Building December 2011 January 2012

A SECOND LIFE FOR TALL BUILDINGS PLUS: www.building.ca December 2011/January 2012 CDN $4.95

Emerging Trends in Canadian Real Estate Office Market Analysis Solar Schools

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2011 National Energy Code for Buildings The new model code • Provides energy efficiency improvements (25% on average over the 1997 edition) for almost all types of buildings • Contains 245 technical changes that address new technologies and construction practices • Is supported by the Government of Canada’s ecoENERGY initiatives to reduce greenhouse gas emissions

Get the facts • Order a print or electronic copy at www.nrc.gc.ca/virtualstore • Visit www.nationalcodes.nrc.gc.ca for free presentations on the most significant changes • Call 613-993-2463 (Ottawa-Gatineau area and outside Canada) or 1-800-672-7990 from anywhere else in Canada The Code is published by the National Research Council of Canada (NRC) and was prepared by the Canadian Commission on Building and Fire Codes in partnership with Canada’s provinces and territories. NRC and Natural Resources Canada provided funding and technical support.

The 2011 National Energy Code of Canada for Buildings provides model energy efficiency requirements for almost all types of buildings, except smaller buildings and housing covered in Part 9 of the National Building Code of Canada.

Energy efficiency requirements for smaller buildings and housing are scheduled to be published in late 2012.

Volume 61 Number 6

december 2011/january 2012

Editor

Peter Sobchak Legal Editor

Jeffrey W. Lem Contributors

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Features 10. A Banner Year for First Nations Land Issues / While poor living conditions

on some First Nations’ reserves have grabbed all of the headlines of late, 2011 will eventually be remembered as a banner year for native land issues generally, and the trend is only going to accelerate as more First Nations seek more land and greater autonomy over what they already have. By Jeffrey W. Lem

12. Work Space / Canadian office markets are prevailing through economic instability.

By Peter Sobchak

NEWSSTAND: For information on Building on newsstands in Canada, call 905-619-6565

15. A Second Life for Tall Buildings / Two iconic downtown Toronto towers undergo major retrofits to address age and environmental issues. By Douglas Birkenshaw & Kevin Stelzer

Building is indexed in the Canadian Magazine Index

by Micromedia ProQuest Company, Toronto (www.micromedia.com) and National Archive Publishing Company, Ann Arbor, Michigan (www.napubco.com).

20. An Educated Approach to Solar / Three schools across Canada have incorporated advanced solar technology as both renewable energy solutions and teaching tools for the budding eco-conscious generation. By Rhys Phillips

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24. “It’s hard to blow it” / The prevailing sentiment in Urban Land Institute’s 2012 Emerging Trends in Canada survey is that “We’re hedged against most bad outcomes here.”

By Jonathan Miller

Departments 4 Editor’s Notes

6 Upfront

29 Infosource

Cover: First Canadian Place and Toronto-Dominion (TD) Centre are two of the most iconic office towers in Canada, and form the nucleus of Toronto’s Financial District. Photo by Tom Arban.

Above images courtesy of: Moed de Armas & Shannon; Enermodal Engineering.

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30 Viewpoint

editor’s notes

It was a very green year The Canada Green Building Council (CaGBC) has had a very busy year. According to data released on November 30, 401 projects registered for LEED certification in 2011, with 169 receiving it so far. That’s 23 more than were handed out in 2010, and we are still unsure how many certifications were granted in December (data that, at time of print, the CaGBC has not released).

So far in 2011, 17 projects have received the highly-coveted Platinum rating, which, as far as I am concerned, is the most important batch of certifications in the data set. I agree with the growing sentiment that LEED Silver is losing its value as a designation level, since it can be achieved now by simply following the building code and implementing basic commonsense sustainability measures. Neither Certified nor Silver should be lauded by builders these days, but instead should be expected (and even better, penalized if not achieved).

That batch of Platinum winners is an interesting mix of rating systems: almost half were LEED Canada for Homes, which has slightly different point categories and thresholds that reward efficient residential design. The rest include New Construction (NC), Commercial Interiors (CI), and Existing Buildings: Operations & Maintenance (EB:O&M). What was most gratifying to see was that the New Construction Platinum recipients have all at some point been featured in Building: Dockside Green (October-November 2008); Dr. David Suzuki Public School (August-September 2009 and this edition); A Grander View (February-March 2010) and Chapelview Apartments (June-July 2011).

However a closer inspection of the list (available on our

website as The LEED 2011 Inventory) reveals an interesting evolution – that LEED-certified existing buildings are catching up to their newly-built counterparts. Although the stock of certified recipients is still overwhelmingly made up of new construction projects, both in volume and square footage, thanks to the introduction of EB:O&M we are seeing explosive growth in existing buildings. For example, in 2009 the USGBC saw projects south of the border certified under EB:O&M surpassing those certified under its new construction counterpart on an annual basis, a trend that continued in 2010 and 2011. Now, they report that as of December 2011, square footage of LEED-certified existing buildings in the U.S. surpassed LEED-certified new construction by 15 million square feet on a cumulative basis. We can expect a similar tidal shift in Canadian certification in the coming years (EB:O&M has already doubled its number of recipients in Canada, jumping from three in 2010 to seven in 2011).

EB:O&M is a powerful incentive to tackle the pre-existing stock of buildings populated by energy guzzlers and water sieves, and this is why we have decided to give Enermodal Engineering’s headquarters, A Grander View, our Project of the Year accolade. Although technically a new construction, in 2011 it became the first LEED Canada triple Platinum building with certifications in the NC, CI, and EB:O&M rating systems, and also the first ever LEED Canada EB:O&M Platinum certified building. To read more about this project visit www.building.ca B

Peter Sobchak

Building welcomes your opinions.

E-mail your comments to editor@building.ca

READ

12 energy-related predictions for 2012 in Canada / It is estimated that almost a third of Canada’s current energy consumption is used for building heating and cooling. Stephen Koch, executive director of NAIMA Canada, believes this number could be cut in half with proper conservation initiatives, and gives his energy conservation predictions for 2012 within an insulation context.

WATCH

Take a virtual tour of the proposed 1.7 million square foot Humber River Regional Hospital in Toronto’s west end, the largest acute care hospital in the GTA and the first in North America to automate all of its operational processes.

EXPLORE

Discover more of the green and sustainable building features of the LEED Canada Platinum-rated Dr. David Suzuki Public School in Windsor, Ont.

ATTEND

REDEX — Real Estate Developers Expo / February 4-5 2012, Toronto Introduction to Insulated Rammed Earth / February 11-12 2012, Vancouver Electric Vehicle & Infrastructure Summit / February 22-23 2012, Toronto Hotel Association of Canada (HAC) Conference 2012 / March 5-6 2012, Toronto

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upfront

Nedlaw installs the largest active living wall in the U.S.

BRESLAU, ONT — Nedlaw Living Walls has installed a 1,570sq.-ft. structure, the largest known active living wall in the United States, at Drexel University in Philadelphia as part of the new Papadakis Integrated Sciences Building.

According to Dr. Alan Darlington, president of Nedlaw Living Walls, more than 1,100 individual plants and 20-plus different plant types were used to fill the wall. At 70 feet tall by 22 feet wide, the wall incorporates a patented biofilter system capable of generating between 16,000 and 30,000 cubic feet of ‘virtual’ outside air per minute.

Designed in collaboration with Toronto-based Diamond and Schmitt Architects, the wall is a key component of the sustainable design features of the Papadakis Integrated Sciences Building, which is targeting LEED designation for energy efficiency. The six-story, 150,000-sq.-ft. building will house 44 research and teaching laboratories for biomedical engineering, biology and organic chemistry, and a fossil preparation lab. Principal architect, Donald Schmitt, says the goal of incorporating the fivestory active living wall is to “set a new standard of architectural and sustainable design excellence, one that will engage students and faculty alike in an interactive environment for learning and research.”

Canada’s housing market outperforms on the global stage

TORONTO — A Scotia Economics report says Canada’s housing market is cooling, but at a slower pace than most other markets in the developed world. In the bank’s latest real estate outlook, it said that Canada is showing resilience that few other countries have been able to maintain. “While Canada’s hot housing market also has begun to cool, it remains a notable outperformer.”

Of the nine major developed markets tracked with available Q2 data, only Canada, France and Switzerland showed housing price increases year-over-year. In Canada, existing home prices were five per cent higher year-over-year in Q2 (on par with Q1 appreciation), while prices appeared to level out in July and August, the report showed.

“Heightened economic uncertainty combined with recent signs of a loss of momentum in Canada’s job market could keep some potential buyers on the sidelines for the time being,” said Adrienne Warren, Scotia Economics senior economist and real estate specialist. “On balance, we anticipate a modest slowdown in the volume of sales transactions heading into year end, alongside relatively flat prices.”

“I just think the other factor we’ve seen in the slowing and softening of prices just reflects the fact that the housing market itself has become fairly balanced between the number of buyers and sellers out there,” she said. “If anything, I think the cooling off in prices is positive for longer-term affordability for buyers.”

While interest rates are expected to remain low for some time, the Canadian economy is showing signs of losing some momentum, a factor that would affect home purchases. Warren said it will be important to keep an eye on the job market. “Typically, we find that there’s not really a high correlation with interest rates and direction of home prices as much as there is with labour market conditions. From a demographic perspective, the people who had wanted to come into the market and take advantage of the low interest rates, a lot of that has been satisfied.”

The report also said that the weakness of the U.S. housing market is a big factor contributing to the continued weak U.S. economy. That spills over to Canada’s forestry sector, which

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december 2011/january 2012

upfront

supplies building materials for their housing market. In Q2, average inflation adjusted home prices fell six per cent in the U.S. (five per cent decline in Q1). This brings the cumulative decline in U.S. real home prices since late 2005 to about 30 per cent.

Scotiabank expects a protracted period of weakness in the U.S. housing market, as it could take several years to work through the sizeable oversupply of housing, including current ‘off-themarket’ units.

Despite global uncertainty, Canadian real estate investors are upbeat with greater appetite for risk

TORONTO — Although the global economy is still on shaky ground, Canada’s principal institutional and private real estate investors are optimistic and have a greater appetite for risk, according to Colliers International’s Global Investor Sentiment Survey. An overwhelming majority (86 per cent) of Canadian respondents indicated they are planning to expand their portfolios over the next six months. This is distinctly higher than the global investor stance (71 per cent) and up from 61 per cent the previous year. Furthermore, two-thirds (68 per cent) of Canadian investors believe the market will continue its upswing trend over the next 12 months.

The level of optimism expressed by Canadian investors is also translated into increased tolerance towards risk. Nearly two-thirds (64 per cent) of the survey participants from Canada confirmed they are willing to be more risk aggressive, the strongest level of risk tolerance among all regions surveyed globally.

“The shift in Canadian investors’ stance towards risk is only natural considering the relative strength of our economy and the ability to access capital for acquisitions,” says Ian MacCulloch, National Research Director with Colliers International in Canada.

“With these supporting factors coupled with the low cost of debt, Canadian investors are positioning themselves to take advantage of opportunities in other markets abroad and are willing to take greater chances to reap higher yields.”

According to the survey findings, 59 per cent of Canadian investors believe access to credit has improved and the cost of debt is on the decline (68 per cent). To some extent, this explains investors’ bullish stance as well as their renewed interest in overseas investments, citing the U.S. and Europe as the most sought -after destinations.

“The scarcity of ‘for sale’ assets in Canada is also pushing domestic investors to look for growth opportunities outside,” adds Ian MacCulloch. “The U.S. and Europe, mainly Germany, are considered lucrative destinations for Canadian investors who see a unique window of opportunity to buy low in primary markets.”

On the flip side, the survey also highlights some of the issues and challenges investors are facing. Three in four Canadian investors (73 per cent) believe the pricing of commercial real estate has increased too fast coming out of the recession. A similar number

of respondents (73 per cent) also cited having aging assets in their portfolio (obsolescence) as a major concern.

Minto named Ontario GREEN Builder of the Year for a third time

OTTAWA — For the second year in a row and the third time in four years, The Minto Group has been awarded the GREEN Builder of the Year award by the Ontario Home Builders’ Association, announced during the OHBA President’s Gala Awards of Distinction in Toronto.

“With many innovative firsts, The Minto Group clearly demonstrated that it significantly lowers the environmental impact of its land development, construction and building

building december 2011/january 2012

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upfront

operations,” stated the OHBA. “As well, the company has achieved valuable green cultural changes with their customers and residents through social media and “green” committees while employees are engaged through Minto’s Green Champion program and its internal Green website.”

Minto has consistently achieved 25 per cent or more energy savings in its low-rise communities, 30 per cent or more energy savings in its high rise condominiums, and has eliminated 17,947 tonnes of greenhouse gas annually. Their footprint-lowering innovations include “all-off” switches, HRV-Fancoil, rainwater harvesting, and multi-chute recycling, can be seen in developments such as Ampersand at Chapman Mills in Ottawa and MintoMidtown (pictured on previous page) in Toronto.

Quadrangle Architects unveils Studio2 design

TORONTO — In collaboration with developer Aspen Ridge Homes, Quadrangle Architects Limited has unveiled the design of a 41-storey condominium bordering Toronto’s financial district.

Built on a large 1.5 acre site in a neighbourhood characterized by mid-rise industrial buildings, Studio2 is the sister to Studio on

Richmond and comprises an eight-storey podium building and a lower five-storey wing along the soon-to-be revitalized Nelson Street, along with retail spaces and a row of townhouses designed to serve as either residences or commercial spaces.

The Studio2 tower, scheduled for completion in 2014,reaches a full 10 storeys higher than phase I, and the creative tension between the soaring structures depict both stability and movement. The towers both rest atop eight-storey podiums; the lower podiums mimic the warehouse style of the immediate area, reinforcing the historic connection to the community. The podiums are clad with three colours of precast concrete panels imitating a stone patterned exterior, and are punctuated by a pattern of windows, recessed balconies and projecting walkouts.

The glazed towers are designed in contrast to the lower portion and focus on dynamic movement. They are bright, airy and light-filled stacks of glass boxes separated by two-storey transitions that take advantage of floor-to-ceiling views. As the boxes stack higher and higher, the angled mullions at the corners suggest subtle movements sideways in all directions, and the balconies undulate in and out on all faces of the boxes.

The buildings’ interiors were designed by Mike Niven Interior Design Inc.

Vancouver and Toronto commercial property tax ratios trending downward

TORONTO — The new 2011 Property Tax Rate Analysis, a Canada-wide survey of property tax rates of major urban centres produced by REALpac and Altus Group, has yielded both encouraging and alarming results. At the high end of the spectrum, Vancouver, Toronto, and Montréal continue to post the highest commercial to residential tax ratios which are well in excess of 4:1. While REALpac remains concerned about these unfair ratios, it was pleased to see that for the fourth consecutive year, Vancouver and Toronto continue to trend downwards with significant reductions, and applauds the cities for working towards a more favourable business environment.

In contrast, Montréal continues to trend upwards at an alarming rate that may well put them on par with Toronto and Vancouver as early as next year, and will surpass them shortly thereafter if the current ratio increases continue. On the opposite end of the spectrum, REALpac commends the cities of Winnipeg and Edmonton which continue to promote favourable business environments with the two lowest commercial to residential tax ratios amongst major Canadian municipalities.

On an absolute tax basis, Calgary, Edmonton, and Vancouver populate the low end of the spectrum with the lowest estimated property taxes per $1,000 of commercial assessment while Halifax, Montréal, Toronto, and Ottawa have the highest.

From a residential assessment standpoint, Vancouver, Calgary, and Edmonton yield the lowest property taxes per $1,000 of residential assessment while Winnipeg, Halifax, and Ottawa yield the highest.

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upfront

One kilometre stretch of Calgary’s RiverWalk Phase 2 now complete

CALGARY — After a year of planning and construction, RiverWalk Phase 2 is officially open and winds west from 3rd Street SE to the Centre Street Bridge, marking the completion of roughly one kilometre of RiverWalk from RiverWalk Plaza at the Simmons Building west to Eau Claire. This newest section of RiverWalk features a separated pedestrian promenade and cycling path, extensive landscaping with native grasses and trees, as well as a viewing deck which looks out over the Bow River.

RiverWalk is a significant recreational amenity for the City of Calgary. It is an innovative promenade and public gathering space which is designed to give Calgarians convenient access to the Bow River. Once completed RiverWalk will be a continuous four-kilometre stretch of pathway that will run from the Centre Street Bridge all the way to Lindsay Park and will connect to the 700 kilometres of existing pathway systems in the city. CMLC is now in the detailed design stage for the next phase of RiverWalk Phase 3, with construction expected to begin soon. Phase 3 of the pathway will wind east from 6th Street SE following the Bow River around Fort Calgary to 9 Ave SE. This section is expected to be completed mid-2012.

TD opens first net-zero energy bank branch in Canada

LONDON, ONT — TD Bank Group opened its first net-zero energy bank branch in Canada, at 1663 Richmond Street North in London, Ont. The retrofitted TD branch uses solar panels located on the surrounding property to generate approximately 100,000 kwH of green electricity a year. In addition, to make the facility more energy efficient LED lighting has been installed in the branch and on the signs outside, and control and remote building monitoring systems have been upgraded. The project also involves developing land around the branch for public use. The TD Green Energy Park will open in the spring and include: a solar electric car charging station for customer use; a public amphitheatre; sustainable and drought tolerant landscaping; and educational signage.

“This branch marks another step in our ongoing effort to reduce our energy use and meet our carbon neutral commitment,” said Roger Johnson, senior vice president, Enterprise Real Estate, TD Bank Group. “Earlier this year we opened a newly built net-zero energy branch in Florida. In London, however, we’ve converted an existing branch to net-zero energy.

It’s an important test case for us because it will help us understand the scope of potential savings from retrofitting existing branches.”

In 2012, TD will continue to implement its green building design standards, including: installing solar panels at 10 retail locations; continuing to implement LEED building design standards; completing a retrofit of all exterior signs to LED lighting across Canada; creation of a living roof on its flagship branch in Toronto at the corner of King and Bay Streets.

“Changing our branches from energy users to energy generators is one more way that we can lead by example in the transformation to a greener economy,” said Karen Clarke-Whistler, chief environment officer, TD Bank Group.

REIT Round-up Allied REIT buys four Calgary properties

TORONTO — Allied Properties REIT has acquired four new properties in Calgary. They include the Alberta Hotel Building; Fashion Central; Art Central; and Cooper Block. The four represent a total gross leasable area of 136,209 square feet. They also report completing 18 acquisitions in 2011 for $345 million: 13 in Western Canada; four in Toronto and one in Montréal. Less than 12 months ago, Allied had no property west of Winnipeg, and now owns nine Class I or heritage properties in Calgary, two in Edmonton, three in Vancouver and one in Victoria with total GLA of 920,686 square feet. When combined with Allied’s properties in Winnipeg, they will comprise 17.5 per cent of Allied’s total rentable area, with Central Canada (Toronto and Kitchener) comprising 44.3 per cent and Eastern Canada (Montréal and Québec City) the remaining 38.2 per cent.

H&R REIT breaks into the New York market

TORONTO — All it takes is US$415.5 million to own a piece of New York, as evidenced by H&R REIT, who have acquired Two Gotham Center in Long Island City, New York. The recently completed 22-storey Class A office tower is targeting LEED Silver certification, and comprises 661,000 rentable square feet of office space, 100 per cent leased to the City of New York for an initial term of 20 years. The property represents the first building of Gotham Center, a two-block development that is transforming the landscape of Long Island City. Once completed, it will contain approximately 3.5 million square feet of new office, retail, parking and residential development. Designed by New-York-based architects Moed de Armas & Shannon, Two Gotham Center was developed and owned by developer Tishman Speyer, in a partnership with Square Mile Capital LLC and the Modell family.

B

Oops…

In the article entitled “Goodbye Ivory Towers, Hello Urban Campus” in the August-September edition, Edward J. Cuhaci and Associates Architects Inc. was not mentioned as one half of a 50/50 joint venture team with Diamond and Schmitt Architects on the design of the Algonquin Centre for Construction Excellence in Ottawa. Both firms played equally critical roles in the realization of this project, and we regret the oversight. building december 2011/january 2012

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legal

BY JEFFREY W. LEM

A Banner Year for First Nations Land Issues While poor living conditions on some First Nations’ reserves have grabbed all of the headlines of late, 2011 will eventually be remembered as a banner year for native land issues generally, and the trend is only going to accelerate as more First Nations seek more land and greater autonomy over what they already have.

The sad housing crisis being experienced by the Nishnawbe Aski First Nation at the Attawapiskai Reserve on James Bay has certainly focused national attention on aboriginal title and the plight of some First Nations reserves. In some ways, however, the Attawapiskai issue has deflected attention from what has otherwise been a banner year for aboriginal title and First Nations real estate rights.

For instance, and perhaps most recently, there was news that the Fort William Ojibwa First Nation finally settled its 160-year land claim dispute to title to the lands of their reserve on the shores of Lake Superior immediately south of the modern City of Thunder Bay. According to the Toronto Star, the federal government settled the native land claim for approximately $150 million, with each member of the reserve receiving approximately $25,000 in cash, and the balance of proceeds earmarked for future economic development. The Fort Williams First Nation dispute was one of over 40 land claims actively being negotiated in Ontario (with another 30 claims in the pre-negotiating stage), and was essentially a boundary dispute, with the Fort Williams First Nation arguing that the current boundaries of their reserve did not properly reflect the lands that were promised to them under their specific treaty.

The Fort Williams land claim settlement follows a similar settlement in 2010 by the Mississaugas of New Credit, who had previously maintained a long-standing land claim to a significant portion of the City of Toronto (mostly along the lakeshore of what used to be the City of Etobicoke). Like the Fort Williams land claim, the Mississaugas of New Credit First Nations received approximately $145 million for their land claim, with $20,000 in cash going to each band member. The native land claim over significant parts of the City of Toronto went largely unnoticed by most Torontonians, in large part because the claim, although derived from their alleged rights in and to the real estate, was actually framed only as a monetary claim against the government, with no claim for any remedy against the land itself or against the current landowners in Toronto who would have been affected.

Jeffrey W. Lem is a partner in the Toronto/ Markham offices of Miller Thomson LLP, a national law firm with 11 offices across Canada.

Jeffrey is Certified by the Law Society of Upper Canada as a Specialist in Real Estate and can be reached at jlem@millerthomson.com.

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december 2011/january 2012

Contrast this money approach to the strategy adopted by the Chippewas of Sarnia First Nation back in 1999. The Chippewas of Sarnia claimed freehold ownership, through a faulty treaty surrender over a century earlier, to pretty much the entire City of Sarnia. Not only was their claim against the government for money, but the Chippewas also specifically claimed actual fee simple title to most of the lands in the City of Sarnia, although they promised not to evict the then-current putative owners until after suitable negotiations (presumably for additional fees or other compensation). Although the Chippewas of Sarnia also promised to exclude residential properties and churches from their land claim, needless to say, probably all landowners in the region breathed a huge sigh of relief after the Ontario Court of Appeal denied the Chippewas their land claim and the Supreme Court of Canada rejected the Chippewas’ request for leave to appeal any further (although it always remained open for the Chippewas to pursue a monetary claim against the government for perceived wrongs of the past).

Unfortunately, as some of these historic land claims got settled in 2011, others were only just beginning. The Ottawa Citizen reported that members of the Algonquin First Nations based in Quebec were preparing to launch what could be the largest land claim in Canadian history — asserting aboriginal title to a huge expanse of 650,000 square kilometres across Eastern Ontario and Western Quebec, including major urban centres like Montréal, Ottawa, Cornwall, Cochrane and Trois-Rivières. Like the Fort William Ojibwa First Nation in Thunder Bay and the Mississaugas of New Credit in Toronto (but unlike the Chippewas of Sarnia), the Algonquins are not expected to actually claim title to or take possession of the lands in which they are claiming ownership, instead they are reported to be limiting their real estate ambitions to monetary claims against the government for breach of trust.

Further west, we find the federal government embroiled in litigation at the Supreme Court of Canada with the Métis, who now claim, over 140 years after Louis Riel’s Red River Rebellion, that the government did not properly honour the treaty arrangements made with the Red River Métis after the rebellion. Those treaty arrangements provided for approximately 5,500 square kilometres of land in Manitoba to the 7,000 or so children of the Red River Métis. Although the Métis are technically only asking the Supreme Court of Canada for a simple declaration that the government did not honour its fiduciary obligations to care for the Métis, according to CBC News, the president of the Red River Métis has expressly acknowledged that any victory by the Métis at the Supreme Court of Canada might very well morph

legal

BY JEFFREY W. LEM

into claim for the land itself (a là Chippewas of Sarnia). The Métis and the federal government each made their submissions to the Supreme Court of Canada in December of 2011, and a decision is not expected until well into 2012.

Even when there are no new land claims being introduced or settled by the First Nations, the mere assertion of their other aboriginal rights (most particularly, hunting, fishing and trapping) can have significant impact on construction and development in the country. In another landmark court case decided in 2011, the Grassy Narrows First Nation won a significant judicial victory when it convinced the Ontario Superior Court of Justice that the Ministry of Natural Resources did not have the jurisdiction to issue forestry licenses in the so-called “Keewatin Lands” where Grassy Narrows members hunted, fished and trapped.

Although the decision has already been appealed to the Ontario Court of Appeal (and will likely end up at the Supreme Court of Canada regardless of how the provincial top court decides), and although the decision technically only applies to a very specific treaty and very specific activities over very specific lands, many pundits have remarked on the increased political risk that the case has already added to renewable energy projects and resource plays throughout the nation as a result of the Grassy Narrows victory.

Indeed, a number of commentators have already identified the Grassy Narrows victory as a direct threat to the development of

the so-called “Ring of Fire,” the Northern Ontario resource play that has been touted to be the region’s economic saviour in the years to come.

Finally, and lest readers are tempted to dismiss native land claims as being remote development risks applicable only for infrastructure, resource and energy plays in remote corners of the country, 2011 was also the year in which most of the remaining Caledonia lawsuits were finally settled. These claims, including a class-action lawsuit brought by area residents, arose from the violent occupation by Six Nations band members of a residential subdivision complex in Caledonia, Ont. back in 2006. The sheer violence of the occupation, the apparent inadequacy of the resulting police response, and the proximity to Toronto, should give all developers and builders some serious pause for consideration.

“Aboriginal rights and title claims can add significant risk to any project development,” says Sandra Gogal, a partner at Miller Thomson who has acted for a number of large industry clients in the mining, forestry and energy sectors on matters relating to aboriginal consultation, and one of the country’s leading experts on aboriginal rights matters. “Upfront assessment of aboriginal claims and the implementation of a proper consultation process can not only help minimize this risk but also contribute towards the development of a project which is mutually beneficial to both the developer and the affected aboriginal communities.” B

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02/01/2011 12:30:03 PM

WORK SPACE

By Peter Sobchak

Canadian office markets are prevailing through economic instability.

End-of-year analyses of real estate trends can always be a sobering experience, especially this year, given the apparently never-ending global economic challenges. But thankfully, it seems, corporate real estate markets across Canada have remained relatively healthy in 2011. The overall vacancy rate in Class A and Class B office buildings in Canada’s major cities dropped from 6.8 per cent to 5.4 per cent over the first half of the year, and total vacant space fell from 14 million square feet to just over 11 million square feet.

Toronto demonstrating a sense of resilience The office market in the Greater Toronto Area (GTA) exhibited robust activity, especially in the third quarter of the year, and seems to be insulated from the weak U.S. economy for the time being, according to Colliers International’s Fall Semi-Annual GTA Office & Industrial Market Reports. The average vacancy rate dipped to 5.6 per cent versus 6.4 per cent six months ago, marking a return towards pre-recession levels. With only 5.6 per cent of GTA office space physically vacant and available space moving below the 10 year average of 10 per cent, Toronto is considered a healthy market, especially in the context of comparable American cities.

Not surprisingly, Class A space across the GTA continues to attract the most attention as tenants seek better quality product with suppressed pricing, stemming more from economic uncertainty than market fundamentals. “Tenants like Corus Entertainment, PriceWaterhouseCoopers and CI Investments are reinventing themselves by relocating from Toronto’s conventional office districts, including the traditional financial core, to areas on the outskirts of the downtown core which offer organizations Historical Performance & Forecast | Office Market | Greater Toronto Area

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the opportunity to occupy newly constructed, state of the art buildings, and design flexible new work environments that cater to their culture and employee preferences,” says John Arnoldi, managing director with Colliers International in Toronto. “This underscores the notion that the office landscape in Toronto is surely experiencing a renaissance driven by changes in workforce demographics, and we expect this transformation to continue.”

Looking over the horizon, the GTA will experience positive, but slower economic growth in the next 12 to 24 months, according to the Conference Board of Canada. With this in mind, Colliers anticipates that when combined with global economic conditions and uncertainty, office demand will be affected but market fundamentals will remain balanced. According to Colliers’ forecast, which is based on the correlation between office market metrics and various economic indicators, average asking net rental rates are expected to increase from $15.77 to $16.27 per square foot by Q3 2012, with the average vacancy rate dropping from 5.6 to 5.0 per cent by Q3 of 2012.

Downtown Montréal continues to show strength In its Real Estate Market Study, Newmark Knight Frank Devencore reported that vacancy rates in downtown Montréal’s office buildings have fallen from 8.0 per cent to 6.1 per cent over the past 12 months as the market continues to recover from the financial crisis. As a result of decreasing vacancies, asking rental rates could begin to edge upwards in the months ahead, and some landlords may be less inclined to offer the range of leasing inducements that were common at the end of 2009 and early in 2010.

“Over the past 12 months, nearly 900,000 square feet of office space has been absorbed in downtown Montréal and we are gradually returning to the market conditions that existed prior to the recession, when downtown occupancy rates were at the 95 per cent level,” said Jean Laurin, president and CEO of Newmark Knight Frank Devencore.

“In fact, market conditions are such that we are beginning to see a variety of predevelopment activity in the office market, something that hasn’t taken place on the island of Montréal since 2004, when Phase 2 of E-Commerce Place was delivered.”

At the present time, at least one office/ condo development is underway, and Cadillac Fairview continues to seek anchor tenants for a proposed 500,000-

sq.-ft. office tower in the downtown. Further, there are two large development properties being marketed around Place Victoria in the city’s Quartier International. Rio Tinto Alcan has also made it known that it may be relocating its Montréal headquarters, a move that could change the complexion of the downtown district’s office market significantly.

major tenants of the Nortel Campus—Ericsson and Avaya— recently announced that they would be moving their operations to Kanata, and collectively absorbing approximately 300,000 square feet of space.

Ottawa vacancy rate to rise significantly

In the robust Metro Vancouver suburban office market, proximity to rapid transit has become a key market driver. Office locations within half a kilometre of rapid transit stations have a vacancy rate almost one third of areas which are not served. Office landlords have the upper hand in the well-served locations and developers are looking to build more transit-oriented suburban office complexes.

“Transit is becoming increasingly important in Metro Vancouver,” said Jones Lang LaSalle executive vice president Ray Ahrens in their inaugural Vancouver Rapid Transit Office Index.

“The direct vacancy rate for buildings within a rapid transit station is 4.8 per cent compared to 12.3 per cent for the rest of the suburban market, and the average asking rents are approximately eight per cent higher.”

“As Downtown and Broadway Corridor availability decreases and rents increase, our landlord and tenant clients are becoming more interested in transit-oriented suburban locations,” said Ahrens.

Some new developments such as Broadway Tech Centre are serving this growing demand and more are planned including The Brewery District and Merchant Square in New Westminster and Phase II of the Renfrew Business Centre in Vancouver Outlying.

With Canada’s sound financial fundamentals underpinning strong business confidence, tenants with leases coming up for renewal across the country are being advised to thoroughly examine their options at least months in advance of lease termination.

B

Newmark Knight Frank Devencore reported that the office vacancy rate in downtown Ottawa should rise considerably over the next two to three years, opening up a range of opportunities for tenants that have not existed for most of the past decade. The possibility of new office towers being built for the private sector, coupled with the intention of Public Works and Government Services Canada (PWGSC) to vacate a substantial amount of its space downtown, is driving this shift in the market dynamic.

Through the first half of 2011, vacancy rates in Class A buildings stood at 4.0 per cent, and approximately 395,000 square feet was available for lease or sublet. Class B vacancy rates registered a very low 1.8 per cent, and less than 150,000 square feet was available. “We anticipate that vacancy rates in downtown Ottawa could double to six per cent or higher over the next couple of years,” says Don Marks, director of Advisory and Corporate Services for Devencore Real Estate Services. “As a result, rental rates should soften and tenants will be presented with a greater range of opportunities. Any increase in vacancy rates, however, may be tempered by the degree to which federal buildings are taken off the market for retrofitting.”

Combined Class A and Class B vacancy rates in Kanata held at 15 per cent mid-year, down slightly from 16.3 per cent at the end of 2010. These vacancy rates may soon fall, however, as two

Rapid transit drives Vancouver’s suburban office market

The most expensive streets for office space in North America In a recent study by Jones Lang LaSalle of 40 office markets across North America, Sand Hill Road in Menlo Park, Calif., topped the list with average rents reaching almost $114 per square foot (psf). Toronto’s Bay Street comes in at number nine (behind obviously iconic streets such as New York’s Fifth Avenue and Pennsylvania Avenue in Washington, D.C.) with average rents at around $52 psf. The top rent here is at $78 psf, a staggering 81 per cent higher than the average in the rest of the city. Ottawa’s Albert Street ranks 10th and Burrard Street in Vancouver lands in 11th place.

“Location is everything in real estate and this study proves it.

These streets are really driving Canada’s office market,” said Jim Becker, president, Jones Lang LaSalle Canada. “Rents for office space on these streets were around 60 per cent higher than the average rents in the same metropolitan area, and despite exceeding the national rent average of $32.20 by 28 per cent, there is never a shortage of tenants willing to rent space at one of these coveted addresses.” Across the 40 markets analyzed in the study, rents on the most expensive streets exceed the market average by 49.8 percent.

The top five most expensive streets for office space in Canada are: 1. Bay Street, Toronto, $52.09 per square foot. At the epicenter of Toronto’s financial district and possessing one of the lowest historical vacancy rates in Canada, Bay Street is home to many law firms, international banks, financial companies such as hedge funds and securities companies.

2. Albert Street, Ottawa, $49.94 per square foot. One of the main east-west streets in downtown, Albert Street houses many of the capital’s government office buildings.

3. Burrard Street, Vancouver, $48.88 per square foot. A main thoroughfare in the city’s financial district and home to top law firms, financial service and real estate related companies.

4. Third Avenue, Calgary, $47.51 per square foot. Law firms as well as energy and oil companies are among some of the tenants renting space on Third Avenue.

5. McGill College Avenue, Montréal, $41.05 per square foot. The scenic avenue located in downtown and stretching only four blocks has attracted and retained some of the largest banks, insurance companies and law firms in Canada. building december 2011/january 2012

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(Photo by Tom Arban)

A Second Life for Tall Buildings Two iconic downtown Toronto towers undergo major retrofits to address age and environmental issues.

By Douglas Birkenshaw & Kevin Stelzer Every North American, European and Asian city with a significant skyline will face a complex challenge over the next two decades, as they grapple with the need to curtail greenhouse gas (GHG) emissions and the materials and components of their tall buildings will reach the end of their natural life span. The number of buildings involved is staggering — Singapore, Hong Kong, New York City and Toronto alone have close to 20,000 buildings that are over 12 storeys.

While Singapore and New York boast iconic buildings that date to the 1930s, the vast majority of towers in Europe and North America were built in the 1960s and 1970s, while the tall buildings in Asia date from the 1980s and 1990s. This means a significant number of tall buildings around the world are now between 30 and 40 years old, an age at which major systems and components need replacement.

These buildings not only show the effects of everyday wear and tear, but were designed in a time when energy costs were low and the awareness of GHG emissions did not exist. Today, buildings account for the lion’s share of GHG emissions — 48 per cent

of all GHG emissions and fossil fuel energy consumption — and as awareness about how emissions affect global climate change and the cost of power increase, governments are developing legislation and policy incentives to help building owners undertake sustainable retrofit projects. A recent McGraw Hill Construction report projects a rise in green retrofit and renovations from a $2 to $4 billion market to a $10 to $15 billion market by 2016.

Currently, green building comprises five to nine per cent of the retrofit and renovation market activity by value and is projected to grow to 20 to 30 per cent in just five years.

Unless a building has serious structural issues, tearing it down is rarely an option; it is financially prohibitive, difficult and timeconsuming. The cost of rebuilding is also high in dollars and time — it can cost upwards of C$250 per square foot for new construction, with a timeline of at least four years. Many tall towers are also landmarks that can’t be demolished.

Since building structures are generally designed for a 100 year durability timeline, retrofits are perfect for bringing a building back to life for less than half the cost of new construction. An building december 2011/january 2012

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envelope re-skinning is 15 to 20 per cent of the cost of new construction, or less than C$100 per square foot.

Drivers of Renewal Significant energy savings are realized by replacing or retrofitting the building envelope and performing mechanical and electrical retrofits. The energy cost saving can range dramatically, depending on the building’s location and whether it was originally constructed with insulation. Typical American commercial buildings achieve a 10 to 50 per cent energy savings.

The condition of a building is a key factor for attracting and retaining tenants. A building must be maintained to the highest standards to keep its status in the leasing hierarchy, procure premium rents and attract the world’s leading companies.

Companies who value innovation and social responsibility are increasingly looking for green building renovations, which can garner significant rental premiums for buildings that meet these criteria. Revitalization is also motivated by the desire to improve tenants’ physical comfort.

Mitigating the safety risk of failing panels (and the associated public relations and economic costs) is another factor that drives the revitalization of tall buildings. Failures can range from the catastrophic to the quotidian, including: falling building parts such as pediments and cladding panels; failing systems including elevators and escalators; and aging faulty wiring and plumbing.

Many building owners have no way of monitoring building failure as part of due diligence because the building’s height poses additional challenges.

Because of commercial buildings’ rampant energy use and GHG emissions, more governments and organizations are also introducing incentives to help building owners undertake sustainable re-cladding and retrofit projects. Financial incentives are increasingly common, for example the Singapore Building and Construction Authority introduced a $100 million Green Mark Incentive Scheme for Existing Buildings to encourage building owners to retrofit their buildings, and the U.S. offers a similar program through Energy Service Agreements and Property Assessed Clean Energy bonds.

In 2007, the City of Toronto developed a framework to reduce GHG emissions in the city. The “Change is in the Air: Toronto’s Commitment to an Environmentally Sustainable Future” sets several reduction targets, including: reduce GHG emissions by 30 per cent below 1990 levels in the Toronto urban area by 2020; reduce GHG emissions by 80 per cent by 2050; and reduce smog-causing pollutants by 20 per cent by 2012.

Recognizing that buildings cause a large percentage of GHG emissions, the City proposes to develop financing for high-rise rental and condominium energy efficiency retrofits. The Better Buildings Partnership New Construction Program [BBP-NC] was established to encourage building owners to design buildings to be more energy efficient than those designed to only meet the minimum requirements of the Ontario Building Code. Eligible buildings include commercial, industrial and multi-unit resi-

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Previous page and above: Four suspended platforms wrap around each corner of First Canadian Place, attached at the middle level by tie-in struts bolted to temporary brackets. Winches on the roof suspend the platforms from above and move them down the face of the building. The tie-in struts are removed and the entire structure moves down one floor. Each step takes about four days.

dential buildings that are being constructed under Part 3 of the Ontario Building Code.

Retrofit Challenges One of the greatest challenges of revitalizing tall buildings is that the retrofit must often be conducted while the building is operational. Changing the windows on a 50-storey tower while companies conduct business is no easy task. As illustrated by Toronto-Dominion Centre and First Canadian Place, it often involves developing state-of-the-art processes for managing retrofits with minimum disruption to tenants, combined with inventive solutions for dealing with the particularities of construction, as every tall building is uniquely structured and clad.

Building owners and managers also face several financial and technical challenges with a revitalization project. The process often starts with a branding challenge which relates to the tower’s ability to maintain its status and qualitative rating in its local real estate market. In addition, the capital costs and life cycle costs of a building are not easily tied together, and while interest rates are low, it is not easy to get a bank to fund a building retrofit. A recent McGraw Hill study indicates that green retrofits are financed almost entirely from operations revenue. Many building owners use alternative financing measures in addition to company profits: for example 41 per cent also use energy-efficiency savings that result from retrofits/ renovations and 14 per cent use performance contracting.

Financing varies widely between building types. Research such as the McGraw Hill study shows that financing for a retrofit is

often derived from operating cash flows. In the case of prestigious Class A towers (usually privately owned by large developers or governments), financing is not an issue: competitive pressures, market presence and the occupants’ safety and comfort are paramount and drive the retrofit.

Financing retrofits of aging Class C buildings and housing towers pose huge social, financial and environmental challenges, whether they are privately or publicly owned. For example, 30 and 40 year old social housing projects and condominium towers with poor maintenance records are now in dire need of repair and pose a huge challenge to owners, occupants and cities, which may need to step in and remediate.

and bronze glass panels that will once again give FCP’s façade a commanding silhouette on Toronto’s skyline.

Many other aspects of the renewal are invisible and systemic, including mechanical and electrical system upgrades. Interior renewals include updated lobbies, staircases, water features, an underground market and retail areas.

Project Challenges It was imperative for both the owners and the designers that the building maintains its iconic image and commanding presence on the skyline while also enhancing it. The design solution was therefore to renew the image while paying homage to the original Edward Durrell Stone design. The beautiful white colour of the original Carrara marble had lost its lustre, succumbing to years of weather damage and pollution. The designers chose to use modern glass technology that could restore the whiteness of the building while adding sharpness and flair. The slim build of the tower was accentuated by tinted glass in the re-entrant corners, giving the tower a sleeker but highly-recognizable look.

The challenge, then, was how to undertake a massive internal and external renovation with minimal disruption to tenants.

Re-skinning a building of the size and scale of FCP was unprecedented. Each marble panel weighs 90 kilograms, so safely and systematically removing each panel was critical to this challenge.

In order to do so, a highly sophisticated scaffolding system was designed specifically for this project. Beginning at the top and working its way down, this unique system is mechanically connected to the building giving it the ability to scale up and down the building.

The scaffolding unit is a three-storey movable platform with 14 separate sections that can hold up to 160 workers at a time.

On average, it takes three days for 80 workers to replace all of the marble on an entire floor. In order to minimize tenant disruptions, work on the building is done in three shifts, the loudest

FIRST CANADIAN PLACE

(Photo by Lenscape Inc., courtesy of Brookfield Properties Inc. and EllisDon Corporation)

Originally completed in 1975 and still unrivalled as Canada’s tallest office tower, First Canadian Place established a new standard in the design and construction of tall buildings. Innovative from its inception, First Canadian Place (FCP) incorporated many design, construction and engineering firsts, such as being one of the earliest examples of structural tube steel construction. Its design also included double-decker elevator cabs and a state-ofthe-art mechanical infrastructure with enormous fresh air capacity. B+H was the architect of record and worked with design architect Edward Durell Stone (1902-1978).

At almost 35 years of age, FCP reached a critical point in its lifespan, suffering from many common ailments a building of its generation can face. So in September 2009, owner Brookfield Properties and its partners embarked upon an extensive rejuvenation of the 72-storey tower involving re-cladding the exterior; renovating the office lobbies and retail areas; and extensive mechanical and electrical systems upgrades.

The exterior treatment is complex and technically challenging. The 45,000 marble panels that make up the building’s skin will be removed and replaced by over 5,600 white fritted glass

Above: First Canadian Place image from time-lapse camera looking south-east. building december 2011/january 2012

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(Photo by Tom Arban)

and most disruptive work done at night so as not to disturb the tenants in their offices.

The marble panels are removed on the bottom level of the platform. After this, workers remove the sealant, stone and panel support brackets, which is then wheeled to the elevator hoist.

The installation of the glass panels then begins on the top level of the platform. The 450-kilogram glass panels are transported to the platform by an elevator hoist and carried across by monorail.

The new glass panels are being sourced and manufactured locally, less than 50 kilometres from the site, significantly reducing the carbon footprint. Additionally, the 45,000 marble panels being removed will not end up in a landfill. Instead, each panel is being recycled and repurposed for multiple uses including concrete, base product under roadways, landscaping, and community art projects.

The project is presently undergoing LEED EB&OM certification, a process that includes significant building retro-commissioning and energy benchmarking. This process will naturally lead the owners and designers to become intimately aware of the building performance and how it can be improved. The process is also inherently ongoing, requiring a commitment to establish and achieve goals and maintain performance levels. Additionally, the re-skinning is taking place within a spectrum of retrofit strategies, many of which focus on energy optimization such as: new heat recovery chillers; new high efficiency condensing boiler installation; retrofitted and re-calibrated induction system; scavenger exhaust heat recovery; and new lighting and lighting controls.

TORONTO-DOMINION CENTRE Commissioned by the Chairman of TD Bank, Allen Lambert, in partnership with Fairview Corporation, the Toronto-Dominion (TD) Centre is arguably the heart of Toronto’s financial district.

The complex is arranged around a granite-paved pedestrian plaza and originally consisted of three buildings: the 56-storey TD Bank Tower (1967); the one-storey Banking Pavilion (1968); and the 46-storey Royal Trust Tower (1969). All three original buildings were designed by Ludwig Mies van der Rohe, one of the seminal modernist architects of the 20th century, working in association with B+H and John B. Parkin Associates.

After completion of the TD Bank Tower in 1968, construction methods were evaluated and refined for the Royal Trust Tower. Its steel cladding was pre-assembled into large panels to speed and simplify construction. The panels were two-storeys (24 feet) high and 30 to 40 feet wide. The pre-assembly technique was developed after a study of steel construction methods used for the TD Bank Tower, in which sections of cladding were erected piece by piece.

Revitalizing a Living Heritage Monument An icon in Toronto and one of the world’s most important examples of Mies van der Rohe’s large projects, the TD Centre is one of the only modernist buildings to receive Ontario Heritage Act designation (2003). Because of its historical significance in the city, the decision to undertake a complete revitalization was not taken lightly. After a major tenant moved out of the Royal Trust Tower, suddenly vacating 17 floors, Cadillac Fairview Corporation seized the opportunity to revitalize the property as part of a strategy to

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Above and next page: All glazing above the ground floor of TD Centre was replaced with double-glazed recycled units. These units were installed at night by a crew of 16 workers replacing 16 units per shift; two on the swing stage and two on the floor of the building. Original induction units on the floor at the perimeter were removed to allow direct access to the floor-to-ceiling windows, and then replaced with more efficient induction units in the ceiling. New roller blinds were installed in the ceiling to control sunshine and glare. These new systems resulted in a 50 per cent reduction of heat loss per linear meter.

attract tenants in an increasingly competitive commercial real estate market, and announced in May 2010 that it would begin revitalization of the TD Centre, starting with the Royal Trust Tower.

The primary challenge of this project was to ensure that all interventions remain true to the original design by Mies van der Rohe. Under the Ontario Heritage Act, no owner of historicallydesignated property is permitted to alter the property in a way that is likely to affect its attributes. In addition, the client wanted to replace the windows with minimal disruption to the tenants.

As such, the revitalization includes replacing the existing windows, painting the exterior, performing mechanical and electrical system upgrades, replacing elevators and a complete renovation of the lobby and exterior plaza.

The renovation of the plaza, now called Oscar Peterson Square, is a critical component of the revitalization. Over the course of the plaza’s life, cracks in the thick, honed granite pavers were simply patched, resulting in a quilt-like appearance in the stone. Intact original pavers are being repurposed to replace broken pavers, and the waterproofing under the plaza is being replaced.

Renewal is in the Details To guarantee the meticulous historic preservation of this architectural gem, B+H is working with noted heritage architect Michael McClelland of E.R.A. Architects. The team has gone to great lengths to ensure that all of the interventions remain true to Mies van der Rohe’s original design vision.

When it came time to choose paint for the exterior of the building, the team travelled to Chicago to meet with consultants at the firm Wiss Janney Elstner and Associates. It took two months and several mock-ups to select the most appropriate paint to match the original, unique graphite paint. Some 5,676 single pane windows are being replaced with double-glazed thermal pane windows that are tinted bronze to match the originals and reduce heat loss by 50 per cent.

During replacement, considerable care was taken to minimize disruption to tenants. Instead of starting the retrofit from the top down or the bottom up, the windows are systematically replaced based on tenant occupancy, with vacant floors and offices retrofitted first. The windows are replaced using a swing stage that can First Canadian Place project team • Original Building Architect of Record: B+H • Original Building Design Consultant: Edward Durell Stone • Retrofit Architect of Record: B+H • Retrofit Design Architect: Moed de Armas & Shannon • Retrofit Consultant Team • Construction Managers: EllisDon • Structural Engineer: Halcrow Yolles • Engineering Consultant: Brook Van Dalen • Preconstruction Engineers: Halsall Associates Ltd.

support six workers who work overnight. The furniture is moved to the interior of the building to give workers unobstructed access to the windows. Workers cut out the existing windows and install the new ones. Once work is complete, the furniture is returned to its original location. At a rate of 16 windows per night, it takes just over a week to replace the 132 windows on each office floor.

The exterior of the building was not the only challenging aspect of this project. The interior, also designated as a heritage space, required significant care and detail. For example, to restore and repair the existing glass mosaic tile ceiling, the design team spent over two months searching for matching tiles. With no success, they decided to remove the mosaic ceiling so the tiles could be cleaned, polished and repaired. The existing ceiling was cut down into 3-ft. by 3-ft. pieces with the drywall still attached. The pieces were then soaked overnight and tumbled so crews could pan for tiles to clean and polish them. This process resulted in a 20 per cent loss, so new glass tiles were blended back in with the original tiles, re-assembled onto 1-ft. by 1-ft. sheets and re-installed.

In the lobby, the office directory and information desk were redesigned to keep much of their original material. The information desk maintained its original granite surround and internal structure. Only the interior of the desk was changed to allow space for computers and storage. The directories were also updated with touch-screen monitors.

In a letter to Sidney Bregman dated July 5, 1966, Mies van der Rohe wrote “…I am hopeful that The Toronto Dominion Center will become one of the finest of building groups; but this can be so only if we set certain standards below which we never fall. In my opinion, a building is fine precisely because of an accumulation of such standards—from the top to the bottom and every detail.” This sentiment can be said to nicely sum up not just his feelings at the outset, but also those driving the revitalization efforts of both these landmark towers.

B Toronto-Dominion Centre project team • Original Design Architect: Ludwig Mies van der Rohe (18861967) • Original Architects of Record: John B. Parkin Associates and Bregman + Hamann • Architects (B+H) –in joint venture • Retrofit Architects: B+H • Structural: EXP • Mechanical & Electrical: H.H. Angus • Lighting Design: Gabriel McKinnon • Vertical Transportation: KJA • Landscape: Janet Rosenberg + Associates • Heritage: E.R.A. • Painting Consultant: Wiss, Janney, Elstner Associates Inc. • Envelope Consultant: ZEC

Douglas Birkenshaw and Kevin Stelzer, both Principals at B+H, are currently the Principal-in-Charge and Director for the First Canadian Place renewal, respectively

For an expanded version of this article visit www.building.ca building december 2011/january 2012

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An Educated Approach to

Solar

Three schools across Canada have incorporated advanced solar technology as both renewable energy solutions and teaching tools for the budding eco-conscious generation.

By Rhys Phillips

Bluenose Academy: Harvesting a sometimes elusive sun If you intend to build within the boundaries of a UNESCO World Heritage District, an acute sensitivity to the existing built environment is a must. The distinctive maritime vernacular architecture of Lunenburg, N.S. is justifiably renowned. The town’s vibrant colours and intimate scale, as well as the nearby and very visible presence of the historic Lunenburg Academy (1906), presented John Crace of Halifax-based WHW Architects with a challenge when designing the Bluenose Academy, a new grade 1-9 school. In replacing a bland 1960s structure, however, the design hill was made even steeper by a requirement to obtain LEED Gold certification. By integrating SolarWall, a Canadianinvented solar heating technology, the school is a fine contextual yet modern addition to the heritage village that unobtrusively integrates its impressive green technology.

The approach, say the architects, was to respect Lunenburg’s character “by taking cues from the domestic wooden buildings… and interpreting them in a contemporary way.” The 80,000-sq.-

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ft. school is composed of a split, single- and double-storey block containing administrative services, a gym and a cafeteria on the first level that all encircle a double height, light-filled atrium. A library boasting an impressive glazed corner wall overlooks the Lunenburg harbour where the school’s namesake can be seen at its mooring. A bridge across the atrium joins the library to the three-storey academic wing at level two. To approximate residential scale, each pair of classrooms is staggered so that the wing’s façade reads as a series of bays that relate to those found in many local historic buildings. Double hung, black framed windows arranged in the same 1:2:1 pattern found in the nearby historic Academy, masonry treatment of the first level and flashes of strong Lunenburg red in the glazing are just some of the devices used to tie the otherwise modern building back into the community.

Schematic courtesy of Conserval Engineering

If Canada’s federal government has sometimes appeared ambivalent about the need for green technology, the provincial jurisdictions have been more aggressive in investing in alternative energy sources. The three educational institutions profiled below, one in Nova Scotia and two in Ontario, have all incorporated advanced solar technology as renewable energy solutions while two have also done so to generate income and to provide sophisticated teaching tools.

St Lawrence College: Using solar technology for profit and education “It’s getting easier to be green — at least when it comes to a career,” wrote Jacqueline Louie last May as the introduction to her article, Future looks Bright for those Seeking Green Careers, a profile of the environmental careers organization ECO Canada. Ontario’s St Lawrence College, with campuses in Kingston and Brockville, has embraced this belief that green technology jobs have a bright future. “We are building a cluster of programs around careers in green technology and renewable resources,” states Blayne MacKey, Director of Facilities Management Services at

the College. An ambitious initiative, now in implementation, to install a large solar energy generation system at its two campuses, would seem to indicate that St Lawrence has also bought into Ted Turner’s 2008 statement that “Solar is the greatest business opportunity in the history of humanity.” As the David Suzuki Foundations notes, Germany has almost 80,000 employed in solar technology while Canada lags far behind. Thus, not only will the system generate significant income for the college, it will provide a state-of-the-art student training resource.

In 2009, St Lawrence College became Ontario’s first college to offer a Wind Turbine Technician/Industrial Electrician Co-op Diploma Apprenticeship program. The new training facility constructed for the program included not only a full-size wind turbine but also employed SolarWall on its south wall to assist with heating. SolarWall was also used for the plumbing shop building as an applied research experiment for radiant floor heating and more conventionally in a student residence. A year later, in October 2010, the college announced its intention to install the largest PV rooftop installation at any post-secondary institution in Canada at its Kingston and Brockville campuses. This system will join more modest solar power projects already in place including two PV panels on the wind turbine building used in a joint experiment with Queen’s University to study the impact of snow loads on panels. Two panels on the college’s Energy House, an off-grid “living lab,” uses solar for hot water and lighting.

At Kingston the system will generate 250 kW from more than 1,200 solar modules installed on three separate flat rooftops, while 442 panels on the campus’ main building in Brockvile will produce100 kW. A large television screen in the main building foyer at Kingston will provide a constant read out of how many tonnes of green house gas emissions have been displaced by the clean output of the new solar panel system. The total expected

Photo courtesy of Ainsworth Inc.

To respond to its green agenda, the building’s envelope uses enhanced insulation and large, high-performance windows to increase available natural light. Occupancy sensors minimize electricity use and a back-up heating system employs local renewable wood pellets. Despite the region’s notorious reputation for cloudy days, however, the real star is the sun. At a modest level, solar photovoltaic (PV) panels provide energy for hot water and a modest “solar television” demonstrator. The school has also been hardwired to generate electricity from the sun once it becomes economically viable. But the use of SolarWall (in red of course), on the south wall provides the most significant solar punch.

This solar air heating system, invented and successfully commercialized by Conserval Engineering starting in the 1980s, has helped propel Canada into the world lead for solar heat, says Heather MacAuley, principle of My Generation Green Technology Solutions in Halifax and a consultant on the school.

Perforated metal collector panels are installed several inches from the south facing wall allowing solar radiation to heat the panels.

Ventilation fans create negative pressure in the cavity to draw in the heated air, which is then drawn off at the top and distributed by the HVAV system. Since the school wanted 100 per cent fresh air turnover, a demand that brings in lots of cold air, says MacAuley, this system was ideal. With average winter temperatures in the 0 to -5 degrees Celsius range, SolarWall will raise the incoming air temperature by approximately 20 degrees Celsius despite only indirect (cloud) and reflected light. Conversely, in the summer this unique and very effective rain screen prevents solar radiation from hitting the south wall. Warm air created in the cavity is vented through holes at the top. Meanwhile, fresh air enters the building through by-pass dampers.

Although not used at Bluenose, Conserval also markets a SolarWall/PV combination that produces a win-win situation.

By racking PV modules just above the SolarWall surface, the excessive heat generated by the panels is drawn off to be used to heat the building. At the same time, this cools the panels and by so doing increases the PV’s efficiency by 10 per cent. “The cooling effect allows the PV panels to operate at their rated electrical output and also prevents damage to PV modules caused by overheating,” states the company.

By integrating solar thermal heat technology seamlessly into the school as an appropriate red wall, the architects have been able to avoid jarring components that might have otherwise compromised their interpretive design.

Previous page top: Dr. David Suzuki Public School includes several types of renewable energy technology, such as 36 kW of mounted PV panels, to both compare their effectiveness and serve as a learning tool for students. Above: St Lawrence College’s Plumbing Trades building utilizes SolarWall heating technology (diagram opposite). building december 2011/january 2012

21

revenue generated by both operations is estimated at $280,000 annually based on a now-signed agreement with the Ontario Power Authority Feed-in-Tariff (FIT) Program. This program ensures an Ontario government commitment to purchase energy generated by the system over the next 20 years at a fixed rate.

For the St Lawrence College operation, the agreement sets the rate at 72 cents per kW hour. “There will be a six to seven year payback,” reports MacKey. Ainsworth Inc., a Canada-wide, single-source contractor for supply and installation of technical building services with an increasing focus on green technologies, is responsible through a designbuild relationship for putting the system in place. The three-busbar cell panels selected by Ainsworth will be provided by Conergy of Cambridge, Ont. with over 70 per cent Canadian materials.

Installation began this fall. (In November 2010, it was announced that Ainsworth would also be installing 2,000 PV panels on nearby Belleville’s Qunite Sports Centre under the FIT program.)

In addition to providing a significant income stream, the new PV solar generation system will serve double duty as an interactive student learning resource. “Students in our Energy Systems Engineering program will be able to gather real-time solar data and learn how tilt angles, flat versus sloped rooftops, different types of inverters and different geographic locations impact the generation of solar power” states MacKey. This data will assist students in learning how to optimize the design of solar systems. This is a rare situation in the college curriculum where students will work with analytical research to assist with applied technology. Not incidentally, it will also provide the solar industry with information on design efficiencies in the sometimes harsh eastern Ontario climate.

Within the college’s cluster of green technology programs, solar is part of a three year Renewable Energy Systems Program.

In addition, at the Brockville campus a three year “Sunnyside”

partnership involves St. Lawrence College with Upper Canada Solar Limited, the local Employment and Education Centre and the Ontario Trillium Foundation. It will train 48 to 60 installers for their Solar Photovoltaic System Installer Certificate and the Installer/Manufacturing Certificate. Trillium is providing a $503,300 grant for this mixed, in-class and paid intern program but the college will continue the courses on a cost recovery basis after the partnership agreement ends. In line with the new economy, it is hoped the availability of a trained workforce will attract solar technology businesses to locate or expand into Eastern Ontario. Supporting this objective, St Lawrence students have a partnership with SWITCH Kingston in a social marketing program for the “Solar Rooftop Challenge.” The objective is to make the city the most sustainable in Canada, in part by having the city, businesses and institutions install roof top solar systems.

David Suzuki Public School: Living up to its name

Photos courtesy of Enermodal Engineering.

If you are going to name a school after an internationally renowned scientist and environmental advocate, it better be green and then some. The Dr. David Suzuki Public School in Windsor, Ont., the first LEED Platinum certified educational institution in Canada, meets that standard. Developed by the Greater Essex County District School Board and designed by McLean and Associates Architects, the 60,000-sq.-ft. school boasts solar PV panels for hot water and electrical generation, a windmill, grey water recovery and reuse systems, non-potable rain water capture and use, light harvesting through GPS tracking skylights and solar light tubes, custom designed high-efficiency widows, natural light sensors to moderate artificial light use, a highly reflective white and green roofs. These are just some of the means used to achieve an energy consumption level 60 to 65 per cent less than the current building code.

Dr. David Suzuki Public School is a ‘living classroom’ with many features that help illustrate green building technologies to students so sustainable design can be actively integrated into the curriculum. For example, (left) walls of the mechanical room are transparent to allow teachers to explain how the various types of energyefficient equipment work, and a transparent floor panel (right) allows students to see the radiant floor heating technology below.

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Rooftop solar trackers are visible from a rooftop classroom (above), and to create a superior indoor environment for students and staff, the school includes a living wall as well as several innovative fresh air strategies (right).

According to the David Suzuki Foundation, “the most promising solar technologies in the short term are those that capture the energy of the sun’s rays to heat indoor space or water and use the sun to generate electricity.” It is clear that harvesting the sun plays a key role in his namesake school.

The integration of these solar technologies has been extensively used with funding from the Ontario Green Schools Initiative. As in the Bluenose School and at St Lawrence College, the Canadian product SolarWall has been incorporated. A 172-sq.-ft. SolarWall has been seamlessly blended into the school’s striking façade on the south-facing exterior of the second level science classroom. A duct connection with one of the air handling units draws outside air in through the sun-heated perforated metal wall, thus warming the air before entering the unit. An assessment based on an alternative electric boiler in place suggests an annual savings of 5,200 kWh. Solar PV panels have been used for two purposes. On the roof, two south-facing 30-sq.-ft. solar collectors developed and installed by London, Ont.-based Smylie & Crow Associates heat fluid servicing a 4.5 kW electric hot water heater, and generates an annual savings of 4,280 kWh. The largest component, however, is the 165 Sharp 224W PV modules installed by Carmanah Technologies Corporation, Canada’s largest solar integrator headquartered in Victoria, B.C. Able to generate an estimated 50,000 kWh of electricity annually, the system is tied into the grid through the FIT program and able to meet 10 per cent of the facility’s total energy needs. Annual savings are estimated to be

50,359 kWh. With a FIT buy fee of 71 cents per kWh, the system will generate approximately $34,000 annually allowing for a 10 year pay back period. By considering the solar panel requirements from the start, the architects were able to integrate the system as a dramatic blade that seems to slice down through the south-facing façade while acting as a partial canopy to the entrance. Thus, it serves as both a design element and a very public reminder of the school’s objectives. As at St Lawrence College, students will be able to monitor performance from the lobby.

The Future is Bright With such technologies so conspicuously used in our education systems, one can expect an emerging generation that is solar and environmentally savvy, and who will expect — even demand — green in their entire built environment.

B

To view more sustainable building features of Dr. David Suzuki Public School, visit www.building.ca building december 2011/january 2012

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“IT’S HARD TO BLOW IT” The prevailing sentiment in Urban Land Institute’s 2012 Emerging Trends in Canada survey is that “We’re hedged against most bad outcomes here.”

By Jonathan D. Miller Appreciating their “island in the storm,” temperamentally conservative Canadian real estate players grapple with tamping down unaccustomed over-confidence and wondering whether mostly stable property markets won’t be buffeted by world economic turmoil, particularly U.S. contagion. Offsetting the increasing “global market risk,” Canada’s considerable aces in the hole remain “a robust banking system,” the fiscally sound government, and rich stores of natural resources and commodities, as well as steady immigration. “If not for what’s happening elsewhere in the world, Canada would be on fire. It makes a big difference when the government is not broke.”

Investment Trends Slowdown. For 2012, solid market recoveries could turn more muted, sustained by modest, “not stellar” income growth. Western provinces and Newfoundland will prosper as long as energy prices allow, while most of the east deals with an export/manufacturing slowdown and potential financial industry belt-tightening.

According to an interviewee, “The downgrade of the American system and the volatile status of the oil patch make the economy fragile and unpredictable,” and create more marketplace risk.

Typically restrained Canadian consumers had been on uncharacteristic spending and homebuying binges encouraged by low interest rates, but their self-assurance has ebbed, and job growth has decelerated in response to all the noise about European and U.S. debt woes. Sensing a “general slowdown,” interviewees signal taking a better-to-be-cautious investment approach. “Greed is off the table. We need to remember we’re a small player in a big pond.”

Strengths and Weaknesses. Canadian companies have strong balance sheets, and the overall economy is buffered by exports of oil from Alberta oil sands, hydropower, potash fertilizers, and many minerals, including precious metals and industrial materials. The resource industry seeps into other sectors and helps support finance, accounting firms, and lawyers.

Manufacturing concentrated in Ontario and Quebec “has become more problematic,” hobbled by reduced U.S. imports and the strong Canadian dollar. “If Asia gets hurt by a consumer pullback in Europe and the U.S., then Canada won’t escape pain”

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from further slippage in export demand. Banks “turn the screws” on lending to typically frugal Canadian consumers— average household debt suddenly eclipses U.S. levels—and, consequently, spending will subside. Economists cannot figure out why Canada’s productivity badly lags that of the United States.

“Maybe because the economy has more mom-and-pop, smaller companies, which haven’t caught up to employing Fortune 500 efficiencies,” one person interviewed speculates. While interviewees expect flat to slight growth in 2012, “we’re more immune from shocks and less tied to the U.S. hip than ever before.”

More Tentative Jobs Outlook. Canada’s unemployment rate manages to stay nearly two percentage points below that of the more troubled United States, helped by the country’s various resource industries. In Alberta, oil sands workers can easily make $100,000 a year, and both Newfoundland and the Maritime Provinces show signs of life thanks to recent offshore energy activity. Still, interviewees overall see “little jobs growth” and point to trends similar to those that constrict employment gains in the States. Formerly high-paying blue-collar manufacturing Maturing Loans: Preferred Strategy for Lenders

by Mid-2012

work declines, the victim of global competition, and office jobs requiring a financial skill set could be stymied by retrenchment in banking and investment-related businesses.

“We need to develop more high-skilled manufacturing industries like Germany.” If energy and commodity prices ever drop in a global economic recession, those high-paying energy sector jobs would be in peril, too, and the expected consumer pullback could hurt service sector businesses, including retailers. The employment scene looks “extremely flat without any apparent kick start,” and “the fizz could easily go out of the market.”

Lots of Money, No Product. Canada’s resilient property sectors appear ready to weather any potential problems without severe distress. Occupancies of 90 per cent and higher persist in a near steady-state equilibrium across most commercial markets from coast to coast. Stringent lending practices and mortgage regulation keep the housing sector healthy, and condominium developers prosper in further densifying 24-hour cores.

Canadian pension fund owners and REITs seem well satisfied clipping coupons on most of the country’s iconic office buildings and fortress malls. “It doesn’t make sense to sell when you already have the best income-producing properties.” As a result, substantial sidelined capital attracted to a safe haven finds slim pickings; partnering with local developers may be the only way for frustrated investors to break into closed office markets. But disciplined banks temper construction lending on speculative projects, limiting those opportunities and stanching potential overbuilding. By keeping capital at bay, Canada’s real estate performs as advertised—providing steady cash flows and modest appreciation without much volatility.

Credit Culture. The country’s “conservative credit culture” remains the foundation for relative stability, helping short-circuit the chance for boom/bust cycles that now routinely devastate U.S. real estate investors. Influenced by an immigrant ethos for building wealth off savings, Canada applies a heavy hand of regulation to its banking and investment sector. Borrowers need substantial equity or must take out loan insurance to get home mortgages; exotic CMBS and other security structures never found footing; and most business is financed by wellcapitalized national institutions. “Any potential contagion would be contained within our borders.” Now, a big problem for the country’s sturdy banks and large public pension funds is where to invest capital in the face of limited domestic opportunities.

Some of their biggest investment snafus come outside the borders in less-regulated markets, including notably the United States.

Canada’s solidity attracts a continuing influx of immigrants who undergird growth in burgeoning 24-hour cities and help sustain “an edge for the economy.” They view Canada as a “safe place to come,” where “ethnic groups not only feel comfortable at universities, but also stay after graduation.”

Unbound Urbanization. Non-institutional offshore money can find a home in 24-hour-city condominium towers and upscale residential properties. Chinese capitalists with newfound wealth actively park cash in Vancouver and Toronto apartment units, leading to a wave of new construction. The transformation of skylines in other Canadian cities, including Montréal, Calgary, Ottawa, and St. John’s, also begins with new high-rise, glass

Real Estate Capital Market Balance Forecast for 2012

and- steel box residential profiles as some local government put growth boundaries into effect to discourage further suburban sprawl. Investors readily turn units into rentals to cover expenses, tapping intense demand from young professionals and empty nesters looking for urban action and greater lifestyle convenience.

Retailers want to expand downtown footprints, too, and work with developers on “Eurostyle” mixed-use projects incorporating apartments on upper stories and stores along streetscapes and lower levels. Companies also rethink suburban office strategies, following Gen Y talent back into the cores.

Local governments, meanwhile, take advantage of in-town building activity. In Vancouver, Toronto (inside the 905 belt), and increasingly in Calgary, they saddle developers and homebuilders with “onerous” development fees to raise revenues in lieu of higher property taxes. Not surprisingly, infill land costs skyrocket: low-rise and even mid-rise projects become more uneconomical on small sites, so 50- and 60-storey condo towers rise up in Greater Toronto.

At some point, back-to-the-city trends may stall out due to escalating living costs: “It’s becoming very expensive.” Anti-sprawl laws also increase values on existing single-family homes within growth boundaries: they become more precious commodities, especially for families outgrowing all those cramped apartments.

Development. Commercial construction remains pretty tepid.

Don’t expect much office development in many markets; manufacturing weakness holds back most warehouse construction; and retail projects focus on infill developments tied to condominiums.

Concerns increase about all the high-rise residential projects springing up in major cities, particularly Toronto and Montréal.

“It’s pretty scary when planners push density at developers, who start building 60-story condo towers and get 20 to 25 per cent building december 2011/january 2012

25

margins. They’ll just keep building until it’s just a matter of time [before] too many get built.” Banks will become more nervous about lending standards for these projects. “You see a lot of apartments not sold on top floors of upscale buildings, which suggests a lack of depth in the market.” Buyers in Vancouver and Toronto skew toward Asian investors and speculators, who rent most of the units. “This activity is unsustainable.”

Pure rental apartment developers cannot price out product against the condo competition, so they join in on the action.

But many interviewees contend the condo wave can continue, supported by urbanization move-back-in trends and large numbers of immigrant renters. Minuscule residential vacancy rates support their views.

Some developer sector specialists work together in tight infill markets to build synergistic residential, retail, and office projects that combine uses at constrained sites. “Local government intensification policies force them to look at new forms and concepts to lower costs,” and create more attractive projects that feature convenient amenities. Toronto adopts more streetscape retail, á la Manhattan.

Developers in Toronto, Vancouver, and Calgary grumble about staff cutbacks at planning agencies and lengthier government approval processes, not to mention skyrocketing fees and surcharges. Other significant developer gripes mentioned by interviewees include higher infill land costs, parkland set-asides in the Toronto 905, parking requirements in the Toronto 416, and infrastructure funding shortfalls. Municipal regions clash over agendas and lack coordination in planning infrastructure and future housing needs, interviewees claim. Tenant demand for more sustainable projects focuses developers on LEED certifications: “It’s become a significant leasing prerequisite,” but hasn’t translated into higher rents yet.

Real Estate Business Prospects for 2012

Property Types in Perspective In 2012, Canada’s property sectors, except hotels, should bathe in a comfortable equilibrium of high occupancies, steady rents, and level demand. Vacancy rates settle in the mid- to high single digits across office and industrial markets, and even lower in retail and apartments. Development remains controlled without the threat of overbuilding unless buyer demand for condominiums declines dramatically in Toronto, Vancouver, and Montréal. For investment, survey respondents favour apartments, downtown offices, and neighbourhood shopping centres over suburban office space and hotels. On the development front, “everything looks stable; rents are about the same as 10 years ago, and all the caution about the world debt crisis will keep construction under control. It’s more of the same.”

Apartments. The multifamily residential sector will stay tight as continuing immigrant flows sustain demand in the major cities.

Even if job growth declines and homebuying cools, apartments should be “a safe haven.” When people have less, they rent.

Increasing numbers of younger adults delay buying houses; they simply cannot afford them after recent price spikes. Aging demographics also favour more apartment demand: empty nesters and

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seniors move out of suburban homes into smaller, easier-to-maintain units with urban conveniences. Apartment developers can readily obtain construction financing, but thin margins dampen interest: renters look for higher-finish condo-quality buildings, conditioned by all the condo units for rent. Until the market turns, developers do better building condos instead. Investors “can never get their hands on enough apartments. And everybody has the same idea. When you get some, hold onto them.”

Retail. Unlike the United States, Canada has not overbuilt stores, and many burgeoning residential districts in downtowns are underserved. Expected declines in consumer spending should not precipitate major problems: landlords anticipate levelling cash flows and minor vacancy increases from low- to mid-single-digit levels. Some U.S. retailer bankruptcies actually open up space for new U.S. chains previously shut out of markets. REITs and pension fund owners work “cozily” with tenants in “an oligopoly” to avoid overbuilding and maximize sales in existing malls.

Neighbourhood shopping centres in prime suburban areas do

Change in Availability of Capital for Real Estate in 2012

well, too: planning controls on sprawl limit competition from too much commodity development. Most of the new construction activity will concentrate in cities as part of high-rise residential projects. Retail and condo developers join forces to meet growing urban demand for stores and provide better amenities for projects in a win-win collaboration. “Urban retail is where it’s at—not only mixed-use, but also low-rise sites and street-level forms.”

Internet impacts “feel more like a continuum and evolution” because bricks-and-mortar sites are not oversupplied. Some retailers carry less inventory and use less storage space.

Industrial. The lingering U.S. export malaise continues to dampen outlooks for Ontario industrial markets, especially for owners of older, low-ceiling space, which is threatened by obsolescence. Investors follow tenants, who gravitate to newer big-box distribution product. Excellent absorption of these high-ceiling facilities offers opportunities for developers to replace old warehouses on well-located sites. Interviewees wonder if car manu-

facturing will ever recover because automakers shift facilities to cheaper plants in right-to-work states south of the border.

“They won’t be building new plants in Canada.” The near-par exchange rate also hurts the industrial sector: Canadian goods no longer look as cheap to U.S. buyers. But demand intensifies for new data centres: companies outgrow old space and need to accommodate new technology for backing up systems and disaster recovery. “The cloud needs to go somewhere.”

Office. Institutional investors and REITs cuddle their Class A downtown towers in the primary 24-hour cities. They have no intention of letting go of these cash-flowing babies in markets stuck in near-perpetual supply/demand balance. “Any supply bulge from the 2009 recessionary blip has been absorbed,” but owners need to keep close tabs on decisions from Bay Street executive suites in Toronto and government budget hawks in Ottawa and Edmonton. Will workforces in these cities be slimmed down?

At the very least, interviewees have trouble identifying sources of new job growth to create pressure on rental rates, except in energy markets as long as oil prices and demand stay up. On average, “don’t expect any increases”; trophy buildings may register slight upticks, while Class B buildings may get nicked. “It looks like a flat market for 2012.” Investors grow more leery about suburban locations: traffic congestion and move-back-in trends work against them. “Without barriers to entry, suburban nodes don’t hold value as well.” Investors must be “more agile” and markettime quick exits. “The challenge for larger suburban commercial districts is how to turn into full-fledged cities” by building the proper transit infrastructure.

Companies and their workers “want greater convenience and avoid car dependency.” Tenants show signs of following the lead of U.S. companies, “jamming more people into less space. It may never go back to the old ways.” They also want to manage energy costs and pay attention to LEED ratings. “Their issue is expenses, not environmental consciousness. They still ask for more parking spaces.”

Hotels. The lodging sector hobbles along. A weak U.S. dollar continues to discourage cross-border visits. At least, “liquidity is back and the better stuff trades,” though significant yield spreads separate “trophy and trash.” This gap is “not nearly as wide in other sectors.” Financing for acquisitions or new projects remains “very difficult” compared with “unavailable” several years ago.

Established business centre hotels in Toronto and Vancouver hold their own without new competition and can score high occupancies during the workweek. Resort and vacation destination properties suffer from restrained tourist demand, while suburban and limited-service hotels struggle to raise room rates. Many properties bought at or near market peaks look a little ragged around the edges as struggling owners delay capital upgrades. On a bright note, in St John’s the revved-up resources business leads to new development. Room rates have rocketed at the limited number of existing hotels.

Housing. Tightening credit standards in the wake of consumer splurging puts a wet blanket on Canadians’ recent home buying bender. “Low interest rates caused distortion in housing and consumption. People didn’t know where to put capital; housing building december 2011/january 2012

27

seemed like the best place to go.” Interviewees expect an ongoing “pullback from the golden mean” as the economy levels off and when “interest rates inevitably tick up.” Any correction should be mild compared with that in the United States.

Mortgage borrowers must put down significant equity stakes to obtain loans and take out insurance in case of default. The Asian investment boom in “frothy” gateway-city condominiums—“the first thing you do in China when you make money is invest in Canadian real estate”—likely will run out of gas, but maybe not in 2012. Developers need to read the Asian market tea leaves carefully. “The party can continue as long as these investors don’t see opportunities elsewhere” or don’t face a reversal of fortunes back home. In the meantime, condo inventories sit at historic lows, helping drive up prices, and projects cannot obtain financing without significant presales and substantial (15 to 25 per cent equity) deposits. “Developers also have the right to sue for specific performance on the entire sales price if buyers try to back out.” Affected by government intensification policies and European-inspired greenbelts, infill land costs escalate to eye-popping numbers in site-restricted 24-hour-city neighbourhoods, especially around Toronto and Vancouver. Land bankers can score grand slams on projects thanks to their lower basis or jam through hard bargains partnering with developers looking for sites. “In core areas around the GTA, developers’ margins get squeezed on land costs. That’s why they start building more big towers.” Homebuilders get clobbered by the inflated land costs, too, especially within intensification zones, and are forced out to the fringes. Everyone complains about municipal development charges—upwards of $60,000 a unit in some places. Looking to limit unpopular property tax hikes, governments hit developers, who pass on costs to homebuyers or eat some of the expenses.

Increasing bureaucratic hassles and approval delays also raise blood pressure levels.

Best Bets

Investment Hold Those Trophies. That’s the Canadian way. Husband cash flows, astutely manage properties to control costs and retain tenants, and consider retrofitting with energy-saving technologies to ensure future competitiveness. “In the low interest rate environment, clipping coupons makes sense.”

Buy or Hold Infill Land. Intensification policies will continue to propel land values in the gateway cities: available sites look like gold. Prices may appear “crazy” today, but could seem like bargains tomorrow. “You won’t be able to replicate these opportunities in the GTA or Vancouver.” Move-back-in trends work against outer suburbs and disconnected suburban nodes.

Don’t Take Chances. Equilibrium markets provide limited opportunity to score big investment gains, and the economy enters a slower growth mode. For more opportunistic returns, investors could partner with hands-on operators to take under-

Prospects for Capitalization Rates

used Class B–/C apartment buildings and improve NOIs. Old, well-located warehouse space in prime GTA locations could be ripe for conversion or redevelopment into condominium or mixed-use space.

Development Turn More Wary. The big-city condo surge looks unstoppable, but maybe it’s time to turn a bit more cautious. Whenever something looks too good to be true, it usually is. The investor wave could give out, and pricing may need to take a breather.

Be Selective. Other sectors offer few opportunities beyond a choice office building in certain 24-hour downtowns like Vancouver or even Montréal. Mixed-use gets a boost across all major markets: retail developers work on infill projects aligned with condo construction. New apartments make sense in markets where condo construction is muted; demand will always be there. Hotels go nowhere.

Property Sectors Buy or Hold Apartments. Continuing immigration will fire steady demand.

Buy or Hold Class A Offices. These are irreplaceable assets in the downtown cores.

Buy or Hold Fortress Malls and Grocery-Anchored Retail. In prime suburban districts with barriers to entry, these properties will continue to excel.

Buy or Hold Big-Box Industrial Properties in the Toronto Area. The tenant market gravitates to new distribution properties over old-school storage space. Development opportunities exist for converting well-located low-ceiling warehouses into big-box formats.

Hold Hotels. It’s no time to sell.

B

Jonathan D. Miller has written Emerging Trends since 1992 and lectures frequently on trends in real estate, including the future of America’s major 24-hour urban centres and sprawling suburbs. He also is author of ULI’s annual forecasts on infrastructure and he writes the weekly Trendczar blog for GlobeStreet.com, the real estate news website.

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viewpoint

BY STEPHEN CARPENTER, PEng

Underfloor (Air Distribution) or Underwater Underfloor air distribution (UFAD) is not a particularly new design idea, but the increased number of buildings with this technology in the past few years has illustrated that there are some important things to consider when contemplating designing such a system.

There are several potential/advertised benefits to this system: • Heat rises so the fresh air naturally rises to the level of the occupant, ensuring excellent air quality and penetration.

In a conventional office, warm, fresh air often hovers around the ceiling level and leaves without ever reaching the occupant; • Extended economizer cycle (longer free cooling season), especially in cool, dry climates (San Francisco can achieve about 2,217 100 per cent economizer hours while Toronto would get about 600); • Reduced floor-to-floor height due to less mechanical ductwork – can achieve a 13.5 foot ceiling height in the space where a conventional office would have an 11.6 foot ceiling; • Possibly lower fan power: less ductwork and less duct resistance; lower external static requirement for the fan; • Flexibility in installing data cables.

While there are potential benefits to UFAD, there are some drawbacks, such as increased price (typically estimated to be around $3.50 per foot more compared with an equivalent ceiling system).

Other elements to consider when exploring an UFAD system include the following: 1 Investigate alternatives, because some of the benefits of UFAD are overstated. There are other cheaper and more effective alternatives (such as chilled beams, or DOAS). For example, a raised floor providing just ventilation and not heating or cooling might provide the required accessibility to data wiring, without the common problems of UFAD. 2 Get commitment from the owner and architect for full construction coordination among trades, including constructability reviews before final contract drawings and tender.

3 Insist on a good building envelope — less glass, better glass, no thermal bridging — to reduce perimeter loads.

4 Ensure the floor is sealed well — leakage is the biggest downfall of the UFAD systems. Seal all joints, inspect construction, and pressure test.

5 Hire a commissioning agent or other construction coordinator to focus on UFAD installation and testing.

6 Ensure good zone control – divide underfloor into compartments and provide air directly to each chamber.

Consider separate AHUs dedicated to compartments sharing similar exposure or load profile.

7 When in heating mode, perimeter zones should not steal air from centre zones. Provide return grilles and ducting or dedicated air supply.

8 Prevent overcooling. Provide underfloor terminals (VAV or fan powered terminals) for all spaces with variable loads, including in central areas. This may be 50 per cent of floor plate or more.

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december 2011/january 2012

9 Design the AHUs to provide 100 per cent of the latent cooling load. The higher delivered air temperature means that a conventional AHU design will not provide the required dehumidification. Any underfloor cooling coils should not be designed for wet coils (i.e., how to drain condensate? Service access?). Consider providing dehumidification to outside air entering the AHU, for example a dedicated outside air system with total energy recovery, heat pump assisted dehumidification, such as Munters system.

10 Use the Berkely Center for the Built Environment (CBE) guidelines and CBE Design Tool to calculate design flowrates and confirm design supply and return temperatures (http://www.cbe.berkeley.edu/research/ufad_designtooldownload.htm). Preliminary estimates of design flow rate can assume 37 per cent of space cooling load is handled directly by the floor plenum in central zones, and 22 per cent in perimeter zones. Refer also to the ASHRAE UFAD Design Guide (www.ashrae.org) but note that it is dated (2003). B Stephen Carpenter is president of Enermodal Engineering, Canada’s largest green building consulting firm. With offices in Kitchener, Calgary, Edmonton, Winnipeg, Halifax, Vancouver, and Toronto, Enermodal provides LEED consulting, energy efficiency engineering for new and existing buildings, building commissioning, and Net Zero Ready M/E design. Enermodal has certified over 115 LEED projects – representing one-third of all LEED Canada certified projects.

1-800-GET-PINK® or visit www.owenscorning.ca

EvERy GREEN BuILd ShouLd INCLudE PINK ™

For over 70 years, home builders around the world have trusted Canada’s

Why choose EcoTouch PINK Insulation?

No. 1 insulation for high-quality and dependable products. Today, a leader

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in energy efficiency is proud to bring you the next generation, EcoTouch™ PINK™ FIBERGLAS Insulation with PureFiber™ Technology. It’s made from

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ThE PINK PANThER™ & © 1964-2011 Metro-Goldwyn-Mayer Studios Inc. All Rights Reserved. The colour PINK is a registered trademark of owens Corning. © 2011 owens Corning. All Rights Reserved. *70% recycled content is based on the average recycled glass content in all owens Corning fiberglass batts, rolls and unbonded loosefill insulation manufactured in Canada. SCS certified. **Made with a minimum of 99% by weight natural materials consisting of minerals and plant-based compounds. ∆Savings vary. Find out why in the seller’s fact sheet on R-values. higher R-values mean greater insulating power. GREENGuARd Children & SchoolsSM Mark is a registered certification mark used under license through the GREENGuARd Environmental Institute. owens Corning PINK™ insulation is GREENGuARd Certified for indoor air quality, except bonded loosefill products. This product has achieved GREENGuARd Children & Schools Certification and is verified to be formaldehyde free. Certified Thermal Insulation Material CCd-016. © 2011 owens Corning. All Rights Reserved.

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You’re always looking for new ways to control your operating costs. Energy use is no exception. Your local electric utility has a range of energy-efficient solutions tailored to businesses. Small businesses may be eligible for incentives to upgrade their lighting. Commercial, agricultural and industrial operations Your local electric utility can tap into funding for lighting, system and equipment upgrades, as well as offers incentives for: for energy audits and shifting energy usage away from peak demand times.

• Energy-efficient lighting Big or small, every Ontario business can benefit.

Find out more by contacting your local electric utility or visit saveonenergy.ca/business Subject to additional terms and conditions found at saveonenergy.ca. Subject to change without notice.

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• Shifting energy use • Equipment upgrades • Energy audits