Page 1


SPRING 2016 / ISSUE 71

Apartments Wanted Let’s Not Take these Prices for Granted


Montreal Brims with Business Potential All Electronic Roads Lead to Montreal


True Leaders Rise to Tough Times Downturn Could Make Us Stronger A Bright Light in Bleak Economy



Bramalea City Centre | Brampton, ON 2015 International BOMA Award Winner for The Outstanding Building of the Year (TOBY)

READ THE BCC CASE STUDY AT MORGUARD.COM. 1-800-928-6255 Mississauga | Toronto | Ottawa | Montreal | Winnipeg | Calgary | Edmonton Vancouver | Victoria | New York | Chicago | New Orleans | Fort Lauderdale TSX: MRC | TSX: MRT.UN | TSX: MRG.UN

READ ON FOR THE UNDERLYING MESSAGE OF THE 2016 TRI-CITY REAL ESTATE FORUMS cent vacancy rates in downtown office space - the highest in more than a decade. Experts will discuss new investment opportunities, the changing dynamics and how to appeal to a new tenant base. George Przybylowski Vice President, Informa Canada

Whether held in Vancouver, Montreal or Edmonton, this year’s Canadian Real Estate Forums aim is to enlighten, educate and inspire all who make this industry their playing field. The Real Estate Forums have become the go-to source for high-quality speakers; those that can hone in on the issues facing the commercial real estate industry today, whether they pertain to asset managers, brokers, developers, investors or other sector professionals. On March 30 in Vancouver industry experts will discuss the switch toward non-resource based industries; municipal initiatives, infrastructures and planning policies as the city’s regional population will rise to an anticipated 3.4 million in 25 years; and the continued land struggles facing apartment and multi-family developers in their quest to meet the needs of the additional million residents to the region’s demographics. The Forum will also touch on the commercial sector’s woes with over 11 per

As the City of Vancouver strives to become the “greenest” city in the world by 2020, with developers employing LEED standards in all construction, the industry will have to come to terms with what this will mean to sustainability and direction, especially in the Greater Vancouver area. April 5th will feature the 18th annual Montreal Real Estate Forum, which attracts upwards of a thousand real estate executive attendees. This Forum is year on year sold out months in advance and this year will be no exception, as discussion topics range from economic drivers and markets, vacancy rates and research and development projects and how these will impact the commercial industry to debt financing and the multi-residential marketplace, especially on the condo, student and senior housing supply ends of the spectrum. As with all major cities in Canada, Montreal’s urban growth translates to parallel demand for transportation infrastructures, so experts will engage on transit-oriented developments, giving insights into the pros and cons of applications for real estate development. On the retail end, Forum experts will discuss the increasing opportunities for inner-city mixed-use and residential developments that incorporate retail space as malls make way for multi-purpose properties. Focusing on upcoming opportunities will be key in all REFs this year, as experts zero in on

unsung areas ripe for investment. Montreal’s South Shore, for example, has become a hotspot as of late, as job creation in the area continues to grow, along with household incomes. Dealing with such investment opportunities will be front-and-centre at the Montreal forum, including discussing where new capital will originate. In addition, the 17th Edmonton Real Estate Forum will look at how the capital city of Alberta is weathering change and, not surprisingly, this conference will be focusing on the challenges a low oil price and economic downturn has had on the real estate sector, be it commercial-, industrial-, investment- or residential- based. The Edmonton Forum is one of the largest conference of its kind in Western Canada. The gathering of the minds on May 12 will be overflowing with insider information on the strategies needed to move forward, including the innovative, entrepreneurial spirit that will take it there. As Canada looks outside of the continental borders for its trading partners, namely Asia, commercial real estate for industrial and logistics infrastructure have become key priorities, especially in port cities on the West and East. This trend will be front-and-centre here as well as at the Vancouver Forum, as those cities continue their push to get their products to the Asian market. The underlying message for the 2016 tri-city REFs, though, is that there are drivers out there that, when realized, can spur economic growth. Using innovative, entrepreneurial and diverse takes on the marketplace, Forum experts can navigate attendees through the trees and the forest to see the land beyond. ■ 3



Read On for the Underlying Message of the 2016 Tri-city Real Estate Forums


The Altus Report: What if Lower for Longer is True?



Global Real Estate: A Winner in 2016 100+ EXPERT SPEAKERS



Property Transactions by Asset Class


Enabling City Building in Canada: Barriers to Economic Growth 61 Revenue Tools: The Awkward Conversation 64 The Role of Real Estate in Limiting Global Warming to 2 Degrees: Post COP 21

About Informa BRINGING KNOWLEDGE TO LIFE Businesses, professionals and academics worldwide turn to Informa for unparalleled knowledge, up-to-the-minute information and highly specialized skills and services. Our ability to deliver high quality knowledge and services through multiple channels, in dynamic and rapidly changing environments, makes our offer unique and extremely valuable to individuals and organizations.

Advertisement Inquiries

Canadian Real Estate Forum Magazine

Frank Scalisi Director of Sponsorship and Advertising Sales T: 416-512-3815 E: See full details on page 64

The Canadian Real Estate Forum Magazine is published three times annually. Editions coincide with key Canadian Real Estate Forum and associated markets:

Conferences For more information on our Conferences visit See our ad on page 54 4

Spring: Montréal • Vancouver • Edmonton Fall: Ottawa • Calgary Winter: Canada-wide • Global E-magazines are available at

Informa Exhibitions, Construction & Real Estate Rick McConnell, President, George Przybylowski, Vice President

Editor & Associate Editor Michel Rémy Jean Pickering

Design Informa Canada Design Studio Canadian Real Estate Forum / SPRING 2016







Thank you to our sponsors

Thank you to our sponsors

Thank you to our sponsors

20 Vancouver continues quest for quality

32 Montreal abounds with business potential

22 Nowhere to go but up

34 Montoni developing major destination in Laval

46 Edmonton continues to show resilience despite headwinds in the provincial economy

22 Dwindling logistics land squeezes Vancouver economy 24 Apartments Wanted 24 BC Economy Surprisingly Resilient 26 Vancouver: Something Has to Give 26 Oil and the World Economy Trickle Down 28 Let’s Not Take these Prices for Granted

48 True leaders rise to tough times

36 How to Keep Up with Our City’s Growth

49 How to get your team’s energy pumping when the oil isn’t

36 Retail navigates the online paradox

50 Sitting Tight in Edmonton

37 Student real estate clubs: Bridging the gap between the classroom and the power deal

51 Downturn Could Make Us Stronger

38 Everyone wins! It’s time to tie infrastructure to value-added 39 Stars Aligning for Montreal Lenders

52 A bright light in bleak economy 53 Snapshot of Edmonton Development

40 South Shore delivers top quality at competitive price 41 All electronic roads lead to Montreal 42 40 Years Later the Projects Keep Getting Bigger 42 Vacancy concerns in a tenant’s market: Look for changes by 2018




By Sandy McNair

A look at implications for major markets Not long ago, for many people, Lower for Longer referred to interest rates. Today for many Canadians and most every Albertan Lower for Longer is an even more compelling reference to oil prices and in turn business and consumer confidence as well as growth rates. That is, the rate of growth of the economy, the local population, the participation rate and the employment rate. With implications across Canada, Alberta’s, Saskatchewan’s and Newfoundland’s economic performance has shifted from being one of Canada’s key growth engines and performance leaders to the other end of the continuum. For those in the commercial real estate market, Lower for Longer may also be a comment on future rents. In this article we will explore several future scenarios by taking a close look at our


history for lessons and identify the current industry-wide as well as the city-specific dynamics that make today unique with potentially surprising outcomes for our commercial real estate markets. Back to the Future – Any Useful Insights and Lessons from 1982? Between 1979 and 1983 Calgary experienced a growth spike of magical proportions. During those frenzied five years, the total inventory of office space in Calgary more than tripled. In 1981 more than 6 million square feet was completed. In each of 1979, 1980 and 1982 more than 4 million square feet was completed with slightly less than 4 million square feet completed in 1983 for a five year total of 25 million square feet. That’s more than what has been or will be completed in the eleven years from 2007 to 2017 as confirmed in the following graphic. Canadian Real Estate Forum / SPRING 2016

PREPARING FOR THE FUTURE BY LEARNING FROM THE PAST Calgary New Supply Millions of square feet. • Data as of March 10, 2016. Source: © Altus Group Limited 1998-2016 7

1979-83 23.8 million SF built In 1983, 72% of the total inventory had been completed in the 5 years since 1979

6 5 4

2007-17 22.8 million SF built In 2017, 32% of the total inventory had been completed in the 11 years since 2007



2 1 0 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Total Office Area Completed each Year

Total Office Area Currently Under Construction by Target Completion Year

Downtown Calgary New Supply Millions of square feet. • Data as of March 10, 2016. Source: © Altus Group Limited 1998-2016 1979-83 14.7 million SF built In 1983, 64% of the total inventory had been completed in the 5 years since 1979

4 3.5 3 2.5

2007-17 12.7 million SF built In 2017, 28% of the total inventory had been completed in the 11 years since 2007

2 1.5 S

1 0.5 0 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Total Office Area Completed each Year

On a Friday in February of 1982 Calgary’s boom ended. Expectations of $60 per barrel oil were crushed and eventually met a $10 per barrel reality. Expectations of the then current interest rates of 16% shifted from declining to increasing. By August of 1982 interest rates reached 21.75%. In addition, the Federal Government’s National Energy Program shifted from being a remote risk to a reality. Until 1982, exploration was a key engine within the energy industry. At that time the hunt for energy included exploratory drilling in the Arctic and elsewhere. By comparison today’s energy industry is driven by mining, horizontal drilling and other emerging and breakthrough technologies. A candid look at the energy industry’s current and

Total Office Area Currently Under Construction by Target Completion Year

near term opportunities will include a newfound and mission critical focus on cost control to match market prices, net of delivery to market costs, even better use of technology as well as environmental stewardship, credible monitoring and compelling communication initiatives. During the eleven years of 2007 through 2017 Calgary has and will continue to experience another spike in new supply of office space. Perhaps surprising to some industry participants, taking a deeper look at the facts reveals much. While significant, this eleven year cycle has been much less frenzied with less than 3 million square feet per year being completed and being delivered into a much larger marketplace. Also of note is that 10 million square feet, almost half of the total, has been completed in the beltline and suburbs, shifting the breakdown of total inventory for downtown/beltline/suburbs to 62%/12%/26% from a breakdown of 64%/12%/24%, in 2006 and a breakdown of 67%/12%/21% in 1999.

Being human, we all have built-in survival strengths and a few weaknesses. Straight line thinking is one of those built in weaknesses. When things are good, like the economy, we expect them to get even better. And our natural predisposition is that a weak economy will get worse. Perhaps this is left over from the fight or flight imperative with natural selection over thousands of years favouring flight. In any event most of us do not see the corners in advance. One of the key lessons from 1982 in Calgary is that following the downturn, a bottom is found, but too often straight line thinking delays and impairs the shift in confidence that contributes to the economy moving ahead. This pattern will likely repeat. Calgary specifically and most of Canada have the highly skilled people with ‘can do attitudes and cultures’ who will pivot and eventually generate new and compelling opportunities.


• presents existing buildings with uneven but significant challenges as supply is no longer being driven by incremental demand.

Shifting Industry-Wide Drivers and Dynamics The fundamentals of supply and demand will always matter and impact all commercial real estate industry participants. Yesterday, today and tomorrow are different from each other. Understanding the underlying drivers and resulting dynamics is a key early step to successfully preparing for the future. Here are five recent and likely ongoing shifts in the drivers for us to explore more deeply as we anticipate the future of specific markets, portfolios, neighbourhoods, occupants and buildings:

Operational Excellence • new and evolving expectations of tenants and other stakeholders reward those commercial real estate owners, managers and leasing experts with the desire, processes and ability to create, shape, fulfill, communicate and manage expectations in an evolving market; • superior returns will be even more directly linked to tenant satisfaction, referral, recommendation and retention. Deeply understanding the leading indicators to these outcomes has become the key differentiator in markets that are increasingly over supplied.

Intensification • accelerating focus on and successes with Work / Live / Learn / Shop / Play spaces and buildings at downtown and other significant nodes with significant and varied impacts on vibrancy and value. Fragmentation • viewing buildings within the same asset class or geographic market as equivalent or homogeneous is flawed - the averages are dangerous; • we all need to dig deeper into the details including new attributes and details to understand the risks, strengths and options.

More New Supply • driven by ongoing pressure from institutional and other investors to place capital; • appeal of new buildings to occupiers in their ‘battle for talent’ by using new technology at higher densities; • resulting in many occupiers more intensely using less but better space;

City-Specific and Neighbourhood-Specific Variations The markets have fragmented and the averages are dangerous. Within the same city, the differences in performance and direction can be stark. In our ongoing search for leading indicators, analytic tools and techniques we have been isolating and tracking office buildings with one acre or more of space available for lease. As the graphic below summarizes the pattern in Vancouver and Edmonton is more muted than Montreal and Toronto, with Calgary experiencing the steepest increase in both the number of buildings and the total amount of available space in the “1 Acre Club.”

Conversions and Next Best Use • identifying and understanding the full range of options and probabilities – being ready to go beyond upgrades and repositioning into repurposing as part of a future-proof plan as opposed to hoping to avoid becoming a distressed asset / owner with only the more desperate options remaining.

IMPACTING FUTURE MARKET BEHAVIOUR, PERFORMANCE, AND VALUE Office Markets Across Canada – Number of Buildings & Total Available Area in The 1 Acre Club Millions of square feet. • Data as of March 10, 2016. Source: Altus InSite © Altus Group Limited 1998-2016.




146 142

16 14 12


10 8 6 4

31 40


2 Q1 2013 / Q3 2014 / Q1 2016



22 22

Q1 2013 / Q3 2014 / Q1 2016




92 96 61


Q1 2013 / Q3 2014 / Q1 2016

Q1 2013 / Q3 2014 / Q1 2016

Q1 2013 / Q3 2014 / Q1 2016




Each of the “1 Acre Club” buildings contain more than 43,550 square feet of space available for lease in existing and under construction office buildings as of March 10, 2016. * “Midtown” refers to Vancouver Outlying Area in Vancouver, the Government District in Edmonton, and the Beltline in Calgary.


Canadian Real Estate Forum / SPRING 2016

Yardi Investment Management shortens the investment lifecycle and provides visibility from the portfolio level down to individual transactions.

SOCIAL. MOBILE. SMART. YARDI Investment Management


Generate value with a fully automated solution that drives superior returns, reduces risk and inspires investor confidence with complete transparency.

To learn more, call 888.569.2734 or visit

The premise behind tracking changes in the 1 Acre Club is that the owners, managers, lenders and leasing teams associated with these larger blocks of available space have a material impact on future market behaviour, performance and values in both up and down cycles.

In Calgary there are now 81 buildings in the 1 Acre Club that contain in aggregate more than 10 million square feet of available space, or an average of almost 3 acres for each of those 81 buildings. Only 3 years ago in Calgary, there were 28 buildings in the 1 Acre Club containing a total of 2.8 million square feet of available space for an average of 2.3 acres per building. Revealed within this data is the relative stability of Calgary’s beltline. In suburban Calgary the number of buildings in the 1 Acre Club has held steady during the past three years while the total available space has doubled, compared to the 5.6 times increase in the total available space in the 1 Acre Club buildings in downtown Calgary. Looking at Vancouver, during the past three years the suburbs have experienced a material reduction in the number of buildings (from 22 to 15) and the total amount of available space (from 2.1 to 1.4 million square feet) in the 1 Acre Club. Vancouver midtown (covers the City of Vancouver with the exception of the Downtown Core) has experienced the opposite over the past three years with the number of buildings in the 1 Acre Club growing from 1 to 8 and the total available space tripling. In downtown Vancouver, during the past 18 months the number of buildings in the 1 Acre Club has held steady at 18 but the total amount of available space has declined by 200,000 square feet to 1.46 million square feet. In Edmonton the number of buildings in the 1 Acre Club is relatively stable over the past three years, but within the data are several important contradictions. In the suburbs the total amount of available space in the 1 Acre Club has declined by half. The amount of available space in the 1 Acre Club in midtown has tripled. In the downtown core, the amount of available space in the 1 Acre Club has increased sharply from 557,000 square feet three years ago to almost 1.5 million square feet today with almost all of that increase happening more than 18 months ago.


In Montreal during the past three years the number of buildings and total amount of available space in the 1 Acre Club grew sharply until 18 months ago when the rate of increase moderated, but continues. Midtown Montreal has actually improved during the past 18 months with 5 fewer buildings and a reduction of 240,000 square feet of total available space in the 1 Acre Club. Toronto being a larger market with many large buildings, it has a much larger number of buildings in the 1 Acre Club. Like Montreal, most of the increase in the number of buildings and total available space in the 1 Acre Club in Toronto occurred more than 18 months ago. Midtown, although very small has improved over the past 18 months with a 270,000 square foot reduction in total available space in the 1 Acre Club. The Greater Toronto suburbs are unchanged during the past 18 months in terms of number of buildings and total available space in the 1 Acre Club. In Downtown Toronto if we remove the impact of a 1.5 million square foot new development with a 2019/2020 completion date that appears to be proceeding, then over the past 18 months the number of buildings in the 1 Acre Club has reduced from 42 to 38 with a reduction of the total available space in those 1 Acre Club buildings of 1 million square feet. Of interest, each of those 38 buildings in the downtown Toronto 1 Acre Club contain on average 4.26 acres of available space, up from 3.4 acres three years ago. The premise behind tracking changes in the 1 Acre Club is that the owners, managers, lenders and leasing teams associated with these larger blocks of available space have a material impact on future market behaviour, performance and values in both up and down cycles. No one can know what the future will bring. There are so many variables and way too many potential combinations of local, national and global outcomes to know clearly what will happen next. What we can do is prepare for a range of different futures and scenarios. Stress test. Listen. Think. Canadian Real Estate Forum / SPRING 2016

Jones Lang LaSalle | Š2015 Jones Lang LaSalle IP, Inc. All rights reserved.

Breathing new life into your vision Whatever your assets, needs or aspirations, our in-depth local knowledge and far-reaching global insight will help you succeed with the real estate opportunities that are perfect for you. Tenant Representation Capital Markets Agency Leasing Hotels Industrial Multi-Family Valuation Retail Project & Development Services | Follow us @JLLCanada

Calgary Market – Change in leased Area Forecast




29.7% 30%


Q4-15 17.9%

2.0 1.5


25% 20%

19.7% 16.4% 15%






Vacancy Rate (%)

Inventory Growth - SF (Millions)

Inventory Growth – Millions of square feet / Vacancy Rate. • Source: Altus Insite Š Altus Group Limited 1998-2016


2006 2007 2008 2009 2010

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Inventory Growth No Growth (0 SF) Modest Growth (500,000 SF)

Availability Rate Modest Reduction (-500,000 SF) Significant Reduction (-1,500,000 SF)

Greater Vancouver Market – Change in leased Area Forecast Inventory Growth – Millions of square feet / Vacancy Rate. • Source: Altus Insite Š Altus Group Limited 1998-2016 20%


Q4-15 12.0%







14% 12% 10%



8% 6%


Vacancy Rate (%)

Inventory Growth - SF (Millions)


4% 2%



2006 2007 2008 2009 2010

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Inventory Growth No Growth (0 SF) Modest Growth (500,000 SF)

Here is but one simplified example of looking at several future scenarios. Perhaps it will inspire you to think about your properties’ and portfolios’ futures. We would welcome the opportunity to contribute to your processes and thinking. To help inform each of the forecasting scenarios in the above noted graphic, we have reviewed the 10-year change in leased area (sometimes referred to as absorption) data. The 10 year average for Greater Vancouver is 494,000 square feet with the single year high at almost 1.87 million square feet and the single year low at -1.61 million square feet. For Calgary, the 10 year average is 973,000 square feet with the single year high at nearly 4.94 million square feet and the single year low reaching -3.13 million square feet. While these outliers are 12

Availability Rate Modest Reduction (-250,000 SF) 4JHOJmDBOU 3FEVDUJPO 4'

single year results they reinforce the need to look at multiple scenarios as it is unlikely that the next 5 years will resemble the average of the past 10 years. Preparing to Win or Waiting for ‌? Those that win big, really big, have a pattern of becoming very busy and focused when others are slowing down, or even hiding while waiting for confirmation of the next upward trend. Those that seek to outperform their peers will be well served to take a similar approach. ■Sandy McNair is the Data Curator of Altus Data Solutions, a division of Altus Group. In January 2016 Altus InSite, RealNet and several other businesses and teams within Altus Group were integrated to form Altus Data Solutions. Canadian Real Estate Forum / SPRING 2016


By Catherine Ann Marshall

“The rise in global investment in 2015, coupled with a greater incidence of portfolio deals are a “sure sign that investors are searching more widely for returns and looking to deploy capital quickly,”

There are a couple of key reasons why Dr. Peter Hayes, Global Head of Investment Research at Prudential Real Estate Investors, expects 2016 to be another good year for real estate investment. A backlog of capital waiting to be invested in real estate is one of them. Another is the increasing diversification benefits from global investment today. In his annual outlook report Trends for 2016 report, Hayes identifies global real estate trends that lead him to expect that this year’s transaction volume could increase by 5% over 2015. He also anticipates that cross-border capital flows, about one-third of the total transaction volume in 2015, will continue to be an increasing percentage of overall activity. “Investors have plenty of capital to deploy even in the event of a pull back from some sovereign wealth funds due to low energy prices,” Hayes said. He points to a study by Prequin which shows that US$91 billion of capital was raised by private real estate funds in 2015, which only added to a pool of US$240 billion ready to be invested. In addition to the pressure of “the wall of capital,” another important driver of cross-border activity is meaningful

diversification benefits from investing in all major regions. Hayes notes that synchronized global upswings in the mid-2000s followed by the global downturn in real estate markets in 2009 harmonized the performance of all real estate, implying little or no benefit of market-level diversification. Now, with regional markets out of sync, the smoothing of a portfolio’s return volatility through multi-regional exposure is attractive to investors. The rise in global investment in 2015, coupled with a greater incidence of portfolio deals (see chart) are a “sure sign that investors are searching more widely for returns and looking to deploy capital quickly,” said Hayes. “As growth broadens, we anticipate a rotation of capital away from gateway cities towards late recovery markets, such as in the eurozone periphery, and smaller cities, where availability of space is starting to fall,” said Hayes. ■ For more insights into international real estate trends, don’t miss Global Property Market, June 1 & 2, Javits Center, New York City.

Portfolio Deals as a Share of Global Investment Volume Sources: Real Capital Analytics and Prudential Real Estate Investors (as of December 2015)


Canadian Real Estate Forum / SPRING 2016









European real estate

By Chris Andrews, Head of Client Relationships and Marketing

– it’s shopping time!

For investors, times of economic softness in the home market underscore the importance of a diversified portfolio. That is probably one of the reasons why we are seeing increased interest from Canadian investors in our global real estate strategies – and particularly in continental Europe. The investment case is a strong one – continental Europe offers the best total return prospects of any major global market over the next three years (averaging c.9% p.a. according to our forecasts). Supported by a strengthening economic recovery and extensive quantitative easing (QE) stimulus from the European Central Bank (ECB) as well as the added benefits of a mature, liquid and diverse market, it is not surprising that one in four North American investors is considering investing in the region. So where are the best investment prospects? Some of the strongest recent performance and future rental growth prospects can be found in areas which were the worst affected by the global financial crisis. For pension funds and institutional

investors it is therefore important to fully assess the risks, and approach of each investment on a case by case basis.

Limit risk with prime shops and food stores Given that Europe’s economic recovery has to-date largely been driven by domestic spending, we currently see some of the best risk/return balance in the retail sector. Private consumption growth is set to be supported by the anticipated continued QE stimulus from the ECB, as well as by recent favorable developments in the job market (with unemployment hitting fouryear lows). We therefore expect retail shops to lead Europe’s mainstream sectors in terms of rental growth over the coming

three years, delivering a forecast average increase of 3.3% p.a. For investors seeking to minimize risk, dominant high street assets in major cities with strong tourism should be a focus (for example Milan or Copenhagen), as well as well-located food stores. With its long leases and inflation-linked income, the latter sector is a defensive diversifier for investor portfolios and has a track record of providing a solid income stream throughout the economic cycle. Grocery has been one of the most resilient product categories in the face of rising online sales, and although we expect this trend to change, it will take some time before food shopping habits adjust.

Investment case study – long lease portfolio of Portuguese supermarkets • Portfolio of 12 supermarkets operated by Sonae – the dominant retailer in Portugal, which accounts for over a quarter of the country’s food sector and has a track record of outperforming the overall Portuguese economy

• Long lease with annual indexation

• Strong locations, including the capital Lisbon and the tourist destinations of Porto and Algarve

• Initial rents set at a level intended to maintain long-term affordability

For Canadians, and other overseas institutions, the potential diversification benefits are likely to be amplified by the fact that investors tend to be underweight retail in their home markets so such an investment would further broaden their portfolios at a sector level.

• Total price of €164m • Defensive investment with a yield premium to “core” Europe

investor demand is pushing down yields for prime assets with long leases.

Beyond retail – active management and alternatives

Slightly further up the risk curve, we believe that Europe’s economic strength presents interesting active management opportunities to maximize income from well-located but currently under-rented properties (particularly in areas which are set to benefit from infrastructural changes).

There are also plenty of opportunities in other sectors. Rising office-based employment, for example, bodes well for rental growth in select German, southern European and Nordic markets. Strong

In the industrial sector, some of the better value can be found in urban logistics assets which cater to the e-commerce sector (or can be adapted to do so).

Beyond traditional commercial real estate, we see interesting, income-focused opportunities in alternative sectors. One example is senior housing, backed by a strong supply/demand imbalance in certain geographies. Whichever European opportunity you choose, when investing offshore, it is vital to have access to in-depth knowledge of local markets and on-the-ground investment and asset management expertise. Choosing the right partner provides a trusted guide to navigate new markets, as well as access to exclusive off-market investments.

Via Torino in Milan, Italy

In focus: impact of online retail The global retail sector is undergoing massive structural change with the continued rise of online shopping – and Europe is no exception. We do not see e-tailing as a threat to property, but as a necessary evolution of an additional purchasing channel. Overall, it will reduce net demand for physical shops (in Europe and globally), but we think the impact will not be as dramatic as many believe. Traditional retailers selling easily digitized products such as books, music or films were among the early losers of these technological advances, resulting in some notable bankruptcies. Online shopping with home delivery has also had a significant impact on physical stores. However, arguably much of that switch has already taken place, at least in countries with high internet penetration. In addition to these structural changes, the cyclical downturn – caused by the global financial crisis and the ensuing

recession in many countries – was also an important factor responsible for the retailer administrations and bankruptcies of recent years. The retailers who have survived are likely to be stronger and better able to adapt to changing consumer needs. Crucially, the latest trends in European retail are supportive of the continued need for physical shops. One is showrooming – when people visit shops to see, touch and try on goods which they later buy online. Another is Click & Collect – buying things online and picking them up in person, often from a shop (to avoid having to wait at home for delivery and to simplify returns). Thirdly, a large proportion of shopping in Europe is done by tourists – a trend which shows no signs of abating, but is likely to grow in line with rising world tourism. Finally, Europeans have been very reluctant to buy food online, preferring to personally select the ripest fruit, crustiest bread and juiciest cuts of

meat. That may change over the coming decades, but is not likely to any time soon.

Investment implications From an investment point of view, we believe ecommerce has created some potential weak spots, but has also left many opportunities, particularly in spaces offering convenience and/or experience: • Convenient city center locations, particularly in top tourist destinations; • Shopping malls with leisure and restaurants/bars as primary elements; • Well-established food stores with strong catchment areas; • Flexible retail space offering experiences alongside shopping; • Assets with weaker retail prospects but attractive alternative use options (including leisure, residential or even dedicated Click & Collect hubs); and • (Beyond retail) specialized logistics units, designed to best meet the needs of ecommerce in countries like Germany, France and Sweden.

For more information, please contact John Parsons, Managing Director, MacGregor Global Investments (312) 274-6800 This article presents the authors’ present opinions reflecting current market conditions. It has been written for informational and educational purposes only and should not be considered as investment advice or as a recommendation of any particular security, strategy or investment product. MAR 16 / 113403




























5 years dership ea




A Global Leader in Sustainable Property Investing

ability l in

Bentall Kennedy ranked 1st globally among its peer group in the 2015 Global Real Estate Sustainability Benchmark (GRESB)

5 Years of Sustainability Leadership We recognize that sustainability issues are material to our clients at both the portfolio and asset level. Prioritizing ESG factors into portfolio management enables us to maximize long-term investment returns by identifying risks and

out of 153 Top firm globally (Diversified sector) Bentall Kennedy

opportunities related to emerging issues such as climate change, resource scarcities and new clean technologies.


out of 22

Sustainability is a tremendous motivator and a broad catalyst for innovation at Bentall Kennedy. As one of the

Top fund globally (Diversified, office/residential sector) MEPT (Core Open-End Fund)

core drivers of excellence in our management practices, this vision








obsolescence while reducing utility consumption and strengthening relationships with tenants and stakeholders on behalf of our clients. It’s simply better business.

Top 2% 17th out of 707 participants across all sectors globally

Learn more about our sustainability programs. Visit:

Bentall Kennedy, a Sun Life Investment Management company, includes Bentall Kennedy (Canada) Limited Partnership and Bentall Kennedy (U.S.) Limited Partnership.

Vancouver has arrived. It is now perceived as an international destination in the same class as other major world cities, according to Vancouver Real Estate Forum chair Richard Weir. “It’s hard to find flaws in the Vancouver real estate market,” said the Bosa Development Corporation Executive Vice President, Real Estate and Development. “The market here benefits from a confluence of factors: Low interest rates, high levels of confidence in the Vancouver and British Columbian economies and an inundation of institutional and foreign capital. Investors see Vancouver as such a safe and stable haven that the flood of funds into local real estate assets will likely continue unabated for some time. “It’s hard to see the flow of capital stopping at any time during the next 18 months,” Weir anticipated. The metropolis’ strength is broadly based across all real estate market sectors. “It’s residential. It’s industrial. It’s office. It’s retail,” Weir enthused. “The strong increase in investor demand is matched by very healthy demand from prospective tenants. Vacancy rates in retail and industrial are very 20

Canadian Real Estate Forum / SPRING 2015

VANCOUVER Richard Weir Executive Vice President, Real Estate and Development, Bosa Development Corporation


low. Demand remains healthy - even the office sector, which has witnessed a slight uptick in vacancy rates hasn’t experienced anything like the setbacks that other cities have endured.” The influx of cash persists, despite diminished capitalization rates. “Valuations are very high but, given the alternatives, the investment community seems to have come to the conclusion that they’re justified,” Weir observed. “Investors can see that the market is bolstered by strong user demand.” The main challenge for prospective investors? Identifying quality assets to acquire. Hemmed in by the mountains to the north and east, the United States to the south and the Pacific to the west, land scarcity drives prices relentlessly upward. The problem is felt most acutely in the industrial sector, as the remaining stockpile of developable land dwindles rapidly. “The availability of land is always one of the greatest challenges in the Vancouver market,” Weir acknowledged, “which is one reason why Vancouver industrial land prices are high. Ultimately, as an industry,

we need to find opportunities to bring additional supply of industrial land on line.” This year’s Vancouver Real Estate Forum aims to challenge participants with a fresh take on its thriving real estate market. “We’ve introduced new ideas and are thinking differently about how we approach ongoing issues,” he said. “We have extended our focus beyond the traditional approach that we have adopted in past years.” Weir underscored the strength of the panelist roster at this year’s Forum. “The retail panel will take a look at the pending impact of emerging technology on the retail sector,” he said. “We have a panel that will scope out entrepreneurial opportunities in real estate. The industrial panel will address the burning issue of how to accommodate the industrial development upon which Vancouver’s economy so closely depends, despite current constraints.” “The quality of panelists whom you will hear is excellent and their outlooks will benefit all our participants,” Weir concluded. ■ Robert Frank



“If we don’t create more homes, all of housing stock will become even less affordable. The answer is to increase density.” to the east and north as well as the American border to the south, Vancouver lacks the luxury of urban sprawl. The influx has already driven prices to the point that well thought out densification remains the only option.

Greg Moore Mayor, City of Port Coquitlam

Vancouver’s thriving economy, compelling lifestyle and picturesque backdrop attracts tens of thousands of newcomers each year. Population projections predict that it could be home to 3.4 million residents by 2040, and all those people will need a place to live, observed Port Coquitlam Mayor Greg Moore. Land remains the main constraint to housing them. Hemmed in by the sea to the west, the mountains

“If we don’t create more homes, all of housing stock will become even less affordable,” said Moore, who also Chairs the Metro Vancouver Board of Directors. “The answer is to increase density.” That entails altering the longstanding reverence for the single-family home. “If you grew up in New York, you didn’t have those expectations,” he said, “unless you were willing to move far from the city. The same goes for San Francisco, London Paris and Seoul. Vancouver is now making that transition, and not just the urban core - it’s happening out in the suburbs as well.” Transit rules supreme To protect job corridors and farmland,

densification needs to concentrate along transit corridors, Moore suggested. “Metropolitan Vancouver’s 23 municipalities have teamed up to hammer out a 25-year strategy called Metro 2040,” he said. “It’s a legally binding agreement to harmonize planning and zoning bylaws in order to achieve a common vision for 21st-century Vancouver.” The region has already seen considerable densification along it rail commuter lines. “People have started to accept the relationship between mass-transit and density in in Vancouver and beyond,” Moore said. “Even where there isn’t rail service, town centres with good bus services are starting to see robust densification.” The challenge is for city halls to keep pace, he added. “They have seen a lot of building permit and rezoning requests flow through the door in very short order and are trying to keep up with all the growth.” ■ Robert Frank


“The supply chain is critical for Canada, as everyone in the country depends on trade,” reminded the Principal of Sites Economics, Richard Wozny. “Even at the local level, annually every new hundred acres of logistics buildings contributes an estimated $1.7 billion a year to Vancouver’s economy, mostly in wages.” “Logistic-oriented land laps up about 100 acres per year,” he added, urging policymakers to grapple with the issue without delay. Therein lies the problem, he said.

Richard Wozny Principal, Site Economics Ltd.

Trade looms large in Vancouver. Most Canadians don’t realize that the country’s economy relies more than twice as much on exports as trade giants like Japan and Germany. 22

"Greater Vancouver is running out of well located industrial land,” Wozny explained. “Only 1,000 acres of Vancouver’s remaining industrial-zoned vacant land is suitable for large scale international logistics, there is only a ten years supply mostly in Richmond, Delta and TFN. ” Unlike other types of industrial logistics land has certain requirements such as; flat, over five acres, in a roughly suitable configuration and with good highway access. The ideal site may be on the order to 15 or 20 acres, and located between the deep sea terminals and rail intermodal yards,” Wozny

continued. “Forcing thousands of trucks to travel outside of this area costs money and increases the carbon footprint.” “Logistics jobs are migrating to Calgary, which is currently adding 50 acres of logistics oriented development per year that should be located here.” Wozny predicted that the pace of loss to Calgary could easily reach 100 acres per year figure within the next few years, doubling the current economic opportunity cost for Metro Vancouver. “In addition to a shortage, what industrial land is left is often vulnerable to speculation and rezoning,” he observed. “Municipalities are often pressured to accommodate higher-value development projects such as residential or commercial.” “Inland ports are suitable for some imports but often not as efficient as the actual port. The most efficient supply chain would deal with a larger share of the imports closer to the port and avoid excessive numbers of international marine containers moving deep into North America and then back for the return trip to Asia. ” he suggested.” ■ Robert Frank Canadian Real Estate Forum / SPRING 2016

! CREF Spring 2016 v10.qxp 2016-03-22 10:39 PM Page 23

2016 KingSett Growth Fund KingSett Mortgage Fund KingSett Income Fund KingSett Urban Fund

$2.3 billion of tran nsactions in 2015

$1 billio on ta argeted fo or i estm inv mentt in i 2016 Relationships, Flexibility, Executio on.

Let’s talk. KingSett Capital owns interests in over $ billion of assets and is Canada’s leading private equity real estate investment business co-investing with institutional and high net worth clients using active management to create premium risk weighted returns.

416.687.6700 |


Dan Sander President, Hollyburn Properties Ltd.

Vancouver’s real estate market today is explosive, with record pricing in every asset class. That’s great news for investors but not so great for anyone in need of affordable rent. Purpose built rental properties are very undersupplied in Vancouver. “All of the supply in that market segment came on board 40 to 60 years ago,” says Dan Sander,


Chris Lawless Chief Economist, British Columbia Investment Management Corporation

President of Hollyburn Properties Ltd., who describes the quality and condition of existing rental stock as being at a crisis level. “The reality is that in this market, developers have been building condos for the last 25 to 30 years,” he says. “Nobody has built rental housing.” Further complicating matters, he says the maturation of the city has been more prevalent in the last six months than in the last six years, making Vancouver an increasingly expensive place to live. While at the moment rental rates remain affordable compared to Seattle, San Francisco and other major cities that is changing. Meanwhile, the much more plentiful condo stock affects purpose-built rental in a couple of ways: “First, the condo market drives up the cost of land,” Sander explains. “End unit pricing for condos is so high that developers can afford to pay more for land – and the higher the cost of land, the less feasible new rental construction is. But the second component is a benefit: between 20 and 50 per cent of the existing condos are rented out. We call that the shadow market; it adds shadow supply to the existing rental base.”

Chris Lawless, Chief Economist with the British Columbia Investment Management Corporation, has studied the BC economy since the early 80’s and finds the current situation surprising. Despite how poorly the commodity markets have performed, BC is leading the country in growth. “That’s simply amazing,” Lawless says, “given what happened in previous commodity downturns. In the early 1980’s the province saw the biggest recession in its history. Today, we’ve had this big decline in oil and gas prices. Forestry is doing a little bit better but not great. All the mining, metals and mineral prices are low because of weak demand from China. And yet the province is ahead.” Lawless believes economic diversity has helped. The oil producing provinces’ misfortune has boosted Ontario and BC, where the Canadian dollar exchange rate against the US has decreased from close to parity to around 75 cents. Dollar depreciation has helped non-energy exports and benefited manufacturing industries across the country. BC tourism has also started to see a turnaround.

“The reality is that in this market, developers have been building condos for the last 25 to 30 years. Nobody has built rental housing.”

That said this “shadow supply” only benefits those who can afford it. Rents in a condo building, Sander points out, can be up to 40% higher than in an older, purpose-built apartment building. On the bright side, there has been a trickle of new purpose-built projects entering the marketplace for the first time in 15 years. Hollyburn Properties, too, sees opportunity in the segment and is building new rental. Sander admits it’s not an easy proposition. “It’s still a challenge to add real supply,” he says. “Vancouver’s population base is increasing by 30,000 a year and rents are going to escalate, there’s no question.” ■ Michelle Morra-Carlisle

The film and TV production industry has been largely been driven by the currency and by government tax credits which, in BC’s case, are quite generous. Perhaps even be too generous, as the provincial government claims (given the low dollar) it pays close to 60 per cent of the costs of film and TV productions that locate here. BC might remain competitive, Lawless suggests, through new ventures such as shipping liquefied gas to Asia - for which the province has received proposals. Unfortunately this would not be as lucrative as it might have been 3 to 5 years ago; weak demand in Asia has lowered the price of gas there. Still, Lawless feels that from a regional perspective these kinds of projects would be beneficial for outside the Lower Mainland BC. Without question BC continues to be a success story, which is evident in the high migration to Vancouver. “It has become a very desirable place to live,” Lawless says, “and this is where the controversy is locally. For people who brought up their kids here, it’s becoming unaffordable for their kids to buy houses. But that’s the fate of cities that become world class.” ■ Michelle Morra-Carlisle


Canadian Real Estate Forum / SPRING 2016


“Opportunities are still everywhere, but the vanilla boilerplate stuff is gone. Anything that has income will be sought after by people willing to pay a premium for it.”

have not recovered as fast as the governments wanted. That’s why stimulus is still going on.”

Stephen Wong Managing Director, Atelier Capital Partners Inc. The Vancouver market is tight. It doesn’t seem possible for property values to rise and for interest rates to drop any further, but continued interest from Chinese capital – and a trickledown effect of global market woes – make Vancouver real estate fiercely competitive. “This is unprecedented territory for all the central banks around the world,” says Stephen Wong, Managing Director of Atelier Capital Partners Inc. “Economies


Benjamin Tal Deputy Chief Economist, CIBC World Markets China is experiencing some big changes that lead to economic uncertainty in that country. That’s the reason for a recent significant increase in money leaving China and finding its way into other markets, such as Canada. And 26

Something has to give, and Wong believes it will be demand. “Where that demand comes from, and exactly what kind of demand is in question, will depend on geographic sector and other factors,” he says. While from a general macro perspective real estate has seen unprecedented valuation gains and capital growth, Wong doesn’t think rental growth is as robust as capital growth – and that’s a concern. “Opportunities are still everywhere,” he says, “but the vanilla boilerplate stuff is gone. Anything that has income will be sought after by people willing to pay a premium for it.” Atelier Capital Partners Inc., a member of Edward Wong Group, looks for opportunities to create values with, rather than competing for an income stream that’s already there. The company doesn’t consider itself a bidder for income, but mainly a value-add

according to Benjamin Tal, Deputy Chief Economist with CIBC World Markets, “I would not be surprised if over the next 12 months you see more money leaving China.” While that can be good news for real estate in Vancouver, for example, with the flood of foreign capital coming in, Canada’s generally sluggish economy today can be attributed in part to what is happening not only in China but in other emerging economies, including Russia and Brazil. As Canada’s oil and gas industry struggles, other parts of the country will benefit. For British Columbia, Tal sees today’s lower oil prices as a positive rather than a negative. “In fact, you will see more people coming from Alberta to BC – it’s already happening – creating more demand for real estate,” he says. In a nation as large as this one, not all downturns are created equal. What’s next for Canada will much depend on the state of oil and gas, or to one’s proximity to that industry.

company. From that angle Wong says the market still offers plenty of assets worth pursuing, “but it means getting our hands dirty. We only look at our core competencies in terms of certain locations, and focus only on those sectors.” Atelier, whose parent company is headquartered in Hong Kong, started investing in North America in the mid 2000s and today operates mostly in the west coast cities of Vancouver, Calgary, Seattle, San Francisco, Los Angeles. Wong says the company’s Vancouver exposure is limited. “There are many long-term players in the game and very few sellers - so Vancouver pricing is not the easiest hurdle,” he says. Yet there’s no denying the city’s appeal to investors. “Vancouver is a beautiful city,” Wong says. “It’s the only city on the west coast of Canada and has easy access to Asia. Also, from Asia, it’s the door to Canada.” ■ Michelle Morra-Carlisle

“Look at what’s happened to the performance of REITs in Canada in the past year,” Tal says. “What our analysts have seen is the ones with exposure to Western Canada have tanked, while the ones that really aren’t so exposed to that Calgary or office market, for example, have kind of hung in there.” While confident the economy will rebound, he cautions that the process will take time. “As oil prices do recover over the next couple of years, which I think is true, we will see the return of some of the now shutdown US oil production before we get Canada back in gear,” Tal explains. “It’s not just a year or two for the Canadian economy. It’s a run of several years where oil prices, even if they recover, will be at levels no higher than $60 or $65 a barrel and therefore too low to reignite the capital spending boom that was evident in Alberta, Saskatchewan and even Newfoundland over the previous decade.” ■ Michelle Morra-Carlisle Canadian Real Estate Forum / SPRING 2016


BUILT TO LEAD. Cushman & Wakefield is a leader in the global real estate marketplace, putting the client at the centre of everything we do. With over 43,000 employees in over 60 countries. 4.3 billion square feet of space under management. $191 billion in transactions. $5 billion in revenues. Built to help clients reach their full potential.


Jim Szabo Vice Chairman, CBRE Limited, Capital Markets For real estate investors, Vancouver is an established player on the international stage. The coastal city not only has attracted Asian investors since the 1980s but also has a history of appealing to other foreign interests, including high profile German investors in recent years. Currently, American investors are exploring the Vancouver market because of the low value of Canada’s dollar. Vancouver is leading the country in GDP growth and retail sales 28

“Vancouver pricing needs to stay in line with the different international markets. If it gets beyond that, the capital is very quick to fly and will go somewhere else.” growth and has very good fundamentals. Jim Szabo, Vice Chairman of CBRE Limited, expects that to continue over the next 24 to 36 months for sure. “The city is attracting a lot of capital, both domestic and foreign,” Szabo says. “With Alberta basically on hold right now [since oil and gas prices declined], the domestic flow of capital that would normally go into Alberta is now being refocused on either central Canada or into Vancouver. And from a global perspective, Vancouver has really come on-stream as an international destination for foreign capital.” Foreign investment has held steady in Greater Vancouver at approximately 15% of the market over the past 4 years but spiked in 2015 to roughly 40% of all Land and commercial Investments over $5 million in value. He points out the main challenge in Vancouver’s markets: supply. The city has only so many properties. Building more product is always a challenge because it takes time; while the demand exists today it could take three years to complete construction of a new building. According to Szabo, the new developments now coming

out of the ground in Vancouver won’t come close to meeting demand. With abundant capital looking for a home in a fairly small market, the pressure on current assets has led to today’s unprecedented prices. “Vancouver needs to stay in line with the different international markets,” he warns. “If it gets beyond that, the capital is very quick to fly and will go somewhere else. “Some of the foreign capital that we see coming in here is also investing in Sydney, London, New York, Chicago, San Francisco, Paris and Toronto. They’re buying here because our fundamentals are good,” he adds, “but if our fundamentals go offside, meaning our leasing markets, our economy or our pricing gets out of whack, that capital will go elsewhere. Currently, Vancouver is competitive with international cities that attract foreign capital. That may change.” That said, Canadian Institutional, Public Co, Pension Funds were the largest Foreign Investor in the U.S. In 2015, capital flows continue to be Global. ■ Michelle Morra-Carlisle Canadian Real Estate Forum / SPRING 2016


For nearly 27 years we’ve been changing the definition of what is possible when it comes to residential, industrial, office and infrastructure projects. And we’re just getting started. With 11.5 million square feet of income-producing property under management, and over 8,000,000 square feet currently in the pipeline, our model for turning underutilized assets into vibrant, sustainable developments is second to none.

































Canadian Real Estate Forum / SPRING 2015

MONTRÉAL Bernard Poliquin Ivanhoe Cambridge, Senior Vice President


There’s plenty of technological and cultural talent to tap into in Montreal, according to Ivanhoe Cambridge’s Senior Vice President Bernard Poliquin. The city’s flourishing universities and cosmopolite population are key ingredients to Montreal’s future prosperity, for as long as the province’s policymakers play their cards right. “Montreal is a magnet for talent from around the world,” said Poliquin, who chairs the Urban Development Institute of Quebec’s board of directors. “Innovation and technology are thriving in this city and the workforce speaks several languages, going much beyond English and French. Montreal’s workforce is also younger than that of the United States, while the city’s immigrants are better educated than those entering the United States and have a strong connection with Montreal’s top-notch academia as well as its artistic and cultural verve. If we can manage to make them succeed, everyone wins.” Indeed, Canada attracts the most and the best-educated newcomers of any OECD country, in proportion to its population. These new comers provide the city with a workforce that is a natural fit for outward-looking and export-oriented organizations that need an educated talent base with knowledge of markets located around the globe. “Our future prosperity depends therefore directly on our ability as a society to integrate newcomers effectively,” Poliquin said. “We want to become a competitive

destination for growing sectors of the new economy and achieve growth rates similar to other large cities across the world.” Organizations such as Cirque du Soleil, Sid Lee, Stingray Music, Behaviour Interactive, and many more represent the cultural and innovative spirit that is unique to this city. It is this spirit that is the foundation of Montreal’s social environment and business community. It is the city’s unique business ecosystem that has attracted WeWork, which will open its first Canadian location at Place Ville Marie in the heart of Montreal’s downtown core. WeWork, a US$15 billion global co-working network, already has locations in the United Kingdom, the Netherlands, Germany and throughout the United States. The newly elected federal government has stressed its intention to invest significantly in the country’s infrastructure, which also spells good news for Montreal. In the medium-term, this investment, which will likely be of the magnitude of several billions of dollars, will undeniably stimulate Montreal’s economy. Moreover, this investment would be a blessing for the city’s transportation network, a network in desperate need for a revamp. This, in turn, will improve the fluidity of transportation for people, goods and services, providing a lift to Montreal’s economic potential. ■ Robert Frank



Mike Jager Business Development Director, The Montoni Group

Laval’s economy is thriving attracting a polyglot population that is growing so quickly that within a decade or so it will surpass Québec City to become the province’s second-largest city. The Montoni Group sees a prosperous future there, so it has teamed up with Fonds Immobilier de solidarité FTQ, to build the biggest megaproject that Laval has ever seen. The $420 million Espace Montmorency is transport-oriented development in its truest form. The massive multi-use facility will rise opposite the eponymous Metro station. Its 750,000 sq. ft. of office space and 250,000 sq. ft. of retail will connect with the subway by underground tunnel.

for parents and seniors – not merely the people who work there.”

as well as Laval who hitherto headed downtown for entertainment.”

The site is strategically situated beside Urbania’s 1,700-unit condo complex to the north, and the $200 million Place Bell 2,500-seat arena and 10,000-seat cultural event complex that Pomerleau is building next door.

Montoni is preparing to announce which retailers have already signed on.

“Espace Montmorency will be a place where people will bring their families on weekends,” Jager said. “There will be live music festivals. It will attract visitors from throughout the region: Families from Montreal, the North Shore and South Shore

“We’re in discussions with four potential hotel operators and three active living outlets,” Jager added. “We’re also in negotiations with prospective office tenants. The property is particularly attractive to top-tier corporate clients as well as technology firms that are attracted by the work, live and play place that we are building.” ■ Robert Frank

“It’s more than an address, it’s a destination,” said Montoni Business Development Director Mike Jager. “We’re creating a village within a village. Staff will be able to take their kids to Espace Montmorency, drop them off at daycare, head for a workout at the gym upstairs, savour a coffee and then go to work. At break or for lunch, they never have to leave the premises. If an out-of-town client visits, they don’t have to pick them up. The hotel will be on site. It will be for everyone, with as much active living as attractions 34

Canadian Real Estate Forum / SPRING 2016


ICI, L’AVENIR SE CONSTRUIT. INVESTIR ET BÂTIR ENSEMBLE Le Fonds immobilier de solidarité FTQ, en partenariat avec des leaders du secteur, réalise des projets immobiliers rentables, créateurs d’emplois et socialement responsables depuis plus de 20 ans. C’est en participant financièrement et stratégiquement à leur succès que le Fonds immobilier contribue à l’émergence d’une vision moderne du développement urbain qui sait FAIRE TOURNER L’ÉCONOMIE D’ICI.

BUILDING A BETTER FUTURE WORKING TOGETHER TO PROMOTE ECONOMIC GROWTH For more than 20 years, the Fonds immobilier de solidarité FTQ has been strategically investing with other real estate leaders in profitable and socially responsible flagship projects that create jobs. Working together to enhance our partners’ success, the Fonds immobilier is helping to define a more modern approach to urban development, with a view to DRIVE QUÉBEC’S ECONOMY.

PA R T E N A I R E S / PA R T N E R S :


Claude Sirois Executive Vice President, Shopping Centres, Ivanhoé Cambridge, North America

The Conference Board of Canada has released figures showing an expected GDP growth of 2.3 per cent in Montreal this year, up from 1.7 per cent in 2015. The report says Montreal's economic improvement will be driven by a strengthening manufacturing

sector, a rebound in construction and steady services sector gains. Both Montreal and Québec City are benefitting from a low Canadian dollar and a healthy U.S. economy. From a real estate perspective, Claude Sirois believes the city still has work to do to continue the growth momentum. “We need to support new entrepreneurs, creators, millennials,” says the Executive Vice President, Shopping centres for Ivanhoé Cambridge, North America. “We must offer performing space for performing occupants. Finally, we must continue to better promote Montreal, its advantages, diversity, and its talent and play the currency in our favour.” Montreal could outpace the national average this year after trailing it for five straight years. That said, investors, owners and developers of office, retail and multi-unit residential properties are not immune to risk. “There is still a strong demand for top quality assets,” Sirois says. “More than ever, institutional investors need to be disciplined about how they allocate capital. Capital has memory (and that’s a good thing).” He adds that the

fundamentals play a crucial role in ensuring success, and that execution and asset management will determine the winners. In terms of asset class, he believes Triple A office and Retail will remain high on the investors’ list in 2016. Asked where in the cycle Montreal is now he says, “There is a generalized sentiment that we must now manage a down cycle. A lot of liquidity remains, which may trump the leasing fundamentals. There is a fragile arbitrage between the two.” Montreal has enjoyed extensive development activity in recent years, so much that investors wonder if the city could become overbuilt. “Clearly, we’ve reached an inflexion point,” Sirois says. “There is a flight to quality but the market isn’t able to absorb the inventory fast enough.” The challenge for owners in such a market will be to achieve growth in office and retail rental rates. That, Sirois says, will require “quality of the product, eco-friendly certifications, above average service to tenants and innovative ideas to differentiate.” ■ Michelle Morra-Carlisle

Jean Rickli Senior Advisor, J.C. Williams


The internet might have diminished demand for bricks and mortar, said Jean Rickli, but it will transform stores, not eliminate them. Storefronts will still be needed, but will tend to be employed quite differently from how they were hitherto used. “Omnichannel means that you have to be in all channels,” said J.C. Williams senior advisor. “Customers have to be able to touch, feel and understand your brand.”


Canadian Real Estate Forum / SPRING 2016

STUDENT REAL ESTATE CLUBS: BRIDGING THE GAP BETWEEN THE CLASSROOM AND THE POWER DEAL Yeramian, Former President of the McGill Real Estate Club and now a graduate of the Bachelor of Commerce program with a major in finance.

Simon Yeramian Former President, McGill Real Estate Club New real estate clubs for students are springing up on university campuses across Montreal, helping to bridge the gap between the classroom and the industry. Because no real estate program was offered at McGill University at the time, student Simon Yeramian took matters into his own hands two years ago by founding his own association. “I was really interested in real estate and there wasn’t anything at McGill that offered an opportunity to network or ability to learn about the sector,” says

“Two of my friends and I got the idea to start this club so other students interested in real estate could get a better idea of what is involved. We wanted to provide an opportunity to learn more it, meet professionals in the industry and start networking with them. “As students, it was pretty hard to meet them. You could meet finance or accounting professionals, for example, but we found real estate was pretty closed off to students. Not many resources were available through the university.” The club, which now boasts more than 300 members, brings in prominent guest speakers, provides training and arranges tours of construction and development sites. In addition, through working with the organizers of the Canadian Real Estate Forums, it provides students with opportunities to volunteer and attend the Montreal Forum, and other similar conferences produced by Informa in

Québec. Yeramian, who graduated last December and recently accepted a job offer at a small real estate investment firm that invests in student housing called Werkliv, has since passed the torch on to a new President. Similar clubs at other post-secondary institutions are also flourishing and helping to bring in new blood to the industry. Over at HEC, students at the business school can learn more about the profession through ImmoHEC, another student-run real estate club. And last year, Concordia University’s Real Estate Club hosted the first edition of the Montreal Real Estate Games, a real estate case competition based on a real life real development scenario, where teams of five formulate creative solutions to the given problem. Whether by hosting a cocktail hour or inviting local professionals to share their personal successes and challenges, such clubs hold a key role in bringing awareness of the various aspects of the real estate industry to business students and influencing their ultimate career choices. ■ Barbara Balfour

“Retailers are slowly and steadily channeling their capital to bring the shopping experience into the 21st century. Today’s consumers like to investigate a product on the web, check it out in-store, then go home and buy it online.” Paradoxically, bricks and mortar will become increasingly important to sustain and promote a product, he reckoned, with prepositioned inventory giving way slick Amazon-like logistics. “Retail store have become distribution points,” Rickli declared. “It might entail a hub-and-spoke arrangement or another approach but regardless, the ability to put products on your doorstep within 24 hours of purchase is the new gold standard.” Retailers are slowly and steadily channeling their capital to bring the shopping experience into the 21st century. Today’s consumers

like to investigate a product on the web, check it out in-store, then go home and buy it online. That affects a store’s footprint, Rickli said. The warehousing-to-showroom ratio might vary but the customer is always king – so storefronts will stay the place where experts and after-sales service are available. Mixed-use premises in office towers, condos and apartment blocks adjacent to mass transit are becoming more popular, Rickli noted. Montreal’s shopping poles have also skewed demand geographically. “We have witnessed Dix30 and Carrefour Laval draw dollars away from the city core, as will the Royalmount development,” he said. “However, the buzz about Holt Renfrew’s move to Ogilvy was dampened by

Sainte Catherine Street renewal plans. It’s a healthy street that is slowly adapting. “High fashion is the latest trend in the high street,” Rickli added, “with reports of Dutch and British firms like All Saints setting up shop here. Climate remains a challenge, though, since rain and snow always deter customers.” Meantime, Montreal continues to attract new retailers, though the cost of language compliance have led Nordstrom and Saks Fifth Avenue to set their sights on Toronto and Vancouver for their first foray into Canada. “Montreal is lagging a bit but it is only a matter of time before some of these retailers show up here and make a statement,” an optimistic Rickli concluded. ■ Robert Frank 37

Manhattan’s Hudson Yards project,

He lauded Manhattan’s Hudson Yards project, which unleashed the vast potential of land value capture. The joint city, state and transit authority project raised $3 billion by issuing bonds.

and transit authority project raised $3 billion by issuing bonds. The trio succeeded based on the projected rise in revenue the city will garner by extending the New York City subway to the district. Its tax take jumped, even before construction commenced on the first office tower, which is slated for completion this year. “Hudson Yards is a fine example of land value capture at its best,” Raymond declared. “Other jurisdictions should seriously consider this approach for future projects. The greater the investment, the greater the return that they can achieve. Everyone wins.” Though land value capture remains in its infancy in Canada, many American cities other than the Big Apple have already adopted the approach.

EVERYONE WINS! IT’S TIME TO TIE INFRASTRUCTURE TO VALUE-ADDED The fiscal and financial worlds once trod their own separate paths, barely aware of one another.

Philippe Raymond Partner, Ernst & Young

Today, the trend is to acknowledge the increased worth of property in the vicinity of infrastructure developments and tie that added value to the additional tax revenue that it will generate, once it is complete. That’s a boon to cash-strapped administrations chary of infrastructure’s eye-watering cost. “It’s a win-win proposition,” said Ernst & Young Partner Philippe Raymond. “In some cases, it will be the deciding factor that will make the difference between proceeding with a project or abandoning it.” He lauded Manhattan’s Hudson Yards project, which unleashed the vast potential of land value capture. The joint city, state


“Tax increment financing (TIF) is an example of land value capture mechanism,” Raymond said. “A portion of the revenue increase is specified to pay for the project. Likewise, some jurisdictions designate Local Improvement Districts, where a special tax is imposed on the area that will benefit. In addition, development rights are sometimes levied on developers, who ultimately benefit from the infrastructure improvement. Other countries around the world are following suit. It’s only a matter of time before we see this in Canada.” Transit oriented development is an obvious example of its application, but land value capture mechanisms can be applied to most forms of infrastructure, such as recreation centres or other infrastructure that benefit citizens. Everyone gains, so it’s a virtuous circle. “The common criterion for all these projects is for the investment to generate value for people who will want to live near that infrastructure”, he explained. ■ Robert Frank Canadian Real Estate Forum / SPRING 2016

At the epicenter of Manhattan’s New West Side, Hudson Yards is the largest private real estate development in the history of the United States and the largest development in New York City since Rockefeller Center. It is anticipated that more than 26 million people will visit Hudson Yards every year. The site will include over 17 million square feet of commercial and residential space, 5 state-of-the-art office towers, more than 100 shops anchored by New York City’s only Neiman Marcus, a collection of restaurants including world class Chefs Thomas Keller, José Andrés, and Costas Spiliadis, approximately 5,000 residences, 14 acres of public open space, and an Equinox® branded luxury hotel. Hudson Yards will be home to leading brands Coach, L’Oréal, SAP, HBO, CNN, Time Warner, VaynerMedia, BCG, KKR, Wells Fargo Securities, Intersection, Sidewalk Labs, and Boies, Schiller & Flexner.


Nektar Diamantopoulos Senior Vice President, Debt and Structured Finance, CBRE Limited, Capital Markets The lending market in Montreal has become very aggressive – for those who find the right deal – compared with other Canadian markets, according to Nektar Diamantopoulos, Senior Vice President, Debt and Structured Finance, CBRE

Limited, Capital Markets. “In other markets,” he says, “it just seems like it’s really difficult because valuations are really high right now and rental growth hasn’t followed.” In Calgary, which has thrived for years, oil has started moving south, causing layoffs and making lenders nervous. Vancouver properties have grown so pricey they’re difficult to underwrite. Toronto has lots of diversification from the suburbs to downtown, “but in Montreal you have a lot more opportunity, and it’s a lot easier to underwrite a deal,” Diamantopoulos says. “There’s more cash flow.” A quasi negative for Montreal, one of the oldest industrialized cities in North America, is its older inventory. When older product gets to a certain age limit it often falls behind and turns into B-product, which lenders tend to avoid. That said, many property owners are doing improvements both downtown and suburban, to hotel, multi-res and senior properties. “Some are teaming up with big institutional capital and putting together capital expenditure programs to improve the real

estate and/or build new to diversify risk in terms of property age,” he says, adding that although Montreal has experienced a shortage of new product, that’s changing. In particular, a lot of senior development is in progress. New hotels are under construction for the first time in years. And mixed use condo developments “have been going up like crazy,” he says. Also changing the tides is Alberta’s struggling economy, which has lenders taking a closer look at other markets, including Montreal. Finally, Diamantopoulos is optimistic that the three levels of government are working together to improve Montreal’s economy and infrastructure. “We’re slowly getting back into more of a balanced market coast to coast, which is how it should be. Montreal is the second largest market in Canada in terms of real estate inventory but it was probably getting third to fourth place finish in terms of capital allocations for mortgages,” he says. “That’s changing and it’s a great story for everybody.” ■ Michelle Morra-Carlisle 39

5:56 PM

Tuesday, May 10, 2016 Metro Toronto Convention Centre, North Building

Chaired by: Brian McCauley x Concert Properties Dermot Sweeny x Sweeny &Co Architects Inc. NEW FOR 2016 - CHAIRS’ RECEPTION 9 May 2016

Title Sponsor

Chairs’ Reception

AltusGroup Platinum Sponsors

To register, sponsor or for more details go to: or email


commercial complex adjacent to the intersection Highway 10 and Highway 30 proved so popular that they were almost immediately populated by Triple-A tenants.

“We can dig very quickly on the same site,” Sanscartier enthused. “All the infrastructure, electricity, water and so forth is set up to erect another building there.”

“It confirmed the decision that we made at the outset,” Sanscartier smiled. “We attracted top clients – banks, engineering, accounting and insurance firms, pension and investment funds – the crème de la crème.

It would be hard to beat the value anywhere in the Montreal region. Jonxion offers LEED premises situated next to quality restaurants and the wildly popular Dix30 shopping megamall next door.

That gave Galion a problem most real estate magnates would love to have: prospering tenants.

Yves Sanscartier President, Galion Gestion Développement Immobilier Galion Gestion Développement Immobilier President Yves Sanscartier likes to look at the long term. So when he read the analyses of Montreal’s South Shore real estate market, he spied ample opportunity. His instincts and rationale proved sound. Galion’s Jonxion 40

“We looked at our client base and realized that if our clients wanted to expand, they would have to go elsewhere,” he said. “It’s a nice problem, but a predicament. We want them to thrive, but we can’t afford to lose them.” Sanscartier’s answer? Grow with the clients. “It provided for continuity,” he said. Our clients also could see that the population is growing. So we added another 125,800 sq. ft. facility.” Galion has also made provision in case a major renter comes along. It can use its experience and existing plans to build an almost identical on land that it owns alongside its existing complex.

“Businesses want that visibility,” Sanscartier said. “They get first-rate quality of life in a luminous setting with amenities like showers, bike racks and bike paths through green spaces that we have set aside. All that for a gross rent of about $30 a square foot that compares with the price of B-class properties in Montreal, where parking is a challenge. Jonxion, in contrast, offers tenants free indoor parking. The coming reconstruction of the Champlain Bridge also appeals to commuters who want to avoid the impending traffic tie-ups. “Our lessees are quite pleased to be on the South Shore and not have to fight their way across the bridge every morning,” Sanscartier concluded. ■ Robert Frank Canadian Real Estate Forum / SPRING 2016


automation. Today, you use a switch to turn on a light. That might no longer be the case.”

their own domains,” he forecast. “Often, it will be purpose-built.”

Nerandzic is in a position to know. Ericsson Canada’s chief technology is designing the networks that will accomplish this.

Ericsson has operated in Canada for more than six decades and set up its more than 2,000-strong research and development centre in Montreal more than a quarter-century ago.

“It took about 130 years for human civilization to wire all its buildings for telephones,” he said. “In 2015, we reached another milestone: connecting everyone on the planet with mobile service. That took just 25 years. With 5G, the next step will connect devices – everything with a microchip will be linked. In addition to inexpensively connecting devices, 5G will also offer much faster and more reliable connections, exchanging data in gigabits per second.

Dragan Nerandzic Chief Technology, Ericsson Canada Brace yourself for the internet of things: The next generation of telecommunication devices are about to trigger another technology revolution. “Fifth-generation (5G) telecoms will trigger a deluge of disruption in a host of industries,” predicted Dragan Nerandzic. “That includes real estate, since buildings will soon become easier and less expensive to operate by remote

“That will permit remote machinery operation and virtual reality to support operations,” Nerandzic explained. The advances are based on cloud computing. Ericsson is building three giant processing centres to handle all the data. The only one outside the telecom giant’s native Sweden is currently under construction just west of Montreal. “It will lead industries – not just telecom companies – to develop new business models and new ways of doing business in

“Most of the mobile technology that we use every day on our smartphones was empower by the people who developed it here in Montreal,” Nerandzic said. Ericsson nonetheless undertook exhaustive studies before deciding to stake its cloud computing capacity in the Montreal region as well. Physical and geological factors played a part. Earthquake zones and flood plains would pose a problem. Montreal’s access to infrastructure, political stability as well as its cheap and abundant hydro power and cool climate – which limits the need to air condition – were also advantages. People mattered too. The city’s educated workforce and many universities and research facilities proved a powerful magnet. “All those factors came into play in settling on Montreal,” Nerandzic affirmed. ■ Robert Frank

40 Speakers x 400 Attendees x 395 $ + taxes Register at

April 27, 2016 x Fairmont Le Château Frontenac



Questions? Call 416.512.3807 x Email



Jonathan Wener Chairman and CEO, Canderel Group of Companies Jonathan Wener, Chairman and CEO of Canderel Group of Companies, recalls having had $5000 in 1975 and needing to borrow another $10,000 to start doing deals. A fortunate transaction soon earned him a profit of $50,000 that became the


Lloyd Cooper Vice Chairman of Office Leasing, Cushman and Wakefield

With vacancy rates reaching 10 per cent last year, the Montreal office market is currently geared towards tenants, says Lloyd 42

start-up capital for Canderel, which today celebrates 40 years of real estate excellence. Werner attributed his success to the care that he has taken in choosing his partners. His recipe for success boils down to three rules: 1. You have to like the people whom you’re doing business with; 2. You have to have fun; and 3. You have to make money. “If one and two aren’t here, you rarely get three,” he said. “Relationships are very expensive to establish but extremely efficient to lever. You achieve huge savings in time and energy and turn your attention to the market. That true of all your relationships, including with your tenants.” Asked how real estate was in the early days, Wener recalls his time as Senior Vice President of First Québec Corporation. “From 1980 to 1989 we did 40 projects and mortgaged out on 100% of them,” he says. “Today that’s not so easy. “Today it’s far more institutional. There’s an awful lot more money in the marketplace and all chasing the same deals. Yields have gone

Cooper, Vice Chairman of Office Leasing for Cushman and Wakefield. However, this will change in the next couple of years, he says. “It’s currently close to bottoming out. We’ve seen it as low as it’s going to go, and so we won’t see it solidify into a landlord’s market until 2017 or 2018.” While there is a significant amount of new product to be unveiled, it’s a non-issue since most of it has already been leased. “Half of the Manulife Towers have been leased out to Manulife, and three or four deals being negotiated by Ivanhoe Cambridge may fill them by up to 90 per cent by early 2017,” says Cooper. Tenants on the move create opportunities in less expensive spaces for new occupants – and for landlords to refurbish them in order to attract new talent. When Deloitte emptied a 190,000 square feet space in Place Ville-Marie complex, it gave landlords a chance to strip out its floors and take out its asbestos, in addition to upgrading electrical and HVAC systems and leveling the floors. “There is still some asbestos in the older buildings, and the tenant has to move out for

down dramatically, both on the development side and on the acquisitions side.” Wener’s portfolio includes many milestones and memories. For instance, he was “numb from nervousness” and his hand was shaking when he signed a $65 million cheque for the Royal Trust building. Today his company has a few mega projects in the works, including almost 6 square miles in Texas, south of Austin, and a 1200-acre project on Calgary native land. “The buildings seem to get bigger. The projects keep getting bigger,” he says. “It keeps me up at night.” None of this would be possible without a solid team. Canderel prides itself on its group of well-respected senior executives many who have been with him for more than 25 years. To ensure continuity, Werner involves younger real estate executives in the planning process. Wener advised, make up “a very tight team that’s very decisive and very inclusive. We make sure everybody is learning along the way.” ■ Barbara Balfour

it to be completely eradicated,” says Cooper. “Now that space envelope is like a brand new space - it’s a constant investment in capital.” When Stikeman Elliott chose to renew their space, they did so under the condition their landlords would upgrade their air systems, change the lobby, and redo the building envelope. “All those capital improvements were part of the deal,” says Cooper. “Other companies will be able to do the same if they choose to renew their lease. In downtown Montreal, absorption has received a boost from younger high-tech companies that are growing dramatically and have recently gone public, such as Shopify and Stingray. “They’ve occupied a lot of space very quickly,” Coopers says. “And then you have the entry of WeWork into the market, which took 80,000 square feet at Place Ville Marie right away. That’s pure absorption—a tenant that wasn’t in the market and is coming in to lease space for the first time.” ■ Barbara Balfour Canadian Real Estate Forum / SPRING 2016

Building cities relies on a collaborative vision. We appreciate the trust placed in us by Canada’s cities. On the strength of such confidence, we continue to be a leading innovator in real estate development and management, imagining spaces where residents and businesses can flourish.































License # 10172

Romspen Investment Corporation is a non-bank mortgage lender specializing in commercial real estate across Canada and the United States. With over $1.5 billion under administration, we offer customized mortgage solutions for term, bridge and construction financing from $4M to $100M.

GRANITE? GLASS? STEEL? ALL BUILDINGS ARE MADE WITH MONEY. Blake Cassidy 800 494 0389 or Sylvia Demirdjian 1 514 972 5933


Canadian Real Estate Forum / SPRING 2015

EDMONTON Brandon Kot Managing Partner, Canada ICI.


As the world enters its 20th month of a precipitous decline in oil prices, Brandon Kot is surprised at how resilient the Edmonton market has been so far. “In 2015, the province gave up more than 60,000 full-time jobs inside of a 12 month period - that will have an impact on any market, and it has been particularly drastic for the Alberta economy,” says Kot, the managing partner at Canada ICI. “The commodities sector also drives the health of the national economy and we are just seeing the impact on how much the continued slowdown in oil has impacted Canadian economic growth” Edmonton has fared reasonably well during this period bottom cracks have formed in the market, although regionalized to specific asset classes directly connected to oil and gas industry. “We’re definitely nearing the trough of this commodity cycle but the real question remains, how much longer are we going to be in this pricing environment and how much more resilient can the Edmonton market be?” Kot credits the ongoing major capital projects in the city for shielding Edmonton from some of the direct pain to which other markets have been exposed. “Edmonton is very much a government town with a strong industrial base. The growth of the large industrial sector is based on the operations and maintenance side

of the oil and gas industry which has continued on we’ve been benefactors of that,” says Kot. “A handful of major infrastructure projects happening in the Edmonton Capital Region right now are keeping our construction base active. The Northwest Upgrader, The arena district, for example, has been a tremendous blessing, and is keeping over 6,000 trades people active on site on a daily basis between those two projects alone We’ve got another 12-18 months of major capital projects to get us through; and then we’ll see how much more resilient our market will fare after they conclude.” The development Edmonton has seen within its downtown core within the next 24 months will reposition the city in a new light, says Kot. “These new projects have given us a renewed sense of confidence and represent an important part of the growth and maturation as a city.” Kot strongly believes that opportunities lie in times of uncertainty or a sense of caution in the market, and urges those in the industry to take action by becoming a student of the market. “If you’re getting the market cues through headlines in the press, you’re too late; this is such an important time to get informed, to engage in discussion with the professionals on the ground, to look for ways to manufacture opportunities.” ■ Barbara Balfour


NAIOP: MOVING COMMERCIAL REAL ESTATE FORWARD At NAIOP, we empower investors, developers and owners of commercial real estate to advance their businesses and careers. Our members span the industry – retail, office, mixed-use, industrial, multifamily, hotel and more – and our powerful

chapter network unites members across North America. At NAIOP, you have unlimited opportunity to connect with the dealmakers and visionaries who are shaping our industry, both locally and across the continent.



Darin Rayburn CEO, Melcor REIT

The CEO sets the tone, counsels Darin Rayburn. That’s easy to say and do when the good times roll, but it takes a true leader to navigate troubled waters. “The demeanor, actions and language of a leader during those downtimes is the weathervane for the rest of the staff,” said Melcor REIT’s CEO. “You have to remain honest, acknowledge the 48

challenges and rally them around the fact that the greatest opportunities arise during the toughest times.” Too many leaders obsess over where they are in the current business cycle. Rayburn advised them to step back, take a broader view of the economic tumult to spot lucrative deal opportunities. He recalled how real estate leaders whom he worked with early in his career inspired their teams by sharing their own experiences of adversity – and how they capitalized upon it. “I witnessed how they reacted,” Rayburn recollected. “They were good mentors, though I didn’t realize how good they were at the time.” Experience also proved a proficient teacher. “I made some mistakes along the way,” he admitted, “especially back in the 1990s.” “We could have bought some real estate at fantastic prices but my ego got in the way,” Rayburn reminisced, highlighting the potential pitfalls of protectiveness. “The five per cent more that I declined to spend would



today have been worth exponentially more.” Edmonton continues to thrive, he observed, though Calgary has faced a different lot. “Despite their proximity, the cities are in two different worlds,” Rayburn said. “Calgary always gets hit earlier and recovers more rapidly. It remains to be seen whether an additional hit to Edmonton is merely delayed or if we have already passed through most of the setback.” That poses opportunities for newcomers to the real estate industry, he added. “Get out there and make something happen,” Rayburn urged. “This is a people business. You’ll be top-of-mind if you do something memorable.” He also encouraged entrants to sound out today’s real estate movers and shakers for advice. “A ton of people have thrived through these cycles,” Rayburn recommended. “Phone them.” ■ Robert Frank Canadian Real Estate Forum / SPRING 2016

HOW TO GET YOUR TEAM’S ENERGY PUMPING WHEN THE OIL ISN’T “That’s where we find our inspiration. It takes an adjustment to appreciate how much our clients expect us to be there for them in a gloomy economic market.

Cory Wosnack Principal, Avison Young

Whether times are good or bad, there’s always a requirement for strategic thinking with commercial real estate transactions, says Cory Wosnack, Principal with Avison Young. “While it’s a lot more enjoyable working with happy clients with robust businesses in a booming industry, when the opposite is true they count on us more than ever,” says Wosnack.

“There have been very few occasions that young people in the business for less than 10 years have had to work in this kind of environment. They’ve had to learn to focus on relationship building first, to put their priority on providing strategic advice, and to forget about the deal.” Many deals later in Wosnack’s career, he looks back at his portfolio of work with a great deal of excitement. “Knowing you’ve changed a neighbourhood, a community, or the lives of a business owner and their employees, speaks to the long-lasting impact of the work we do. “People fall in love with this business - most people stumble into commercial real estate and decades later, they find it’s one of the longest standing relationships in their lives.”

Despite forecasted increase in vacancy rates due to new construction, Wosnack cautions against market pessimism in the next 24-36 months. “What is often forgotten is that the leases for the space currently occupied by these tenants won’t expire until two to four years from now. “We will be seeing a very different marketplace and perspective of what the economy has to offer at that time. In the interim we have room to continue improving on the marketplace.” Owners of existing office buildings will have to rethink their approach to get their spaces leased and their tenants happy. “It’s similar to what’s happening in the hotel industry – the J.W. Marriott coming into Edmonton will make the Westin and the Fairmont better, while the customers will like the effects of existing inventory raising their game, such as more amenities, better pricing and quality. It raises the game. No one likes being told they have to raise their game, but it will certainly result in a better outcome.” ■ Barbara Balfour

BLANKET MORTGAGE $125,000,000 Hotels and condominiums - Richmond, BC



$43,500,000 Vacant land for future seniors housing complex - Gatineau, QC

$47,000,000 and $73,000,000 Industrial units - Edmonton, AB

Diverse commercial properties. Complex customer needs. Simple title insurance solutions. FCT. When key players in commercial real estate need to ensure their complex deals close on time and according to plan, they choose FCT as their title insurance provider. 25 years ago we set the bar for success high and have been raising that bar ever since.

Make it your best practice — choose Experience Excellence™ and trusted leadership every time.

X ® Registered Trademark of First American Financial Corporation. ™Trademark of First American Financial Corporation.



Harbour Equity capital corp.

Dave Young Executive Vice President and Managing Director, CBRE Limited

After a slow 2015 and a slow start to 2016, many investors continue to wait and watch. “People are trying to figure out what pricing is going to do given the state of our economy and how to price that potential risk into a deal,� says Dave Young, Executive Vice President and Managing Director of CBRE Limited. He says the strongest market today is multi-family, in terms of activity, while supply is low in Edmonton’s business, office, retail and industrial sectors.


“Investors are willing to buy in Alberta but not at historic prices,� he says. “Should vacancies start to increase or people start to leave the province, or should we see decreased in-migration, how will that impact retailers, industrial tenants and rental rates?� The impact of what happens next will depend on asset class and owner. A private owner with a vacant building and a large mortgage might have problems but, as Young points out, much of the office and large retail and industrial properties are owned by pension funds. “They’ve got significant staying power,� he says. “So would you sell at discount if you believed that, in the long term, Alberta will come back?� In terms of industrial, he says the difficulties lie mostly with the heavily oilfield or energy related portfolios, because those are the sectors where layoffs have occurred. “The closer to the drill bit you are, the more challenging your leasing is and the more problems you will probably experience as the year goes forward,� he says. As for retail, he says it remains strong with the possible exception of fashion. As Albertans continue to buy food, medicine, and liquor, these types of businesses command decent pricing. Despite last year’s closures of Future Shop and Target, retail vacancy in Edmonton is at just 4.5 percent. Without venturing an economic forecast, Young stresses that the “good� oil and gas companies—those with strong balance sheets—are still going okay. And he sees an upside to this uncertainty: “I think if unemployment goes up you’re going to get better quality workers, and people will get more efficient with their real estate and with their salaries,� he says. ■Michelle Morra-Carlisle


Canadian Real Estate Forum / SPRING 2016


Harbour Mortgage Corp. Phil Milroy President and CEO, Westcorp Keeping an organization motivated through an economic cycle requires focus. Phil Milroy, President and CEO of Westcorp advises real estate investors to concentrate on what they do best and understand the economic changes that are underway. “Stay focused on the value proposition you bring,” Milroy says, “and mitigate the fact that your income stream could be lower than it was before. To protect the value of your property as much as you can, you have to take apart every part of your organization. See where it’s very good and do more of that, and see where you can do better and correct it.”

Creative Commercial Real Estate Lending Solutions Across Canada

$650M in mortgages under management Reliable Funding • Solutions Driven

After Canadian oil and gas prices plummeted in late 2016, Milroy says, Edmonton’s residential rental market “started to see a few cracks” in the poorer properties mid 2015. The better properties have now just barely started to be affected. “Edmonton has actually performed quite well thus far,” he says. What happens next will depend on employment, and how many layoffs occur. Employment will also determine the degree of migration in and out of Edmonton. When the economy rebounds, Milroy believes that the surviving firms will come out stronger than before. He adds that young professionals entering the field today will benefit from a valuable time to learn. “It is going to be a more competitive environment for the next little while than what they will probably have to contend with for the majority of their career,” he says. “Becoming really well equipped to deal in a tougher competitive environment will stand them in really good stead in future.” Asked which homes will interest the next generation - whether apartments or highrise, midrise or lowrise condos - he believes in letting the market decide. Whatever happens, he is confident that the next 18 to 24 months in Edmonton will be transformative. “The millennial generation is significantly more conscious of being kind to the planet,” he says. “They want less commute in a car and more on foot or by public transit. They want less waste, less wasted space, more common space. We see opportunities to increase the amenities of any residential building but decrease the size of units, which seems to have gone over really well. Downtown Edmonton is coming alive.” ■ Michelle Morra-Carlisle

Ontario: Neil McCutcheon (416) 361-3315 x233

Pierre Leonard (416) 361-3315 x247

Quebec: Chantal Morin (514) 461-2150 x227

Western Canada: Chris Hudson (587) 352-9441 FSCO Lic #10290



John Rose Chief Economist, City of Edmonton

Alberta’s capital continues to thrive amidst the economic gloom according to the City’s Chief Economist John Rose. “Edmonton gained 27,000 jobs in the past month and continues to see employment and job growth,” said Rose.

“Bottom line is that the Edmonton economy is strong,” Rose affirmed. “This is not Calgary, Red Deer or Fort McMurray.” The improvement stands in stark relief to the rest of Alberta, where net job losses have spurred outmigration.

“Bottom line is that the Edmonton economy is strong,” Rose affirmed. “This is not Calgary, Red Deer or Fort McMurray.”

“Edmonton’s economic performance is among Canada’s strongest, just behind Toronto and Vancouver,” he explained. “Housing starts and sales might slow down a bit next year, but the economy should still grow by up to one percent, which will be quite a contrast with the rest of Alberta.”

The main risk is if energy prices fail to rebound. That would force the provincial government to trim expenditure.

Why? Very little of the local economy is tied to the energy sector and up to a quarter of the workforce relies on Edmonton’s big-three employers: education, health care and the public sector. In the meantime an $8 billion construction project to build a bitumen upgrader in nearby Redwater started in 2015 – perfect timing to take up slack from the energy slump. Consequently, sales of homes and major consumer items like cars remains firm, though Edmonton has seen a slight slackening in demand for discretionary services like restaurants, bars and entertainment.

“Up to a quarter of Alberta’s revenue stems from non-renewable resources,” Rose reminded. “That has drilled a deep hole in the provincial budget. There is limited appetite here for deficit spending and Alberta’s credit rating has already been downgraded. Should the government opt for cutbacks, Edmonton’s big-three employers will be in the crosshairs. That would hit the economy quite hard.” The immediate risk, he concluded, is that people get spooked by what is going on elsewhere and pull back on housing purchases. “Bottom line is that we need improvement in energy prices,” he said, “but Edmontonians need to remain focused on the fact that the economy is still strong here.” ■ Robert Frank

Employment Growth by Region Jan 2014 to Jan 2015, 3 Month Moving Average • Sources: City of Edmonton

Edmonton Lethbridge - Medicine Hat Alberta Wood Buffalo - Cold Lake Calgary Camrose - Drumheller Red Deer Banff - Jasper - Grand Prairie -10.0% 52








Canadian Real Estate Forum / SPRING 2016

Tailored Your transactions have specific needs. At Stewart Title, we have the commercial and title insurance expertise to provide solutions that fit. Have a standard commercial transaction that requires a ready-made policy? Or perhaps you have a truly complex deal that needs a customized solution? We help close your deals on time with the right coverage for the risks involved. Work with the partner that provides solutions fit to your needs. Call (888) 667-5151 or visit

© 2016 Stewart. All rights reserved.


Melanie Ducholke CFO, Camgill Enterprises Ltd.

Downtown Edmonton is experiencing significant development activity and consequently, employment in the construction sector, due to the new arena and Kelly Ramsey office tower in the works. Outside the core activity has slowed, however, though not a the pace of Calgary.

“Land costs are holding well because there haven’t been many transactions involving people short-selling their land, but that could change.” “In terms of residential development, Edmonton has generally done a pretty good job of not overbuilding,” says Melanie Ducholke, CFO of Camgill Enterprises Ltd. “On the other hand, banks are saying they do have housing developers taking a look at spec homes that are sitting on the market, and they’re getting to that 12 to 18 month period where they have to start paying back loans on them. Do I think we’ll have enough in-migration to backfill our product? I don’t know.” Construction costs and land costs are trending upward. According to Ducholke, people are hanging on to land until they absolutely can’t afford to anymore, or will hang onto it if they’ve put a lot of infrastructure into it, and wait until the market turns around. Land costs are holding well because there haven’t been many transactions involving people short-selling their land – but Ducholke believes that could change. As for construction costs, she says, “I’ve talked to some project managers that have

said when they’re putting out pre tenders they’re getting differentials of up to 25% between the top and the bottom. That shows that a shift is starting on the contractor side. If you’re a preferred contractor or a preferred general contractor, I think you’re only seeing a slight downward pressure on the construction cost side, but the underdogs are definitely coming in and short cutting their budgets and tenders.” Will the current downturn bring opportunities to Edmonton? Ducholke isn’t sure, given how volatile the market is today. “We do have healthcare and education, but how far can it take us?” she says. “Canada just in general has such a small population, and it’s typically is more expensive for people to set up big businesses here that draw a lot of people and create money and capital within the country. We’ve always been a resource based economy.” ■ Michelle Morra-Carlisle 53

SPRING 2016 / ISSUE 71

Include the Canadian Real Estate Forum Magazine in Your Marketing Strategy Now and Reinforce Your Organization’s Message to this Key Audience! Your Unique Opportunity to Reach Over 5,000 Influential Real Estate Professionals in Canada’s Commercial Real Estate Sector 1



Readers include Decision Makers from: • Public and private real estate organizations • REITs • Federal and provincial governments WWW.REALESTATEFORUMS.COM

Three Annual Editions Focusing on the Following Key Markets: Spring: Montréal • Vancouver • Edmonton

• Pension Funds and pension fund advisors • Brokers, law firms and other intermediaries • Banks, trust companies, life insurance and other financial institutions • Corporate real estate executives aligned to many major Canadian organizations

Fall: Ottawa • Calgary Winter: Canada-wide • Global


Interested? Connect with Frank Scalisi T: 416-512-3815 E:

BONUS! Receive Ongoing Exposure through the Online Digital E-magazine on the Real Estate Forum Website ORGANISED BY

: : :

TAKE ADVANTAGE OF OUR UPCOMING EVENTS Canada’s Leading Real Estate Conferences Listen to Industry Leaders x Learn About the Latest Trends & Strategies x Build Your Network


Land & Development May 10, 2016 x Metro Toronto Convention Centre, North Building

April 27, 2016 x Fairmont Le Château Frontenac

EDMONTON REAL ESTATE FORUM May 12, 2016 x Shaw Conference Centre

WINNIPEG REAL ESTATE FORUM May 17, 2016 x RBC Convention Centre


Calgary Real Estate Strategy & Leasing Conference May 31, 2016 x Calgary TELUS Convention Centre

Global Property Market - NYC June 1 & 2, 2016 x Javits Center, NYC, USA

Canadian Apartment Investment Conference September 7, 2016 x Metro Toronto Convention Centre, North Building

October 19, 2016 x Ottawa Conference & Event Centre


September 8, 2016 x Metro Toronto Convention Centre, North Building

October 25, 2016 x Calgary TELUS Convention Centre

TORONTO REAL ESTATE FORUM November 30 - December 1, 2016 Metro Toronto Convention Centre, South Building

RealLeasing October 6, 2016 x Metro Toronto Convention Centre, North Building

Montréal Real Estate Strategy & Leasing Conference October 25, 2016 x Palais des congrès de Montréal

MONTRÉAL REAL ESTATE FORUM March 28, 2017 x Palais des congrès de Montréal

Vancouver Real Estate Strategy & Leasing Conference November 1, 2016 x Vancouver Convention Centre East

SASK ATCHEWAN REAL ESTATE FORUM April 20, 2017 x Queensbury Convention Centre, Regina

VANCOUVER REAL ESTATE FORUM Spring 2017 x Vancouver Convention Centre West

Global Property Market - Toronto November 29, 2016 x Metro Toronto Convention Centre, South Building

Québec Apartment Investment Conference February 16, 2017 x Palais des congrès de Montréal



June 1, 2017 x Halifax Convention Centre

February 28, 2017 x Metro Toronto Convention Centre, North Building

For details on these conferences and to register online visit Sponsorship and advertising opportunities available. Contact Frank Scalisi at or 416-512-3815


Canadian Real Estate Forum / SPRING 2016

Calgary Industrial

Address: 5775 & 5855 11th St. S.E. Price: $8,150,000 Price/sq.ft.: $82 Purchaser: Standen’s Limited Brokers: Avison Young

Edmonton Industrial

Address: Centre 51 Price: $13,964,000 Price/sq.ft.: $135 (adjusted) Cap Rate.: 6.7% Purchaser: Guardian Capital Group Limited Brokers: Avison Young


Vancouver Office

Address: Metrotower III Price: $204,900,000 Price/sq.ft.: $499 Purchaser: Greater Vancouver Water District

Toronto Retail

Address: 8855 Woodbine Ave. Price: $20,180,000 Price/sq.ft.: $456 Cap Rate.: 5.1% Purchaser: Apple Cheer Inc. Brokers: Colliers International Property Consultants Inc.


Canadian Real Estate Forum / SPRING 2016






Total Price





1200 Bay St.

ProWinko Canada Ltd. & Kroonenberg Group


89,886 sq.ft.




2879-2965 Bristol Circle

LPF Realty Industrial Inc.


448,077 sq.ft.




205 & 207 Morningside Ave.

Minto Group


214 units



Res Land

363-391 Yonge St.

Cresford Developments


0.824 acres




1424 West Broadway

Value Property Group


7,756 sq.ft.




Vallejo Court

Lotus Pacific Investments


41 units



Res Land

1745 West 8th Ave.

Delta Group


1.300 acres



Res Land

1301-1325 Davie St.

Intracorp Developments Ltd.


0.397 acres




5268 Memorial Dr. N.E.

Intergrated Asset Management Corp.


16,141 sq.ft.




1115 9th St. S.W.

Hydro-Quebec (50% interest)


158 units



ICI Land

8945 38th St. S.E.

Remington Development Corporation


30.950 acres



Res Land

Legacy Blvd. & Legacy Main St. S.E.

Legacy Park Ltd.


7.440 acres




17007 111th Ave. N.W.

Automotive Properties REIT


38,578 sq.ft.




11211 Winterburn Rd. N.W.

PBR & R Holdings Ltd.


52,592 sq.ft.




Aurora at Summerside

Bentall Kennedy


125 units



ICI Land

127-354 Sturgeon Cres.

Gowan Agro Canada Limited


40.080 acres



By Michael Brooks CEO, REALpac

It is sometimes hard to square the rhetoric of senior level governments about enhancing productivity, attracting innovative new businesses, growing current businesses, and improving regional prosperity, with the cost and delays associated with local development. Planners and politicians are quick to take the credit for city building, and to be fair, the planners at least are looking long term. The politicians may just be looking to the next election. If you don’t vote, you don’t matter. All of those new businesses of course need real estate: they need houses, they need apartments, they need offices, they need industrial buildings, and those employees need retail and a variety of municipal services. The construction and real estate sector generates some $63 billion in annual economic activity in Canada, including 340,000 jobs, and $32.4 billion in total net contribution to Canada’s GDP in 20111. One would think municipalities in Canada would all want a piece of that. So why does it take so long and cost so much to get approvals to build those houses, apartments, offices, and industrial buildings in many Canadian cities? Why would it take more than 12 months in Toronto, Winnipeg, Montréal, and Halifax to process an official plan amendment, when Edmonton, Regina, Saskatoon, and Ottawa


can do it between 4 and 6 months? Why would it take more than 12 months in Toronto, and between 7 and 11 months in Calgary, Saskatoon, Winnipeg and Halifax to do a zoning bylaw amendment, when Vancouver, Edmonton, Regina, Ottawa and Montréal can all do it between 4 and 6 months? Why do 6 of 10 major Canadian cities not even have a target for the processing time of an official plan amendment or a zoning bylaw amendment, and 5 of 10 have no processing timeline target for a plan of subdivision or plan of condominium? 2 Why does it cost between $38,000 and $115,000 (standalone retail $38,000, standalone office $81,000, standalone industrial $181,000 and Mixed Use $115,000) to get a zoning bylaw amendment in Toronto, when in Halifax it’s $330 across the board, in Winnipeg $1500 across the board, and in Edmonton from $2200-$5000? Even Ottawa seems an outlier at $15,000 across the board compared to Halifax, Montréal, Winnipeg, Saskatoon, Regina, and Edmonton. 3 If cities and governments in Canada were truly interested in trying to attract new business to their jurisdictions, they ought to spend a lot more time looking at that “welcome” from the development approvals Canadian Real Estate Forum / SPRING 2016

and cost point of view. This is particularly so in high cost cities such as Toronto and Vancouver. Developers and investors have real money at risk. Politicians and planners have no skin in the game, and no disincentive to overtax and delay development. It is the developers and investors who are at the leading edge of attracting and retaining existing tenants, buyers of land, buyers of buildings and buyers of houses. Only the developers and investors are talking to market participants on a daily basis and are sensitive to changes in demand. Often, developers and investors have a better idea of what economic participants in the city want than the planners and politicians. Greater collaboration is needed between those two camps.


By Brooks Barnett, Manager, Government Relations & Advocacy, REALpac

Developers and investors need cost and timeline certainty to de-risk development. A slow or delayed process adds uncertainty and may cause developers to miss current markets. All municipalities in Canada need to set hard processing timelines with a view to enabling economic development in their community instead of restricting and adding risk to it. The approval costs of development in certain Canadian cities are out of line and send a negative message to economic participants. The costs and delays are a silent economic drag: the city will never know what business it lost, or which constituents went elsewhere because it just takes too long and costs too much compared to alternatives. Ultimately, delays and high upfront fees drive up the costs of land, doing business, and living, in those cities. A change in cost structures, if affected after a developer has committed to a project, can

Revenue tools; the perennial topic of conversation that Canada’s sub-national governments have had to grapple with (or choose not to grapple with) as budget season begins, where bureaucrats explain how scarce money actually is, ratepayers quiver with anxiety, and politicians reset their own expectations and goals. The reality is that running a city or a province is expensive. Generally, residential and commercial property and other traditional taxes will yield enough money to power a government and provide services to residents, particularly if the political will is there to raise property taxes at or above the inflation rate or to meet heavy expenditure years. More and more however, governments are finding they don’t have that willpower, and so there is little to no money left to fund legacy projects, vitally needed capital expenditures, and other key investments. For many sub-national jurisdictions, government spending hasn’t grown significantly and yet year after year, governments struggle to balance budgets. So constituents as well as politicians often debate whether government has a spending problem or a revenue problem. It’s likely to be a bit of both. Revenue tools – specialized financial mechanisms that can be used to generate

be the difference between profit and loss. Some costs are completely unbudgetable such as Toronto’s notorious Section 37 of the Planning Act charges, and Vancouver’s Community Amenity Contributions. Canadian cities need to consult the development and investment community much more earnestly if they hope to continue to attract the business and activity the senior levels of government say they want. Expedite and streamline approvals, publish all criteria in advance, and drop fees to more modest levels, then maybe these prospective businesses will show their interest. ■ 1

The Contribution of the Commercial Real Estate Sector to the Canadian Economy; REALpac and NAIOP Research Foundation, September 2012 (report prepared by the Altus Group)


2012 Canada wide development process survey report, REALpac, 2012


Canada-Wide Key Performance Indicators: Survey Report on Planning and Development, REALpac 2015 (report prepared by The Planning Partnership)

more money – are frequently proposed as a way to close budget gaps or pay for new projects, where local politicians don’t want to access the property tax base. Parking space taxes, road tolls, land value capture mechanisms, sales taxes, income taxes, consumption taxes, and development levies are all revenue tools that have been seriously discussed by provincial and municipal governments in recent memory. Canada’s commercial real estate owners, investors and managers should be mindful of how much some of these tools can directly or indirectly squeeze the industry, or whether they are needed at all. Revenue tools can be a double edged sword. Sure, they can raise vital money for a province or city, but they can also be a severe and punitive burden on industries like commercial real estate. When they are especially harsh or unnecessary, they may be a disincentive for investment, or worse, force businesses (and therefore their tax contributions) from a jurisdiction. These are facts that provinces and municipalities should weigh against the potential benefits of non-property tax revenue tools. Economic competitiveness must be the key principle in evaluating potential municipal or provincial revenue tools. In this sense, the question government policy-makers should 61

Property taxes can be much more effective than many of the above-and-beyond mechanisms proposed during budget deliberations. Property taxes are dedicated to the jurisdiction in which they are collected, and meant to fund the services needed by residents and land owners. The value of a property is the proxy for ability to pay. It is a tax base that has worked for hundreds of years.

ask is, “do revenue tools help the ability of businesses to grow, support jobs, and thrive in a variety of economic conditions?” Ideally, a comparative impact study should be completed to assess any negative impacts on local and regional economies before new taxes, charges, or user fees are created. The introduction of new revenue tools should follow only after there has been a genuine effort to improve the cost efficiency of public services, there is absolute clarity on intergovernmental funding arrangements, stakeholders are provided with an opportunity to speak to industry-specific impacts of any such tools, and government agrees that it is ultimately accountable for budget overages that are a result of their own policy or project implementation. Revenue tools should be evaluated and conform to the following principles: Equitability Costs should be shared across taxpayer groups who benefit from and share services. Costs should be broad based and should not burden one industry or taxpayer group over another. There should not be, as much as possible, any double taxation. The commercial real estate industry in particular is a highly burdened and under-served sector. In any given municipality, real estate interests are subject to heavy property taxes, development levies, density bonusing charges, parkland and parking cash-in-lieu requirements, and application processing fees. 62

Any number of real estate-related funding tools would only add to this pressure, and could affect competitiveness and growth in the industry. Transparency Tools should have clearly stated rules governing their use, and be easily understood by taxpayers and affected stakeholders. Simply put, the business case behind the tool in question needs to be properly formulated and effectively administered. The amount of money ratepayers are expected to pay year over year should be predictable for them, as well as the government. Dedicated to a goal Tools should be dedicated to their intended purpose and should serve a long term funding function. Policy decision makers should detail where potential revenues will be allocated when the tools are adopted and collected. Revenues that are generated should not be placed into general coffers where money can easily be absorbed by the multitude of other funding requirements of a government. Governments should dedicate funds to purposes that can be proven to have a positive impact on a business’ ability to grow and develop. For example, commercial parking space taxes are a revenue tool frequently discussed by provincial and municipal governments. Policymakers should be mindful however, these taxes do not pass any of the tests above and would therefore be a poor funding option. Parking taxes – pitched as a dollar per day per space fee paid by owners of the spaces themselves – disproportionately affect the commercial real estate industry and are a severe form of double taxation since commercial parking spaces are part of the assessed value of a property. Further, there would be a lack of equity in that these taxes would have the worst impact on smaller retail properties, large malls, and car-based retailers. Past

studies confirm the tax would be prone to administrative complexity that could erode cost efficiency. Financial modelling would be problematic because the projected revenues (based on the number of parking spaces in a given jurisdiction), may also be subject to change throughout the fiscal year. Unless governments attached specific uses for the funds raised, it would be difficult to predict how efficiently these funds would be used. It is important to mention that these revenue tools were dismissed by the City of Vancouver in 2006, the City of Toronto in 2007, and the province of Ontario in 2013. It is likely policy makers within these governments also recognized these taxes would have hindered economic competitiveness. Property taxes can be much more effective than many of the above-and-beyond mechanisms proposed during budget deliberations. Property taxes are dedicated to the jurisdiction in which they are collected, and meant to fund the services needed by residents and land owners. The value of a property is the proxy for ability to pay. It is a tax base that has worked for hundreds of years. There is a solid measure of equitability in property taxes since they are borne by all property classes. Property taxes are easily understandable for taxpayers and are predictable, as they are based on the assessed value of the real estate. When applied fairly, and balanced well between commercial and residential taxpayer groups (in a ratio as close to 2:1 as possible), they won’t overly burden residents or businesses, and can help attract investment and jobs to a community. Governments should not be so quick to look at new funding mechanisms when existing mechanisms might suffice. Ultimately, economic competitiveness should be the number one concern of policy-makers. Time will tell whether governments will do what is right, or do what is easy. ■ Canadian Real Estate Forum / SPRING 2016

ADVANCE YOUR CAREER WITH REALpac’s NEW REAL PROPERTY INVESTMENT CERTIFICATE “ Great job bringin g in the differen t guest speaker s... more meanin gful than just learning textboo k knowled ge” CAPITAL MARKETS & INVESTING


“ All instruc tors have a very

strong grasp of the subject matter and were very helpful and willing to answer questio ns and provide advice ” VALUATION IN COMMERCIAL REAL ESTATE,



ENROLL NOW! Visit > Professional Development > Real Property Investment Certificate Program A C C R E D I T I N G



By Michael Brooks, CEO, REALpac Katharina Lütkehermöller, Investment Commission Consultant, UNEP FI


On December 12th, 2015, 195 countries met in Paris for the 21st Conference of the Parties (COP 21). They agreed to work together to substantially curb global warming by limiting it to a maximum of 2°C, possibly 1.5°C, and phase out fossil fuels by the end of the 21st century.

Each of those 195 countries, including Canada, now need to produce top-down and bottom-up, sector by sector, country action plans so as to meet that target. The buildings sector has one of the highest carbon footprints – it currently contributes 30% of global annual greenhouse gas (GHG)

Canadian Real Estate Forum / SPRING 2016

Innovators in Real Estate Financing CMHC & CONVENTIONAL LOANS AVAILABLE FOR: Rental Properties

Commercial Properties

Construction Projects


Visit to learn more

“...estimates show that by 2070, 150 million people in the world’s large port cities will be at risk from coastal flooding, along with US$ 35 trillion worth of property – an amount equal to 9% of global GDP.”

emissions and consumes around 40% of the world’s energy. Following through on the commitments made in Paris means not only avoiding at least 50% of projected growth in buildings’ energy consumption, but also finding ways to reduce the energy consumption of existing buildings. The mitigation potential from our sector is huge. Achieving this potential will be critical, but it requires massive investments to be made. For example, aligning the existing building stock’s carbon footprint with the 2° target requires a global investment in energy efficient building retrofits of about US$300 billion annually by 2020. Given the size of the investment needed to finance a low-carbon economy, public private collaboration is essential. Real estate investors and owners will both have an important role to play in making this transition happen. The real estate sector is also highly exposed to physical risks which are already being felt, with direct losses from floodings resulting in an average of US$150 billion annually between 2002 and 2012. In addition, estimates show that by 2070, 150 million people in the world’s large port cities will be at risk from coastal flooding, along with US$

35 trillion worth of property – an amount equal to 9% of global GDP. Following Paris, the investment community will increasingly be impacted through more regulation as countries implement their nationally determined contributions (“NDCs”) and place a stronger focus on the carbon footprints of investments and their exposure to further regulation. In fact, regulatory pressure is growing everywhere already today, both with regard to mandatory energy disclosure (coming to Canada in Ontario and British Columbia as a start), climate change risk disclosure as exemplified by the European non-financial reporting directive or the French law on energy transition for green growth, and mitigation through ever more stringent building codes, and demands for responsible tenants to locate in energy efficient buildings, among others. These clearly represent material risks for investors and have implications for their fiduciary duty. Indeed, every real estate asset owner, investor and stakeholder must now recognise that they have a clear fiduciary duty to understand and actively manage these very risks as a key routine 65

“...there is ever more evidence that positively connects sustainable real estate with investment fundamentals, including increased client demand, lower vacancy periods, reduced obsolescence, and reduced operating costs. Green and energy certified office and residential builds also have a lower risk of mortgage default compared to that of non-certified properties.” component of their business thinking and management process. Failure to actively address those factors may not only hinder global efforts to address the climate challenge, but will also likely hurt financial long-term returns, undermine economic sustainability and reduce the calibre of the infrastructure passed to future generations. Early movers on the other hand can protect asset value and seize investment opportunities. For example, there is ever more evidence that positively connects sustainable real estate with investment fundamentals, including increased client demand, lower vacancy periods, reduced obsolescence, and reduced operating costs. Green and energy certified office and residential builds also have a lower risk of mortgage default compared to that of non-certified properties. While ever more real estate investors actively address ESG and climate risks and seize investment opportunities, significant up-scaling is required to achieve the transition to a low-carbon economy in line with governments’ commitments. Many real estate investors have yet to fully integrate climate and ESG risks into their investment process.

To support real estate investors with this work and increasingly move from disclosure to impact, the United Nations Environment Programme Finance Initiative and its global partners (IGCC, IIGCC, Ceres INCR, PRI and the RICS) have come together to create clear signposts for action for real estate stakeholders, regardless of size or existing levels of sophistication of ESG and climate issues. REALpac was pleased to be part of that initiative, and the resulting work, “Sustainable Real Estate Investing: Implementing the Paris Agreement: An Action Framework” (available at work-streams/property/sustainablerei). The easily accessible and actionable signposts and accompanying framework distil all available material published over the last five years, reviewing and filtering those most relevant for each of the real estate stakeholders and the different steps in the investment process. In addition, it provides investors and their advisors and consultants with guidance on how to move from inquiry and requests for disclosure, to prescriptive requests that will focus on results and give managers more direct guidance. The result is an easily accessible framework that leaves no excuse for any real estate stakeholder not to take action. ■


Reach a Targeted National Audience. For more information on how you can advertise in Real Estate Forum Magazine, contact: Frank Scalisi at or 416-512-3815 • Bentall Kennedy

Cushman & Wakefield



Broccolini Real Estate Group 31




Canadian Urban Limited


First National Financial LP




CMLS Financial


Fonds immobilier de solidarite FTQ

Colliers International


Concert Properties





Harbour Equity Capital Corp. 50 Harbour Mortgage Corp


15, 40, 41, 54, 55




Related / Oxford Properties


KingSett Capital


M&G Real Estate


Romspen Investment Corporation


Stewart Title Guaranty Company




NAIOP Edmonton


Peoples Trust Company


Yardi Systems Inc.


Canadian Real Estate Forum / SPRING 2016

3 reasons why First National is Canada’s #1 non-bank commercial lender: 1. Relationships We challenge clients to think differently. They trust us as advisors because we go deep and commit to the long term.

2. Ingenuity Our broad product portfolio, network, specialists and flat structure allow us to challenge the status quo, transforming complex deals into industry precedents.

3. Responsiveness We deliver every time -- making quick decisions, executing on what we promise and eliminating red tape and bureaucracy.

In 2015, our team originated $5.2 billion in commercial loans, bringing our mortgages under administration to $20 billion and making First National the largest commercial lender in Canada.

1.800.465.0039 Troy Barker Assistant VP, Commercial Financing, Prairie Region Andrea Wildeman Assistant VP, Commercial Financing Simon Verdy Director, Commercial Financing

Ontario Mortgage Brokerage License No. 10514

Put real estate on your investment horizon. Canadian real estate continues to stand out as a strong, steady performer. Whether you are considering real estate for the first time, or wish to expand on your portfolio, Canadian Urban will help you meet or exceed your objectives. Our core pooled funds represent a diverse range of investment opportunities across the country – with returns that consistently rank in the top quartile. To learn more about our opportunistic turn-arounds and our passionate approach to the real estate market, contact Canadian Urban today.

Toronto: (416) 367.1300 | Edmonton: (780) 424.7722 | Toll Free: 1.877.612.7722

Millions discover their favorite reads on issuu every month.

Give your content the digital home it deserves. Get it to any device in seconds.