CPM Summer 2024

Courting Office Returnees

Expertise. Insight. Trust.

Mechanical Electrical Sustainability Decarbonization

Having the technical expertise and insight to conduct retrofit projects in established buildings without affecting the day-to-day business of occupants is our specialty. It’s what sets us apart.

The truth is, existing buildings are far more complex and challenging than new construction, and require a unique game plan every time. It’s why the process for delivering mechanical and electrical engineering solutions requires more than a cookie cutter approach – it demands that you have a deep insight into the building and how new systems can be integrated into existing systems seamlessly. All of our projects are reviewed by senior engineers, each with over 30 years of experience in their respective fields, ensuring that our clients always receive engineering services of the highest quality.

T: 416-443-9499 | E: marketing@mcgregor-allsop.com mcgregor-allsop.com

Electrical Switchboard Upgrade

Bill Powell, M.Sc., P.Eng., President & CEO

Neil Spence, Director of Electrical Engineering, Building Services

Rob Niessl, P.Eng., Director of Engineering, Northern Region

Ming Xiong, P. Eng. Mechanical Engineering Principal

Mark Dahmer, P.Eng., PMP Mechanical Engineering Principal

Peter LaForme, Executive Vice President

Andre Lebedev, P.Eng., Director of Electrical Engineering

Robert Borovina, P.Eng., Director of Mechanical Engineering

Leo Perez, P. Eng. Senior Mechanical Engineer, Sustainability and Decarbonization

VOL. 39 NO. 2

SUMMER 2024

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

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editor’snote

BIFURCATION is the quirky new favoured buzzword to describe the survival-of-the-fittest scenario that is unfolding in the office sector. The consensus among commercial real estate insiders is that newer Class A buildings in prime locations should continue to attract tenants and hold their value, but they’ll do so at the expense of aging, less desirable stock, which is emptying out as leases expire. It’s kind of like musical chairs for real estate, with contestants jostling to grab a share of diminishing demand for space.

Loosening occupancies are also occurring in the context of financial upheaval and investor uncertainty that has engendered a slowdown in transactions, a slide in returns and a shift away from office in the weighting of institutional portfolios. Nevertheless, for properties on the positive side of the bifurcated divide, there are indicators that pressures are easing with recent downward adjustments in interest rates and continued optimism that office attendance will improve.

“The majority of groups that we speak with believe that there is some more room for office values to move lower, but, going forward, I would expect that the value declines for office will be more situational, asset-specific and show a separation from strong assets and struggling assets,” Robert Santilli, a Director of Valuation Advisory with Altus Group, observed during a recent online presentation of results from the firm’s survey of Canadian commercial real estate trends in the second quarter of 2024.

As we report in this issue, the Canadian government is among the prominent tenants now exerting pressure for high-performance leased space that produces net-zero greenhouse gas emissions. We also look at how amenities have become central to the strategy for luring workers back to the office — including examples of how vacant lobby-level retail space has been transformed into a tenants’ lounge, and a co-working venture that’s angling to capture space subscribers with an upscale alternative to traditional leasing options.

Meanwhile, employers are prioritizing commuting ease for their workers. Colliers Canada’s most recent quarterly delve into tenants’ preferences finds that availability of reasonably priced parking and access to frequent and efficient transit service typically top lessees’ wish lists for amenities associated with the building.

The logistics of travelling to the office are widely seen as a prime influence on employees’ attitudes about being there. Speaking during a webinar earlier this spring, Amy Erixon, President, Investment Management, with the real estate advisory firm, Avison Young, pointed to the current long-term construction projects that are simultaneously slowing the traffic flow on a major highway into Toronto’s core and the downtown street grid.

“It’s really, really difficult to get into the downtown from any direction unless you’re using transit,” she said. “I think the resistance to coming back to the office is largely a commuting issue.”

Barbara Carss barbc@mediaedge.ca

contents

Capital Projects, Upgrades and Operational Efficiencies

12 Green Expectations: The Canadian government revises performance criteria for leased facilities and its owned portfolio.

14 Lobby Reconfiguration: Vacant retail space gets makeover to a tenants’ lounge.

16 Snug Solution: Micro-unit dwellings poised to stretch urban affordability.

20 Layers vs. Silos: Shifting from smart building projects to smart building programs.

28 Absent Accessibility: People with disabilities reveal how and where they are impeded outside their homes.

36 Redevelopment Rules: Toronto reexamines current planning requirements for replacing demolished office space.

42 Policy Repeat: Canadian government releases delayed Green Buildings Strategy.

46 Flight Options: Upscale co-working space vies for migrating tenancies. Articles:

6 Diminished Gains: New tax implications for commercial real estate.

22 Contemplating Compliance: Disclosure rules necessitate data management strategies.

32 Merchandising Buzz: Ontario retailers ponder alcohol sales feasibility.

40 Scope for Improvement: Latest national inventory report presents snapshot of buildings sector’s emission profile.

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DIMINISHED GAINS

New Tax Implications

By Barbara Carss

RECENT CHANGES

TO Canada’s capital gains tax had the most immediate repercussions for private real estate investors who were in the process of divesting properties when the federal government announced its intentions in the 2024 budget this spring. In the longer term, it’s expected that the jump from a 50% to 66% inclusion rate will be factored into a range of asset management and investment decisions.

Regardless, some of the most prominent players in the Canadian commercial real estate market won’t incur direct fallout since pension funds are exempt from capital gains tax. Nor is the tax applicable on deals that render a loss on the seller’s acquisition costs, so many insolvency-triggered offerings in the marketplace won’t be affected.

For corporate property owners, the new capital gains inclusion rate means that 66% of the realized profits from a sale — i.e. the gain above original acquisition costs — will be added to their taxable income for the year.

A more moderate two-step formula will be applied to non-incorporated individuals who

for Commercial Real Estate

sell investment properties. They will be taxed on 50% of capital gains up to $250,000 and then on 66% of the remainder of their profits.

“If you’re a private investor subject to the capital gains tax, based on our initial quick calculation, the new inclusion rate probably adds anywhere between 8 and 12% to your cost, depending on your tax bracket,” Mark Sinnett, Executive Vice President, capital markets, with the real estate advisory service firm, Avison Young, told webinar attendees soon after the government’s announcement..

Yet, it’s not clear if commercial real estate will be a big booster of government revenues in the near term. Transaction volume has dropped significantly since early 2022, linked to uncertainties around financing costs, prospects for returns and an often unnegotiable gap between vendors’ and would-be purchasers’ expectations.

Speaking during the same webinar, Amy Erixon, Avison Young’s President, investment management, noted that institutional investors have been among the most active sellers in this low-activity period, as they seek to shift their asset allocation away from office

properties and/or cash out holdings to then reinvest in new development.

“A lot of the sales that are going on are from tax-exempt pension funds so it’s sort of irrelevant to the amount of property that’s coming to the market. Private sellers are a very small piece of the market currently,” she observed.

DEADLINE PRESSURES

The June 25 commencement of the new tax regime posed a formidable deadline for vendors aiming to realize their profits before the inclusion rate rose, potentially giving purchasers more leverage to negotiate the price and/or attractive vendor take-back financing.

“The banks are only lending 45 to 55% on apartments now and it takes three to six months, if you’re lucky, to get approved for financing,” says Lorenzo DiGianfelice, owner and broker of record with Commercial Focus Realty Inc., specializing in multi-residential transactions. “For those who wanted their properties moved ASAP, the best

option was probably a first mortgage vendor take-back for a year so a buyer can get financing later.”

“The bid-ask gap, the difference between buyer and seller expectations, is the reason we’re seeing less investment activity and some properties on the market for a long period of time. So it’s going to be challenging for anyone who’s in the position of having to sell for a certain reason,” concurs Raymond Wong, Vice President of Altus Group’s data and research division.

DiGianfelice foresees there will be more manoeuvrability within larger portfolios to find offsetting capital losses, while small-scale owners of lowrise multi-residential buildings or investment condominium units could be more exposed. Adding to the blow, incorporation will effectively add an extra $40,000 to their taxable incomes when they realize upwards of $250,000 in capital gains (or a prorated differential for lower amounts of profit) versus owning the property as an individual.

“The larger landlords have top accountants and tax planning advisors to figure out all this stuff; the smaller momand-pops do not,” DiGianfelice submits. “Most small landlords have put their buildings in a corporation and that’s going to hurt them now.”

Alternatively, vendors may begin to proactively account for higher tax costs.

“We suspect we’re going to see pricing that somewhat reflects that. It will just get priced in. That’s, unfortunately, an unintended consequence,” Sinnett hypothesized.

COMPETITIVENESS IMPACT

There is also trepidation the pullback on capital gains could generally inhibit real estate investment, undermine key office tenancies and disadvantage REIT unitholders versus stock shareholders. While citing Canada’s many competitive strengths — solid real estate fundamentals, lower labour costs than in the U.S. and a steadier economy with less geopolitical upheaval than much of the G20 — industry players nevertheless express concern that foreign investors could be put off.

“Last year, five of the top 10 investment transactions for real estate involved foreign buyers. They are coming to Canada because of the stability,” Wong reports. “The question is whether this capital gains tax will deter them from further investment. Any time you add another factor to the issue when you’re trying to compare where to invest — what country or asset type — that plays into it.”

Wariness in other industry sectors could likewise filter down to commercial real

DEEPER DEPRECIATION FOR SPECIFIED INVESTMENTS

Canadian businesses investing in data management capabilities before January 1, 2027 will be able to deduct the full capital cost of some key purchases in the year they come into use. The 2024 federal budget opens an approximately 32-month window, granting 100% capital cost allowance (CCA) for designated “innovation-enabling and productivity-enhancing” assets.

These include:

• patents or the licences to use them, which normally have a 25% CCA rate;

• data network infrastructure equipment and related software, which normally have a 30% CCA rate; and

• general-purpose data processing equipment and related software, which normally have a 55% CCA rate.

The accelerated CCA applies for assets acquired on or after April 16, 2024 and is only available in the year that they come into use, which must be before January 1, 2027. It is estimated it will be a $725 million benefit to claimants over the lifetime of the program.

“Businesses that invest in cutting-edge technologies are a key driver of Canada’s economic growth,” the budget document states. “The government wants to encourage Canadian businesses to invest in the capital — both tangible and intangible — that will help them boost productivity and compete productively in the economy of tomorrow.”

The 2024 budget also introduces temporary accelerated CCA for new purpose-built rental housing, increasing the annual depreciation rate from 4% to 10%. This will apply for projects that commence construction between April 16, 2024 and December 31, 2030, and are ready for occupancy before January 1, 2036

Other eligibility requirements mirror those already in place for the elimination of the goods and service tax (GST) on new rental housing construction — applying to new rental housing construction, additions or conversions from commercial uses that comprise at least four private apartments or at least 10 suites or rooms.

“Increasing the capital cost allowance rate from 4% to 10% will incentivize builders by moving projects from unfeasible to feasible, through increased after-tax returns on investment,” the budget document states. “Allowing homebuilders to deduct certain depreciation expenses over a shorter period of time allows homebuilders to recover more of their costs faster, enabling further investment of their money back into new housing projects.”

investment&finance

“If capital gains are taxed more now, the tax burden of REIT distributions will be higher.”

estate. “If tech activity and demand is dampened due to entrepreneurs looking to the U.S. instead of Canada, this would reduce demand for office leasing in particular,” CBRE Canada Chair, Paul Morassutti, stated in a recent blog.

The 2024 budget documents presents the capital gains adjustment as a move to better equalize the marginal tax rate across the Canadian population and to generate an additional $19.4 billion in federal revenue over five years. Parsing out the tax-paying profile of more than 2.4 million Canadian corporations, the budget document shows that about 307,000 or 12.6% registered net capital gains in 2022. This group posted average taxable income of $702,000 versus an average of $174,000 across more than 2.1 million, or 87.4% of corporations with no capital gains.

The budget document projects that Canada’s marginal effective tax rate (METR) — representing the average level of business taxation when accounting for federal and provincial/territorial tax, investment tax credits and capital cost allowances — will continue to be the lowest among G7 nations out to 2028, and will also

be lower than the average for the other 37 nations in the Organisation for Economic Co-operation and Development (OECD).

It pegs Canada’s METR at 14.5% for 2024 and projects it will rise to 16.8 % by 2028. Looking south, the U.S. METR is plotted at 19.7% for 2024 and expected to climb to 24.9% by 2028.

REIT UNIT-HOLDERS HIT

There is also something of tie-in to issues raised in the 2022 fall economic statement and 2023 federal budget, which ushered in a new tax on the repurchase of equity (also known as share buybacks). Entities that trade on public exchanges will be subject to a 2% tax on the net annual value of repurchased equity, mimicking a 1% levy introduced in the United States last year. In both countries, it’s in part seen as a measure to discourage the redistribution of company profits through share buybacks, which are taxed as capital gains, versus dividends, which are taxed as income.

“Differences in taxation rates between income earned from wages, capital gains and dividends currently favour the wealthiest among us,” the 2024 budget document

states. “The proposal would reduce the tax rate differentials that currently exist between the various sources of income, for instance between dividends and capital gains.”

However, real estate investment trusts (REITs) are already compelled through their legal structure to pay out 85 to 100% of their taxable income to unit-holders via monthly distributions. Rather than closing the tax gap between earnings from REIT distributions and stock-related earnings from a combination of dividends and share buybacks, analysts argue that the 66% inclusion rate will hit REIT unit-holders at the front end of their distributions.

“Since REITs do not pay taxes at the REIT level, capital gains from a sale of property are reflected to unit-holders. If capital gains are taxed more now, the tax burden of REIT distributions will be higher,” advises Erkan Yonder, an Associate Professor of real estate and finance at Concordia University’s John Molson School of Business. “The impact of capital gains tax on regular corporations will be indirect to shareholders, and it will be minimal if the income of a corporation is not dependent on capital gains. So, opposed to the investors of firms with income less dependent on capital gains, REIT investors will be impacted more.”

Leading up to June 25th, the 50% cent inclusion rate for capital gains had been in place since October 2000. That was a year when the government and Finance Minister of the day, Paul Martin, pulled it down, in two phases, from a 75% threshold as the 21st century began.

COMMERCIAL LOANS EXEMPT FROM PENDING CONTROLS

New federal regulations clarify that most commercial loans are exempt from more stringent controls on interest rates that will come into force in 2025. Recent amendments to Canada’s Criminal Code, adopted as part of the 2023 Budget Implementation Act, lower the threshold of the legitimate lending rate from the current allowable 48% on an annual percentage basis (APR) to 35% APR.

The move was first promised in the 2023 budget as a means to crack down on predatory lenders and better ward against borrowers getting caught in a cycle of onerous debt. The criminal liability is attached to lenders (not borrowers), but the enabling legislation also provides for some exemptions.

The new regulations designate borrowers of mid-sized to large commercial loans as outside the government’s intent to protect potentially vulnerable individuals and their dependents. “Commercial loans do not trap Canadians in a cycle of debt as they are extended to commercial entities, not individual Canadians,” the accompanying regulatory analysis states.

It acknowledges that parties to commercial loans generally understand the trade-off of risks to return, and that high interest rates may be necessary to attract capital investment to ventures that could have spinoff benefits for the broader economy. The new regulations leave the 48% APR threshold in place for commercial loans valued between $10,000 and $500,000 and remove all criminal limits on loans that exceed $500,000.

The retention of the 48% APR criminal threshold for lower valued loans is framed as a measure to provide some protection “particularly for small business borrowers,” while also affording them more flexibility to secure financing that may not be available at the lower 35% APR stipulated for individual borrowers. Meanwhile, commercial loans valued at less than $10,000 are considered a rarity, which could present a potential loophole for predatory lenders in the absence of controls.

“Commercial loans below $10,000 will be subject to the new criminal interest rate to disincentivize lenders from manipulating regulatory exemptions and circumventing the criminal rate by issuing consumer loans as commercial loans,” the regulatory analysis states. “Commercial loans valued above $500,000 will not be subject to the criminal interest rate. This is to avoid contractual frictions and ensure healthy and productive investments in areas of venture capital and private equity.”

S

SMART is the future of the built environment. Its success is based on understanding the needs of the owners, managers, and tenants. And realizing the value that technology brings in building performance.

What is a SMART BUILDING:

Benefits of a SMART BUILDING:

Why BOMA BEST:

A smart building uses a responsive digital framework to deliver optimal outcomes for building owners, managers and tenants. This is done through understanding current technology and its ability to deliver human-centric built environments focused on user experience, operational efficiency, and energy and cost optimization A well-managed smart building will provide a sustainable, cost-effective building that is future-proofed and highly responsive to user comfort

A certified Smart Building will deliver six key advantages:

1. Increased Energy Efficiency

2. Improved Air Quality

3. Enhanced Comfort

4. Tenant Satisfaction

5. Increased Asset Value

6. Future-proofing

BOMA BEST Smart Buildings will be the industry benchmark – defining how building owners and managers can leverage technology to realize significant value in their assets. The certification program doubles as a management tool, guiding owners and managers on a digital transformation within the built environment to optimize operations, drive sustainability, create unique user experiences, and deliver financial value to their stakeholders and customers

The BOMA BEST Hub will provide users an easy-to-use and accessible tool, allowing buildings to achieve their smart objectives. The Hub includes:

• Dynamic Reporting & Benchmarking

• Interactive Dashboards

• Checklists

• Corporate Document Library

• Recommendation Road-maps

THIRTY YEARS OF FOREST GROWTH FROM HUMBLE BEGINNINGS TO INDUSTRY LEADERSHIP:

When laying the groundwork for his inaugural business, Domenic Gurreri knew choosing the right name was crucial.

It was 1994, and as a civil engineering student, Domenic had secured some contracting completing interlock and soft landscaping work for residential clientele. With the positive responses he received, he soon realized it was something he could build a successful career on. To reflect his vision of rejuvenation and growth, Domenic landed on “Forest Contractors” for his company name, laying the foundation for a growing entrepreneurial pursuit.

Domenic knew owning his own business was going to be tough—at least at first—but he was familiar with commitment. His Italian father had instilled the ethos of dedication and commitment into him from an early age, and his summers were spent working for the family business, a janitorial company. Although Domenic had no direct connection to the construction industry, many of his friends did. He was fascinated by the processes involved with construction and, through some contacts, was able to take his first steps towards working in the industry.

He soon found that much of his profit was eaten up by the cost and delay of using equipment rentals. To be competitive, he knew he needed to own the machinery outright. While still a student at Toronto’s George Brown College, he made arrangements for a bank loan. He was quickly denied—in fact, the bank manager laughed at him—but undeterred, Domenic returned with the backing of his parents who agreed to act as co-signers.

INNOVATIVE EQUIPMENT ACQUISITION

With the money in his pocket, the company acquired key pieces of machinery including a Combination Roller, a piece of equipment used for compacting asphalt. The machine was not yet being used by competitors in a patch and repair setting and was considered an innovative move in the commercial and industrial sector. Fun fact: you can find the Combination Roller displayed in the second-floor foyer at the Forest Group head o ce. Along with the Combination Roller, Domenic acquired a dump truck, doolies, back hoes, mini excavators, skid steers, rollers, small spreader, and a trailer to move the equipment from one job to another. Just two years into their inception, Forest now could take on a larger volume of jobs and move into the commercial industrial arena. They now had the control over quality needed to ensure seamless project completion.

In those first years, every dollar earned was put back into the business to allow it to establish itself and grow. And it grew considerably.

BEGINNINGS OF FOREST GROUP

In 1997, Forest Contractors Ltd. found its first o ce location with an attached shop. In 2004, he owned his first o ce facility with a yard, and in 2012, Forest opened their own asphalt plant strategically located at the junction of two major highways to conveniently serve customers across the GTA and beyond. With five storage silos for various hot-mix asphalt types and updates made to the acquired asphalt plant facility, Forest Paving Ltd. was born, marking the beginning of the Forest Group! In 2017, Forest winterized the asphalt plant, allowing the plant to produced hot-mix asphalt all year round for our clients.

Now aligned with their own asphalt plant, Forest Group were able to be more competitive on municipal projects. Forest was able to successfully bid and work with municipalities by providing low and competitive pricing to clients and was not only able to supply itself with high quality asphalt but serve as a supplier to other asphalt companies. The asphalt plant also serves as a recycling division, whereby waste concrete is crushed and reused as a gravel base approved by MTO standards.

In 2015, Forest acquired A. Wesley Paving Ltd., further expanding their capabilities in providing high-quality paving and asphalt services.

With over three decades of experience, Forest Group employs over 250 dedicated professionals and maintains a fleet of over 450 machines. Forest Group has headquarters in Vaughan, a paving division in Concord, and equipment yards in both Brampton and Burlington. With an emphasis on sustainability and resource management, Forest has earned the trust of top-tier clients including Canadian Tire, Rogers, CIBC, York University and CN Rail, along with many other satisfied clienteles.

WELCOMING FOREST READY MIX

Mix

It doesn’t stop there. Forest has been recognized as a Platinum Club member of Canada’s Best Managed Companies and has been the recipient of numerous awards including the Vaughan Business Achievement Award, ICCO Business Excellence Awards, and the BOMA Canada Pinnacle Award promoting service excellence in the Commercial Real Estate Industry.

Forest Group continues to expand and grow. Recently, the company introduced the SmoothRide solution to Ontario. Originally engineered for large road and highway paving, Forest Contractors Ltd. have adopted the technology for use in parking lot paving. SmoothRide enhances the removal of old asphalt, significantly minimizing the disposal of millings and reducing the use of excess asphalt. This approach extends the asphalt’s lifespan, eliminates deficiencies, and optimizes e ciency, resulting in less overall waste per project. The SmoothRide solution is an environmentally responsible option for property owners who value sustainability and cost savings.

As they did years before by using the Combination Roller, Forest Group have once more proved themselves as initiators of innovative technology in the paving and asphalt industry.

from the past three decades. Domenic and his team recognize that the unwavering support of their employees, clients, partners and community are the backbone of Forest’s continued success. The anniversary celebration was an incredible evening that reignited the flame of future ambitions, and gratitude for past achievements.

THE QUESTION FOR DOMENIC GURRERI IS, WHAT COMES NEXT?

Specializing in asphalt paving and concrete construction, the Forest Group o er extensive and diverse services and solutions for initial construction, maintenance and repair. Results-driven and client-focused, Forest Group builds strong, sustainable foundations to protect our client’s investment for today and for the future.

To book a visit with a site representative, or to find out more, please contact 416-951-2159 or visit www.forestgroup.ca

Forest Ready Mix provides premium concrete mixes direct

the company’s core values

In 2023, the company expanded further with the introduction of Forest Ready Mix to the group of companies. Forest Ready Mix provides premium concrete mixes direct to customers and upholds the company’s core values of excellence and innovation.

CELEBRATING THIRTY YEARS

Forest Group recently celebrated their thirty years of service with family, friends, and clients in Vaughan, sharing many success stories

NET-ZERO NON-NEGOTIABLE

Canadian Government Sets New Conditions for Leased and Owned Facilities

By Barbara Carss

OTTAWA landlords are contemplating a list of new expectations from a prized office tenant following recently announced updates to the federal government’s green operations strategy. Along with added lowcarbon and climate-related criteria for procurement and the development, retrofit and management of federally owned facilities, the government will be looking for leased space that has or will soon achieve net-zero greenhouse gas (GHG) emissions.

Beginning in 2025, federal departments and Crown corporations that are entering into or renewing leases are instructed to: prioritize net-zero emissions; assess climaterelated operational risks and ability to meet contingency standards; and ensure adequate electric vehicle (EV) charging capacity in locations where “significant federal fleet operations” will be accommodated.

For new and renewed leases, landlords will be expected to report energy and water

usage, solid waste output and GHG emissions through ENERGY STAR Portfolio Manager for any space 500 square metres (5,382 square feet) or greater. Those results will be publicly posted for buildings in “major urban centres”.

By 2030, the government has set a target to secure net-zero office space in at least 75% of its new or renewed leases. Looking to other types of suppliers, bidders on “high-value” government contracts will be required to provide GHG life cycle assessment reports with their offered products and services beginning in 2025. Contractors and project managers will also have to fulfill requirements for the construction and renovation/retrofit of federally owned facilities, which include life cycle analysis based on a shadow carbon price of $300 per tonne and climate change risk assessment.

“This update to Canada’s greening government strategy will enhance climate

adaptation, improve the emissions performance of Crown corporations and set important interim targets,” maintains Jonathan Wilkinson, Minister of Energy and Natural Resources.

“We are making our government operations cleaner and leading by example to drive change,” concurs Anita Anand, President of the federal Treasury Board.

Despite the more rigorous criteria for leased office space, the updated green operations policies may open up opportunities for commercial landlords since the government is also moving to cull its owned facilities that do not meet lowcarbon and climate-resilient standards. Property portfolio reviews are to occur at five-year intervals and there is now a 2030 deadline for completing climate risk assessments of “critical assets” with required adaptation measures to be implemented by 2035.

PORTFOLIO RATIONALIZATION

The updated green operations strategy confirms that “portfolio rationalization” is under consideration. There are currently 10 Ottawa office buildings on the government’s disposal list, most of which still accommodate federal workers who will presumably need to be transferred elsewhere. Meanwhile, public service workers are expected to return to the office for a minimum of three days per week — up from two — as of September 2024.

“It’s hard to know where the federal government will end up in terms of its space needs over this five-year period between 2025 and 2030,” says Dean Karakasis, Executive Director of the Building Owners and Managers Association (BOMA) of Ottawa. “With the 10 buildings that it wants to sell, we don’t know yet how that will play out in the marketplace. The government will readjust its requirements as it sells off these and possibly other assets.”

That might also opportunely dovetail with a revamp or switch-out of some unpopular workplaces. Speaking during a webinar earlier this spring, Mark Sinnett, Executive Vice President with the real estate advisory firm, Avison Young, theorized that the sluggish pace of workers returning to the office in Ottawa and Toronto is partly attributable to public sector landlords.

“The provincial and federal governments are not making an effort to upgrade their offices to make it inviting to come back,” Sinnett submitted. “Going back to an office with three-quarter cubicles in a tired-out provincial or federal government office building is not conducive to the modern work environment. It’s a bit of a failure on their part to adjust and adapt to new realities.”

Given numerous previous policy statements and initiatives related to emissions reduction and climate change adaptation, the federal government’s updated office leasing criteria are not considered surprising. Concurrently, many commercial landlords are pursuing their own GHG reduction programs with targets to achieve net-zero emissions by 2050 or earlier.

To help facilitate that process, BOMA Ottawa is working with Hydro Ottawa to inform members about a range of provincial and federal incentive programs to subsidize energy efficiency and emissions reduction. That includes funds recently allocated to Hydro Ottawa through the federal deep retrofit accelerator initiative, which is earmarked to support comprehensive retrofits that deliver at least a 50% cut in energy consumption and a 70% drop in emissions output in existing buildings.

Karakasis reports “overwhelming registration” for a recent BOMA Ottawa seminar on the topic.

“The more we can get every single building to be a candidate for government space, the better,” he says. “We want to put the pieces of the puzzle together and end up with a series of low-carbon, highly efficient, climate-resistant buildings that the government can have access to when it goes to market to look for space for its people.”

GUIDANCE FOR COMPLIANCE

Carbon offsets will be allowed, at least initially, in calculating net-zero status. In scenarios where government officials are unable to secure net-zero office space in the market, the updated policy states that commercial landlords will be expected to “implement an industry-recognized path to

net-zero emissions within 15 years” as a contractual condition of the lease.

The updated policy also refers to Public Services and Procurement Canada’s (PSPC) guidance plan for a net-zero, climate-resilient leased portfolio, which was to have been developed by 2023 and include “a program to work with landlords”. However, as of June, BOMA Ottawa was still waiting to see that plan.

“We stand ready to talk,” Karakasis affirms. “PSPC knows BOMA Ottawa well and that, at any time, if they want to do a formal or informal chat amongst landlords to get input, we’re prepared to facilitate that.”

Although the largest concentration of affected landlords are in the national capital region, the new leasing criteria will apply anywhere the federal government rents space. The BOMA BEST sustainability assessment and benchmarking program could prove helpful for owners/managers interested in attracting or retaining the federal government as a tenant, and perhaps even more so for federal government and Crown corporation facilities managers, since it aligns with many of the monitoring and reporting functions they’ll be expected to fulfill.

Notably, federal and Crown corporation entities will have to: track and disclose potable water consumption in major facilities; track and disclose waste diversion; minimize the use and disposal of environmentally harmful and hazardous chemicals and materials; and track and disclose the total amount of refrigerants in large HVAC and refrigeration systems, as well as GHG emissions from “significant” releases of refrigerant. Both federally owned and leased office space will have to show that climate-related risks that could affect operations have been assessed and addressed.

“Achieving government sustainability goals requires a strategic approach,” maintains Victoria Papp, Senior Director, Strategy and Innovation, with BOMA Canada. “Certification programs like BOMA BEST are pivotal in guiding building owners towards energy efficiency, climate resilience and transparent reporting — all essential for meeting rigorous government sustainability mandates.”

Complete details of the Canadian government’s updated operations strategy can be found at www. canada.ca/en/treasury-board-secretariat/ news/2024/06/updated-greening-governmentstrategy-2024.html.

Tenant Lounge Reborn from Vacant Retail Space LOBBYING RETURNEES

By Rebecca Melnyk

A FORMER CONVENIENCE store in the lobby of a downtown Toronto office tower has been transformed into a private 1920s-style Art Deco lounge for tenant meetings and events. Now known as the Green Room, the warmth of the space evokes the intimacy of a speakeasy, but, rather than being shrouded in secrecy, this spot wants to be discovered.

QuadReal Property Group, the tower’s landlord, partnered with the interior design firm, Figure3, on the project in 2021 — a year when retail operators within commercial office buildings were typically suffering the loss of a full nine-to-five workforce. Some real estate landlords that have seen such businesses depart are now experimenting with reactivating vacated retail spaces into amenities for tenants.

For employers, and their landlords, that can be seen as a lure for in-person office attendance and/or an opportunity to entertain clients on-site. At QuadReal’s tower at 200 King Street West, the 1,600-square-foot venue is also an option

for tenants — particularly those that may have recently downsized from larger quarters — to host larger meetings that might otherwise have to be taken off-site.

“When you enter the building, it’s an easyto-miss, tucked-away space, off to the side,” observes Tamara Rooks, Figure3’s Creative Director of Workplace. “We were trying to find a way to make it look appealing and inviting, where you get a little glimpse of something as you walk by.”

Ambient lighting, rich wood tones and jewel-coloured accents create a speakeasy vibe. The design also plays with different ceiling levels — opening up from the conventional entrance area to a 17-foot double height, sporting a dramatic chandelier. Lilac drapery softens the angular shape of the room and makes it feel cozier.

A budget-conscious design scales back on some elements — using wallpaper that imitates wood veneer, for example — but does not scrimp on lighting. Vintage blown glass fixtures are dotted throughout the space, also matching the aesthetic of the

tower’s lobby lighting and brass accents.

A variety of seating options allows lounge users to have group conversations or more intimate chats. There is an eightperson boardroom table, with AV connections, that can be used for team meetings, and bench seating with bistro tables to enable heads-down work.

Tenants can book the space for daytime work or bring in a third-party vendor to host an event. A drop-down media screen is viewable from any vantage point in the room, which can hold up to 30 people for a presentation.

“I’ve attended events in the QuadReal Lounge and witnessed people peek their heads in and look around with interest,” Rooks recounts. “It’s bringing more action and intrigue to the ground level and I’m looking forward to seeing how the use of the space evolves with the needs of the business.”

Rebecca Melnyk is Editor of Canadian Facility Management & Design.

Photo by Steve Tsai, Steve Tsai Photography.

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Micro-Unit Dwellings Poised to Stretch Urban Affordability SNUG SOLUTION

By Erin Ruddy

INNOVATIVE DESIGN concepts underpin the promise of micro-unit apartments as an affordable housing solution. For tenants, they offer more privacy and security than sharing space with a roommate. For builders, smaller unit sizes are more cost-effective.

While demand for affordable accommodations is only expected to intensify, the question is: are people willing to embrace 300 square feet of total living space?

“There may be initial concerns for some Canadians, but we believe, that with the right approach, micro-units can offer a compelling housing option to young professionals, students, empty-nesters and individuals seeking affordable urban living,” says Riz Dhanji, President and Founder of RAD Marketing, a real estate development firm in Toronto. “With my 30-plus years of experience in real estate, there has been a noticeable cultural shift towards embracing smaller living spaces,

particularly in urban areas like Toronto where affordability and convenience are key drivers for many.”

His company recently commissioned a study from the real estate research firm, Urbanation, to investigate the viability of micro-units as a long-term solution to Canada’s housing crisis. It gathered a range of perspectives from provincial government representatives, housing stakeholders and designers, and considered prospects for both rental and ownership tenure. Findings

Photos courtesy of RAD Marketing.

suggest there is a great deal of potential for micro-unit dwellings in cities with high rent costs, like Toronto and Vancouver.

“We’re finding that the end-user is placing more emphasis on amenities and location over square footage. Developers understand this and are finding more and more innovative solutions to maximizing space,” Dhanji reports. “What we’re seeing in all the high-rent cities is that the way people live and work is evolving with an increasing emphasis on flexibility, mobility and sustainability. Micro-units align with these changing lifestyles by offering a low-maintenance, lock-and-leave living environment that complements the modern urban lifestyle.”

Although still at an embryonic stage in Canada, several major cities in Europe, Asia and the United States have already embraced the micro-unit housing model.

“We have seen this model pop up in highrent cities such as in New York and San Francisco, addressing the pressing need for affordable housing. We’ve also seen them work in European cities like London and Berlin as a solution to housing shortages,” Dhanji says. “In these markets, the adoption of micro-units has not only addressed housing affordability challenges, but also fostered vibrant and inclusive urban communities, demonstrating the transformative potential of this housing model on a global scale.”

Toronto’s growing population of young professionals and steady influx of newcomers seeking rental housing would also seem to be well matched to those trends. “It could help provide a kickstart to their futures, offering an affordable entry point into homeownership,” he asserts.

Design innovation and advancements in proptech also have a role to play. To make the micro-unit model viable, developers and landlords will have to maximize space efficiencies, address the challenge of limited square footage and ensure functionality and comfort, while keeping costs to a minimum. Given every square inch must be usable, the intentional selection of furniture with multiple functions is the cornerstone of micro-unit design.

“Smart furniture and modular systems are key components of this innovation, allowing for versatile arrangements that cater to diverse needs within a single space,” Dhanji acknowledges. “Beds that fold into walls, extendable tables, and coverable seating exemplify this approach, but the success hinges on the meaningful engagement of developers, architects, and interior designers. They have no choice but to stay on top of the

latest technology and design trends, and continually push the boundaries of what is achievable within the constraints of microunit living.”

He foresees wider uptake of micro-units within the next few years. That will come as replicable designs scale up development capacity and all levels of government get on board.

“Cooperation with financial institutions and the Canada Mortgage and Housing Corporation (CMHC) would help to catalyze their proliferation, as well. Offering options with reduced deposit requirements and CMHCbacked secured financing, along with extended amortization periods, will all contribute to making these units more accessible,” Dhanji submits.

Micro-units align with environmental benefits that could also help to win government support. Higher density living means more efficient land use and reduced urban sprawl, along with the low-carbon footprint of smaller units.

Research from the United Nations Environmental Programme (UNEP) concludes that a 20% reduction in a dwelling unit’s per capita space could reduce the emissions associated with the production of building materials by 50 to 60% by 2050 and reduce heating and cooling demand by up to 20%.

Erin Ruddy is the Editor of Canadian Apartment.

Embracing Environmental Sustainability: Embracing Environmental Sustainability:

INNOVATIONS IN CONDOMINIUM SERVICING

Cleaning contracts in commercial and condominium settings are arguably one of the most difficult to satisfy. Where cost and visual impact are the proportionally dominant factors in choosing a service provider, expectations from property management understandably run high. Savvy cleaning and maintenance companies are looking to technology to heighten their ability to service and provide for their clients. As the importance of environmental sustainability becomes increasingly recognized, many companies are also striving to integrate eco-friendly practices into their operations.

A big challenge in the condominium sector is the diversity of needs across a variety of buildings and communities. Unlike commercial properties, where environmental standards like LEED and BOMA certifications are well-established, condominiums often lag in adopting sustainable practices. This presents a unique opportunity for service providers to educate and influence condo boards and property managers about the benefits of eco-friendly solutions.

According to Andrew Hood, Vice

President of Innovation

Building Maintenance, the goal is not only to provide cleaning and construction services but also to improve environmental, social, and governance (ESG) standards across their operations.

“We can shift the narrative from simply hiring a cleaning service to choosing a partner committed to environmental stewardship,” he explains. “This approach is particularly relevant for condominium boards and property managers, who may not yet prioritize sustainability as much as their commercial counterparts.”

CLEANING SCHEDULES AND BLUETOOTH TRACKING

Innovation is also a leader in using technology and industry standards to provide a better service. One of the standout innovations is their use of the Mero system, a cutting-edge technology that tracks and optimizes employee tasks. This system uses Bluetooth beacons placed in wall outlets to scan cleaners’ fobs, providing real-time data on their location and activity. This not only ensures that tasks are completed according to schedule, but also enhances transparency and accountability. Additionally, this data can be used to refine cleaning routines and improve overall service quality.

“With Mero, we’ve seen an active increase in our growth potential with new customers and security in supporting existing contracts. We had a problem at one of our sites where cleaners were not following their routine. Mero’s technology allowed us to highlight the exact areas where cleaners were spending time and changed the dynamic of the property. We can now offer an improved quality of services,” Hood explains.

Another exciting development is the use of robotic vacuums and scrubbers. While these are currently more suited to open commercial spaces, the technology is rapidly developing. The company is at the forefront of these advancements, piloting new robotics and integrating them into their service offerings as they become viable for residential use.

WATER CONSERVATION INITIATIVES

Water conservation is another critical area where Innovation Building Maintenance has made significant strides. “We’ve teamed up with a company to reduce water usage consumption in buildings by replacing standard urinals with waterless urinals,” says Tahsin Bondokji, President of Business Development. “This is new patented technology which we’re excited to offer to our clients.”

awarded a bronze medal. That’s something we’re very proud of.”

Additionally, Innovation Building Maintenance employ ionized water for cleaning, eliminating the need for harsh chemicals while still delivering effective results. This method involves charging water molecules to create a potent cleaning agent, a technology that is both innovative and environmentally friendly.

This approach is particularly relevant for condominium boards and property managers, who may not yet prioritize sustainability as much as their commercial counterparts.

Using HEPA-filtered vacuums with low sound decibels to reduce noise pollution and improve indoor air quality, their attention to detail underscores a holistic approach.

To date, Innovation has deployed waterless urinal facilities in major shopping centres across Canada, including Yorkdale and Scarborough Town Centre. The urinals significantly reduce water consumption, showcasing a practical application of sustainability in high-traffic areas. This technology is now being considered for residential buildings, further bridging the gap between commercial and residential sustainability practices.

Third-party auditors like EcoVadis and Green Seal certify all chemicals used by Innovation as safe, ensuring minimal environmental impact.

“EcoVadis is the world’s largest third party ESG auditor,” Bondokji says. “In our first year of being audited, we were

Innovation Building Maintenance has also partnered with Veritree to establish a tree planting initiative aimed at reforesting areas affected by wildfires. Since its inception in 2023, a total of 20,571 trees have been planted in British Columbia. Such programs not only offset the company’s carbon footprint but also engage the community.

By educating board members and property managers about the benefits of these initiatives, Innovation is helping to drive a cultural shift towards more sustainable living. Their thorough approach incorporating advanced cleaning methods, water conservation, and cutting-edge tracking systems, positions them as a frontrunner in the industry.

To learn more, visit www.innovationmaintenance.com

LAYERS vs. SILOS

Shifting from Smart Projects to Smart Building Programs

By James Dice

PURCHASERS OF a single category of smart technology can typically look to their selected vendor to provide the full stack of devices, integration, networking, data infrastructure and software applications to achieve the required outcome. However, many building owners/managers are now setting out to acquire multiple categories, reflective of a broad range of operational and management demands.

There are technologies designed for different outcomes: reducing operating expenses; improving sustainability; enhancing occupant experience; and reducing risk. As well, there are technologies designed for different stakeholders: engineers; operators; energy managers; network managers; service providers; and technicians.

Building owners are realizing they don't want to buy redundant layers from different application vendors. They want any application they buy to share common infrastructure. This is occurring as part of a shifting mindset from smart buildings projects to smart buildings programs.

Projects are single-focused, time-bound and implemented in silos. Programs are comprehensive, ongoing and integrated into core operating procedures.

Smart buildings programs involve horizontal layers of technology that enable bi-directional communication with overlay software applications. Portfolio level standards (e.g. cybersecurity) are also key to determine how each layer is set up and maintained, and how new devices are introduced.

INTERACTIVE TECHNOLOGIES

The device layer is essentially on the front line, gathering data to be communicated to the application layer. This includes HVAC, lighting, metering, smart window shades, IAQ sensors, connected solar arrays, EV chargers and even coffee makers.

These are siloed systems, each with a unique purpose linked to certain inputs and outputs. As a smart technology, each is a separate stack of networking, asset registers, data models, data storage, user interface and devices.

The device layer is key to enabling performance and outcomes up the entire chain of smart technologies. Yet, studies suggest that 87% of commercial buildings in the United States don’t have any digital systems in place so this is where an influx of investment can be anticipated.

The network layer is the next step up, providing remote access to devices, and connecting devices to each other and to the cloud. It will have its own hardware, management software and standard operating procedures, which will need to be reliable and capably monitored and maintained.

The data layer — also known as the data lake or middleware — creates a two-way street for information. It provides a standard application programming interface (API) to each application and a standardized interface between those applications and each downstream device. It retrieves and models the data that is locked away in proprietary and siloed systems.

The application layer sits on top of the data layer and provides outcomes to users through mobile apps, web apps or process-based applications. This includes utility bill analytics, sustainability reporting, carbon accounting, fault detection and diagnostics (FDD), facility service tracking and advanced supervisory control.

Applications can be categorized by their capabilities and the use cases they enable, which generally fall into five types of industry needs: to centralize/visualize data; analyze data; control underlying systems at the device layer; optimize workflows; or engage stakeholders. A consolidated application layer provides rigour for determining which applications are needed for which users.

The grid and market layer is smart technology that enables building-to-grid connectivity. Vendors in this category provide energy and grid services, but don’t necessarily have software or consulting business models.

They might be efficiency as a service (EaaS) providers that package together hardware, software and engineering and project management services to execute decarbonization projects. That typically involves a partnership with the local utility and financing providers, and allows buyers to offload their upfront costs.

Virtual power plant (VPP) vendors also populate this layer. They integrate their technology directly with the utility and directly with their customers’ buildings in order to monetize the building’s ability to curtail demand during times when utilities will pay for that curtailment.

Finally, the service provider layer encompasses vendors that sell their time and expertise to augment the buyer’s staff and advise buyers on all the facets of the smart buildings journey. They can either be independent consultants or affiliated with a particular technology vendor. Large commercial real estate portfolios will also often have in-house staff dedicated to smart technology.

PURCHASING PRINCIPLES

In purchasing decisions, prospective buyers should consider the following principles:

• Don’t pay for things twice: Reduce costs by reusing digital infrastructure components for many different outcomes. Avoid redundant integration, data storage and data modelling vendors that don't easily communicate outside of each vendor's stack.

• Reduce vendor lock-in as much as possible: Increase flexibility by making each layer interchangeable and replaceable without needing to start over.

• Enforce standards and control at each layer: Minimize complexity and maximize control by ensuring each layer meets the owner’s standards for how each layer is set up, how each layer is maintained, and how new technologies are introduced.

• Robust infrastructure enables better outcomes: We needed to build the

smartphone before we could put applications on it. The same goes for buildings.

James Dice is an engineer, certified energy manager, certified measurement and verification professional and the founder of Nexus Labs, an online information forum specializing in vendor-neutral insight and analysis about technology for smart buildings and decarbonization. For more information, see the website at www.nexuslabs.online.

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Disclosure Rules Necessitate Data Strategies CONTEMPLATING COMPLIANCE

BASED ON self-reporting, many of the commercial real estate firms subject to the United States Securities and Exchange Commission’s (SEC) pending climaterelated disclosure rules are grappling with how they will comply. Just 12.5% of respondents to a recent poll conducted by the Open Standards Consortium for Real Estate (OSCRE) indicate they have the data management systems in place to collect and coordinate the raft of information that will have to be presented to investors.

That includes:

• an inventory of “reasonably likely” climate-related risks to which investables are exposed;

• an associated explanation of how those risks potentially may or already have affected business operations/planning and financial outcomes; and,

• a comprehensive slate of details about the actions taken to reduce those risks.

By Barbara Carss

As well, where public investors hold at least USD $70 million worth of equity, such companies will be mandated to disclose their scope 1 and 2 greenhouse gas (GHG) emissions. That encompasses GHGs directly emitted from sources within their portfolios and GHGs attributable to the production of electricity and/or steam their portfolios consume.

“The rules will provide investors with consistent, comparable and decision-useful information, and issuers with clear reporting requirements,” SEC Chair Gary Gensler said when the final version was released earlier this year. “Further, they will provide specificity on what companies must disclose, which will produce more useful information than what investors see today.”

More than two-thirds of participants in the OSCRE poll reveal they have not yet taken action, are still trying to understand the requirements or are in the process of

determining what new types of data they will need to obtain. About 19% have completed an assessment of where pertinent climate-related data is generated within their organizations and are preparing to begin harvesting it.

OSCRE’s analysis of these results notes that affected companies could have begun considering the potential implications as early as March 2022 when the SEC first unveiled the draft rules for consultation. However, lollygaggers still have some time to catch up as the final version faces court challenges. In April, the SEC voluntarily paused the enactment process while those challenges proceed, but also declared confidence in the rules’ validity.

“The Commission is not departing from its view that the Final Rules are consistent with applicable law and within the Commission’s long-standing authority to require the disclosure of information important to

investors in making investment and voting decisions,” states the SEC’s stay order.

DILIGENCE PROMPTS PREPAREDNESS

There is general consensus among many affected parties that the disclosure mandate will take effect relatively soon and diligent companies listed on exchanges in the U.S. should get ready. Meanwhile, Canadian Securities Administrators (CSA) is in the midst of a similar rule development process in Canada and the SEC rules are considered instructive since CSA has stated it will look to other international examples as it finalizes its own requirements.

Many Canadian companies that are listed on U.S. exchanges — including all start-ups making initial public offerings — will be directly affected, although larger players that are dual-listed on the TSX and U.S. exchanges typically fall under the auspices of SEC’s multi-jurisdictional disclosure system and will remain subject to CSA requirements. Regardless, investors at home and abroad can increasingly expect access to standardized insight on how assets may be exposed to climate-related risk and what investment managers are doing to address it.

“It is really part of global momentum for greater transparency around climate-related physical and transition risks,” Paulina Torres, JLL’s Research Manager for ESG and sustainability, observed during a recent webinar exploring global real estate trends. “This is happening across markets and outside the U.S.. Canada, the United Kingdom, Europe, Australia and, most recently, China have all implemented or proposed mandatory ESG disclosure with first reports due by 2026 or earlier.”

The SEC’s phased compliance schedule would see the largest listed companies

GUIDANCE FOR ESG REPORTING

Significantly more of Canada’s prominent commercial real estate players have begun reporting greenhouse gas (GHG) emissions and pursuing net-zero emissions targets during the past year. REALPAC’s newly released update of industry sustainability trends reveals that 68% of its membership now reports scope 1 and 2 emissions, up from 48% in 2023.

Nearly half (49%) are targeting net-zero emissions in their portfolios at some point by 2050, up from 33% last year, and 49% are also tracking some scope 3 emissions, up from 37% last year. Consistent with findings presented in last year’s inaugural report, REALPAC members identified net-zero carbon as their top sustainability priority, but energy management and climate resilience are viewed with more importance compared to 2023.

Results gleaned from REALPAC’s member survey are a companion to the resource document’s wider discussion of a range of issues that are increasingly raised in investment decisions and regulatory compliance. That includes an overview of GHG accounting and scope 1, 2 and 3 emissions — direct on-site (scope 1); indirect from purchased energy (scope 2) and emissions tied to activities and products/materials that owners/managers and building users conduct, consume and/or produce (scope 3) — along with insight on embodied carbon, low-carbon energy, carbon offsets and an example pathway for achieving net-zero emissions.

It also delves into climate risk and resilience, sustainable financing mechanisms and ESG reporting, with the aim of providing guidance on emerging and evolving resources, policies and practices. As well, a comprehensive glossary defines key terms and concepts, spells out a proliferation of acronyms and identifies organizations and standards that are coming into prominence.

In an introduction to the report, REALPAC’s Chief Executive Officer, Michael Brooks, tallies the growing list of investment management, regulatory and consumer expectations that prudent commercial real estate operators need to consider.

“There is a continuing progression of carrots, sticks and, of course, disclosure obligations affecting our industry,” he observes. “The number of companies committed to achieving Paris-aligned decarbonization pathways using the science-based targets initiative (SBTi) is increasing exponentially around the world.”

The sustainability report can be found on REALPAC’s website at https://realpac.ca/ product/sustainabilityreport2024. – REMI Network

KEEPING UP WITH AN EVOLVING VOCABULARY

NAIOP’s updated glossary of common commercial real estate business terms presents an expanded list reflective of an evolving vocabulary across a multidisciplinary workforce. The newly released 2024 edition features 250 standardized definitions categorized by nine different functions, including a new section related to ESG and building certifications.

Last updated in 2017, the glossary debuted in 2004 through the efforts of the NAIOP Research Foundation with input from an industry task force with representation from developers, investors, financiers, brokers and real estate associations. The 2024 edition builds on that earlier work, adding new terms and revising other definitions to align with changing construction design standards.

“If commercial real estate firms use commonly understood terms, collaboration is easier, deals will close more quickly, and our industry can continue to evolve into a more modern marketplace,” says Marc Selvitelli, President and Chief Executive Officer of NAIOP.

Arising from that modern marketplace, the glossary now includes terms related to cold storage, data centres, new technologies employed in warehouse/distribution space and new investment products, in addition to the 11 key definitions for ESG and building certifications. The 250 definitions are organized by industry category, but there is also a comprehensive alphabetical index of the entire list.

The 2024 edition of Commercial Real Estate Terms and Definitions can be found at www.naiop.org/research-and-publications/ research-reports/reports/terms-and-definitions. – REMI Network

reportingobligations

(categorized as large accelerated filers), in which public investors hold at least USD $700 million worth of shares/units, begin to report scope 1 and 2 emissions in their 2026 annual reports and registration statements, followed by a first assurance report in 2029.

Listed companies in which public investors hold USD $70 million to $699 million in shares/units (categorized as accelerated filers) would commence reporting in 2028 with the first assurance report set for 2031. Other climate-related information would be due earlier — in 2025 for large accelerated filers and 2026 for accelerated filers.

Smaller listed companies are expected to begin disclosing required climate-related information in 2027, but will be exempt from reporting scope 1 and 2 emissions. As well, all companies must affix electronic tags to climate-related information within their reports and registration statements.

SCOPING OUT THE METRICS

For subject commercial real estate companies, tallying scope 1 and 2 emissions could actually be the easier component of compliance. It’s also projected to have spinoff benefits for those that have favourable findings to report.

“Many corporates are already tracking this data because of the ESG targets that they have in place at the corporate level,” Torres said. “That data measurement will essentially shine a light on a building’s energy performance, and you can expect tenants to increasingly seek operational efficiencies from their spaces when they’ve got access to energy data through these disclosure requirements.”

Requirements to assess and disclose how climate-related risk materially affects portfolios calls for a broader range of data, which is not always so straightforward to collect. To date, organizations like OSCRE and GRESB, the overseer of a global benchmark for the ESG performance of commercial real estate portfolios, have been among the more proactive agents in developing and promoting standardized metrics.

Speaking during a recent webinar sponsored by the Real Property Association of Canada (REALPAC), Erik Landry, GRESB’s Director of Climate Change, acknowledged that the combination of emerging regulatory dictates and corporate ESG-driven initiatives has spawned a proliferation of data and data providers.

“With that proliferation came the hunt for the best data. Well, spoiler alert: there is no best data. It really depends on your use-case and what you want to use that data for,” he reflected. “The environment is changing; the data is changing; the methodologies are changing. So we’re putting an emphasis on continuous improvement and making sure that these processes reflect the most up-to-date understanding and best practice.”

OSCRE is approaching the challenge from a data management angle, as it continues on its ambitious agenda to forge consistency in the collection, management, reporting and transferability of environmental data. It underscores the importance of master data management to implement a shared framework for data accuracy, consistency, accountability and stewardship within an organization.

“A holistic approach will enable them to collect, analyze and report data across multiple reporting platforms without significant human manipulation of data, which will ultimately reduce the time needed to collect, analyze and report environmental data,” the analysis of its recent poll results maintains.

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LIBORIO’S LEGACY CON TINUES

Remembering Liborio Gurreri, celebrated founder of Tor Can ICI Roofing Inc.

Agreat leader is often described as someone who thrives on embracing challenges, fostering connections, and solving problems in pursuit of progress; someone who isn’t afraid to adapt, learn, and motivate others down the same road to success.

Liborio Gurreri, visionary architect and founder of Tor Can Waste Management and Tor Can ICI Roofing Inc, exemplified these exceptional traits, and more.

All those who knew him, defined Liborio as a kind, committed professional who embodied the true spirit of entrepreneurism, embracing every triumph and defeat with one prevailing philosophy: “Only by exceeding our customers’

expectations can we hope to have the opportunity to earn their business another day.”

Liborio will be remembered as a celebrated member of the construction community in the GTA, and for his leadership and commitment to high-quality service and safety standards in the roofing industry.

Liborio established Tor Can Waste Management in 2000

“Liborio was a friend who was always one to offer words of wisdom, encouragement, and advice. You could always count on him, and he never let you down. The same characteristics were evident in his approach to business. He always did what he said he would. There was no problem he could not solve.”

- Mark Veneziano, Partner at Lenczner Slaght LLP

“Liborio’s legacy cannot be measured by money, success, or material possessions. The relationships he built with his family, friends, and business associates made a profound impact that is rare for most people to experience. He leaves a meaningful and memorable mark on our lives. ”

– Italo Lunardo, Founder, President & CEO at LPI Mechanical Inc.

followed by Tor Can ICI Roofing Inc in 2019. Both wholly owned companies were built on the mantra “service over profit,” which became the guiding ideology that allowed the small enterprises to successfully challenge the corporate Goliaths of the day.

With five successful years in business, Tor Can ICI Roofing Inc’s expertise lies in the installation of commercial, industrial and institutional roofing systems using TPO, EPDM, PVC, metal and traditional 4 ply tar and gravel buildup, always to the manufacturer’s strictly specified applications. The company is also proud to be recognized as a Soprema authorized installer, which is often cited as the best roofing system in the industry.

The team continues to hone its re-roofing expertise in the property

management sector in a manner that would make its founder proud - by exercising sensitivity to the needs of tenants while delivering the highest quality service that it helped garner the business of property management icons. Some of their most notable customer projects include Shoppers World Brampton, Iron Mountain, Yorkdale, McDonalds, and Rogers.

Liborio’s footprint was vast, but so too was his focus on the future and succession plans. This includes the 18year mentorship of Michael Collura, VP, and the accompaniment of a handpicked management team that were all reared for their understanding of good business and a commitment to earning their clients’ trust daily.

“BUILDING

A LEGACY THROUGH LEADERSHIP FIRMLY FOCUSED ON THE FUTURE”

Liborio’s brother, Domenic Gurreri, founder and President of Forest Group, remembers him as a “true gentleman, admired amongst his friends, family and the community alike. His dynamic energy had a remarkable way of filling any room with a sense of warmth. His absence has left a significant void in our lives. He will be forever loved and never forgotten.”

It’s safe to say that all those who knew and worked for Liborio Gurreri are grateful

LIBORIO GURRERI 1968 - 2024

Liborio passed away on June 7, 2024, at the age of 56. Through his work, his family, his businesses and his philanthropic endeavours, Liborio Gurreri will live on, and his contributions to his field will leave a lasting legacy.

for his visionary leadership, commitment to quality, and tireless work ethic that guided him every step of the way, and the industry remembers him fondly.

Liborio also had a great spirit of generosity, which he demonstrated through his support and involvement with several charitable initiatives, including Josie’s Pink Truck Foundation, which the family launched in loving memory of his daughter, Josie.

Supports EASY FIXES OVERLOOKED accessibility

Accessibility Survey Finds Absence of Low-Cost

THE BUILDING features that most commonly impede people with disabilities are not those that are the costliest or most structurally complicated to correct, new survey findings show. Respondents to a recent poll conducted on behalf of the Rick Hansen Foundation ranked the absence of handrails, grab bars, ramps and automatic door openers as the barriers to mobility they most frequently encounter outside their homes.

That’s somewhat discordant with the prevalent perception across the entire survey base, of both the able-bodied and people with disabilities, in which 57% of respondents hypothesized poor accessibility is related to the difficulty of renovating older buildings and 45% identified high cost as a factor.

Other results, which the Canadian market research firm, Leger, gathered from 1,500 respondents in February 2024, reveal that 57% consider the accessibility of the public and private spaces they frequent to be “fair” or “poor,” and 41% have seen no improvement or a decline in the accessibility of those spaces over the past three years.

“People with disabilities continue to face major barriers to participating in everyday activities in their communities,” says Brad McCannell, Vice President, access and

inclusion, with the Rick Hansen Foundation. “The study shows that Canadians feel the accessibility of buildings and spaces in their city are improving too slowly or haven’t improved at all. Current practices simply aren’t meeting the real needs of the community.”

Although just 14% of survey respondents defined themselves as a person with a disability, their answers to more detailed questions reveal that 35% have a condition that is classified as a disability. As well, 31% have a family member with a disability whom they live with or help to care for, and 40% have friends or close acquaintances who have a disability.

Mobility and/or hearing impairments are most common, cited by 26% of survey respondents, while 8% report vision impairment and 5% have a neurological condition or an acquired brain injury.

Nearly 20% of respondents experience chronic pain and more than 20% have another chronic health condition, such as diabetes, heart disease, chronic obstructive pulmonary disease (COPD) or autoimmunity.

Approximately 900 respondents report they occasionally or frequently encounter barriers to access. Among this group, 36%

experienced obstructions in homes that are not their own, 33% flagged festivals/special events and public washrooms, and 32% cited outdoor public places such as sidewalks, pathways and parks. Office/ professional buildings, grocery stores, restaurants and other retail/commercial venues have presented impediments for 29%, while 24% confronted barriers in sports and recreation centres.

Public facilities have a moderately better track record, with 23% of respondents reporting they’ve encountered barriers in hospitals, libraries and city halls, and 16% facing barriers in schools and/or on postsecondary campuses. However, perhaps particularly notable in the latter case, just 10% of the total survey base is between the ages of 18 and 34, while 57% is 55 or older.

BARRIERS ENCOUNTERED

Drilling down to the types of barriers encountered, 579 respondents reported 12 different scenarios outside their homes, with each, on average, experiencing 2.8 of them. Related to relatively low-cost features, 42% of respondents report the absence of hand rails or grab bars; 38% report a lack of ramps or sloped pathways; 36% report lack of automatic door openers; and 18% report lack of appropriate directional signage.

Narrowing the focus further to 138 respondents with physical mobilities who are employed in workplaces outside their homes, 19% report their workstation design is unsuitable.

Turning to inadequacies that likely require greater capital investment to resolve, 24% of respondents who have encountered barriers outside their homes report narrow doorways and hallways; 21% report inadequate elevator access; and 21% report unsuitable flooring surfaces.

Meanwhile, the Canadian government has recently opened a new round of funding

to support small-scale projects aimed at improving physical access or implementing supportive technology for people with disabilities. Up to $14.7 million has been earmarked to provide up $125,000 per project to upgrade:

• public facilities that host programs/services in which people with disabilities may choose or need to participate; or,

• workplaces where people with disabilities are or could be employed.

The funding is available to not-for-profit organizations, private companies with fewer than 100 employees, municipalities, Indigenous organizations, territorial governments and organizations that provide emergency, temporary or transitional housing. Grants are provided as set amounts for a designated list of common upgrades, including: ramps; accessible washrooms; accessible doors; elevators; accessible lifts; pool lifts; accessible playgrounds; multisensory rooms and stations; accessible parking; accessible drop-off areas; and

Indigenous organizations, organizations based in Yukon, Northwest Territories and Nunavut or other designated rural or remote areas, emergency and homeless shelters, foodbanks and meal providers, and charities that offer second-hand clothing can obtain funding to cover 100% of eligible project costs. Other grant recipients must supply 25% of the amount from their own funds or other secured sources.

“We acknowledge the impact organizations across the country are having in building truly accessible communities and workplaces,” says Canada’s Minister of Diversity, Inclusion and Persons with Disabilities, Kamal Khera. “Through the Enabling Accessibility Fund, our government is proud to support those community champions who, project by project, are creating a Canada for everyone, where barrier-free access and disability inclusion are the norm.”

The overwhelming majority of respondents to the Rick Hansen Foundation/ Leger survey agreed it is important for people with disabilities to be able to participate in the community and the economy. They also prioritized accessible

housing, initiatives to ensure buildings and public spaces are accessible and efforts to educate Canadians at large about accessibility issues.

Concurrently, 28% attributed barriers in the built environment to failure to adequately enforce accessibility regulations, and to neglectful designers and builders. Another 23% suggested existing accessibility standards are too lax.

Respondents were also most inclined to hold designers, developers and building owners/mangers to account, with 70% concluding that this group has “significant responsibility” for accessibility. Fewer expressed such high expectations of provincial (64%), municipal (63%) or federal (57%) governments.

The complete survey findings from the Rick Hansen Foundation’s National Accessibility Study can be found at www.rickhansen.com/ news-stories/disability-information. More information about the Canadian government’s Enabling Accessibility Fund can be found at www.canada.ca/en/employment-socialdevelopment/programs/enabling-accessibilityfund.html

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Ontario Retailers Ponder Alcohol Sales Feasibility

By Barbara Carss

LEASES AND logistics will be major factors in whether Ontario retailers can act on new flexibility to sell beer, wine, cider and ready-todrink, alcohol-infused beverages in grocery and convenience stores. Liberalized rules had been slated to take effect across the province in 2026, but a newly accelerated schedule has advanced that timing to this summer and fall — extending regulatory permissiveness for private sector operators well beyond the current network of about 450 licensed grocery stores and 225 boutique wine shops.

Eligible retailers will have to secure a licence from the Alcohol and Gaming Commission of Ontario (AGCO) and abide by those conditions, but up to 8,500 opportunities will be made available. Under the phased rollout, grocery stores that are already licensed to sell wine, beer and cider became free to offer ready-to-drink beverages and larger-quantity beer packs holding up to 30 containers as of July 18, 2024. Convenience stores can enter the alcohol sales market on September 6, with the remainder of grocery stores allowed to follow on November 1.

“Our responsible and balanced approach treats Ontario consumers like adults by giving them more choice and convenience,” Ontario Finance Minister Peter Bethlenfalvy said earlier this spring, as the provincial government unveiled the updated schedule.

Given the sudden advancement of the start-date, many newly eligible retailers may be unprepared to jump into the market imminently. Other contractual obligations may also constrain or prevent their ability to do so.

“The legality of it doesn’t necessarily mean that a particular tenant can start selling alcohol,” affirms Marco Gammone, a Partner practicing with Aird & Berlis LLP’s real estate and commercial leasing group. “There are typically three things in existing leases that apply and will govern.”

That begins with a use clause, which spells out what a tenant can do within the space. With that, landlords often include a list of general prohibited uses.

As well, tenants may have to abide by the exclusive rights landlords have granted to other lease-holders within a facility. For example, a restaurant or anchor tenant may have the exclusive right to sell alcohol within a portion of, or an entire mall.

Gammone foresees that convenience stores — defined under the regulation as venues no greater than 4,000 square feet, in which at least 50% of the product space is devoted to food and beverages — will encounter more obstacles than larger food retailers. Use clauses for major grocery stores tend to be more expansive, allowing for many different kinds of uses and changes in use that are considered consistent with normal grocery store operations.

RULES AND COMPETING INTERESTS

Retail strategists point to other potential complications, particularly for small operators with limited shelf and/or storage space. Alcohol sales could bring staffing pressures since anyone handling the product will need to be at least 19 years of age and possess Ontario’s Smart Serve certification. There may also be concerns about security, new insurance costs and energy costs tied to an extra refrigeration load.

“It’s going to take up shelf and storage space so what do they give up in a small store to be able to accommodate the alcohol?” muses Lisa Hutcheson, Managing Partner with the retail strategy consulting firm, J.C. Williams Group.

“They may have higher-margin goods they’d rather sell,” concurs Alex Edmison, a Senior Vice President with CBRE and part of the firm’s retail team in Toronto.

Under the rules, the Liquor Control Board of Ontario (LCBO) will act as the wholesaler for grocery and convenience stores and is mandated to give retailers a 10% discount on its basic retail price until 2026. The provincial government pledges to have a new wholesale price framework after that time, and to consult with stakeholders in devising it.

The pricing of individual products will no longer have to be uniform across Ontario, but it cannot dip below a designated minimum. Nor can retailers engage in marketing programs that offer rewards points or coupons, or tie discounts on alcohol to the purchase of other types of products.

Despite a store’s business hours, alcohol can be sold only between 7 a.m. to 11 p.m.. Packages of containers cannot be opened up and sold individually, and containers with a volume greater than 5 litres are prohibited.

All alcohol merchandise must be delineated by product type and located in one contiguous area of the store, and at least 20% of available beer, cider and ready-to-drink beverages must be from small producers. Allowable alcohol content cannot surpass 7.1% by volume for beer, cider and ready-todrink beverages or 18% for wine.

PICKING PROFITABLE MARKET SEGMENTS

Many retailers are expected to find room to manoeuvre profitably within those parameters. While the new retail flexibility is coinciding with what appears to be a general decline in alcohol consumption, it’s in sync with other trends that could serve some market segments, and their landlords, well.

“It’s certainly an interesting opportunity for specialty food businesses, where we’ve really seen a movement occurring.”

Hutcheson says. “With people being a little more cash-strapped in the current economy, they’re not going to restaurants quite as much and they’re gravitating to the specialty

grocers and the independent grocers. They’re also looking for efficiency and one-stop shopping and this could really align with that.”

Edmison notes that multinational convenience store chains like Circle K and 7-Eleven have a history in American jurisdictions where alcohol retailing has long been allowed, which likely comes with a corporate footprint for launching sales in Ontario. Even so, rollout won’t necessarily speed up just because the start-date has been reset 16 months earlier than first scheduled.

“They might be trying to expand stores and slightly remerchandise them. The product is physically bulky so they might need a larger physical space,” he speculates. “That takes time to do, although they may have allowed for it in some of their newer stores, based on what they knew was coming.”

Meanwhile, favourable locations are tapped to deliver lucrative paybacks for both big and small players.

“With all the convenience store locations that could be available in the province of Ontario, yes, there are going to be winners where alcohol sales are very accretive,” Edmison predicts.

Landlords could see spinoff benefits in increased foot traffic in malls and outdoor shopping centres, financially healthy tenants

and potential for rent growth on lease renewal. However, percentage rent deals are not considered an expedient option.

“Landlords should be wary of taking a percentage of profits from revenue streams that they’re not licensed to take,” Gammone cautions. “Taking a cut of the profit generated from a controlled substance comes with some risk if they don’t have the same or a similar licence as the retailer.”

MUTED PARALLELS WITH CANNABIS

The provincial regulation stipulates that First Nations band councils must pass an approving resolution before the AGCO can issue a licence to a grocery or convenience store located on a reserve. Elsewhere, objectors appear to have little leeway to dissuade eligible licence-holders if there is nothing in the lease to block them.

Gammone recalls the scenario that arose when some residential condominium corporations were stymied in their efforts to prevent cannabis retailers from establishing businesses in the commercial area of mixeduse buildings. Historic condominium documents that simply prohibited illegal activities became ineffective once cannabis was legal. However, he hypothesizes that past drafters may have had more foresight about potential future alcohol sales.

“The condo documentation didn’t [explicitly] prevent it because 10 or 20 years ago when they were creating these condo docs, nobody thought to prohibit the sale of cannabis. I think more people put their mind to the sale of alcohol in condo documents or leases because it’s a product that has been sold everywhere — in restaurants, the LCBO, the Beer Store, etc. — for a very long time,” Gammone reflects.

Unlike the legalization of cannabis, which prompted a wave of leasing to accommodate a new category of singlepurpose retail facilities, it’s expected most grocery and convenience store operators will initially begin selling alcohol under an existing lease. With up to 8,500 licences promised to be available, there’s also less urgency to scramble to get into the market.

“I think retailers may choose to wait to see how it goes and what the competition is like,” Hutcheson says. “It will be interesting to see how some of the big grocery stores execute this. Right now, where it’s offered, it’s really just that boutiquey kind of aisle that’s got a lot of Ontario-based product and the small sixpacks of things.”

“I would call it more incremental change than a profound shift in retail, but it’s, on balance, a positive,” Edmison maintains.

Toronto Reassesses Office Space Needs Assumptions MODIFYING THE MIX

PROPOSED NEW policy directions could open the way for a broader range of redevelopment projects in some of Toronto’s key urban districts. A new report to City Council summarizes emerging thinking from an in-progress study of office space

By Barbara Carss

needs and recommends a significant pullback from current requirements for 100% replacement of any office space removed from specified downtown areas or at the midtown Yonge and Eglinton node. Planning staff are instead advocating that

a minimum of 25% of demolished or converted office space be replaced with office or other designated non-residential uses in combination with affordable or supportive housing. It’s also suggested that this policy be reviewed and reaffirmed on a

four-year cycle to adjust for potential changes in the office market. Currently, the City’s consultant has projected that new supply will not be in demand until at least 2034.

“Financial analysis indicates that for areas with in-force 100% replacement policies, reducing this requirement to 25% and enabling the provision of alternative uses such as affordable housing or other nonresidential uses would meet city building objectives in light of existing and projected office demand,” the report to City Council’s planning and housing committee states. “Staff are of the opinion that a temporary reduction in the City’s overall supply of office space will not have a detrimental effect on the City’s economy in the short term. In the medium-term, staff anticipate that office demand will return.”

The staff report and associated background studies precede a looming update of Toronto’s Official Plan. Last fall and earlier this year, Council directed staff to explore the options for converting vacant office space to housing or other potential uses, and also called for more insight on long-term employment trends, evolving office use patterns and economic pressures on existing office stock.

CLASS B INVENTORY STRUGGLING

Much of the ensuing commissioned consultant’s report is unlikely to be surprising to commercial real estate players (particularly since industry stakeholders were interviewed for input). It highlights the largely unforeseen decline in workers’ office attendance arising from the upheaval of the COVID-19 pandemic in tandem with the arrival of 9.2 million square feet of newly constructed office space since 2019.

As well, it reiterates the divergent trends that have seen well-located, high-performance Class A and AAA buildings hold their tenancies and rent levels while aging Class B stock flounders. The availability rate for downtown office buildings constructed since the year 2000 is pegged at 10.1% versus 16.6% for buildings of older vintages.

Class A and Class B vacancy rates are roughly comparable, but for far different reasons. The downtown market has experienced a 13.6% gain in Class A supply since 2019 and a negligible addition of Class B space. About 3.2 million square feet of new office space is still under construction downtown and Class B is bleeding tenancies to the loosening Class A market.

The consultant’s report underscores the message that “not all office space is equal” — maintaining, in essence, that many Class A landlords are grappling with a relatively

RANKING OFFICE AMENITIES

In keeping with popular lifestyle advice, new survey findings suggest office attendance hinges as much on the journey as the destination. Respondents to Colliers Canada’s recent quarterly poll of tenants’ preferences ranked parking as the most important amenity associated with office space, while decision-makers indicated they’d be more likely to renew office leases in areas with good transit service.

Input gleaned in the spring of 2024 — drawn from 427 companies occupying a range of downtown and suburban Class A and B space in various markets across Canada — shows occupiers have generally the same outlook on their space needs as they’ve expressed over the past three years. This time, 51% report they’ll keep the space they’ve got; 26% expect to shed space; and 7% intend to expand their office footprint. Those splits, along with the sizable 17% share of respondents who are unsure of their needs, are largely consistent with survey results since the second quarter of 2021.

Currently, the office attendance rate averages three days per week across the survey base, but it varies more by industry sector. Tech workers and government employees spend the most time off-site, respectively averaging 2.3 days and 2.4 days in the office per week, while energy and cleantech workers are the steadiest office frequenters at an average of four days per week.

The industries with the highest and lowest attendance rates both fall well below the overall survey average of 230 square feet of allotted office space per worker. Tech offices have the tightest configuration with an average of 166 square feet per worker, but energy/cleantech is only slightly more spacious at 169 square feet per worker. Elsewhere, other types of professional services workers enjoy an average of 271 square feet, while legal services provides an average of 251 square feet per worker.

“In a hybrid work environment, the relationship between industry growth and real estate growth has weakened,” Colliers analysts observe. “Growth in the tech industry is likely to lead to a slower rate of growth for leased office space than historical averages across other industries, given their lower in-office mandate and allocation of square foot per employee.”

Among survey respondents who have the authority to make decisions about suite layouts, half voiced satisfaction with their current premises. Those favouring alterations were more apt to prioritize quiet space, through more private offices (13%), improved soundproofing (12%) or more designated focus areas (10%). Just 14% suggested more collaborative space was needed.

The data reveals that the 52% of employers who indicate they would like to see a pickup in office attendance are also more likely to be among those calling for more space to accommodate quiet, independent work. Meanwhile, about 32% of employers report they are satisfied with the amount of time staff spent in the office.

Other correlations in respondents’ answers show that decision-makers with a good opinion of nearby transit service calibre and parking sufficiency are more likely to support lease renewal. Conversely, they are less inclined to renew if one of those attributes is considered to be subpar.

Tenants in downtown locations particularly valued possibilities for increased or subsidized parking and an easing of traffic congestion in the vicinity of the office, while suburban tenants prized better street-based connections to transit routes and shuttle services to and from major transit nodes.

Parking easily emerged as the key must-have on a list of 10 amenities associated with office space — earning the nod from 81% of company decision-makers. Diverse dining options (59%), 24/7 security (56%) and retail outlets (53%) ranked next in prominence, while electric vehicle charging stations (20%), on-site childcare (16%) and ESG certification (10%) received less enthusiastic endorsement.

That said, survey respondents generally indicated support for a range of ESG issues. None of the 10 listed options averaged less than 3 out of 5 on respondents’ priority scale. Health and well-being, diversity and inclusion and community investment and engagement were identified as the leading concerns, while renewable energy and emissions reduction garnered less attention.

The complete text of the report, The Route of Revival: Tenants’ perspective on office real estate in 2024, can be found at www.collierscanada.com/en-ca/research/rems-officereport-q2-2024.

routine market down-cycle, while Class B buildings are facing obsolescence.

“This distinction continues to emphasize a need to maintain and enhance the supply of Class A space in Toronto and potentially re-evaluate future prospects for Class B and C level spaces,” it states.

Toronto’s current planning policies prohibit a net loss of office space in the Financial District or along the corridor surrounding Bay Street stretching up to Bloor Street, and encourage a net gain of office space in those areas. As well, institutional or other nonresidential space that’s lost due to demolition or redevelopment within the designated Health Sciences District, surrounding University Avenue, must be fully replaced.

At Yonge and Eglinton, there’s a requirement for 100% replacement of office space that is removed to make way for a tall building or large development site, but rebuilds could occur anywhere within the larger area defined as midtown. Yet-to-be-enacted policies (still awaiting Provincial approval) of Toronto’s official plan also set conditions for office space in mixed-use developments slated for downtown, the central waterfront, designated urban centres such as North York or Scarborough Centre, or within 500 metres of a subway, LRT or GO train station.

BALANCING PRIORITIES

Planning staff flag several issues for Council to assess before revising those policies, including: its stated priority to increase housing supply; Toronto’s role as a national economic engine; a call for other kinds of nonresidential venues to foster industries and services that don’t use conventional office space; and the importance of a robust commercial assessment base.

“The loss of office space is typically a permanent outcome that cannot be reversed later if market conditions change,” the report cautions. “Considering Toronto’s important economic role as Canada’s largest concentration of office employment and corporate headquarters and the potential risks of losing office employment space, any policy changes should be informed by comprehensive analysis of trends in the real property market and broader economy.”

The report was tabled at the planning and housing committee meeting on July 11, but stakeholder consultation, financial analysis and assessment of policy options are ongoing. The full Council will have to make any future formal decision. In the interim, City staff are already negotiating with potentially affected redevelopment proponents who have applications in process.

“Where appropriate and on a site-by-site basis, staff are requesting replacement to be provided as alternative non-residential uses (including exploring opportunities for hotels, medical offices and post-secondary institutions) or affordable housing beyond the minimum amount secured through community benefits charges (CBC),” the report advises.

A joint submission to the planning and housing committee from the Greater Toronto chapter of the development industry association, NAIOP, and the Building Industry and Land Development Association (BILD) of Greater Toronto commends the City’s initiative in undertaking the office needs study, but argues that even a 25% replacement threshold could be stifling.

“Given the existing oversupply of office space, a market based approach to replacement would be most appropriate,” the submission maintains. “While redevelopment projects that propose significant density may be able to account for 25% replacement, smaller projects may not. Tying the quantum of replacement to existing gross floor area without considering the magnitude and scale of the proposed redevelopment may not be appropriate.”

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Buildings Sector Pulls Back on GHG throttle

GREENHOUSE GAS (GHG) emissions from Canada’s buildings sector are in line with general improvements seen in the recently released national inventory report for 2022. The 89 megatonnes of carbon dioxide equivalent (Mt CO2 e) emanating from commercial, institutional and residential buildings accounted for 13% of economywide GHG output and surpassed the buildings sector’s 85 Mt tally in 2005. However, it is a 5.3% drop in annual emissions compared to 94 Mt in 2019.

That pre-pandemic year has been tapped as the most relevant benchmark for monitoring Canada’s progress toward its target to cut economy-wide GHG emissions to at least 40% below 2005 levels by 2030. The latest data, which Canada is required to report under its commitment to the United Nations Framework Convention on Climate Change (UNFCC), shows a mere 7% decrease (from 761 to 708 Mt) had been achieved eight years out from that deadline. Nevertheless, it’s a reversal of the upward emissions trajectory seen earlier last decade.

“We have bent the curve and emissions remain on a long-term downward track,”

maintains Steven Guilbeault, Canada’s Minister of Environment and Climate Change.

That’s largely due to a nearly 60% drop in emissions from electricity generation, tumbling from 117 to 47 Mt over 17 years. In 2005, electricity accounted for 15.4% of economy-wide emissions versus just 6.7% by 2022. In contrast, buildings now represent a larger share of the total than their 11.2% quotient in 2005.

Among the five other economic sectors tracked: heavy industry and waste posted improvements; transport sits back at its starting level after first trending upwards; and, like buildings, agriculture and oil and gas have slipped farther behind. In 2022, oil and gas emitted 217 Mt of GHG for 31% of the total — up from 195 Mt and 25.6% of the economywide output in 2005. Even so, emissions from oil and gas have edged down since peaking at 228 Mt in 2018.

Growth factors into the pace and interpretation of progress. Canada gained about 6.7 million residents between 2005 and 2022, boosting the population by roughly 20%. The emissions intensity of the economy, which measures GHGs per dollar of gross

domestic product (GDP), declined by 30% in the same period. Per capita emissions stood at 24 tonnes of CO2e in 2005 versus 18 tonnes of CO2e in 2022.

“The decline in emissions intensity can be attributed to factors such as fuel switching, increases in efficiency, the modernization of industrial processes and structural changes in the economy,” states the executive summary to the GHG inventory report.

Carbon dioxide represented 78% of Canada’s GHG mix in 2022. Other components include: methane (CH4) at 17%; nitrous oxide (N2O) at 4%; and fractions of perfluorocarbons (PFCs), hydrofluorocarbons (HFCs), sulphur hexafluoride (SF2) and nitrogen trifluoride (NF3) making up the remainder.

“Canada’s emissions profile is similar to most industrialized countries,” the report also notes.

ON-SITE SOURCES

Within the buildings sector, the GHG inventory report provides a breakdown of direct, or scope 1, GHG emissions with separate data for commercial/institutional and

residential buildings. Meanwhile, other sectors and subcategories — notably, public electricity and heat production, transportation and mining/extracting, refining and manufacturing processes — cover the buildings sector’s scope 2 and 3 emissions.

On-site energy combustion for space and water heating accounts for the vast share of the buildings sector’s GHG output. In 2022, commercial/institutional buildings emitted 35 Mt and residential buildings emitted 39 Mt from this source. Residential emissions were down by 4 Mt from the 2005 output of 43 Mt, while commercial/institutional emissions were 3 Mt higher than in 2005, largely attributed to floorspace expansion in that period.

“The 4.3 Mt (10%) decrease in emissions in the residential category between 2005 and 2022 is largely driven by energy efficiency improvements, with smaller decreases due to warmer weather and reduced consumption of light fuel oil,” the inventory report states.

Looking at smaller, but growing sources of GHGs, off-road combustion vehicles and machinery for grounds-keeping, property maintenance and snow removal produced 6 Mt of emissions in the commercial/ institutional buildings sector in 2022. That’s up from 4.5 Mt in 2005. Residential

emissions from those sources are on the inverse trajectory, tallying 0.87Mt in 2022 versus 1.2 Mt in 2005.

In contrast, residential buildings are a greater source of emissions from biomass combustion via fireplaces, wood-burning stoves and furnaces — amounting to 3.9 Mt in 2022. “Biomass used to generate electricity is a small source of emissions in the commercial/ institutional subcategory,” the inventory report observes.

Buildings are also a source of fugitive emissions leaking from the piping of gas-fired appliances such as water heaters, stoves and clothes dryers. The inventory report cites this as a combined number for the commercial/ institutional and residential sectors, totaling 1.7 Mt in 2022. That’s an increase from 1.4 Mt in 2005.

RELATED EMISSIONS

The inventory report flags the changing emissions profile related to hydrofluorocarbons (HFCs) commonly used in refrigerants and blowing agents, although this is categorized as GHGs arising from industrial production and product use rather than directly attributed to the buildings sector. Releases from HFCs accounted for 10.6 Mt of emissions in 2022. That’s a 120% increase from 2005, reflective

of their arrival in the marketplace to replace ozone-depleting chlorofluorocarbons (CFCs) and hydrochlorofluorocarbons (HCFCs), but a drop from an 11.5 Mt peak in 2018.

The recent pullback on emissions aligns with the in-progress phase-down of HFC imports under the Kigali Amendment to the Montreal Protocol. That mandated a 10% reduction in HFC imports, relative to the average net imports in 2014-2015, for the fiveyear period from 2019-2023. The next step of the phase-down — a 40% reduction — is now in place until the end of 2028.

The GHG inventory report categorizes construction separately from buildings. For 2022, 1.6 Mt of construction emissions are attributed to on-site energy combustion, up from 1.4 Mt in 2005.

However, a seemingly far greater amount is more difficult to quantify precisely since emissions from off-road vehicles and machinery for construction, mining and manufacturing are lumped together as one number. This tally was 18.6 Mt in 2002, an increase from 16.2 Mt in 2005.

The national inventory report can be found at www.canada.ca/en/environment-climate-change/ services/climate-change/greenhouse-gasemissions/inventory.html

Federal Green Buildings Strategy Summarizes Existing Initiatives RETROFIT RECAP

THE CANADIAN government’s newly released green buildings strategy contains little that is actually new for commercial real estate or public sector facilities. Rather, it’s an after-the-fact summary of programs and policies that have already been announced and funding initiatives that are mostly in progress. This fulfills the 2022 federal budget promise for an overarching masterplan, and parses out where various envelopes of funds have been channelled or will be directed.

The strategy reiterates three key federal intentions to reduce greenhouse gas (GHG) emissions in line with national targets to achieve net-zero emissions by 2050, and to bolster the built environment’s resilience to climate change. That entails: accelerating the pace of retrofits for existing buildings; ensuring that new construction meets lowcarbon, high-performance criteria; and nurturing skills, technologies and financing mechanisms to make both those outcomes possible.

“It is a challenging sector to decarbonize because we must all do it, together. To succeed, close collaboration is needed between the federal government, provinces,

municipalities, Indigenous groups, businesses, financial institutions and industry,” maintains the joint introductory statement from Jonathan Wilkinson, Minister of Energy and Natural Resources, Steven Guilbeault, Minister of Environment and Climate Change and Sean Fraser, Minister of Housing, Infrastructure and Communities. “There are 16 million homes and half a million other buildings standing in Canada today and most of these are expected to still be standing in 2050. Each home and building owner has a role to play in this sector to upgrade and retrofit these spaces to significantly reduce emissions in that time.”

Perhaps indicative of the staleness of the messaging, a junior minister with nebulous ties to those three portfolios — Soraya Martinez Ferrada, Minister of Tourism and Minister responsible for the Economic Development Agency of Canada for the Regions of Quebec — represented the government when the strategy was officially unveiled in July. That’s more than 12 months behind the originally envisioned spring 2023 schedule, which was announced with the government’s consultative discussion paper two summers ago.

AFFORDABLE HOUSING INCENTIVE

The strategy’s regurgitation of existing initiatives does come with one new incentive program for affordable housing providers. Canada Mortgage and Housing Corporation (CMHC) has been assigned to deliver the program, which underwrites deep retrofits that can reduce energy consumption by at least 70% and greenhouse gas (GHG) emissions by at least 80% compared to preretrofit performance.

Non-profit housing corporations, public housing agencies, rental cooperatives, Indigenous governments and organizations, and provincial/territorial and municipal governments are eligible for up to $130,000 per project for pre-retrofit preparatory studies and up to $170,000 per unit in combined lowinterest repayable and forgivable loans for retrofit measures. The forgivable portion will max out at $85,000 per unit or 80% of eligible costs, whichever is the lesser amount.

This could apply for: community and social housing; Indigenous cultural spaces; mixed-income rental housing or mixed-used developments with an affordable rental housing component; shelters, transitional and

programs

Building owners/managers, developers, investors and financiers, industry associations, organized labour and clean tech advocates are tapped to be drivers of the green buildings strategy.

supportive housing; or single-room occupancy buildings. Qualifying buildings must have at least five dwelling units or single-room occupancies and be at least 20 years old, with some exceptions for newer vintage housing in Nunavut, Yukon and Northwest Territories.

In total, $19.5 million has been earmarked to fund pre-retrofit studies and $1.1 billion will available to bankroll retrofit measures. Recipients are expected to repay 20 to 50% of their share of the latter amount over a period of up to 40 years, but will be required to cover only the interest on loans until the energy retrofit components of their projects are completed and they begin to realize those cost savings.

This new program replaces previously fully subscribed (and thus terminated) grants for homeowners to undertake energy and emissions-reducing improvements, and is presented in the federal government’s announcement as a more effective instrument for reaching targeted economically stressed households. Project proponents working with qualified energy services companies will handle the administrative, technical and financial aspects and there will be no costs for unit occupants.

“Using a direct-install model, where the retrofits are managed and delivered by third parties, this program could provide participating households with support up to four times more valuable than the former grant program. Recommended retrofits will be determined by experienced energy efficiency professionals, enabling each participant to receive what their home needs and making their homes more affordable and comfortable,” the government background states.

COMMERCIAL AND INSTITUTIONAL SECTORS

Turning to commercial and institutional buildings, the green buildings strategy tallies the programs through which the government is investing in energy retrofits and other improvements to reduce GHG emissions. Funds for the private sector are largely channelled through Canada Infrastructure Bank’s buildings retrofit initiative, which provides low-cost financing either directly to

large players that can bring a minimum of $25 million in equity to the deal or to aggregators that are tasked with managing retrofit programs for a slate of smaller property owners.

The deep retrofit accelerator initiative is a complementary program, underwritten through a $200 million 2022 federal budget allocation. It tasks designated organizations (chosen through a competitive process) to “build capacity” for deep retrofits in the commercial, multi-residential and institutional property sectors.

There has been a $1.5 billion allocation for upgrades and construction for a range of buildings that serve a community purpose, while the Federation of Canadian Municipalities oversees the green municipal infrastructure fund, which subsidizes larger scale retrofits of public facilities.

As well, $100 million has been made available for provincial/territorial, municipal and Indigenous governments and national and non-governmental organization to promote the adoption and implementation of the highest tier of national energy code performance criteria or other high-performance building codes.

The Canadian government has also made a commitment to reduce GHG emissions and demonstrate leadership on promoting climate change resilience within its own portfolio of buildings. Most recently, it has introduced new policies to target net-zero emissions in office space leased from private sector landlords and introduce conditions related to climate risk analysis and life cycle assessment for contractors bidding on public contracts. (See story, page 12.)

PROMOTING PRIVATE SECTOR PARTICIPATION

Building owners/managers, developers, investors and financiers, industry associations, organized labour and clean tech advocates are tapped to be drivers of the green buildings strategy. It’s envisioned that they will see and respond to economic opportunities and collectively support the demand for and scale of activities that lead to new industry norms.

“The private sector and civil society have a critical role to play in developing awareness of — and adopting and investing in — green buildings,” the text of the strategy urges.

“Creating demand by raising awareness of heat loss in buildings, fuel switching technologies and resiliency options will help spur the green buildings transition from the ground up.”

In that vein, almost one quarter of respondents to Altus Group’s most recent quarterly survey of commercial real estate conditions and sentiment predict that environmental and sustainability requirements will be a high priority in their professional endeavours over the next 12 months. That’s a significant gain from the approximately 15% of respondents who identified those issues as important during the first quarter of 2024, but still lags well behind the top concerns revolving around the cost of capital and interest rates (prioritized by 58% of respondents), development/ construction costs (55%), inflation (41%) and operating costs (39%).

A more detailed breakdown suggests that a larger share of the players with greater economic clout are on board. In total, 50% of respondents report that ESG considerations significantly or moderately influence their investment or credit decisions, but that jumps to 76% of firms that have more than $5 billion worth of real estate under management. Conversely, 12% of survey respondents say ESG is a negligible factor in their decisionmaking, but none of them are with firms that have more than $5 billion worth of real estate under management.

Firms with $500 million to $1 billion worth of real estate under management are most likely to report that ESG considerations are integral to decision-making — 33% versus 18% across the total survey base.

The complete text of the Canada Green Buildings Strategy can be found at https:// natural-resources.canada.ca/transparency/reportingand-accountability/plans-and-performance-reports/ departmental-strategies/the-canada-greenbuildings-strategy-transforming-canadas-buildingssector-for-net-zer/26065. The Altus Q2 2024 CRE industry conditions and sentiments survey results can be found at www.altusgroup. com/featured-insights/canada-cre-industryconditions-and-sentiment-survey.

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FLIGHT OPTIONS

Co-working Space Competes for Migrating Tenancies

CO-WORKING SPACE that’s soon to open in Toronto’s Financial District eschews the conventional format of hot desks in an open area in favour of private offices and building amenities that verge on the luxurious.

Kane Willmott, co-founder of iQ Offices, defines this new offering from his company as hospitality-infused workspace.

Designers have created a lobby in the 15-storey heritage office building at 302 Bay Street that evokes a high-end hotel. That includes a lounge that complements the building’s vintage Art Deco ambience, featuring an aesthetic arrangement of seating choices and a fulltime barista preparing hot and cold beverages.

“People will come and work at the bar,” Willmott predicts. “The barista really becomes a big part of creating this vibrant community.”

Breakout space with bar-height tables, restaurant-style booths, bookshelves and a games room fills the mezzanine level overlooking the lounge, and space subscribers have access to showers and a bookable thermotherapy room with a sauna and tank for cold plunges on the third floor. Private offices occupy the fourth to 14th floors, while a subscribers’ lounge and rooftop terrace top out amenities on the 15th floor.

Large and abundant meeting rooms are central to Willmott’s strategy for attracting space users with small to mid-sized

By Rebecca Melnyk

workforces. These are employers who previously might have leased 7,500 square feet to accommodate about 50 staff.

“We have found, post-COVID, that companies are using them [meeting rooms] more than they ever did. Nowadays, companies are asking: Who is coming into the office and when are they coming into the office? [They’re saying] I don’t need 50 desks; I need 25 desks, but I need the ability to bring 50 people together,” he reports. “We really focus on creating these interesting meeting room environments with all of the latest technology, touchscreen TVs and directional mics — to connect people on-site with people virtually, as well.”

That’s a trend that is picking up as existing office leases expire. Co-working ventures like iQ Offices are particularly targeting new clients as large employers, like banks and major tech companies, look to shut down some of their satellite office space.

As for the much vaunted flight-to-quality, Willmott is gambling iQ’s upscale co-working option will be chosen over discounted subleases for a surfeit of space. “It’s the empty restaurant syndrome where there’s this big beautiful space but only 10 people sitting in the corner and it’s not very inspiring,” he submits.

Outside, a full-height columned portico still dominates the front entrance of what was formerly the Toronto Trust and Guarantee Building. The citation with the building’s 1976 designation from Ontario Heritage Trust calls it a “notable example of the classical temple form considered especially appropriate to banks during the late nineteenth and early twentieth century.” The reworked space continues to respect and celebrate those heritage attributes.

“One of the great things about working with these properties is the elements already built into the space,” Willmott affirms. “You just need to bring them to life.”

Rebecca Melnyk is the Editor of Canadian Facility Management & Design.

THE BUILDINGS SHOW

Dec 4 - 6, 2024

Metro Toronto Convention Centre