recent webinar sponsored by the Open Standards Consortium for Real Estate (OSCRE) International examined some of the staffing pressures arising from growing demands for ESG outcomes and data in the commercial real estate industry.

Ailey Roberts, Principal, Sustainable Investing, with BentallGreenOak, described how ESG teams are navigating steep learning curves at high speed to keep pace with requirements for accurately tracking and consistently reporting on issues ranging from curbing greenhouse gas emissions to climate change adaptation to diversity, equity and inclusion (DEI). It’s a daunting data collection and management exercise with many fragmented components and still evolving methodologies.

“As it relates to data and the increased requirements around ESG, a lot of this stuff is not necessarily taught in school

and certainly not within the lens of real estate. Things like greenhouse gas emissions accounting, for example; that is an incredibly complex package to unpack.” she advised. “Our ability to hire is not favourable with the way the market is right now so we need to do more with the people we have and upskill our teams.”

That’s a general trend across the commercial real estate industry. Companies that may have had a lone sustainability manager just a few years ago now need a range of expertise and a larger staff to respond to rapidly changing demands for reporting and transparency from investors and regulators. Within these nascent departments, there are likely to be few staffers with long-term experience in ESG-related roles.

“You can’t buy the skills. You can’t even buy a lot of the training because things are changing so fast. The training is often not developed yet,” reported Chris Lees, a Technical Director with OSCRE International. “Your best chance is to find people who are smart enough to learn, and those are the people who you want to hire anyway.”

Real-time Monitoring Opens Up Operational Insight INSIDE LOOK

By Rebecca Melnyk

CANA DA’S TOP commercial real estate players have identified the growing importance of visualizing indoor building activities in real time, as the use of space becomes less predictable and tenant needs evolve. Earlier this year, the Building Owners and Managers Association (BOMA) of Canada collaborated with Esri Canada to survey 212 property managers and asset owners, resulting in the new report: Navigating the future of the workplace.

More than half of the survey participants represent portfolios with more than 50 buildings or a million square feet of commercial space. A recent webinar highlighted some of the key findings.

To date, interactive maps have primarily focused on the streets and surroundings outside commercial buildings. Survey respondents favoured a similar tool for guiding visitors and contractors within their buildings, which could provide real-time operational

awareness of indoor spaces and building conditions. Other identified priorities include: coordinating construction, maintenance and renovation projects; and responding quickly to emergencies.

The COVID-19 pandemic and related shift to working-from-home has made it more difficult for property and asset managers to predict occupancy and how people move through commercial space. “They need a standardized platform to gather data from a variety of systems,” maintained Dave Monaghan, Esri

Canada’s Manager for IoT (Internet of Things) and Indoor GIS (geographic information system).

Two-thirds of survey respondents said they currently find helping people get around properties somewhat challenging or a major challenge. Traffic to these buildings is expected to climb over the next five years, bringing increasing pressure.

Meanwhile, creating a digital twin — 3D replica of a physical space — was flagged as a key solution for helping maintenance teams and employees

ERRATIC DEMAND FOR DESKS

As companies put forth policies for in-office attendance, facility managers are at the forefront, having to plan around changing occupancy rates and the erratic demands of buildings. New research from the global worktech company Eptura, draws on proprietary data to analyze 2.7 million desks, 37,000 buildings, and 440,000 floors across more than 8,000 companies, along with a survey of 6,700 employees.

The resulting findings, found in Eptura’s Q2 Workplace Index report, zero in on workplace attendance and worker interaction.

Physical proximity to colleagues figures highly in office attendance decisions. Knowing who else will be in the office has become as essential as knowing what workspaces are available. Employees have been requesting features that allow them to see if their colleagues will be present.

In the second quarter of 2023, 84% of survey respondents in the Americas registered yearover-year increases in desk bookings. The data suggests many employees are choosing to go to the office primarily for socialization and collaboration.

Senior managers and middle managers rank collaborating with colleagues highest when asked what they appreciate most about going to the office. Socializing with friends is the second-most important factor for middle managers, but does not feature in senior managers’ top three motivations. Meanwhile, other staff place socializing with friends and colleagues at the top of their lists.

When asked where they like to work when in the office, 47% of survey respondents say they like to be near their team. The report found that roughly a third of employees in the Americas book desks on short notice — either one day before or on the day they arrive — complicating planning for facility managers.

“Facility and asset managers continue to face significant challenges to identify the right workspace mix for employee needs while keeping their real estate and building systems running efficiently,” says Brandon Holden, Chief Executive Officer of Eptura.

The complete report can be found at https://lp.eptura.com/content-epturaworkplace-index-Q2.html.

ATTENDANCE RATES FLOUT DECREES

Office attendance rates continue to lag employers’ expectations, a new survey of large corporate real estate managers reveals. More than 55% of respondents to CoreNet Global’s queries report that corporate personnel are not fully complying with directives to return to the office.

Theoretically, about 97 of the 175 large global firms participating in the summertime survey now decree staff should work in the formal office at least three days per week, with the largest share of those companies establishing a three-day standard. About 25% of the surveyed corporations still allow employees to work entirely from home, while 12.6% call for five days in the office. Only 2.8% of have a one-day prerequisite.

“We are indeed seeing companies that wish to implement post-pandemic, return to office mandates, but employees are pushing back,” observes Tim Venable, Senior Vice President, research, with CoreNet Global. “We will be watching to see how this dynamic plays itself out over the next year.”

Other survey findings point to general shrinking of the corporate office footprint with more than 55% of respondents currently occupying less space than they did in 2021. Nineteen per cent have trimmed more than 20% of their office footprint.

Meanwhile, nearly half of respondents have redesigned their headquarters — often reducing the number of individual workstations — and upgraded air filtration and added touchless devices.

– REMI Network

surveyfindings

navigate buildings. This GIS-generated map helps decision-makers to visualize the operating systems in every area of the building.

“The process digitizes all of a building’s floor plans and connects the dots between systems within the building to monitor things like HVAC, lighting and occupancy,” the report states. “A range of sensors, including Bluetooth beacons, RFID tags, room occupancy sensors and smart devices, can bring interactive maps to life by providing real-time data and ever-changing floor plans to a mobile device.”

More than half of the survey respondents are already using real-time monitoring to track assets and analyze people movements over time, while 47% are using it for life safety planning and procedures.

“For emergency responders, it’s no longer enough to just have a PDF of a floor plan,” Monaghan noted. “You need real-time situational awareness and that dynamic map of where things and people are right now.”

As well, Monaghan cited the potential accumulation of time savings through streamlining the work order management process and dispatching the closest available maintenance crew to a problem. “If that newfound efficiency saves even five minutes per work order, that could translate into savings on hundreds of billable hours each year, given some companies may experience thousands of work orders annually,” he projected.

Property management executives are also on board with using interactive maps for decision-making purposes, and see

the potential of using indoor GIS for additional insight.

“Rather than just guesswork you can make it a data-driven solution,” observed Shawn Hamilton, Vice President of business development at Canderel and a member of BOMA Canada’s board of directors. “Anything that helps us understand that coefficient is extremely valuable because a lot of the times we are using people’s experience without understanding why something worked or didn’t work.”

Rebecca Melnyk is Editor of Canadian Facility Management and Design. The full report, Navigating the future of the workplace , can be found at https:// bomacanada.ca/navigating-the-future-of-theworkplace-survey-results.

“You need real-time situational awareness and that dynamic map of where things and people are right now.”

SAME OLD, SAME OLD

Ontario Retains 2016 Assessed Values for the 2024 Tax Year

By Barbara Carss

ONTARIO WILL again rely on 2016 market values to apportion property tax in 2024. Earlier this summer, provincial Finance Minister Peter Bethlenfalvy filed a regulation to postpone property reassessment for another year, thus stretching the assessment cycle to double its originally intended time span.

In making the decision, the Ontario government cites concerns about inflation, financial stress related to mortgage renewals and the need for householders to have budgetary predictability. Critics counter that the

delay is indiscriminately driving up property tax rates as municipalities grapple with their own cost pressures, and is stalling needed tax shifts within the commercial property tax class to reflect the change in economic circumstances from eight years ago.

“A reassessment allows for rebalancing and readjusting of value as it relates to each property tax class. With that, comes a higher revenue base for the municipality, which allows it to adjust the tax treatment relative to the property class,” observes David Gibson, Managing Director of the property tax and

assessment advisory firm, Yeoman & Company. “Without that growth in assessment and rebalancing of the allocation, municipalities are just increasing taxes across the board.”

Accurate assessments are particularly key to apportioning the tax burden among commercial ratepayers because of the range of asset types — office, retail, hotel, warehouse/logistics — lumped together with a single tax rate. In general, it’s presumed that office properties would be carrying a lesser share of the overall commercial allocation and warehouse/logistics properties would

shoulder more if assessed values were brought up to date.

“This year there were a number of municipalities with pretty significant tax rate increases. It certainly would have been a good time to have a reassessment in place so the increases were distributed fairly and equitably,” says Jeff Arnott, a Vice President with Altus Group’s property tax division. “When reassessment is delayed, the anomalies in the system — some people are paying more than they should; some people are paying less than they should — just get compounded. The scale of this problem is getting larger by the year. ”

DELAY ADDS UNCERTAINTY

Based on the governing regulation under Ontario’s Assessment Act, updated assessments tied to January 2023 property values are now theoretically expected to be in place for the 2025 tax year. However, Bethlenfalvy makes no commitment to any firm date in a recent letter to the Association of Municipalities of Ontario (AMO).

“Our government will conduct a review of the property tax assessment and taxation system that will focus on fairness, affordability and business competitiveness,” he advises. “In order to maintain stability for taxpayers, we will continue to defer property reassessment until our work is complete.”

AMO, an umbrella policy support and advocacy group for Ontario’s local governments, has been actively urging the provincial government to proceed with reassessment and is now reiterating that it will continue to do so.

“AMO is concerned that further delays will compound uncertainty for residents and businesses. Outdated assessments are inaccurate, increase volatility and are not transparent,” a statement on the association’s website asserts. “Further deferring property reassessment during the review means municipalities could be waiting awhile before a reassessment is conducted.”

“Continuing to push out the assessment period creates continued uncertainty for our industry as we try to forecast where

taxes are going to be and provide good information for our tenants,” concurs Dean Karakasis, Executive Director of the Building Owners and Managers Association (BOMA) of Ottawa. “In

today’s climate of overall economic slowdown, increasing interest rates and shifting tenant needs, having more unknowns is not helpful to creating a stable market for our tenants.”

TORONTO COMMERCIAL RATEPAYERS ON ALERT FOR NEW LEVIES

The City of Toronto is exploring two revenue-generating measures with implications for commercial property owners. Arising from a special City Council meeting in early September to grapple with a multi-billion-dollar current and projected deficit, staff has been instructed to deliver further reports on the logistics of a new commercial parking levy and monetary penalties for failing to meet prescribed building performance standards.

Both options were identified in a third-party report, prepared by Ernst & Young LLP, and incorporated into subsequent recommendations for updating Toronto’s long-term financial plan. This is deemed necessary as the City confronts a $1.5 billion shortfall in operating funds and pressure to find an additional $46.5 billion to adequately cover forecasted operating and capital needs over the next 10 years.

The Ernst & Young (EY) analysis estimates a new levy on commercial parking spaces could generate about $173 million per year at a low-end charge of $0.50 per parking space or up to about $490 million annually if the rate is set at $1.50 per space. This is based on the levy being applied on all paid and unpaid commercial parking spaces, including the parking lots that the Toronto Parking Authority and Toronto Transit Commission operate.

It would be collected on subject ratepayers’ property tax bills and is forecasted to cost about $2.5 million annually to administer. The levy could be imposed under existing municipal authority, and it is aligned with two of the City’s five stated key objectives — easing mobility and responding to climate change.

However, the EY assessment foresees it will be time-consuming to enforce and will likely result in flow-through extra costs for parking consumers. Advocates for the commercial real estate sector and other Toronto-based business groups also underscored that outcome in a late-August written submission to City Council’s Executive Committee.

“In most cases, due to the structure of net commercial leases, the parking levy will not be paid by the property owner or landlord, but by the tenant,” Michael Brooks, Chief Executive Officer of REALPAC stated on behalf of his organization, the Building Owners and Managers Association (BOMA) of Greater Toronto, NAIOP Greater Toronto, the Financial District Business Improvement Area (BIA) and Toronto Board of Trade.

The EY analysis estimates that monetary penalties attached to exceeding an allowable threshold for greenhouse gas (GHG) emissions could raise about $93 million annually. First, though, the City would need a bylaw to put those thresholds in place.

Under the schedule Council has now approved, City staff will present Council with informed advice on a bylaw to mandate the reporting of building-level data on energy and water use and GHG emissions in the fall of 2023. That would be followed in 2024 with the framework for a bylaw to require existing buildings to meet specified GHG emissions standards.

It’s believed that the City should be able to levy fines for non-compliance once an enabling bylaw is enacted. “The City has legal authority to implement a bylaw requiring building owners to meet a performance standard; the permissibility of imposing a charge will depend on the specific design of the tool,” the EY analysis states.

“Outdated assessments are inaccurate, increase volatility and are not transparent.”

ERODING PROGRESS

Property values are updated on an annual or biennial schedule in most other Canadian provinces except Quebec, where reassessment occurs at three-year intervals. (Manitoba added an extra year to its assessment cycle during the COVID-19 pandemic, but is now back on schedule.) Prior to Ontario’s hiatus — which was invoked in the early days of the pandemic and subsequently

extended — the province had settled into a four-year assessment cycle with a mechanism to phase in assessmentrelated tax increases in increments of 25% over those four years.

Gibson argues that the phase-in already reinforces the predictability and transparency that the provincial government claims to be seeking. Both ratepayers and municipalities can plot how assessed values will rise and how the corresponding tax rate should drop with

each year’s new quotient of assessment growth. That should also make it straightforward for property owners to distinguish between assessment-related and spending-related tax increases.

“Provided there’s a reassessment for the 2025 tax year, property owners won’t see the full implications of upward revisions until 2028,” Gibson notes. “In the meantime, the hard-hit retail, the hard-hit office and other markets that are struggling in other parts of Ontario may get a benefit from the reset that they’re not getting today.”

In contrast, the connection between 2016 values and the actual market becomes murkier with every additional year before a reassessment, and the potential grows for dramatic tax shifts once updates finally do occur. Notably, in the late 1990s when the Ontario government first adopted a regular assessment cycle, properties in many municipalities had not been reassessed in multiple decades. That necessitated an elaborate apparatus of caps and clawbacks to ease the severe tax swings and more gradually move to an equitable alignment.

“It was extremely complicated and cumbersome, and it was outrageously confusing for the business community,” Arnott recounts. “By 2020, it had seemed, with the long troubled history of getting there, that Ontario assessment had reached a point where it was stabilized. Now it feels like we’re going backwards.”

Tax shifts are typically more moderate when assessments are updated more frequently. However, even the considerable jump in home values that has occurred since 2016 is expected to cause little fallout for residential ratepayers because it is a sectorwide phenomenon for a single asset type.

“When the market value of the whole residential sector doubles, the tax rate goes down by half, and the majority of residential taxpayers don’t see a huge impact because they follow the average of the residential change,” Arnott explains. “We know that the thought of a reassessment, or just mentioning that a reassessment might happen, scares politicians about residential taxes even though, historically, it doesn’t have the impact that everybody thinks it’s going to. But, if assessments are updated on a very consistent basis, there will be no surprises. Nobody’s assessment will shoot up dramatically; the taxes won’t shift dramatically.”

Membership matters

The Commercial Real Estate landscape is changing. The blend of an in-person and remote workplace, inflation, the aging workforce, ESG and climate change are all pressing challenges.

Property managers look to BOMA Toronto for the network of resources to navigate these critical market issues, deliver operational excellence, and position themselves for success. BOMA Toronto members are in the know.

Build your skills, build your network, build your career. Join today.

For membership enquiries, contact:

Rahim Datoo

Coordinator, Membership Engagement

416-596-8065 ext. 227

rdatoo@bomatoronto.org

www.bomatoronto.org

DEVELOPMENT DISCOUNT

Enhanced GST Rebate Promised for Purpose-built Rental Housing

By Erin Ruddy

THE CANA DIAN government is removing the goods and services tax (GST) on future purpose-built rental housing projects to incentivize much-needed construction. It’s the latest in a flurry of new measures the government has announced to address the ongoing housing crisis and, for residential housing developers, it comes as welcome news.

“This really is a game-changer and it’s something that we applaud the government for undertaking,” says Dave Wilkes, President and Chief Executive Officer of the Building Industry and Land Development Association (BILD) of Greater Toronto. “This is something that the industry has identified as a barrier for purpose-built rental, and we believe that it is a really significant step.”

The measure was first proposed, then promptly dropped, by the Liberal government

in 2015. Reintroduced as the Enhanced GST Rental Rebate program on September 14th this year, it pushes the existing rebate up from 36% to 100% for any purpose-built rental housing project about to embark on construction.

Whether it’s a student housing building, a senior residence, a quadplex or a multi-tower rental complex, qualifying developments can expect a 5% reduction in their overall costs as a result of this enhancement. Projects that convert existing non-residential real estate, such as an office building into a residential complex, are also eligible for the rebate.

The government of Canada’s website stipulates that new rental residential projects must deliver a minimum of the following:

• Four private apartment units (i.e., a unit with a private kitchen, bathroom, and living areas), or at least 10 private rooms or suites

(e.g., a 10-unit residence for students, seniors, or people with disabilities); and,

• 90% of residential units designated for long-term rental.

The enhanced GST rental rebate will not apply to individually-owned condominium units, single-unit housing, duplexes, triplexes, housing co-ops, and owned houses situated on leased land or sites in residential trailer parks.

“The stark and deeply troubling fact is that we are in a housing crisis and face an acute shortage of supply, so it is critical that government leaders come up with steps to spur construction of more housing and purpose-built rentals,” comments Richard Lyall, President of Residential Construction Council of Ontario (RESCON). “We need millions

NEWFOUNDLAND WOOS PRIVATE HOUSING DEVELOPERS

Private housing developers could receive up to $95,000 per unit for as many as 20 new affordable rental units built in Newfoundland and Labrador. The provincial housing corporation is offering the incentive, through a loan forgiveness model, to housing providers that commit to keep rents at a designated low-end-of-market rate for a period of 15 to 20 years. A request for proposals (RFP) was issued in June and closed on August 31.

The provincial government is targeting about 850 new units of affordable rental housing through the program, which also has a stream for non-profit, co-operative housing and Indigenous providers. The latter group is eligible for a higher capital subsidy of up to $180,000 per unit, but will have to charge lower rents than their private sector peers and keep units as affordable stock for 25 to 30 years.

“The government of Newfoundland and Labrador welcomes the opportunity to partner with our private and community housing sectors to develop affordable rental housing and support increased economic activity throughout the province,” says John Abbott, the Minister responsible for the Newfoundland and Labrador Housing Corporation.

The provincial funds could be put toward a new development, an addition on an existing rental housing building or a commercial-toresidential conversion. Projects must bring at least four affordable units to the market, and one to two of those units must be accessible in every project.

It’s envisioned that the new units will be made available to renters with annual household incomes no greater than $42,000. However, program administrators are encouraging mixed-income developments, giving landlords leeway to charge higher rents for units that haven’t benefitted from a capital subsidy within a larger complex.

As such, funding will be dispersed for all units in projects up to 10 units in size, and then for 50% of units exceeding that number. That means a project must have at least 30 units to qualify for funding of the maximum 20 units.

Proponents will be eligible for varying amounts of base funding depending on project locale — set at $65,000 per unit in the St. John’s region; $70,000 per unit in Labrador; and $55,000 per unit elsewhere in the province — and can then qualify for extra funding for exceeding minimum energy efficiency and/or accessibility standards, for committing to a longer period of affordable rents or for a location in close proximity to health care services. Successful candidates will be expected to contribute a minimum of 10% of their own capital equity.

“The Canadian Home Builders’ Association of Newfoundland and Labrador is thrilled with the announcement of the new affordable housing program,” says Alexis Foster, the association’s Chief Executive Officer. “This initiative is vital and we are thankful for the opportunity to provide feedback on the program.”

– REMI Network

TORONTO TO OFFER MULTIFAMILY RETROFIT FINANCING

Multifamily landlords in Toronto could qualify for grants of up to $1.5 million through a recently launched energy retrofit initiative for buildings of 3+ storeys constructed before 1990. The program — dubbed Taking Action on Tower Renewal (TATR) — will offer low-cost financing to be repaid over five to 20 years through a special property-related levy, along with partial loan forgiveness for attaining targets for energy saving and emissions reduction.

To qualify, properties must be located in one of Toronto’s 31 designated neighbourhood improvement areas (NIAs) or house a lowincome occupancy, and be free of property tax and utility arrears for at least five years. Available funding will be capped at 25% of a property’s current value assessment or $5 million, whichever is the lower amount. Loans will be tied to the property and become the obligation of the new owners if the building is sold.

Participating owners must begin the undertaking with a recognized credible energy audit and can choose either a Level 1 or 2 targetand-grant option. Level 1 is a commitment for a 15% reduction in energy consumption and greenhouse gas (GHG) emissions to qualify for loan forgiveness equivalent to 15% of project costs. Level 2 is a commitment for a 30% energy-use and emissions reduction, which qualifies for a grant of up to $50,000 to underwrite an energy assessment and technical study and loan forgiveness equivalent to 30% of project costs.

At least one of four designated upgrade measures will be mandatory for every TATR project: high-efficiency windows; roof replacement and associated enhanced insulation; insulated over-cladding; or heat pumps. As well, any required associated ventilation improvements must be completed.

A range of other building envelope and mechanical upgrades, water efficiency measures, LED lighting/controls and renewable energy systems will also qualify, provided they have been identified in the supporting energy assessment.

The program rules prohibit participating landlords from applying for above guideline rent increases related to the improvements. They must also agree to host information sessions and prepare other communications to keep tenants informed about the project’s progress, and to implement conservation awareness training. Where applicable, they will be expected to offer City of Toronto job training or local skills development programs on jobsites in their buildings.

TATR is funded with a $13.5 million injection from the Federation of Canadian Municipalities’ (FCM) green fund.

REMI Network

more units and must pull out all the stops to make that happen.”

To maximize the impact of the new measure, the federal government is calling on the provinces to follow suit. Ontario and Newfoundland and Labrador have already indicated that they will, while British Columbia and Alberta did not charge provincial tax previously.

SUPPLY DEFICIT RUNS DEEP

In late 2022, BILD, along with the Federation of Rental-housing Providers of Ontario (FRPO), Urbanation and Finnegan Marshall, collaborated on a report looking at purposebuilt rental supply in the Greater Toronto Area. Findings were dire, projecting that the supply deficit will double in the next 10 years, to 177,000 units across the GTA, if urgent action is not taken.

“We haven’t built enough purpose-built rentals to accommodate our growing population, yet projects were still being saddled with whopping sales taxes on the fair market value of a building upon completion,”

Lyall says. “When encumbered with such formidable financial hurdles, developers often find it difficult to proceed with apartment building projects. These adjustments are clearly a step in the right direction, as it will shave costs from constructing apartments and lead to more building.”

From the tenant perspective, advocates of the GST rental rebate program say that any step that encourages the construction of purpose-built rental housing over condominiums is a positive move for improving affordability.

“Eliminating GST on purpose-built rental projects is an important first step towards creating more of the housing that many Canadians need, at costs that are affordable to them. But like the Prime Minister said during the September 14 announcement, there is no silver bullet to solve the housing crisis,” says Jacob Gorenkoff, who leads the affordable housing policy and advocacy work of the Canadian Housing and Renewal Association.

“If we want Canadians to have access to affordable homes, the federal government needs to lead a Team Canada approach to housing, working with all levels of government and private and non-profit housing providers to set clear targets that can be achieved through ambitious, yet functional policies and programs,” he adds. “A key consideration must be supporting Canadians that can’t afford housing offered at sky-high market rates. The best way to help these neighbours is by doubling Canada’s proportion of community housing stock to be on par with the OECD and G7 averages.”

Meanwhile, the Liberals aren’t the only ones proposing measures to encourage more housing development. Federal Conservative party leader Pierre Poilievre has announced his intent to introduce what he’s dubbed the Building Homes, Not Bureaucracy Act to encourage municipalities to meet their housing targets.

Under his proposed formula, bonuses ould be given to the municipalities that exceed their goals, and funds withdrawn from those that don’t. He also proposed removing the GST on any new buildings that offer belowmarket rental prices, and vowed to address municipal-level barriers to housing development.

“We need quick and bold action on the housing front to bring us back from the dark abyss,” Lyall maintains.

Erin

Ruddy is Editor of Canadian Apartment.

–

“This is something that the industry has identified as a barrier for purpose-built rental, and we believe that it is a really significant step.”

FUNDAMENTALLY TECHY

Canadian Markets Offer a Combo of Lures for Firms and Workers

CANADIAN CITIES present highly competitive options for tech startups and firms looking to expand their North American base. CBRE’s recently released annual ranking of the leading 50 markets for fostering tech employment includes eight of Canada’s largest urban centres, with Toronto, Vancouver, Montreal, Ottawa,

Waterloo Region and Calgary all placed in the top half of the list.

Scores are derived from a combination of factors that CBRE analysts identify as lures for both employers and tech workers. The San Francisco Bay area and Seattle emerge decisively in the first and second spots with scores of 82.6 and 71.4 respectively, but a much slimmer range of gradients separates

the next four positions — New York, Washington D.C., Toronto and Austin — with a one-point difference between the number three and number six scores. Notably, Toronto’s 5th place tally of 66.5 is just 0.2 behind Washington and 0.1 ahead of Austin.

The other Canadian cities range in the rankings from Vancouver in 8th to

Edmonton at 39th. However, all are bunched together as the eight most affordable based on combined wage and office rent costs.

The U.S. markets slotted ahead of Toronto come in as the four priciest, whereas, at 44th, Toronto isn’t even the costliest in Canada. (Calgary takes that title.)

“An office here could cost half of that compared to other North American markets when thinking real estate and labour combined,” observed Liz Nucci, CBRE’s Vice President of office leasing in Toronto, during an online briefing in conjunction with the tech scorecard release. “In addition to being affordable, Canada has favourable immigration policies that bring in skilled workers and, in turn, expedite permanent residency. And we have incredibly strong universities,

including the University of Toronto and the University of Waterloo, which attract people here from around the globe and produce that sought-after talent.”

Tech has been one of the strongest employment engines on both sides of the border since the COVID-19 pandemic hit, spurring 150,000 new jobs in Canada and 610,000 in the U.S. since 2020. Given differing populations, Canada boasts the more impressive growth rate of 15.7% versus 11.4% in the U.S.. Approximately 1.1 million tech workers now account for 6.5% of Canada’s total workforce, while about 5.9 million tech workers in the U.S. make up 4% of the workforce there.

Heartening for commercial landlords, there is a general perception that the

sector’s work-from-home rates are easing down from the 46% level registered in 2021. Colin Yasukochi, Executive Director of CBRE’s tech insights division based in San Francisco notes that about 19% of tech job postings now promise the potential for remote work.

Meanwhile, return-to-work is noticeably contributing to leasing deals in Silicon Valley. Chris Shepherd, Executive Vice President in CBRE’s San Jose office, tallied more than 100 in each of last few quarters.

“These leases are made up from two types of companies,” he reported. “The first type decided to work from home and give up an office space, and now they’re coming back to the office. The second is new startup companies.”

office here could cost half of that compared to other North

sectors&cities

HOTEL INVESTMENT ENJOYS COVID RECOVERY

Hotel investment volume surpassed pre-pandemic levels in the first half of 2023. Colliers Canada’s recently released stats for the second quarter also show gains in occupancy levels and revenue per available room (RevPAR) compared to the spring of 2019.

More than $1 billion worth of hotel deals were completed between January 1 and June 30 this year with about 70% of those occurring in the second quarter. In total, 77 hotels traded, a 38% increase over the first half of 2022.

In contrast with trends during the grip of COVID, only about 10% were purchased for conversion to other uses. The normalized average price per room — i.e. for those remaining as hotel accommodations — sits at $192,100, equating to a 32% year-overyear gain.

Eight of 10 provinces (excepting Prince Edward Island and Newfoundland and Labrador) saw transactions during the first half of the year, with the largest share of deals occurring in Ontario (35) and British Columbia (19). However, a smaller number of big-ticket sales in Alberta represent 23% of total investment value. The nine transactions there encompassed 972 rooms and collectively tallied $244 million for a normalized average price per room of $269,500.

Quebec’s eight deals account for another 15% of H1 investment value, comprising a total of 1,023 rooms and a normalized average price per room of $154,400. Looking east, there were two transactions in each of New Brunswick and Nova Scotia, while, looking west, Saskatchewan and Manitoba each chalked up one deal.

Major sales during the second quarter include the $110-million transaction for the 77-room Hazelton in Toronto and the $170-million trade for the 330-room Rimrock Resort Hotel in Banff. As well, InnVest Hotels acquired the historic Algonquin Resort St. Andrews by-the-sea in New Brunswick for an undisclosed price.

The national occupancy rate nudged slightly above 63% for the first half of the year, up 920 basis points (bps) from the same period in 2022 and 80 bps above the first six months of 2019. RevPAR is pegged at $189 for H1 2023, versus $164 for H1 2022 and $159 for H1 2019.

Colliers analysts point to “remarkable increases in average daily rates” as a prime reason for the gain, along with a pickup in domestic and cross-border travel. Canada’s steady population growth and governments’ efforts to promote tourism are also tagged as positive influences.

“This strong bounce is acting as a catalyst for investment sales, both closed and in the pipeline,” they contend. “Despite new interest rate realities, upwards pressure on cap rates has been mitigated by significantly improved in-place cash flows and greater visibility into future operating performance.”

Meanwhile, in the larger picture, JLL pegs global hotel investment volume at USD $20.6 billion (CAD $27.6 billion) for 652 transactions during the first six months of this year. Both figures show a slip from 2022, which was one of the most active years for trades in history. Yet, drilling down to 2023 sales of full-service hotels — accounting for 54% of single-asset transactions — the first half delivered the second-highest ever average price per room at USD $405,000 (CAD $542,700).

Canada does not figure in the most active North American markets for transactions. In fact, the top three — New York City, Fort Lauderdale and San Antonio — all recorded investment sales volume in excess to the entire Canadian market, ranging from USD $1 billion (CAD $1.34 billion) to USD $844 million (CAD $1.13 billion).

However, Toronto is highlighted among 14 identified international “gateway” cities for an above-average gain in RevPAR relative to 2019. For the first six months of this year, Toronto is 19% ahead of the first half of 2019, the best performance of the three North American destinations cited.

– The INNvestment Canada Hotel Report can be found at www.collierscanada.com/en-ca/ research/q2-2023-innvestment-canada-hotel-report

COMPETITIVE COST PACKAGE

Although average office rents in Vancouver and Toronto surpass those in many U.S. markets, Canada’s consistently low-end labour costs provide dramatic counter ballast. The overall package of operating

costs for a 500-employee tech enterprise are pegged at about USD $38.1 million (CAD $50.3 million) in Toronto and USD $37.5 million (CAD $49.5 million) in Vancouver versus USD $78.8 million (CAD $104 million) in the San Francisco Bay area, USD

$62 million (CAD $81.8 million) in Seattle and USD $60 million (CAD $79.2 million) in Washington, D.C.

The scorecard also assesses quality of tech talent based on each market’s concentration of software engineers with at least three years of working experience who had graduated from one of the 25 top-ranked computer science schools in North America (including 20 in the U.S. and five in Canada). By this metric, Waterloo, Vancouver and Edmonton were deemed to provide the best value for quality and cost of labour of the 50 markets.

Despite lower tech wages in Canada, the ratio of average rental housing costs to average earnings is generally narrower than in most of the U.S. cities. Tech workers from abroad may also prioritize other considerations above salaries, as is perhaps seen in the response to Canada’s recently introduced visa program for holders of H-1B specialty occupation visas in the United States, which achieved its target of 10,000 applicants within just days of opening on July 16.

Under U.S. immigration policies, H-1B visa holders who lose their jobs must secure new employment within 60 days or leave the country. Canada is promising a path to permanent residency and will initially also provide temporary residence visas for their immediate family members.

“This could really help position Canada as a stable country to establish themselves in, and one that the best talent should continue to consider,” Nucci said. “I would say this reflects quite well on our attractiveness and why workers should come here.”

Yasukochi characterized the program as complementary rather than a brain drain risk for large tech companies, often headquartered in Silicon Valley or Seattle, that have operations in both countries. That should provide flexibility for employees currently holding H-1B visas to relocate to Canada fairly seamlessly.

“In theory, a lot of the people who are on H-1B visas can keep their same job so that’s highly beneficial,” Yasukochi maintained. “It also allows these companies to tap into an even greater talent pool that could potentially wind up in Canada.”

The complete Scoring Tech Talent 2023 report can be found at www.cbre.com/insights/ books/scoring-tech-talent-2023.

targets

BOMA Canada to Draw Lessons from its Net-Zero Pursuit TRANSITION TEMPLATE

THE BUILDING OWNERS and Managers Association (BOMA) of Canada will purchase carbon offsets for approximately 330 tonnes of greenhouse gas (GHG) emissions associated with its annual conference and tradeshow, BOMEX. It’s a first step in the organization’s net-zero learning pursuit, aiming to decarbonize its own operations, develop replicable guidance from the experience and promote best practices for carbon offsets.

“It starts with getting an understanding of what our footprint is and using that as a benchmark,” explains Hannah Veiga, who is coordinating the project, working closely with Bala Gnanam, BOMA Canada’s Vice President, sustainability, advocacy and stakeholder relations. “We’re working on a policy for BOMA Canada and all the local chapters that could serve as a blueprint for our members as well.”

In addition to calculating and offsetting the footprint of the showcase BOMEX event — set for September 26-28 in Edmonton — the project will consider BOMA Canada’s broader operations and explore approaches for reducing and offsetting emissions related to energy, water, waste, transportation and supply chain. That will include processes for collecting and verifying data and supporting landlord-tenant collaboration.

“Part of our bigger picture is to look at how we foster that relationship between the tenants and the landlords and align their

interests around ESG objectives and then, ultimately, how those kinds of successes could translate into landlord reporting, whether it’s to GRESB or some other mechanism,” Gnanam says.

Another key goal is to develop best practices for evaluating carbon offsets and a registry of qualifying Canadian sources so that BOMA members could identify projects in their own communities and/or types of offsets that best fit with their priorities. The growing number of companies and organizations now purchasing offsets in the voluntary market has likewise drawn some disreputable players with questionable products so Gnanam stresses the importance of verification through credible auditors and recognized standards bodies. As well, this summer in Canada underscores the vulnerability of one common option.

“Part of our recommendation is not to go with any forest offsets,” Gnanam reiterates. “We like renewable energy projects, geothermal projects, projects where engineers are involved, where M&V (monitoring and verification) is involved, preferably local projects and preferably immediate projects.”

One offset is equivalent to one tonne of carbon emissions that has been reduced, sequestered or avoided. Prices in the voluntary market typically range from $5 to $10 per tonne, whereas credits in the

compliance market for large emitters trade at a higher value. While designated large emitters must keep GHG output within a mandated ceiling and may be compelled to purchase credits to do so, participants in the voluntary market typically rely on offsets to meet corporate or shareholderimposed targets for curbing emissions.

In the best case scenario, Gnanam stresses that offsets should be one component of a larger strategy and applied to fill gaps that emitters are working toward closing on their own. However, particularly when purchased locally, they are a tangible investment in sustainability.

“Offsets are a valuable stepping stone in a long journey to decarbonization, and we think it could become a better social exercise for companies buying offsets while continuing to shrink their emissions,” he reflects. “But, what’s a good offset? Where do you get it? How do you make sure that it’s credible? Those are the microlevel issues that we will address.”

For BOMEX, an offset consulting firm derived the 330-tonne estimate based on GHG protocol and emissions factors such as the host venue and hotel’s energy use and attendees’ transportation. For the latter, registrants’ postal codes were used to determine travelling distances and underpin assumptions about whether they will drive or fly.

“Flights account for about three quarters of the emissions,” Veiga notes.

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