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VOL. 33 NO. 4

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Editor-in-Chief Barbara Carss barbc@mediaedge.ca Publisher Sean Foley seanf@mediaedge.ca Editor, Greater Michelle Ervin Toronto Area & Beyond michellee@mediaedge.ca Contributing Writers Bill Baron, James Heaps, David Khorram, Evan Reis, Stu Rich, Ali Sahabi, Susan Thompson, Benton Yetman Senior Designer Annette Carlucci Wong annettec@mediaedge.ca Web Designer Rick Evangelista rickr@mediaedge.ca Production Manager Rachel Selbie rachels@mediaedge.ca National Sales Maya Merchant mayam@mediaedge.ca Kelly Nicholls kellyn@mediaedge.ca Melissa Valentini melissav@mediaedge.ca Digital Media Director Steven Chester stevenc@mediaedge.ca Circulation circulation@mediaedge.ca Alberta & B.C Sales Dan Gnocato dang@mediaedge.ca

President Kevin Brown kevinb@mediaedge.ca Group Publisher Sean Foley seanf@mediaedge.ca Accounting Manager Nadia Piculik, CPA CMA nadiap@mediaedge.ca TEL: (416) 512-8186 • FAX: (416) 512-8344 Published and printed six times yearly as follows: March, April/May, June, Aug/Sept, Oct, Nov/Dec by MediaEdge Communications Inc. 5255 Yonge St., Suite 1000, Toronto, Ontario M2N 6P4 (416) 512-8186 Fax: (416) 512-8344 e-mail: circulation@mediaedge.ca Subscription Rates: Canada: 1 year, $60*; 2 years, $110* Single Copy Sales: Canada: $12* Outside Canada: US 1 year, $85 International $110 *Plus applicable taxes Reprints: Requests for permission to reprint any portion of this magazine should be sent to info@mediaedge.ca. Copyright 2018 Canada Post Canadian Publications Mail Sales Product Agreement No. 40063056 ISSN 0834-3357 Authors: Canadian Property Management Magazine accepts unsolicited query letters and article suggestions. Manufacturers: Those wishing to have their products reviewed should contact the publisher or send information to the attention of the editor. Sworn Statement of Circulation: Available from the publisher upon written request. Although Canadian Property Management makes every effort to ensure the accuracy of the information published, we cannot be held liable for any errors or omissions, however caused. Printed in Canada

editor’snote THE COMMERCIAL real estate industry has more experience with regulatory restrictions than relaxation of laws. Legalization of cannabis presents one of those rarer circumstances that has landlords grappling with what the new leniency might mean and how they'll balance it with their continuing duty of care to safeguard building staff, occupants, visitors and even trespassers. In contrast, the lifting of prohibitions on Sunday shopping and same-sex marriage had positive spinoffs for retail and event space with relatively few complications for operations or management. There was no disruption or threat in the activities buildings hosted, just a potential new influx of clients doing the same thing clients were doing before the law changed. From the perspective of building owners and managers, the legalization of cannabis is perhaps more comparable with telecommunications deregulation. Real estate is similarly at the juncture of outside vendors' products and tenants/consumers' expectations. Competing interests will arise and there will be new demands for vigilance. Among the parallels – in keeping with this issue's Focus on risk management – telecommunications and cannabis both alter a building's fire load and vulnerability. Cabling, together with its insulating cover, is highly flammable and toxic, and is literally housed in a vertical expressway that passes through the fire separations of each building floor. Meanwhile, cannabis brings ignition devices and potentially impaired judgement together. In early fall 2018, opinions are still largely theoretical, but tend to split along sector lines as to whether the new order will be an opportunity or a headache. Retail is perhaps most obviously positioned to enjoy the upside. In this issue, James Heaps and Susan Thompson outline some of the possibilities and provide some prudent guidance. Residential managers base their somewhat less optimistic outlook on experience they've already gained since medical marijuana became available, and in mediating tensions between smoking and non-smoking neighbours. Advisors to that sector stress the importance of contractual tools in tenancy agreements and condominium bylaws and proactive communications. "It's also a good time to remind people that butts of any kind should never be thrown from a balcony," suggests Michele Farley, president and senior code consultant with FCS Fire Consulting Services." Canada's Cannabis Act tightly scopes marketing avenues for the product so, unlike telecommunications, businesses will not be striking deals to add their names to iconic buildings. The legislation does allow placement of a cannabis "brand element on other things" with provisos that essentially restrict it to adult-only pursuits that aren't fun. That arguably less-than-lucrative characterization actually seems to fit a key building service. However, industry insiders aren't expecting any imminent product placement arrangements. "My gut feeling is: No; cleaning supplies manufacturers and distributors would not have an interest at this time," says Mike Sawchuk, a janitorial/sanitation services consultant. Barbara Carss barbc@mediaedge.ca @BarbaraCarss

Canadian Property Management | September 2018 3

contents

Focus: Risk Management 6 Development Drivers: Canadian executives generally agree with their global peers' assessment of positive and negative market influences. 8 Cannabis Retailing: Canadian landlords will need to evaluate and select a new kind of tenant selling a highly regulated product. 12 Climate Change Adaptation: A checklist of investment-level and building-level considerations is emerging as extreme weather continues to wreak havoc. 15 Facilities GIS: Location-based layers of information create a big picture for hazard mapping and contingency planning. 18 Work Site Vigilance: A skyline full of cranes can be a tempting tableau for daredevils and mischief-makers. 20 Rogue Hoteliers: Short-term rentals take up space in the shadow economy. 24 Resilience Reporting: Californians push for more transparency of buildings predating rigorous seismic codes.

4 September 2018 | Canadian Property Management

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opportunity+risks

DEVELOPERS IN ON MARKET Trade Policy and the Approvals Process Makes Canadians Wary CANADIAN RESPONDENTS to a global survey of real estate developers with at least USD $250 million (CAD $322 million) worth of projects in progress are generally in sync with their international peers in gauging positive and negative market influences. Recently released results from Altus Group indicate that, collectively, the 400+ C-suite and senior executives see more opportunity than threat in technological advancements, social change and a less economically stratified society. Earlier this year, the international research firm, IDC, polled these leading real estate players on 11 forces that could potentially affect development demand, developers’ proficiency in supplying product and/or their return on investment. A largely optimistic outlook emerges, albeit with the qualification that respondents were asked to weigh in on market drivers like housing affordability and investment in public infrastructure that, in some cases, may be more theoretical than real. In addition to its global makeup, the survey sample represents a diverse portfolio mix that offers a revealing snapshot of where global investment is 6 September 2018 | Canadian Property Management

going. Notably, mixed-use development is the most active sector, capturing 20% of development underway. Presum ing that residential is a significant component of those mixed uses, that further underscores housing’s prominence. Stand-alone multifamily rental and ownership projects account for another 28% of reported activity. The remaining breakdown is: 16% office/ commercial; 15% industrial; 12% retail; 7% hotel; and 2% government or institutional projects. POSITIVE, NEGATIVE & NEUTRAL FACTORS A significant majority of the survey participants endorse housing affordability, immigration, environmental regulations, public infrastructure investment and the ex p e c t a t io n s of t h e m i l l e n n i a l demographic as positive impacts. Only a minority view any of the 11 market drivers as an outright negative impact, while upwards of a quarter of respondents decree that six of the 11 forces wield no sway over the development pipeline. More evidence of housing’s relative importance might be drawn from the fairly low level of threat attached to

cha nging com mercia l occupa ncy patterns, such as the rise of co-working space. The greatest share of respondents — 46% — categorize these trends as positive; 35% call them negative; and 19% say they have no impact. Respondents are most blasé about transportation technology, such as electric vehicles, autonomous public transportation and the spectre of selfdriving vehicles. Fully half of them attribute little clout, good or bad, to these emerging trends. Perhaps more surprisingly, 31% of respondents are unfazed by taxes and 28% identify the development approval process as a neutral factor. However, this seems to complement other findings of Altus Group’s trends report. “Government regulation is a barrier to market entry, but if already developing in a market, it has a lesser impact on a firm’s decision to leave,” the report concludes. “Fifty-nine per cent say that government regulation has a high impact on their desire to enter a market, but only 26% say that government regulation has a high impact on their desire to leave or avoid a market.”

opportunity+risks

S WEIGH ET DRIVERS Reflective of a dataset with interests in North America and Europe — 24% of respondents are active in the United States; 17% in Canada; 12% in the United Kingdom; 11% in Germany; and 10% in France — cross-border trade policy triggers more concern than the 10 other market drivers addressed in the survey. More than a third of respondents suggest it has a negative impact on projects and decision-making. “Rising trade tensions throughout a number of regions globally are adding to cost pressures in numerous markets, both real, via disputes and tariffs (e.g. steel, rebar and other commodities affected by recent tariff actions), and speculative, based on continued uncertainty about future implications of changes to economic, political and trade agreements,” the report observes. CANADIAN SENTIMENT DIVERGES A further breakdown of national perspectives reveals that Canadian respondents are the most pessimistic, with 40% deeming cross-border trade policy to be a negative force and only 20% calling it positive. In contrast, 40%

of American respondents see crossborder trade policy as positive and 31% see it as negative. Canadians also voice the strongest reservations about the development approval process — with both the highest percentage of respondents, at 38%, categorizing it as negative and the lowest percentage, 30%, calling it positive. Meanwhile, the majority of respondents from the U.S., the U.K. and Europe perceive the development approval process as positive. Michael Brooks, Chief Executive Officer of REALPAC, is quoted in the report, offering further context for Canadian misgivings. “In addition to continuous cost pressures on development generally, m a ny c i t i e s a r e d e a l i n g w i t h unaffordable housing. This disparity can often start at the development stage with unexpected taxes and charges that often get passed onto the end-occupier through increased cost or rent,” Brooks notes. “There is an increased imperative for policy makers to be upfront and clear about all fees a nd cha rges develop er s wi l l b e

accountable for when embarking on a new project. This will help ensure they are developing appropriate project budgets and will move the entire process along with less delay.” Although a majority of Canadian respondents identify environmental regulation as positive, they are somewhat less enthusiastic than their peers from other global regions — registering a 65% approval rating versus 80% of respondents from the U.S. and 83% of participating Europeans. Meanwhile, Canadians are most upbeat about immigration, even in a broadly supportive field, with 85% of respondents calling it positive and only 5% judging it negative. The largest proportion of detractors, deeming immigration negative, are Americans (13%) and Australians (12%). The smallest share of respondents viewing immigration positively are Europeans (73%) and Asians (74%). zz The complete text of the Altus Group Real Estate Development Trends Report can be found at https://www.altusgroup.com/global-realestate-development-trends-report Canadian Property Management | September 2018 7

Canada's move to legalize the recreational use of cannabis and open up its availability to adult consumers presents uncharted business territory for retail landlords. Avison Young sketches out a process for screening prospective tenants, including questions that should be asked to ensure cannabis retailers comply with regulatory requirements and meet property owners/managers' needs for viable tenants that support their business goals â&#x20AC;&#x201C; Editor.

NOT YOUR FATHER'S POT DEALER

Retail Landlords Consider a Newly Legal Tenant Pool By James Heaps and Susan Thompson THE 12 -TO -24 -MONTH period following the rollout of legal recreational cannabis could position Canada to shape regulatory frameworks for cannabis around the world and spur innovation and economic productivity. Canada could become the global model for the regulation and implementation of recreational cannabis. Because both public and private models are being implemented, Canadians will be able to witness and compare the effectiveness of each system. Similarly, as Canada becomes a world leader in recreational cannabis legalization, the countryâ&#x20AC;&#x2122;s real estate sector has an 8 September 2018 | Canadian Property Management

opportunity to stand out globally for the way it expands the retail cannabis property sector. A tenant selection tool will help landlords navigate the process of vetting and selecting prospective recreational cannabis retailers as tenants. Just as federal, provincial/ter ritorial and mu n icipa l gover n ment s have responsibilities, so do landlords. Those responsibilities are financial (to themselves and investors) and social (to existing tenants renting their properties and the larger communities they serve). The legal sale of recreational cannabis will offer

a new and potentially stable tenant base, but, to begin, landlords will have no track record of retailers' performance to guide the evaluation and selection of future industry champions. A Request for Qualifications (RFQ) is a screening process to determine which potential recreational cannabis retailer is the most suitable match for a landlordâ&#x20AC;&#x2122;s property. A landlord should ask potential retailers to provide fulsome disclosure on all material areas of management and operations for their organizations. The responses to the RFQ will provide an overview framework of the potential

opportunity+risks ret a i ler s’ genera l qua l i f icat ions regarding a number of factors. The different factors can be assigned weighting, or points, based on importance to the specific landlord or property. Retailers that surpass the landlord’s minimum threshold on the RFQ can be considered as possible tenants. For prospective retailers, the RFQ framework provides guidance on information, protocols and required and/or preferred experience. Landlords are advised to take the following into consideration: QUALIFICATIONS Very few people in Canada have expertise selling recreational cannabis at this time. Some U.S.-based groups have come to Canada and partnered with Canadian businesses or individuals, sharing what has already been learned in the select U.S. jurisdictions that do permit recreational cannabis sales. A strong prospective recreational cannabis retail tenant should be able to provide an overview of: members of the leadership team; corporate governance; retail experience and diversity of expertise; and industry knowledge. That should include a brief biography of each team member and an outline of mechanisms, processes and relations by which the company is administered and directed. A potential retailer may not have direct recreational cannabis retail experience, but many business models have transferable sk ills — such as liquor stores, pharmaceuticals, tobacco or high-end jewellery. Retailers should show that they are aware of the current legislation and policy relevant to the Canadian retail cannabis industry. Familiarity or established relationships with companies and individuals across the spectrum of the Canadian cannabis industry — producers, processors, distributors, complementary service providers, other retail tenants — should also be factored. HIRING, TRAINING & OVERSIGHT In order to prevent criminal organizations from operating, associating or having a financial interest in recreational cannabis retail sales, a series of background checks will be required for the retail cannabis firm’s directors, shareholders and key employees. The company should provide an overview of its policies and requirements for: • Employee screening: adherence to licensing bodies' criteria or a higher standard

• Training: instruction of staff initially and on an ongoing basis • Oversight: the supervision of staff and operations A robust system of oversight, which provides structural checks and balances, is a crucial element for all companies. As experience is gained, laws governing the emerging retail cannabis sector will continue to evolve. Potential recreational cannabis retailers will need to explain their strategy for staying current with available information and applying newly gained knowledge. That should include a commitment to review training, procedures and corporate policy, update and ensure compliance with quality and safety standards and all pertinent regulations. OPERATING PLAN & PROCEDURES Cannabis store employees will need to carry out standard operations and likely handle unusual, but foreseeable scenarios. A set of step-by-step instructions that comply with a corporate manual or plan, will be beneficial. A prospective retail cannabis tenant should be able to provide details on how its operations align with the federal government's core objectives to dismantle the illicit market, restrict access for youth and promote public health and safety, and provide documented evidence that it is in compliance with all federal, provincial/ territorial and municipal government regulations. This includes prescribed steps for the routine business operations, including typical transactions, and emergency protocols. Landlords should ask how the company will achieve efficiency, quality and consistency of performance, while reducing m iscom mun ication a nd ensuring ongoing compliance with regulations. Is the company able to accommodate some specific needs of the landlord or other tenants — e.g. hours of operation, aesthetics, colours or styling utilized? SECURITY & PRODUCT TRACKING Corporate security and product-tracking systems prevent theft, damage and other threats. An overview of the cannabis company’s systems and loss-prevention protocols should be detailed and answer these questions: • What inventory-monitoring and tracking systems will be utilized?

• Will there be a secure shipping and receiving area included? • How will product be stored on site? • How much product will be on site? • What kind of point-of-sale (POS) system will be utilized? • What record-keeping method will be in place in order to comply with Health Canada’s seed-to-sale track ing requirements? • What type of surveillance and alarm system will be in place? • What information technology (IT) systems will be in place? • How will the IT systems be monitored and maintained? • How will staff be trained initially and on an ongoing basis in regard to IT security? STORE APPEARANCE A store’s physical appearance matters. Each different retail model will find success based on how well it fits into different locations and shopping centre types. Shoppers will have different expectations of their desired retail experiences. It is critical to have a clear vision of what type of retail experience a potential recreational cannabis store will provide and how it aligns with the image the mall manager is seeking to project to shoppers. Other questions related to a cannabis store’s appearance include: • How would this retailer integrate with current tenants? • Would this retail operation enhance the current tenant mix? • What will the store’s exterior look like? • What will the store’s interior look like? • How will product be displayed and what security protocols will be followed? • Is the store looking to provide a more experiential or low-cost model? • What is the target audience for the store? CURRENT FUNDING Given that the legal retail sale of recreational cannabis has not existed previously, there could be uncertainty around where the start-up capital for this industry is coming from. Therefore, the landlord should ask: • What is the current financial capability of the company? • How long will the company be viable based on its current capital position? • How are upfront and capital costs financed? • How does this retail operation plan to cover operating expenses for the first year? Canadian Property Management | September 2018 9

opportunity+risks

A potential retailer may not have direct recreational cannabis retail experience, but many business models have transferable skills.

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• What is the long-term viability of the company? MARKETING & CAPITAL The marketing and sales plan should provide clear direction to the longter m viability of the business. At start-up, there will be material capital outlays for inventory and associated working capital. Working capital is calculated as the difference between a company’s current assets and current liabilities. Businesses should be able to demonstrate viability from initial start-up through a store sale and marketing plan outlining key items, including: • Who is the target market and how is the vendor accessing them? • What is the marketing budget? (Every store is a start-up) • How does the sales plan support the viability of the business? • What is the company's financial backing? • What financial arrangements does the company have in place or expect to have in place? • What is the plan if banks or other providers do not extend financing on inventory? • W hat is t he det a i le d ca sh f low management plan? FINANCING & FUTURE ARRANGEMENTS The prospective tenant’s ability to provide a long-term company financial plan is vital. Therefore, the landlord should ask: • Is this a corporate or franchise store? If this is a franchise model, what are the ongoing franchise fees? • What is the company's growth plan? Where is capital for growth coming from (debt, equity, other)? What are the ongoing capital expenditures (CAPEX) and operating expenditures (OPEX)? • Who are the long-term financial partners? Are there letters of commitment or comfort letters? • Can the tenant provide understandable details about ongoing performance (forecasted and realized economics)? zz James Heaps is Vice President and Susan Thompson is Research Manager in Avison Young's Calgary office. The complete text of Canadian Cannabis Legislation and the Commercial Real Estate Industry: How Can Landlords Qualify Prospective Retail Tenants? can be found at www.avisonyoung.ca/en_CA/research/ white-papers

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riskmanagement

CLIMATE RISK SERVES UP SHOCKS AND STRESSORS Adaptation Measures Deliver Cost-effective Loss Avoidance By Barbara Carss

RISK MANAGEMENT based solely on insurance coverage is a bad gamble in an era when resiliency specialists warn “water is the new fire”. Speaking at a special breakfast event in conjunction with the Canada Green Building Council’s (CaGBC) annual national conference in Toronto last spring, they categorized measures to avoid or minimize flood damage and prepare for long-term power outages among the most cost-effective design decisions and capital investments that building owners/managers can make. South of the border, 2017 was the year of Hurricanes Harvey, Irma and Maria, while, in spring 2018, British Columbians and New Brunswickers alike suffered severe flooding from a calamitous combo of heavy rain and spring runoff. Blair Feltmate, Head of the University of Waterloo’s Intact Centre for Climate Adaptation, noted that Canadian insurers have paid out more than $1 billion in 12 September 2018 | Canadian Property Management

claims related to natural disasters in eight of the past nine years — a marked upward spike from the annual average of $200 to $500 million during the previous 25 years. “I can absolutely guarantee you that things are going to get worse going forward,” he said. “Canada has not experienced the flooding that is coming.” “Who is talking about resilience? Not fringe groups,” concurred Chris Pyke, a Research Officer with the U.S. Green Building Council (USGBC) and the driving force behind a new GRESB module aimed at plotting real estate portfolios’ ability to withstand and recover from climate triggered crises. “Over the last year we have had some of the greatest single-year weather losses ever. The best available scientific data says these things are going to get more severe.” Nevertheless, the old fire still wields sway over regulatory and design parameters. Michelle Xuereb, a Senior Associate and

sustainability strategist with Quadrangle Architects, commended the work now underway to update Canada’s model national codes, revise historical climate data that is no longer an accurate gauge for expected wind, rain and snow loads, and address new types of emergencies, in which building occupants will need refuge rather than a means of quick exit. “Current building codes are built around fire. It’s all about evacuation,” she explained. “The sheltering in place piece, there’s no code that tells us how to do it.” With prompting from the discussion moderator, REALPAC Chief Executive Officer Michael Brooks, the three panellists sketched out their own stake in resiliency via design, investor awareness and best practices for climate risk assessment and mitigation. All are focused on helping to prevent loss at the decision-making stage — how to buttress and cull portfolios; where and how to

riskmanagement bu i ld; where to lo cat e c r it ica l infrastructure, etc. — and bring a range of informed perspectives to the larger issue of vulnerabilities in the existing built environment. “The question is about the capacity to survive in the face of shocks and stressors,” Pyke acknowledged. INVESTMENT-LEVEL CONSIDERATIONS While insurers are keenly aware of the threats, Feltmate urges lenders and credit rating agencies to pay more attention to b ot h cl i m at e r isk a nd d i l igent countermeasures. For example, best practices such as those his research team has developed with the sponsorship of the Standards Council of Canada provide a checklist that could augment other customary analyses of property deals and investor soundness. “Banks are more or less asleep at the switch on this file,” he submitted. “This is a new stressor in the system that they have never had to deal with.” Working primarily with institutional investors, Pyke arguably sees a more attuned demographic that is increasingly focused on how environmental, social and governance (ESG) factors affect the performance and value of their portfolios. Fear of stranded assets is one powerful driver, but so, too, is the gaining flipside notion that there are opportunities for enhanced returns. He cited the example of U.S. based Boston Properties. “Resilience is a pitch they think their brokers can sell,” Pyke reported. “We get broad based recognition on the investment level that this is something they should know more about. On the owner side, I think we get recognition that these are reasonable questions.” BUILDING-LEVEL RESPONSES For new development, some solutions a re i nescapably appa rent. “Step number one is don’t build on flood plains,” Feltmate asserted. Xuereb advises building owners, developers and designers to identify flood risks upfront and pay particular attention to thermal performance and how the building will retain or reject heat if mechanical HVAC systems are not operational. Key equipment should be housed above the projected flood line; materials below that line should be mould-resistant, if possible. Minimizing the window-to-wall ratio and incorporating features to promote passive airflow will better resist infiltration of outdoor temperatures.

A DELUGE OF CONCERNS FOR CONDO CORPS By Michelle Ervin An August storm that dumped a month's worth rain on Toronto will add to insurers' mounting payout. Pete Karageorgos, Director of Consumer and Industry Relations, Insurance Bureau of Canada, Ontario, reports that even before this deluge, the tally had reached $800 million in claims connected to extreme weather across the province, which has Ontario closing in on the countrywide total for recent years. “In Ontario alone this year — the year’s just well over half done — we’ve almost hit that $1-billion mark, so there is a definite impact of severe weather on properties that we’re seeing,” he acknowledges. Among new claimants from the Toronto storm, Kevin Vuong, past condo board president and a candidate in the upcoming municipal election, estimates that the collapse of a fourth-floor storm drain caused six figures in damage in the Southcore tower he calls home. The building’s first four floors were flooded, including the lobby, elevators, amenities and units. After a persistent fire alarm signalled that something was amiss, Vuong soon learned through social media that many other downtown communities had been affected by what was trending on Twitter as #TorontoFlood. In the aftermath in his own building, only two of five elevators were operating, prompting his condo board to deploy a protocol it developed in response to past elevator problems, unrelated to flooding. One elevator continued to serve all floors, while the other stopped only at every third floor, ensuring residents, and particularly people with mobility issues, had a way to get to and from their units. Extra security staff manned both elevators and the stairwell, which was open for use as an alternative route.

“It’s about really creating the best quality envelope your building can afford,” she said. A designated area of refuge with its own dedicated power source could be forged in either new or existing buildings. Landlords or condominium corporations will need to consider what that power source should be, what other resources — food, water, phone chargers etc.— should be in readiness, and how building occupants will know about and make their way to the refuge if normal channels of communication are disrupted.

Communications to residents is another key component of the protocol. “Those kinds of things, though minor, are very important in actually ensuring people understand why decisions have been made the way they are, why things are inconvenient for them, and it helps alleviate that frustration,” Vuong observes. Karageorgos advises condo communities should have a clear definition of the condo corporation's and unit owners' restoration responsibilities to streamline the claims process. This is normally captured in a standard unit bylaw, which boards require majority support from owners to pass. “Insurance companies will want some clarity, and if that isn’t spelled out within those bylaws, of the standard unit, it takes a bit of work on the [part of] the adjuster and the unit owner to try and get through the appropriate paperwork,” he explains. “And so that could cause a delay in the repair starting, someone being out of their unit longer.” Vuong urged boards to proactively inform condo residents that they require individual insurance policies to cover their personal contents as well as any unit upgrades. Boards should regularly review the sufficiency of their corporation’s policy and also watch for evolving offerings. Karageorgos cites the example of expanded water-damage coverage becoming available after another significant summer rainfall soaked Toronto, back in 2013. “I hope that every board, going forward, whether they’re affected or not, will be asking the question of their property management: ‘If we have another Toronto flood, what are some problem areas that we should be keeping an eye out on? And what can we do to protect ourselves against that going forward?” Vuong asserts.

In this, word of mouth, as neighbours check i n on each ot her, ca n be invaluable. Social connections are a no-cost, albeit intangible component of resiliency that Xuereb h ighly endorses. “Knowing the people around you is the best situation you can have in the case of an emergency,” she observed. A l s o on t h e l i st of low- c o st interventions, Feltmate recommends reconfiguring downward slopes that could channel storm runoff into a property — advice that extends to the Canadian Property Management | September 2018 13

riskmanagement numerous staircases to the Toronto Transit Commission’s downtown stations. “Right now, you just have a conduit for water flowing down to the subway,” he said. PEGGING THE TIPPING POINT The best practice guidelines his team has developed thus far focus on residential development, pertaining to homes, new subdivisions and existing communities, but similar standards are in the works for commercial buildings. That will include consultation with organizations like REALPAC and CaGBC. “It has to be informed by the people in this room,” Feltmate told the gathering. For now, panellists tallied a varying level of buy-in, from some very influential champions, like the Financial Stability Board’s Task Force on Climate-related Financial Disclosure, to greater numbers of disinterested or oblivious onlookers. “The core problem is complacency. We think we have time, and we do not,” Feltmate reiterated. However, Pyke predicted the spur to action could be imminent. “What is the tipping point where the evidence piles up and can’t be ignored?” he mused. “I think we are close.” zz

HURRICANE FLORENCE PUTS INVESTORS ON EDGE Valuation analysts were underscoring the case for factoring climate risk into investment and asset management decisions, earlier this summer, as Hurricane Florence moved in the direction of more than 5,500 properties that real estate investment trusts (REITs) own. In addition, data engineering and interpretation specialists with the proptech firm, GeoPhy, tallied 2,900 properties and loans in the storm’s path that were collateral for commercial mortgage-backed securities (CMBS). As the U.S. National Ocean and Atmospheric Agency (NOAA) monitored the approaching storm, Ali Ayoub and Nils Kok scrutinized 94 REITs with holdings located in the areas flagged for storm surge and other severe weather fallout to calculate the number of assets exposed and the percentage of each portfolio those assets represent. For CMBS deals, they looked at the number of assets exposed, the percentage of each loan’s collateral they represent and the appraised value of the properties. “Consider the threat of Hurricane Florence a ‘clear and present danger’ for investors and lenders to the real estate sector,” they warned in a Sept. 12 posting. This reiterates an earlier advisory from the duo, in which they drew on flood risk data from the U.S. Federal Emergency Management Agency (FEMA) and the Climate Impact Lab’s predictive modelling of the economic repercussions from climate change. Across the portfolios of 131 REITs potentially vulnerable to flooding, approximately 5% of assets are in settings FEMA classifies as high-risk. “The value-at-risk is, of course, much higher,” Kok and Ayoub noted. They argue that investors could and should be better informed. For example, loan delinquency can be a consequence of natural disasters as commercial tenants default or find themselves displaced, while rating agencies typically give climate risk or resiliency fairly rudimentary weighting. “Hurricane Florence should be of particular interest to CMBS investors,” Kok and Ayoub asserted. “While investors stay attuned to daily news about interest rates, employment figures and the latest on the continuing trade war saga, financial markets are less apt to reflect on the pending impact that climate events may have on asset values.” – REMI Network

FirstOnSite’s PREP Program – designed to help businesses get back to business Ask us about our PREP Program – minimizing business interruption by helping prepare prior and getting back to business after. FirstOnSite’s PREP program is a partnership between us and you before any disaster event takes place. PREP provides you: Pre-event planning Pre-determination of expectations and price/cost thresholds so we can work as quickly as possible, Walk-throughs of your businesses’ locations, so knowing we are authorized to do so we know the procedures, challenges and options Development of a solid communications strategy, keeping us all connected

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PICTURING RISK

Facilities GIS Integrates Data and Links Resources By Bill Barron, Stu Rich and Benton Yetman

INNOVATIVE TECHNOLOGY increasingly converges with the economic reality of aging buildings and infrastructure. Few organizations have the luxury of starting with perfect data and state-of-theart technology. More often, they have a mishmash of old and new facilities that, by definition, include many fragmented information sources in their native form. However, a geographic information system (GIS) can be implemented incrementally and function with existing data and systems. GIS is a technology platform that organizes information about the world as layers of data linked together by location. It is designed to capture, integrate, manage, analyze and display all forms of geographically referenced information at any scale, helping users to better understand relationships, patterns and trends. Facilities GIS uses location as an orga n izing pr inciple a nd works collaboratively with incumbent data and systems to provide facilities managers with a comprehensive picture of their portfolio.

This common interface that brings together traditionally disparate data, systems and departments can be an effective tool for managing and mitigating risk. With Facilities GIS, an organization can marry geographic location and the geometry of the built environment to aggregate a wide range of facility data in an effective and intuitive manner. It allows location to act as a central point of reference. Once established, stakeholders are then well positioned to address the hierarchy of the business challenges and work flows (portfolio, campus, building, floor, person, asset) as well as remove the artificial barrier between indoors and out. PLANNING GIS is a natural tool for analyzing global multi-hazard risk, providing both historic trend-based information and predictive analysis into the future. Safety and security professionals can leverage GIS to determine natural hazard

exposure through standard global risk datasets (fire, flood, landslide, seismic, etc.), as well as drill into site-specific risk analysis for individual locations. Localized risk analysis includes the ability to perform physical security coverage assessments (viewsheds of cameras, perimeter intrusion detection coverage, life safety asset distribution, etc.), access control trend analysis and ongoing threat updates for one or more sites across regions. The information derived in these analyses directly feeds into emergency planning efforts, helping organizations focus on the critical risk elements in their planning and mitigation processes. The availability of threat-specific emergency pre-plans are critical to any organization to: reduce potential incident impact on facilities and assets; minimize life safety risk to personnel; and ensure compliance with workplace regulations. It is just as critical to keep emergency pre-plans current. Large facilities can change almost daily, so having a clear Canadian Property Management | September 2018 15

riskmanagement picture of floor layouts, personnel assignments and locations of shutoffs is essential to integrating emergency plans into ongoing business processes. RESPONSE When incidents do occur, quick access to information can play a role in reducing the impact. Safety and security personnel monitor multiple levels of threats on a dayto-day basis and have to react quickly as information comes in and events unfold. Within the security realm there is a prevalence of use of Physical Security Infor mation Management (PSIM) platforms for unifying various access controls, building alarm sensors and closed circuit TV cameras (CCTV). These tools serve as a primary means to understand and access information from physical security assets and are often used in a command centre setting. However, even the most advanced PSIM has blind spots when it comes to facilities, as they don’t provide visibility into the operational element of facilities, such as the schedule of a conference room or the location of utility asset. By managing facility location data in GIS, security personnel can reduce or

Facilities GIS uses location as an organizing principle and works collaboratively with incumbent data and systems. eliminate those blind spots by having access to accurate up-to-date facility data (including floor plans) as well as integrated operational data. Furthermore, they can share data with first responders, helping to address what a recent study by the National Fire Protection Agency (NFPA) identifies as existing concerns about first responder access to basic facility-specific information. Nearly all organizations will need aid beyond their own safety and security personnel during and in the aftermath of an incident, whether that's the fire department, other governmental agencies or specialized pr ivate cont ractors. Geospatia l technology is an important component of enabling joint aid and information sharing and ensuring those responding

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to an unfamiliar environment have quick access to critical information, along with the appropriate security access and ability for two-way information sharing with an in-house team. AFTERMATH Planning for continuity is an essential component of mitigating risk related to facility damage or loss — any natural or huma n-t r iggered d isr uption to a n organization’s facility can have an exponential impact on downstream operations and productivity. A geographic analysis of alternative sites' proximity to current operations and employees' homes is a good starting point to inform business continuity decision-making. A locationbased approach to business continuity allows managers to analyze different scenarios and impact areas from an event, quickly identify impacted personnel, divisions and assets, and highlight available alterative locations and assets on a temporary or permanent basis. Increasingly, insurers are relying on data for benchmarking and predictive analytics on a site-by-site basis. The ability to inventory, document and locate assets, along with replacement values, is a proactive approach to risk, value, and mitigation analysis that is essential to comprehensive a nd cost- ef fe ct ive insurance coverage. Tools such as FM Global’s RiskMark ingest huge amounts of facility data to determine component risk and costs of premiums to cover it. In addition to saving time and the cost of collecting this data manually, the large volume of accurate facility data can reduce the overall risk levels and decrease the cost of premiums substantially. zz The preceding article is excerpted from a whitepaper by PenBay Solutions, The Road to ROI with Facilities GIS, Where Geography Meets Geometry for Facilities Operations and Security. Bill Baron is Chief Executive Officer, Stu Rich is Chief Technology Officer and Benton Yetman is Director of Products. For more information, see the website at http://penbaysolutions.com.

Advertising Feature

GTA’s LPI Mechanical Inc. Makes Growth 500 List

This September, Canadian Business released its 2018 Growth 500 list spotlighting the country’s fastest growing companies. Among this year’s honorees were LPI Mechanical Inc., which took the 209th place in the prestigious report. “We’re thrilled and honoured to be on the Grow th 50 0 ranking,” says LPI CEO Italo Lunardo. “Each year, we challenge ourselves to take on bigger projects, hire only the finest in our industry, and constantly strive to exceed our clients’ expectations.” LPI has come a long way since its inception. Since opening its first office in the Greater Toronto Area in 1999, the company has expanded beyond its initial plumbing and construc tion business lines to become a full-service mechanical company. With its 20th anniversary on the horizon, the company today provides a full suite of design/build, HVAC, and plumbing services to construction and service clients across both the GTA and in Western Canada through its Vancouver office. I n a d d iti o n to e a r n i n g a cc l a i m for high-profile projects across the retail, industrial, commercial, and educational sectors, LPI has

also made headlines for winning B O M A To r o n t o ’ s “A b o v e a n d Beyond ” Pinnacle Award in 2017. Speaking to its latest industr y honour, Lunardo notes, “[We send] a huge thank you to our loyal clients and dedicated team. This recent recognition validates that hard work truly does pay of f and we look forward to continued growth.” The Canadian Business’s Growth 500 list covers a broad range of industries, regions, and company sizes. Now in its 30th year, It was created to celebrate organizations that demonstrate an “aggressive – o f te n , ex p o n e n ti a l – reve n u e growth” in the calendar year. “The companies on the 2018 Growth 500 are truly remarkable. Demonstrating foresight, innovation and smart management, their stories serve as a primer for how to build a successful entrepreneurial business

today,” said Deborah Aarts, Growth 5 0 0 p r o g r a m m a n a g e r. “A s w e celebrate 30 years of the Canada’s F a s t e s t- G r o w i n g C o m p a n i e s program, it’s encouraging to see that entrepreneurship is healthier than ever in this country.” The full list for the 2018 Vancouverbased furniture outlet can be found at www.canadianbusiness.com. Learn more about LPI Mechanical Inc. at www.lpigroup.ca.

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HEIGHTENED PERIL

No Upside to Crane Climbers on Construction Sites By Michelle Ervin

CONSTRUCTION SITE security is under renewed scrutiny after a member of the public gained access to a downtown Toronto property and scaled a crane. In the latest incident — the second in as many years — the Toronto Police Service charged a 34-year-old woman with mischief in relation to the damage and obstruction of property exceeding $5,000, as well as failure to comply with a probation order. It's alleged that the damage left the crane unusable. However, the potential for a worse outcome, such as injury or death, is almost certainly on the minds of high-rise builders. The August 2018 incident follows the headline-grabbing rescue Toronto first responders were called to make in the spring of 2017. “Any time something like that comes to light and gets that much media attention, it’s natural for everyone to go back and revisit their policies and say: Okay, this happened on one site. What are we doing to prevent it on our sites?” says Andrew Pariser, Vice President of the Residential Construction Council of Ontario (RESCON). PUBLIC SAFETY BASELINE The residential construction sector typically invokes a continuous-improvement model, 18 September 2018 | Canadian Property Management

which calls for the examination of near misses such as this in an effort to prevent them in the future. Ontario's Occupational Health and Safety Act serves as a baseline for builders, spelling out requirements for public safety around construction sites. In particular, the construction projects regulation calls for measures to protect passersby from such hazards as falling debris. “The public way protection sections are not intended to prevent the public from trespassing on private property where no expressed or implied invitation to access the property has been provided by the landowner or the owner of the project,” a Ministry of Labour spokesperson explained via email. “The recent crane-climbing incidents are a police matter.” Ministry inspectors may investigate if a crane-climbing incident resulted in the injury or death of a non-worker. However, the spokesperson clarified that involvement would be limited to looking at whether there had been any violations of the Occupational Health and Safety Act, which deals primarily with protecting workers from on-the-job hazards. TEMPTING OR DISCOURAGING MISCHIEF In both recent crane-climbing incidents, the

alleged perpetrators were charged with mischief, for which convictions carry the possibility of imprisonment. Toronto Police Constable David Hopkinson confirms this is among the most serious charges a person could face in connection with this type of incident. Other potential charges could include break and enter and theft — also serious — and trespassing, a minor offence. For their part, builders could be held criminally responsible in connection with a crane-climbing incident if an injury or a death occurred and serious gaps in security were identified. “For example, let’s say they left a big spotlight on the crane, the gate’s open, there’s a red carpet to the crane,” Pariser speculates. “Obviously this builder is extremely negligent because they’ve not mitigated risk in the way that they should.” H ow e ve r, s u c h a n e x t r e m e , hypothetical scenario doesn’t reflect the reality of construction site security today. Nor does the pop-culture caricature of a security guard snoozing through a night shift. Pariser reports construction site security has become increasingly sophisticated, and a combination of electronic and physical security is now standard.

riskmanagement If the residential construction sector appears to be keeping the discussion lowkey, it may be because there is a fear of inspiring copycats by giving past incidents too much public attention. Crane-climbing is considered to be a permutation of rooftopping, which refers to the act of scaling tall structures to take photos and videos — typically to post on social media. “It is a worldwide phenomenon and Toronto is no stranger to it,” says Constable Hopkinson. “There have been a few deaths worldwide resulting from this dangerous practice.” He encourages builders to make every effort to secure their sites with measures such as alarms, barricades, fences and motion-activated lighting — weighing the investment against the cost of construction disruptions. “Some of these things may appear expensive, but given that, in both crane-climbing incidents the site was closed for the day, the expense may be justified,” Constable Hopkinson observes. Pariser agrees the loss of productivity is an added, financial imperative to prevent this type of incident. High-rise builders also have an interest in securing the expensive

building materials and equipment that may be stored on residential construction sites. MARKET SYMPTOM In some ways, the emergence of craneclimbing incidents may be a side effect of the residential construction sector’s success. Toronto topped Rider Levitt Bucknall’s January 2018 North American Crane Index, thanks in no small part to the 70 cranes that were in use on highrise condo projects. “The more cranes you have, the more opportunities are there to climb them,” Pariser acknowledges. “Because residential is such a large part of the market right now, especially in downtown Toronto, there’s a good chance that if they’re going to climb on any crane, it’s probably going to be a residential crane. “That’s a sign of success of the market, but it’s an issue I think every high-rise builder has thought about,” he says. “We would globalize it and say: You need a security system for your site, and it needs to encompass a lot more than just protecting your crane, but the crane becomes a focal point when a situation like this arises.” zz

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GHOST HOTELS SPIRIT AWAY HOUSING SUPPLY Taxpaying Operators Want Unregulated Competition Held Accountable

The Hotel Association of Canada argues that short-term rental accommodations have become a fixture of the shadow economy, where they function as commercial operations, yet remain largely free from regulatory constraints or tax obligations. In the recently released discussion paper, Developing a Modern Approach to Short-Term Rentals in a Digital Economy, A Framework for Canadian Regulators, the association appeals to federal, provincial and municipal governments to respond. The following is an excerpt – Editor. INITIALLY, AIRBNB was based on the concept of renting out a room with the owner always present and where common spaces were shared. Over time, the demand gravitated to renting out an entire home for a day or weeks at a time. More recently, the trend has been to take residential units off the long-term rental market and convert them into hotel-like operations. Today, multi-unit hosts — defined as any host renting out two or more units in a single month — represent approximately 25% of the short-term rental market. 20 September 2018 | Canadian Property Management

Aggressive entrepreneurs have figured out a way to operate shadow hotels without having to invest in real estate or follow established health and safety regulations. These commercial operators also avoid many of the normal costs of doing business, including paying taxes and other levies. RENTAL MARKET DRAIN One of the most concerning outcomes of the high volume of homes and investment properties being placed on the shortterm accommodation market is the decline in the stock of affordable

housing. While there is little impact on a community’s housing stock when owners casually rent a room their home — or even an entire home when they are out of town — the outcome is different when investors and entrepreneurs remove units from a leasing portfolio or buy homes or condominiums for the purposes of "home sharing.” The bottom line is that fewer properties are available for longterm accommodation. A 2017 McGill University School of Urban Planning study revealed that Airbnb listings in Montreal, Toronto and Vancouver had caused a 2 to 3%

riskmanagement displacement of the housing stock in some neighbourhoods. T he most successful “hosts” were r unning commercial operations with dozens or even hundreds of homes. The conclusion at the time of the study was that Airbnb had removed about 14,000 units of housing from rental markets in Canada’s three largest cities. Areas close to public transit stations and where affordable housing had been concentrated were particularly vulnerable. A 2018 McGill University study reported that New York City lost up to 13,500 housing units from the long-term rental market to Airbnb. Some 4,700 “ghost hotels” were also discovered, which had removed 1,400 housing units from the long-term rental market. The loss of housing stock from the rental m a rket h a s not on ly i mpa ct e d accessibility, but has also driven up rental rates. The 2018 McGill study also revealed that the housing displacement related to short-term accommodations caused rents in New York to rise by $380 per year. In some of the more popular Ma n hat ta n neighbou rhoods, rent increases attributable to the conversion of housing stock amounted to more than $700 per year. Airbnb’s influence was reported to have cost New Yorkers $616 million in additional rent in 2016. The data shows that short-term rentals have morphed from home-sharing into largely commercial operations. During 2016, one out of every three Airbnb hosts rented out their properties for more than 90 days per year. This pool of rental units generated 71% of Airbnb’s total Canadian revenue. Multi-unit Airbnb hosts make up approximately 7% of listings in Canada and generate more than 30% of all revenue. SPARSE OVERSIGHT The short-term rental platforms take no direct responsibility for the health and safety of their clients. Most municipalities do not require home inspections and there is no assurance with respect to fire, safety or health standards. When residential homes are converted into transient commercial operations, the character of neighbourhoods is changed in ways that were never contemplated. Commercial activity in residential areas can create nuisances and hazards like

excessive noise, insufficient parking, vandalism or even criminal activity. With governments being slow to respond to the new economy, residents use whatever tools are open to them to address the hazards and nuisance factors associated with short-term rentals. Many condominium boards have reacted to homeowners’ concerns by banning short-term rentals outright, but this is difficult to achieve if the original condominium declarations permit shortterm rentals. While the platform rental companies have challenged such restrictions, the right of condominium boards to take such actions — absent declarations — was affirmed in one court of law. Only municipalities can override declarations with bylaws. Some entrepreneurs pretend to rent apartments for personal use only to place them on the short-term rental market. Unsuspecting landlords hear about conversions after they receive complaints from neighbours or they see t hei r un its posted on rent a l platforms for nightly rental. Landlords are understandably upset about a change in use that inflicts significantly higher wear-and-tear than what would be expected from normal family activity. This can happen even when it is not an entire home that is being rented out. A tenant might rent out rooms in a unit they occupy without permission from the landlord. TAX AVOIDANCE The hotel and accommodation industry pays business and property taxes at the commercial rate. According to the 2017 Altus Group Canadian Property Ta x R a t e B e n c h m a r k R e p o r t , commercial operators pay on average 2.85 times the level of property tax that is imposed on a residential ratepayer. This gives a powerful incentive for short-term rental operators to stay in the underground economy. The hotel industry complies with sales and income tax laws and their employees are covered under the Canada Pension Plan, Employment Insurance and workers compensation. Any mandatory tourism or destination fees are also cont r ibute d to suppor t reg iona l marketing campaigns. These fees are used to attract visitors, many of whom end up using short-term rental platforms.

The only true exemption from tax for home renting relates to the GST/HST and only for hosts with revenues of less than $30,000. No one is exempt from paying income tax on short-term rentals. The challenge is that there are few controls in place that ensure that tax laws and local levies are being complied with. Airbnb states that it sends reminder notices to its hosts about tax issues. However, it will only share this data with government authorities when it is compelled to do so. This makes it difficult to detect non-compliance. Som e A m e r ic a n ju r i s d ic t io n s (Massachusetts and Vermont) require rental platform companies to issue official tax information slips to any host with revenues above $600. Airbnb has also been required to share its data with Danish tax authorities. At the platform level, sales and income tax a re usually avoided because companies are legally registered in tax havens and function without “permanent establishments” in the countries where they operate. While this may have been appropriate for manufacturing entities, it makes little sense in the digital economy. FRAMEWORK FOR RESPONSE There is an acute need for federal, provincial, and municipal governments to put in place a modern regulatory framework to address the stresses and unintended consequences created by short-term accommodation rentals. Regulators to date have focused on meeting five key objectives: • M in im ize t he displacement of affordable and accessible housing • Minimize community nuisance while protecting public safety and with adherence to municipal bylaws • Ensure a level competitive playing field • Collect appropriate taxes and tourism levies • Enable voluntary compliance while minimizing the administrative burden for hosts, home-renting platforms and governments The following measures have been tested in some jurisdictions and/or are a recommended potential response: Host Registration and Fees Requires that any property offered for home-renting be registered with the Canadian Property Management | September 2018 21

riskmanagement local government. For the benefit of hosts and municipalities, platform compa n ies shou ld faci l it at e t he registration process. Along with the collection of an annual fee to recover costs, registration enables the monitoring and reporting of rental activity. Platform Registration and Fees Require registration of the rental platform companies along with a significant annual fee and an ongoing fee for each booking. Rental platform companies must be prohibited from listing any property that is not properly registered. Principal Residence Restriction Limits home-renting to a principal residence only. This prohibits the operation of ghost hotels and/or large scale commercial enterprises operating under the veil of home sharing. A significant issue remains in that shortterm rentals are permitted in areas without proper zoning but with some limitations.

Cap on Usage Limits the number of days that a home can be rented through a home-renting platform. This helps to moderate the decline in available housing stock and the nuisance factors associated with the conversion of ordinary residences into commercial operations. Caps typically run from 30 to 180 days per year. Some condominium boards put t he cap at z ero d ays a nd some regulations require explicit approval from homeowners' associations before short-term rentals can be offered. Health and Safety Standards Reg u lat ions t hat re qu i re cer t a i n st a nda rds for sa fet y (e.g. smoke detectors, fire extinguishers, pest control). This provides some minimal level of protection for guests. Reporting A requirement at the platform and host level to report to government on all home-renting activity. This includes mandating that platform companies issue

annual information slips to hosts on rental income with a copy to government authorities. Taxation/Levies Special provisions at the platform level to collect and remit various taxes and/or levies on behalf of hosts. This creates a more level playing field with commercial operators, and provides revenue to government to cover the costs of managing home sharing activity. Enforcement/Penalties Mechanisms to ensure regulations are applied and enforced (e.g. confirm principal residence with a driverâ&#x20AC;&#x2122;s license). Effective enforcement can only be achieved with reliable and timely reporting of activity from the platform. Penalties help to ensure the system is operating as intended through voluntary compliance. zz For more information about the Hotel Association of Canada, see the website at www.hotelassociation.ca

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BUILDING

DAMAGE SHAKES OUT TO THE ECONOMY

Seismic Resilience Can Save Lives and Jobs By Ali Sahabi, Evan Reis and David Khorram

California's Seismic Resilience Initiative sets out a comprehensive rationale for investing in seismic retrofits in The Case for Earthquake Resilience – Why Safer Structures Protect and Promote Social and Economic Vitality, a whitepaper released earlier this year. The arguments are equally relevant in British Columbia where there is an everpresent threat of a "mega-thrust" meeting of the Juan de Fuca and North American plates, as well as shallower earthquakes that could cause even greater damage to buildings and infrastructure. Beyond the critical need to safeguard occupants and others nearby during such events, buildings will play a key role in recovery, as they literally house the economy and shelter the labour force. The following is an excerpt – Editor. THE YEAR 2011 experienced the highest economic losses due to earthquakes on record. According to the Center for Disaster Management and Risk Reduction, more than 20,000 people died and about a million people lost their homes due to earthquakes that year. Most significant were the earthquakes in Christchurch, New Zealand and Tohuku, Japan, with more than one million buildings damaged in Japan alone. 24 September 2018 | Canadian Property Management

Protecting life and limb is the primary objective in any threatening situation. But once the shaking and damage is over, what happens then? Some of the most challenging aspects of recovery are the displacement of residents and businesses, the loss of affordable housing stock, widespread business disruption, unemployment and damage to uninsured homes and other structures.

Apart from the social chaos that can come from any disaster, one major issue is the disruption of jobs and economic activity following a major earthquake. People without homes have a harder time reporting for work and that can hamper business activity. BROKEN SUPPLY CHAIN Deliveries from vendors may be shut off for weeks or even longer as a result of damaged buildings and infrastructure. All this has the potential to lead to a distressed workforce, reluctant consumer climate and a downward spiralling economic cycle. The potential impact on small business is particularly troublesome, when considering that many of these enterprises occupy the very buildings that are at risk of failure during an earthquake. It’s not just small businesses that are at risk. Following the 1995 earthquake in Kobe, Japan, several automobile

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manufacturers had to cease production. Toyota lost its supplier of brake parts and radios, resulting in the loss of production of some 20,000 vehicles. T he Ma laysia n automobile manufacturer Proton had to halt operations for some time because the parts the company was receiving from Mitsubishi Motors could not be shipped from the damaged Kobe Port. In the United States, Chrysler Motors came very close to having to suspend operations. Recovery of the greater Kobe region was devastatingly slow. Thirteen years later, shoe production – a major industry in the region – was at just 78.8% of what it was prior to the earthquake. Likewise, Japan’s robust industry for sake plummeted. Shipping figures in 2008 for the country’s popular rice brew were just 40% of what they once were. Damage to the port facilities resulted in shipping traffic being diverted to other ports in the region.

AFFORDABILITY DEFICIT The bulk of vulnerable buildings are represented by older structures that make up a disproportionately broad swath of the more affordable housing stock. For exa mple, housi ng affordability today is a critical problem in California, which ranks as the second most expensive state in the United States, behind Hawaii. The Journal of Public Economics found that major earthquakes have a disproportionate impact on people of l owe r- e c o n o m i c d e m o g r a p h i c s . Researchers Nejat Anbarci, Monica Escaleras and Charles Register found strong correlations between wealth and resiliency, citing the discrepancy as a matter of social justice. The researchers called on government to help ensure a more even application of building safety codes and retrofits: “The ultimate lesson t h e r efo r e i s t h a t b u i ld i ng a n d development is simply not a physical process – government institutions and social processes must develop in parallel, to keep up with the physical demands and assure m inimum acceptable standards of construction and public safety.” The displacement of hundreds if not thousands of residents can have a devastating impact on a society. Quite often, when large numbers of people are forced out of their homes, the housing market responds erratically. This situation is further complicated when the homes lost reflect a large proportion of a community’s affordable housing stock. RETROFIT PRIORITIES Structures generally considered at-risk for damage or failure in a major earthquake include: Soft-storey: Wood-framed buildings with an open ground level typically used for tuck-under parking, with one or more storeys of dwelling units above. Extremely popular as a means of conserving lot space, buildings of this type constructed prior to 1978 have been proven vulnerable to collapse from seismic activity. Unreinforced Masonry: These structures are characterized by walls and other building components made of brick or other