CPM April 2021

F O R B U I L D I N G O W N E R S , A S S E T A N D P R O P E RT Y M A N A G E R S

VOL. 36 NO. 1 • APRIL/MAY 2021

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Who’s

Who

2021

PA R T O F T H E

P A R T

O F

T H E

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VOL. 36 NO. 1

APRIL/MAY 2021

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TEL: (416) 512-8186 • FAX: (416) 512-8344 Published and printed six times yearly as follows: March, April/May, June, Aug/Sept, Oct/Nov, Dec by MediaEdge Communications Inc. 2001 Sheppard Avenue East, Suite 500 Toronto, Ontario M2J 4Z8 (416) 512-8186 Fax: (416) 512-8344 e-mail: circulation@mediaedge.ca Subscription Rates: Canada: 1 year, $60*; 2 years, $110* Single Copy Sales: Canada: $12* Outside Canada: US 1 year, $85 International $110 *Plus applicable taxes Reprints: Requests for permission to reprint any portion of this magazine should be sent to info@mediaedge.ca. Copyright 2021 Canada Post Canadian Publications Mail Sales Product Agreement No. 40063056 ISSN 0834-3357 Authors: Canadian Property Management Magazine accepts unsolicited query letters and article suggestions. Manufacturers: Those wishing to have their products reviewed should contact the publisher or send information to the attention of the editor. Sworn Statement of Circulation: Available from the publisher upon written request. Although Canadian Property Management makes every effort to ensure the accuracy of the information published, we cannot be held liable for any errors or omissions, however caused. Printed in Canada

editor’snote THESE DAYS, public health officials have become something akin to harried parents on a tedious road trip. They’re not only tasked with safely steering the pandemic response through hazardous traffic on an uncharted route, they’re also trapped with restless passengers repeatedly asking: Are we there yet? As is often the case with arduous journeys, we didn’t know exactly what flattening the COVID-19 curve was going to entail when we set out 14 months ago. In those early days, “unprecedented” was an overworked adjective, but, in retrospect, there have been a lot of familiar parallels with the challenges that arise in any long and complicated project. Looking back at the obstacles encountered, fixes formulated and lessons learned, we can be heartened that surely we’ve now covered more ground than the distance still to be travelled. Accordingly, in this issue, we review some of the pandemic’s repercussions for real estate and discuss some possibilities for a pending vaccinated world. Commercial real estate value and investor confidence slipped last year as the Canada Annual Property Index recorded a negative total return for a rare third time in the 21st century, transaction volume fell by about 50% and industry insiders responding to the Canadian Real Estate Sentiment Survey went into the fourth quarter generally feeling less optimistic than they had three months earlier. Nevertheless, industrial assets registered impressive gains in 2020. Economists also underscore one seeming truly unprecedented aspect of the COVID-19-triggered recession. Higher-income earners have largely remained employed and have presumably been stockpiling cash as they await renewed opportunities to spend. Analysts generally concur recovery in the office and retail sectors will be contingent on stable tenants, returning employees and consumer confidence — factors that can’t be accurately gauged until public health restrictions are eased and emergency financial aid programs wind down. For now, there are plenty of theories about COVID-19’s impact on how we work, shop and choose to balance the convenience of home offices and online purchases with needs for social interaction and stimuli. We outline a few of them in this issue. We also explore the burgeoning influence of ESG (environmental, social, governance) frameworks and benchmarks that could underpin the reassurance investors and tenants will be seeking that buildings are secure, healthy and positioned for the next and subsequent post-pandemic disruptions. Meanwhile, in a year when the investment performance gap of industrial and retail assets stretched even wider, updated municipal assessment rolls accentuate that all non-residential property owners have a vested interest in office and retail recovery. We report on tax shifts now occurring in Calgary and Vancouver and the threat of what’s to come in the Greater Toronto Area. Finally, this issue includes the 2021 Who’s Who in Canadian Real Estate survey. Thank you to Gerald Ngan for so ably collecting and coordinating this year’s results. Barbara Carss barbc@mediaedge.ca @BarbaraCarss

Canadian Property Management | April/May 2021 3

contents

Focus: Real Estate News & Context 6

2020 Investment Returns: Canada Annual Property Index records a rare decline in value following a year of COVID-19-related uncertainty.

12 Market Confidence Falters: Canadian Real Estate Sentiment Survey finds senior executives generally expecting asset values to decline. 16 Office Demand Outlook: New construction adds to worries about pandemic-prompted changes to work routines. 20 Emerging Workplace Options: A minority of office workers foresee a fulltime return to formal offices, but few want to work offsite more than a couple of days per week. 24 Assessing Climate Risk: Canadian real estate assets are generally more exposed to associated financial and regulatory stresses than to the physical threats of extreme and highly volatile weather. 28 ESG Investing: Securities regulators are conducting reviews to test claims against reality. 31 Light Industrial Tax Shock: Value gains and losses reshape the non-residential assessment base. 37 Who’s Who in Canadian Real Estate: 26th annual survey of commercial players and portfolios. 50 Healthy Building Momentum: COVID-19 is intensifying pressure to support building occupants’ physical, social and emotional well-being. 54 Vacation Property Vacuum: Short-term rental feels the pandemic pinch. 56 Reckoning With Entrenched Inequities: Investors, owners and managers look to rebalance hierarchies, broaden input, expand opportunities and reap the resulting returns.

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investment

RARE RETU Canada Annual Property Index Records a Loss in Value for 2020

By Barbara Carss NO WINNER WAS declared this year i n t he a n nua l R E A LPAC / MSCI challenge to peg the investment performance of directly held standing assets in the Canada Annual Property Index. That’s likely because no one foresaw a 1,000+ basis point slide in the 2020 average total return — settling at negative 4.1% — when the annual contest was conducted 12 months earlier. A ten-year run of capital growth abruptly reversed, resulting in a 7.8% loss in value across the 2,356 assets that the 44 portfolios represented in the index collectively hold. Income retur n continued the record-setting downward trajectory witnessed in 2018 and 2019, dropping 70 more basis points to 3.9%. “That’s not just down to the cap rate suppression we were seeing before; it’s really out of income suppression,” Simon Fairchild, Executive Director wit h t he index producer, MSCI, advised during the online release of the 2020 results earlier this winter. “Performance in 2020 is more severe than we experienced in the financial crisis. You have to actually go back to t he deepest yea rs of t he 1990s’ 6 April/May 2021 | Canadian Property Management

recession to see similar falls in value — in 1992, 1993.” The overarching numbers hide a more uneven picture. Industrial once again emerged as the top-performing property type, delivering a 12.7% total return. Multifamily also remained on the plus side of the scale, recording a 5.7% total return. In counterbalance, office and retail, which together account for more than 68% of index value, pulled the average down with total returns of negative 1.5 % and negative 15.1%, respectively. Canada’s 2020 decline was steeper than in the United States where MSCI index results show investors realized a modest average total return of 1.8% down about 4% from 2019. Meanwhile, investors in the United Kingdom experienced less slippage, recording an average total return of negative 0.8%. Industry insiders tasked with providing on-the-spot reaction to and context for the Canadian returns point to differences in market size, relative weight of property types within the index and responses to the COVID-19 pandemic as u nderlyi ng reasons for nat iona l discrepancies.

“I suspect in the all-property index, Canada is being skewed a little bit by the office and retail component and that is impacting those capital returns,” hypothesized Peter Cuthbert, President and Head of Global Real Estate with Fiera Real Estate Investments. “Two bad quarters — quarter 2 and quarter 3, with quarter 2 being particularly bad — have made a difference.” STRATIFIED RESULTS Looking at the capital growth and income return splits for all property types, retail took the biggest hit, with a 17.8% loss of capital value and an income return of 3.2%. It suffered a 30% drop in net operating income relative to 2019, compared to a 13% decline across all properties. While both industrial and multifamily properties recorded capital growth — at 7.8% and 2.2% respectively — only industrial saw year-over-year income growth, at 1.2%. Office properties, equating to 37% of the index value, lost 5.9% of capital value with an income yield of 4.7%. The sector experienced a 2% decrease in net operating income for a better year-over-

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URN year outcome than multifamily assets, which sustained a 2.7% loss. Also indicative of office and retail weight in the index, seven of the eight major markets represented in the index registered a negative total return. Only Ottawa squeaked out a positive margin with a 0.1% total return largely attributable to 4.3% income yield. Toronto — last year’s top-performing market — held on to second place with a total return of negative 0.8%, while Calgary bottomed out the field at negative 12.7%. Colin Lynch, Head of Global Real Estate Investments for TD Asset Management, contrasted Canada’s relatively sparse canvas to the much denser overlay of markets and wider range of economic, social and government influences at play in the United States. There, the stringency of COVID-19 outbreaks and public health measures varied across a deeper pool of commercial real estate tenants and patrons. “We’re in the middle of an exceptional situation where the response to that exceptional situation is clearly different country by country by country, and that’s having an impact, I think, on how folks

“Performance in 2020 is more severe than we experienced in the financial crisis. You have to actually go back to the deepest years of the 1990s’ recession to see similar falls in value — in 1992, 1993.” are looking at property,” Lynch mused. “So much of this is relying on the nature of the government responses to the pandemic. That’s having a real impact — whether it is [commercial real estate] assets that are open versus closed, or whether it’s certainty in the market.” OFFICE CHALLENGES Looking to the recovery period, panellists and MSCI analysts alike agree that some

sectors of the economy and some property types face a more arduous climb back to pre-pandemic levels. Real estate owners, managers and investors are now grappling with some ongoing challenges that have intensified over the past year, and digesting others that they didn’t see coming. In the latter category, total returns for downtown office in major markets fell from the 8 to 9% range in Q3 to negative Canadian Property Management | April/May 2021 7

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“We may have underestimated retail as a leisure activity for a lot of people.” 1.7% in Q4, while suburban office experienced a gentler slide from about 4% to negative 0.9% in the same period. Fairchild links the quarter-to-quarter difference to the timing of evaluations and write-downs for rent abatement and deferrals appearing on the books, and the downtown-to-suburban contrast to the twists of pandemic fallout. “One quarter doesn’t make a trend, of course,” he noted. “But it’s maybe not surprising. From what we know, the downtowns have been like ghost towns for the last year so that’s maybe starting to impact the values.” If the year’s events have somewhat upended assumptions about stronger locations, they’ve also perhaps bolstered ESG (environmental, social, governance) policies, practices and monitoring. Deborah Ng, Head of Responsible Investment and Director, Total Fund Management, with the Ontario Teachers’ Pension Plan Board, maintains ESG has

helped steer building owners/managers along unexpected bumpy terrain and will also serve landlords in a market where they’ll be seeking a competitive edge. “If you want to attract and retain top-tier tenants in office and retail, you really need to have best-in-class s u s t a i n a b i l i t y,” s h e a s s e r t e d . “Corporate Canada is increasingly setting targets and goals with relation to sustainability, and their property is a big ref lection of that end and purpose. So there is definitely a role for real estate to help tenants achieve some of their goals.” Warning that COVID-19 could be a relatively low hurdle ahead of looming climate change upheaval, she notes that the past year has also fleshed out the social dimension of asset management as almost all building users became more attuned to health, safety and exposure to risks that could affect their wider personal networks.

“There is always a focus on the E part of ESG, but I think COVID has really brought out the S aspect of it,” Ng said. “It’s been a challenging time for real estate on a number of fronts with increasing costs for labour as well as dealing with workers who need to selfisolate or need to take time off because they are unwell, and this is all happening at a time when the real estate market has been battered, people aren’t going to the office and retail is down.” RETAIL DYNAMICS Diverging performance of neighbourhood and regional shopping malls was even more pronounced, with a 13.5% difference in their total returns at Q4 — at negative 3% versus negative 16.5% — and a further drop to negative 18% for superregional malls. “Retail has been under pressure for a number of years since the peak in 2013 and we’ve seen a gradual decline since then, but it’s turned into a sharp decline in 2020 and it’s the largest malls that are being hit the hardest,” Fairchild summarized. Panellists foresee some upturn from those depths when COVID-19 threats subside. With a few recent years of rising industrial values bringing the economics in line with big box retail, Cuthbert suggests the timing could be right for hybrid repositioning.

CANADIAN ASSET MANAGERS RANK WITH GLOBAL LARGEST Brookfield Asset Management sits far atop the field in IPE Real Assets’ 2020 rankings of the world’s 150 largest real estate investment managers, registering nearly CAD $361 billion (€232 billion) in assets under management (AUM) as of June 30 last year. That’s a repeat of Brookfield’s standing in 2019, but with a gain of nearly CAD $85.3 billion (€55 billion) in AUM. It also outdistances The Blackstone Group’s second place tally by CAD $130 billion (€83.5 billion) in AUM. Value growth is a general trend across the annual list from the European based institutional investment analyst and news service. Collectively, the top ten players recorded a CAD $203 billion (€130 billion) jump in AUM from the previous year. The top 100 managers of 2020 held CAD $577 billion (€370 billion more in real estate assets than the top 100 of 2019. “The latest numbers continue the trend of recent years — a seemingly inexorable rise in AUM — fuelled by a combination of rising asset values and institutional allocations to the asset class,” the accompanying analysis states. Five other Canadian asset managers are ranked in the top 50, while four more are placed farther down the group of 150. These include: • Ivanhoé Cambridge, ranked 26th with CAD $72 billion in AUM; • BentallGreenOak, ranked 30th with CAD $68 billion in AUM; • Manulife Investment Management, ranked 40th with CAD $58.5 billion in AUM; • Oxford Properties Group, ranked 43rd with CAD $55 billion in AUM; • QuadReal Property Group, ranked 44th with CAD $54.6 billion in AUM: • Great-West LifeCo, ranked 72nd with CAD $28 billion in AUM: • BMO Real Estate Partners (an arm of BMO Global Asset Management), ranked 113th with CAD $11 billion in AUM; • Slate Asset Management, ranked 131st with CAD $6.2 billion in AUM; • Fiera Real Estate, ranked 134th with CAD $6 billion (€3.83 billion) in AUM. The top 150 real estate investment managers are predominantly based in the North America, with 58% from the Americas. Europe is home to 29% of 2020’s largest asset managers, and the remaining 13% are headquartered in Asia-Pacific. For more information about IPE Real Assets, see the website at https://realassets.ipe.com. 8 April/May 2021 | Canadian Property Management

investment “Some of that big box retail is in exactly prime position to serve last-mile logistics, particularly the return channel. So who’s to say that your 15,000-squarefoot box can’t have 10,000 feet of warehouse and 5,000 feet of single-use retail in the front?” he asked. “I think retail and retail properties will bounce back in a different form.” Gradual loosening of public health controls should also bring back consumers who initially may have few other options for discretionary spending. “We may have underestimated retail as a leisure activity for a lot of people. A lot of people, that’s what they do with their spare time. They go to the shopping centre and hangout and interact socially, and a lot of those major centres are community centres as well,” Cuthbert observed. Af t er 2 0 2 0’s 28% d i f ferent ia l b et we en t he b est a nd wor stperforming assets, he predicts the spread will close tighter this year. “It’s very possible that industrial cools off a bit. The pricing has gone through the roof,” he said. “I think we might be surprised to the downside on the top performer, industrial, and get a little bit of recovery in retail and office.” “Retail will get a bit of reprieve postCOVID,” Lynch concurred. “A lot of us are locked up and cooped up and we would like to get out and experience things. So there’s going to be a bit of that when we’re all allowed to.” Nevertheless, from the perspective of one Canada’s most prominent retail landlords — Ontario Teachers’ real estate arm, Cadillac Fairview — Ng sounded a note of caution. “I’m not as bullish on retail, just thinking of the number of bankruptcies that we’ve had, and those are our tenants,” she said. MODEST EXPECTATIONS While last year’s annual contest proved to be a washout, panellists and online attendees were invited to predict the timing of the recovery and project capital growth for 2021 — an exercise that largely drew consensus around early 2022 for a return to pre-pandemic GDP, and 0.1 to 5% capital growth over the coming months. Panellists agreed that much will depend on curbing COVID19’s potency, but that there is more economic stimuli in play than has been seen in previous downturns. “There are sectors — take travel, hospitality, leisure — where there is quite a bit of damage that will take some time

MULTIFAMILY ASSETS SURPASS INDEX AVERAGE Multifamily assets were the second best performers last year for the 44 institutional real estate portfolios represented in the REALPAC/MSCI Canada Property Index. “The headline return of 4.1 negative is masking a 28% spread from the best — industrial at 12.7%, which would be a good return in any kind of year — down to negative 15% for retail,” Simon Fairchild, Executive Director with index producer MSCI, observed during the online results presentation. “That spread between best and worst is twice as big as it was last year, and last year it was the largest that we’d seen.” With a total return of 5.7%, multifamily performance slipped farther behind industrial than in 2019, but also pulled farther ahead of office properties, which slipped to a negative 1.5% total return. Multifamily assets delivered average capital growth of 2.2% and an average income return of 3.5%. Investors saw a 2.7% decline in multifamily net operating income for the year — a gentler downward slope than the 30% plunge for retail assets. Meanwhile, sales values dipped from recent years, but stayed above the benchmark analysts typically use as an indicator of a strong market. Historical data reveals that, on average, assets in the index sell at about a 5% premium over their market-adjusted evaluation — a trend Bryan Reid, MSCI’s Executive Director, Real Estate Research, attributes to a conservative valuation bias, buyers more actively seeking assets with unrealized potential and vendors more motivated to sell when they can reap a premium. “There’s a certain amount of sample selection going on there, but you can also see that the premium will increase or decrease over time,” he advised. “In periods of market strength, we tend to see a higher premium than average, and during periods of weakness or uncertainty, that premium tends to decrease or perhaps even becomes negative.” The latter is the case for retail properties, which recorded average transacted values nearing 10% lower than market valuations in 2020. In contrast, multifamily, industrial and office assets all surpassed the 5% premium. Although the year’s averages are drawn from about half the number of transactions that occurred in 2019, Fairchild reiterated that real estate continues to draw investment. “The new money going into these portfolios has actually gone up, from about $3.7 billion [in 2019] to $3.9 billion. That’s maybe not what people would have expected,” he observed. Multifamily drew more than $660 million of that net new capital investment. That’s about half of the nearly $1.3 billion directed to industrial development, but well ahead of the $220 million the retail sector captured. In contemplating possible pandemic-fallout, commercial real estate insiders do foresee potential vulnerabilities of non-portable assets in a world where employees are increasingly untethered from their workplaces. Industry executives enlisted to provide on-the-spot insight into the 2020 returns reflected on possible implications for multifamily assets in major and secondary markets. “The bigger underlying trends are very important,” reiterated Colin Lynch, Head of Global Real Estate Investments with TD Asset Management. “One: the Millennials are forming families — that’s happening later than before, but it is happening — and people are looking to bigger spaces to form those families. And two: especially in the USA, there is a cost dynamic that’s been going on for more than a decade where people are moving to cities such as Dallas, Houston, Atlanta, Raleigh and Durham. Why? Because those areas of the USA are cheaper.” “The aggregate demand for real estate or shelter doesn’t really change. As long as we have people working, living and breathing, we need shelter to operate under. It’s just that the location of those functional elements of the economy may disperse to more affordable regions,” concurred Peter Cuthbert, President and Head of Global Real Estate with Fiera Real Estate Investments.

to come back. Then, clearly, a lot depends on things that are beyond the world of real estate: mutations; vaccination rollout; and the associated confidence of Canadian consumers around that,” Lynch reflected. “I do think that the dynamic of low interest rates and fiscal policy will provide a little bit of floor relative to other periods of distress. However, I can’t see a dramatic positive overall return for real estate in Canada.”

“We’ve got massive amounts of stimulus going into the major economies around the world and one would hope that will mean it will be a short downturn, but there are some very strong sectoral trends playing out within the real estate sector as well. We’ve got to think hard about the shape of the recovery,” Fairchild submitted. “Asset allocation is just such a critical part of the fund management process and now we see why.” zz Canadian Property Management | April/May 2021 9

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of Property Repairs Saving costs and time with proactive maintenance

When it comes to condo maintenance, planning ahead can pay off. Detecting and addressing minor issues on a building’s exterior or mechanical systems is a proven way of significantly reducing the cost of future repairs and avoiding resident inconveniences. Not to mention, building envelope repairs can often contribute to energy savings, while ongoing preventive maintenance to the building envelope will extend its service life. The following is a run-down of key building envelope inspection areas and simple preventive maintenance actions that can be undertaken now to prepare for the season ahead. MECHANICAL SYSTEMS • Replace air filters in the building’s primary make-up air units, as well as in suites with heat pumps or fans coils. Dirty filters can decrease air fl ow in the system and force fans to work harder, thereby decreasing the life and increasing operating costs. They can also reduce indoor air quality to increase the potential for mould growth. As such, plan to replace air filters about four times a year.

• Operate all valves that are part of the domestic plumbing and hydronic HVAC systems at least two times a year. These valves can remain in the same position for years if not exercised as part of a maintenance program, and there is no worse time to discover a valve has seized than when a shutdown is required. • Complete a full seasonal maintenance on boilers and chillers/cooling towers, as recommended by their manufacturers. These are best completed during the change-over between heating and cooling seasons. EXTERIOR WALLS • Look for wetting patterns, efflorescence (salt deposits), and deterioration below the corners of metal window sill flashings. These are indicators of poor rain deflection at the ends of the sills. • Install drip deflectors at the ends of window sills to promote water flow over the sills and not on the walls. • At areas of deterioration, look for wetting patterns and details causing poor deflection of rainwater. Correct poor rain/snow melt deflection details.

• Install metal drip flashings over brick window sills and at top of masonry walls without flashings since the brick will typically deteriorate much sooner without this protection. FOUNDATION WALLS • Raise the height of the grading around the foundation walls where they are settled to promote drainage away from the building. This will reduce the risk of leakage and deterioration of the foundation walls. • Check that roof downpipes and troughs are clear, connected, and directing water away from the building. • Test and check that sump pumps are working properly and are discharging water away from the building. SEALANTS (CAULKING) • Regularly replace failed sealants (caulking) where provided to control water penetration and air leakage. Sealants should perform adequately for 10 to 15 years when proper materials and installation practices are employed.

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• If your roof has recently been replaced, ensure regular warranty inspections are performed to ensure the warranty is not voided.

WINDOWS AND DOORS • Regularly replace worn and damaged weather-stripping at door and operable window perimeters. Maintaining tight air seals is necessary to control air leakage and drafts which in turn reduces heat loss and energy consumption. As well, tight seals also control rain water penetration. • Try to use other means of ventilation (e.g., kitchen and bathroom exhaust fans during cold weather) when an apartment does not have an automatic mechanical ventilation system. This is particularly important for apartments with hot water heating and radiators below windows to avoid the potential for burst pipes. If a tenant turns an in-suite thermostat on low and leaves a window open there is an increased risk for a costly pipe burst. FLAT ROOFS • Remove debris and vegetation at roof drains. Be sure to remove debris at the level of the waterproofing membrane as well for protected membrane systems. • Have a qualified contractor and/or consultant to assess the condition of the roofing system every year or two.

SLOPED ROOFS AND ATTIC SPACES • Arrange for an experienced contractor to access the attic space to seal pipe, exhaust duct, wiring and electrical box penetrations at the level of the drywall ceiling and air/vapour barrier. This practice will reduce air leakage from the building interior into the attic space thereby reducing heat loss and energy consumption. These measures will also signifi cantly reduce the risk of ice damming along the roof eaves. • Check the level of insulation. The Ontario Building Code requires a minimum thermal resistance for attic insulation. Although you are not required to upgrade to meet the current code, it may be a good time to consider adding to the

existing thickness of the insulation to reduce energy/fuel consumption from not only heating, but cooling. • Check that adequate venting at the soffit and roof vents is provided and that the soffit baffles are not blocked by insulation. Proper venting will extend the life of asphalt shingles and reduce the risk of ice damming provided air sealing at the level of the ceiling is done first. • Install downpipe extensions from upper to lower roofs to avoid accelerated shingle deterioration from increased water runoff and ice damage. A little preventative maintenance goes a long way towards mitigating larger issues. And as with any building maintenance program, there is value in partnering with qualified contractors and consultants who can leverage their experience to assist with assessment and repair of the more complex issues.

Dave Moore is President of Pretium Engineering Inc. [www.pretiumengineering.com], a specialist building science, structural, and mechanical consulting engineering firm that provides high quality, evidence-driven services. Contact a local office to see how “Working Together, Better” can work for you.

investment

OPTIMISM FALTERS Investment Confidence Awaits Vaccine Boost

A SURGING SECOND WAVE of COV I D -19 t emp ere d i nvest ment confidence in commercial real estate during the fourth quarter of 2020. Results of the REALPAC/FPL Canadian Real Estate Sentiment Survey show p a r t ic ip a t i ng s e n io r exe cut ive s expressing slightly less optimism in market conditions than exhibited three months earlier. Notably, though, data was collected in October before the confirmation of approved vaccines. In assessing both survey responses and accompanying insight from interviews with more than 50 influential Canadian players, analysts with FPL Advisory Group conclude that some indicators aren’t telling much of a story. In particular, the survey’s conventional focus on real estate asset pricing has shifted more to macro-level observations, but there are more details to report on access to capital. “Transaction volume remains low, resulting in inconclusive asset valuations. Distressed transaction activity has yet to emerge in Canada,” the survey summary states. “Lenders remain active. There is an increased level of scrutiny during the due diligence process with many less willing to engage in higher risk 12 April/May 2021 | Canadian Property Management

investments. Equity capital is available; however, investors are increasingly discerning when evaluating investment track records and leverage ratios.” Analysts also suggest “uncertainty” characterized the October snapshot, but that came with some perspective on a potential stabilizing force. “Many remain hopeful that a vaccine is imminent,” they advise. Survey respondents — representing owners, asset managers and affiliated professional service providers in all property sectors — collectively nudged the overall index score down to 43 on a scale of 100. Confidence ebbed in both current and future market dynamics compared to the third quarter outlook. Canadian executives were somewhat more positive about current conditions than were their U.S. counterparts — delivering an index score of 28 versus the U.S. consensus at 27. However, Canadian expectations for a future bounce-back were more modest — translating into an index score of 58 compared to the U.S. score of 61. Nearly one-third of Canadian respondents deemed market conditions in the fourth quarter to be “much worse” than they had been 12 months earlier. That’s a sig n i f ica nt ju mp f rom t he 13%

expressi ng t hat v iew i n Q3. Nevertheless, there was a small gain in respondents who perceived conditions were “much better”— climbing to 14% from 10% in Q3. A larger share of respondents expected a longer-lasting downturn, with 27% suggesting that market conditions will be somewhat or much worse by Q4 2021 compared to 23% in Q3. Accordingly, fewer respondents foresaw “somewhat better” times ahead, with 47% making that prognosis for 12 months in the future versus 51% in Q3. A steady 18% of respondents in both quarters predicted conditions would be about the same one year hence. Despite the lack of transactions, 86% of respondents pegged asset values at somewhat or much lower than they had been one year earlier. That’s an increase from 72% expressing that view in Q3, which also encompasses a sizeable jump — from 6% to 24% — in the quotient calling values much worse. Looking forward, 35% of respondents expect asset values to drop further during the next 12 months, while 39% of respondents expect “somewhat” improvement. That’s also more pessimistic than Q3. The report’s selection of anonymous quotes from leading industry sources

investment reiterate many common themes of 2020, including: preference for industrial and multi-residential assets; the pandemic’s hard hit on already struggling retail assets; and unease about tenants’ prolonged absences from office space. Those are consistent trends among lenders and equity investors, as industry sources note that wariness of office and retail assets is serving up competitive jockeying to lend on industrial and multiresidential assets. Alternative lenders are also forging more presence in the market. Generally, respondents reported more hurdles to secure capital in Q4, with 69% gauging it was somewhat or much more difficult to get debt financing and 67% saying it was more difficult to obtain equity capital than it was in Q4 2019. Looking forward, 56% anticipate that equity capital will be somewhat or much more abundant by Q4 2021, while 45% expect lenders will be somewhat or much more amenable. zz For more information about the REALPAC/FPL Canadian Real Estate Sentiment Survey, see the website at www.realpac.ca/page/ CanadianRealEstateSS.

LIFE SCIENCES GROWTH POTENTIAL FLAGGED Growth potential in the life sciences sector has investors assessing opportunities to meet demand for laboratory, manufacturing and associated support space. Real estate analysts likewise point to burgeoning momentum in Canada’s strong research institutions, increasing calls for domestic production capacity and the STEM (science, technology, engineering, math) job creation engine. “Employment growth in scientific R&D has outpaced even the tech sector,” observed Paul Morassutti, CBRE’s Vice Chair, Valuation and Advisory Services, during the recent online release of the firm’s 2021 Market Outlook. He cited Oxford Properties’ recent foray into the sector in the United States with a USD $276 (CAD $350 million) deal for four buildings and announced plans to invest a further USD $500 million (CAD $635 million) on expansion and redevelopment of those facilities. “Here in Canada, we have seen considerable activity in Montreal and Vancouver. We fully expect this sector to follow a similar trajectory that we witnessed in the U.S., albeit on a smaller scale,” Morassutti submitted. “Supporting sectoral fundamentals include: increased life

expectancy; technology and AI facilitating scientific breakthroughs; on-shoring of the medication supply chain; and strong funding availability — all of which has been accelerated by the pandemic.” JLL’s 2020 review and 2021 projections draw similar conclusions. “COVID has exposed Canada’s undersupplied life science and lab sectors. Growing employment and private investment on the demand side are making the case for more investment in this space. Real estate investors, especially long-term-oriented institutional groups, are taking a closer look at this space and we expect a supply response over the next few years,” it states. Avison Young’s examination of global trends influencing real estate in 2021 also highlights two factors in life sciences growth potential: deglobalization and governments pouring stimuli into the economy. “The pandemic has understandably led to a focus on medical facilities and life sciences. Venture capital funding for medical research has increased substantially, with medical infrastructure and R&D spending now increasingly seen as relevant to national security and demand for lab space likely to increase,” it forecasts.

Canadian Property Management | April/May 2021 13

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voidable disasters and regulatory changes have underscored the need for stronger fire prevention measures in recent years. And for building owners and property managers, this means applying extra due diligence when adopting the fire safety systems, training, and certified professionals to keep occupants safe. It’s a risk that can hit close to home. In February 2020, for example, an eighth-floor fire at a Toronto apartment led to the tragic death of a tenant, the hospitalization of six occupants, and the destruction of 29 units. Upon investigation, The Office of the Fire Marshal (OFM) concluded that the initial smoke alarm had been dismissed as fake and - despite best intentions - occupants did not follow the correct evacuation process. “This tragic fire reinforces the need for those who live in highrises, and other occupancies where tenants live, to learn what to do if a fire occurs in your building,” said Jon Pegg, Ontario Fire Marshal, in a follow-up statement to press. “[It’s important to] learn about the fire safety features in your building and the

emergency procedures outlined in the building’s fire safety plan.” Yet, while awareness and training are crucial to fire safety, they are not the complete solution. In fact, had the abovementioned alarm not triggered the apartment’s monitoring system, the story could have been much worse. As such, this incident demonstrates how critical it is to combine fire response training with fire safety systems that are correctly installed, tested, and maintained. “Both sides of the fire equation put their life on that fire alarm system,” says Essa Fire Chief and president of the Ontario Association of Fire Chiefs, Cynthia Ross Tustin. “The people in the building rely on it for themselves and their children to be notified to get out of the building, and the fire department relies on the quality of that fire alarm system - that it’s installed and maintained properly.” “For us, it’s easier to fight a fire in a building that’s empty,” she adds. “We want to arrive when everyone’s been notified and waiting on the lawn for us.”

SPONSORED CONTENT Certified support Ontario’s building owners and property managers are not alone in managing crucial fire safety responsibilities. Today, they have access to certified fire safety system installation and maintenance professionals who can help ensure systems will perform to expectation and that buildings (and their teams) are meeting the most up-to-date Fire Code regulations. “That’s where our Certi-Fire program comes in,” says Cathy Frederickson, a spokesperson with Electrical Contractors Association of Ontario (ECAO). “The fire alarm and protection industry is continually changing, and one of the key changes has been in legislation regarding the installation and testing of fire alarm systems. It is important to keep up with technology by undergoing comprehensive training with new skills and standards. Hence, we are proud of our certified fire alarm electricians, and to provide them with the professional training and certification approved by the OFM to meet the requirements and resolve all types of fire alarm concerns.” The Certi-Fire Program has evolved over 20 years to meet the requirements of the Ontario Fire Code O. Reg. 213/07. It is also one of only two fire system certification courses of its kind recognized by the Ontario Fire Marshal. Through the four-level program, 309A licensed electricians undergo 160 hours of intense academic and hands-on training covering all facets of fire system installation, testing, verification, and maintenance, as well as Fire Code regulations. Recertification (Level 5) is mandatory every five years to stay current with changes of the code and standard. “Typical life safety systems -- your smoke detectors to your carbon monoxide detectors - that’s all you see. But how it was installed, and how it was wired behind the walls, is what makes the system function and keep you safe,” says Dave Kester, Certi-Fire electrician with ProWave Electric, adding, “Certi-Fire ensures not only that your [building’s] life safety outside of your walls is in good working order, but ensures the installation itself is good.” “Fire alarm systems are complicated and different from typical electric work,” adds Mark Llyod, T. Lloyd Electric, an ECAO Registered Fire Alarm Contractor . “Participating Certi-Fire ensures our clients have a fully functional, codecompliant system.” With required re-certification every five years, the intent of ECAO’s Cert-Fire program is to produce electricians who can not only provide a full breadth of electrical services but tackle a building’s full fire safety needs. And to date, the program has certified nearly 2450 professionals to do just that. It takes a team Fire safety is as much about systems as it is people. It’s programs like ECAO’s Certi-Fire and the Association’s additional building owners and property managers awareness training initiatives that are working to unite all building stakeholders in turning down the heat. “Certi-Fire training is critical,” insists Monte McNaughton, Ontario Minister of Labour, Training and Skills Development. “It’s very important that we protect families, people, and businesses right across the province. It’s all about that consumer protection, and this training is essential to that goal.”

Certi-Fire is supported by the Joint Electrical Promotion Plan (JEPP), which is managed and funded by the Electrical Contractors Association of Ontario (ECAO) together with the International Brotherhood of Electrical Workers Construction Council of Ontario (IBEW CCO). Learn more about ECAO’s CertiFire program at www.certifire.org and find more building owner/manager fire safety training initiatives at www.ecao.org/all-your-fire-alarm-needs.

post-pandemicoutlook

UNCONVENTIONAL RECESSION Projected Rapid Recovery Comes With New Context for Office Demand By Barbara Carss AN INFLUX of new office supply was always expected to shake up the status quo in Toronto’s downtown commercial r e a l e s t a t e m a r k e t g ive n t h a t approximately two-thirds of the more than 8 million square feet of space cu r r ent ly u nd e r c on st r uct ion is already preleased. However, prospects for backfilling were perhaps viewed with less trepidation entering 2020 when the downtown Class A vacancy rate floated around 2%. A year of pandemic-related upheaval, which saw a fourfold increase in sublet space and the Class A vacancy rate climb to 7.3% by spring of 2021 now ha s com mercia l la nd lord s more ner vously contemplating dema nd trends as many tenants look to retrench or at least reassess their future space needs. Although the source of this uncertainty may be extraordinary, 16 April/May 2021 | Canadian Property Management

industry veterans note the scenario itself is far from novel. “Too much new supply coming at the wrong time has always been the office sector’s Achilles heel,” Paul Morassutti, Vice Chair, Valuation and Advisory Services, with CBRE Canada, reflected during a recent online presentation accompanying the release of the firm’s 2021 market forecast. CBRE’s 2020 fourth quarter statistics for 10 major Canadian markets show that the vast proportion of in-progress office space is slated for Toronto, Vancouver and Montreal, with Toronto host to 9.1 million square feet or slightly more than half of what’s under construction. Toronto’s share of new downtown office space is even higher, representing more than 67% of downtown construction nationwide and equivalent to about 10% of the city’s existing downtown office inventory.

Vancouver has 61% less space under construction, but it’s set to make a bigger dent in the city’s smaller inventory. The approximately 3.5 million square feet of new office supply in progress is equivalent to 14.5% of the current net rentable area downtown. CBRE pegged the downtown Class A vacancy rate at 4.4% as of Q1 2021, up 20 basis points from Q4 2020 and 260 basis points from Q1 last year. With most informed analysis indicating that a portion of the pre-pandemic workforce will permanently vacate formal office accommodations, Morassutti warned there is likely to be a larger and longer-lasting glut than investors envisioned 12 to 18 months ago. Even with no new supply pending and complete employment recovery, economic growth and job creation would be needed to attain pre-pandemic occupancy levels. CBRE’s modelling concludes the dual impact of off-site work and new supply

post-pandemicoutlook

“Too much new supply coming at the wrong time has always been the office sector’s Achilles heel.”

CALGARY REQUIRES MORE COMPLICATED CURE

could give rise to as much as a 4% jump in Toronto’s downtown office vacancy rate. “We can say without equivocation, remote work is here to stay. Virtually every tenant survey supports this. The physical office will absolutely continue to be part of the future of work, but it will be designed to support more flexibility and choice. It will have to incentivize people to come in,” Morassutti maintained. “The issue is: what impact would a 10% cent reduction in demand have on long-term vacancy? After all, the retail sector has been completely upended by the movement of just 10 to 15% of sales to online platforms.” PREPARING FOR CHALLENGES Findings from Altus Group’s November 2020 survey of 85 commercial real estate executives verify that many asset and property managers are readying for more challenging times. About 35% of the

Reflecting on a year in which a global pandemic unsettled commercial real estate fundamentals to the east and to the west, Calgary-based analysts focus more on tangential circumstances than the COVID-19 outbreak itself. During a recent online market review and forecast, executives with CBRE Calgary’s investment and advisory services fingered an economy tied to oil and gas for sinking the hesitant recovery that had appeared underway as 2020 began. They’re now projecting that more than a third of the downtown office inventory will be vacant by the time 2021 comes to a close. Angus Fraser, Executive Vice President of office leasing, noted the departure of three foreign firms — Devon Energy, Murphy Oil and Equinor — over the past 12 months along with an uptick in mergers and acquisitions (M&A), such as Cenovus Energy’s recent takeover of Husky Energy. That further aggravates a five-year trend of downsizing in the sector’s office footprint. “Our first quarter results are going to show a vacancy rate of 32.3% and that’s on the back of negative absorption of 1.25 million square feet,” Fraser revealed. “Negative absorption was driven primarily by that M&A activity in the energy sector. In almost all cases, all of the office space of the acquired entity was put back on the market. The Cenovus acquisition of Husky Energy was certainly a large contributor to that number with the expected redundancy of all of Western Canadian Place.” Similar trends plague the suburban office market, albeit due to the hollowing out of a slightly different tenant base. Stuart Watson, a Senior Vice President with CBRE Calgary, traces the construction spree that doubled suburban inventory — from 13 million to 26 million square feet — in the decade between 2005 and 2015 to flourishing demand for engineering services. “A lot of the space that was built over that cycle was A Class space with big expansive floorplates,” he advised. “The problem that we’ve faced, really from 2015 onwards, is the disappearance of big energy projects, the consolidation of that [engineering] sector and, as we come out of this pandemic, the new embracement of new workplace strategies.” Both Watson and Fraser see some promise in the tech sector, which has been a focus of the city of Calgary’s economic development strategy. There’s evidence of more local capital going into the sector as wary investors shift away from energy and real estate; a planned downtown SAIT (Southern Alberta Institute of Technology) campus will accommodate the new school of advanced technology; and downtown tech tenants have absorbed about 500,000 square feet of space since 2016, with much of that filled during the past two years. “Relative to the retreat of oil and gas, this is small potatoes, but, nonetheless, this is a source of growth that previously didn’t exist here,” Fraser acknowledged. For companies favouring a return to formal office settings after the prolonged pandemic interlude, he also suggests downtown Calgary offers an attractive combination of low rents, a paucity of dense open-plan formats that would require overhauls to accommodate social distancing, and shorter commuting times than downtown workers may encounter in other large cities. Turning to the suburbs, Watson urges landlords to pivot to capture tech sector players that have been more inclined to build their own facilities. “In the short-term, a lot of the activity in the market is going to be change-related not growthrelated,” he hypothesized. “There’s a new challenge for the supply side of the market. Owners are going to have to find a way to innovate their properties in order to capture demand in what’s really going to be a win-lose market.”

Canadian Property Management | April/May 2021 17

post-pandemicoutlook respondents will see lease terms expire for 5 to 20% of the office space in their portfolios during 2021, and another 2% face rollover of more than 20% of office holdings. Upwards of 60% of respondents expect market rents will drop for high-quality office space and more than 75% predict falling rents for lower-calibre space. A majority — 57% — expect tenants will adjust their space requirements downward in the future because more staff will be working from home, but relatively few foresee shrinkage of more than 20%. Meanwhile, 57% of respondents predicted it would take nine to 12 months to lease high-quality space. That’s a notable upward adjustment in expectations from the 34% who foresaw that timetable when questioned in June 2020. Similarly, respondents generally voiced less confidence in their tenant retention ratios. “Overall, leasing activity in Q4 was very low in general, especially in the central business district, and not expected to pick up until workers return to the office,” accompanying Altus analysis concludes. “Lower quality assets, especially older Class B and C downtown buildings, will suffer the most from flight to quality and

structural vacancy (space never being backfilled).” Nevertheless, Morassutti offers some hopeful qualifiers. “We added almost 5 million square feet of new supply in Toronto beginning in 2008 in the midst of the global financial crisis and another 6 million square feet beginning in 2013 and, quite frankly, the market outperformed virtually all vacancy forecasts both times,” he recalled. “Despite the many doomsday forecasts that we see, Vancouver and Toronto still have the lowest vacancy rates in North America. Montreal and Ottawa are in the top five.” BOUNCE-BACK FORESEEN Looking to the broader economy, Benjamin Tal, Deputy Chief Economist with CIBC World Markets, joined Morassutti in the online forum to reiterate that COVID-19’s wallop is not a conventional recession. He sees the seeds of a strong and rapid recovery in its uniquely slight blow to goodsproducing sectors, the comparatively easier reactivation of the services sector and pent-up demand from consumers with higher incomes who have been stockpiling earnings over the past year.

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“We are sitting on $19 billion of excess cash. This is the story of this recession. The abnormality is that there is a huge amount of money sitting, seeking, waiting for a correction,” Tal asserted. “I believe, in a relatively short period of time, we will see a significant amount of spending. The economic boost is that this spending will be going not to goods, but to services — exactly where the jobs are needed.” That spending momentum has already been channelled to residential real estate, in particular pushing up housing prices outside of large urban centres. Tal charted the steeper rate of increases in areas peripheral to large cities, but caut ione d t hat a post-pa ndem ic rebalancing of work routines could rein in some more far-flung markets. “Maybe today your current employer is fine with you working from home. What about your next one? If you move to a remote area two or three hours’ drive from Toronto, Vancouver, Montreal under the assumption that you will be working from home fulltime, that’s a big risk,” he submitted. “You will see some people will have to rent an apartment in the city because they will be back in the office at least a few days a week.” For now, many investors, asset and property managers are grappling with t he cha l lenge of d i f ferent iat i ng temporary routines from lasting trends, especially while daily life is still largely in the grips of the pandemic interlude. Few commercial real estate insiders realistically await a full reversion to the 2019 way of working, but it is equally unlikely that the vast majority of workers and consumers have fully embraced a life bereft of social interaction. Some people may move to locales where they can live more affordably and upgrade their housing options, but, once there, look to replicate other aspects of the lives they’ve left behind. That could mean demand for pedestrian-oriented development, experiential retail and other functions and amenities associated with urban downtowns. “Increasingly, the office will become less of a commodity and more of a consumer product, and like every consumer product, the office will have to continue to fight for its customers and meet their needs because those customers have options,” Morassutti speculated. “One uncomfortable question that we should be asking ourselves is: Who said the old office was that great to begin with?” zz

Membership matters As the Commercial Real Estate Industry has pivoted to Return to Work Plans, BOMA Toronto is laser focused on providing our members, stakeholders and the Commercial Real Estate Industry with trusted, valuable, relevant resources and guidance. Leading our industry with collaboration, compassion and partnership is the essence of who we are and what we have done for over 100 years. Our CRE front line hero’s are the backbone and foundation of our Industry. On behalf of our Board of Directors and the BOMA Toronto team, you all have our deepest gratitude. Sincerely,

Susan Allen BOMA Toronto President & Chief Executive Officer

bomatoronto.org | 1 Dundas Street West, Suite 1800, Toronto, ON M5G 1Z3

EMERGING

EXPECTATIONS Office Employees Favour Blend of Workplace Options A recent JLL survey of 2,000 office workers worldwide finds a significant majority favouring the concept of the hybrid office for their postpandemic workplace. The associated analysis of survey respondents’ changing attitudes, evolving expectations and emerging preferences includes four broad profiles of future office users – Editor. TWO-THIRDS OF SURVEYED office workers want to be able to alternate between different places of work post-pandemic: 72% would like the option to work from home and 40% seek flexibility to work from a third-party location like a coffee shop or co-working space. About 10% of survey respondents would choose to work exclusively from home, while 24% prefer to work exclusively in the office. Overall, remote work should double — going from an average of 1.2 days per week pre-pandemic to 2.4 days postpandemic. Most of this nomadic work will happen at home, as 72% of employees want to continue working from home two days per week on average. 20 April/May 2021 | Canadian Property Management

The office remains a central place for older employees (50+ years old) who remain more traditional in their workstyles. Home-working is a popular choice in the tech and web industry (the early adopters of remote working) and in more traditional industries like heavy industry, consumer products, and banking and insurance that consider home-working an appealing complement to office work. Working in a third-party place is a new trend for the youngest part of the workforce, generating a lot of interest among 25- to 34-year-olds and even more in the 18 to 24 bracket. It appears especially attractive to the tech and web

industry, but also to employees working in the consumer products field. Health and well-being concerns underpin eagerness for this new way of working. The workers voicing the highest expectations in terms of new working routines (no large in-person meetings, digital interactions when possible) and new office standards (physical space separation, no desksharing) are also the ones most frequently envisaging a recourse to homeworking. Aspirations for a more balanced and local working life also factor into the appetite for home-working. Workers who prioritize a good work-life balance and the reduction of the daily commute

post-pandemicoutlook want to introduce work-from-home into their routine at least once a week. They also want to be able to define their own workstyle — for example: a flexible schedule; a four-day working week; and, for some, the freedom to live away from the city. All workers, regardless of their a spi r a t ion t o wo rk f r om hom e, recognize the social role of the office. As well, survey respondents look for the following amenities within formal offices: connections with nature; spaces for focused work; learning and development spaces; creative spaces; and project and collaborative spaces. Expectations of the workplace differ according to employees’ appetite for remote-working options. Four profiles of workers emerge from the research. At seemingly opposite ends are traditional office workers, who want to work exclusively in the office, and free spirits, who want to escape from it as often as possible. However, both groups tend to be less engaged and less fulfilled than other types of employees, and have fewer expectations of their employees. In contrast, experience lovers and wellness addicts have high expectations for comfort and human experience. Traditional Office Workers These workers typically have not bought into the homeworking experiment, and generally think that it is not suited to their job requirements or their working preferences. They are likely to work in industries with a high presenteeism culture and are quite traditional in their workstyle. While approximately 25% of the workforce practiced work-from-home prior to the COVID-19 pandemic, just 7% of traditional office workers did. They are more likely to be 50+ years of age, work for big companies and in nonmanagerial positions. They are inclined to be more detached, neither strongly identifying with their companies nor fulfilled in their jobs. Experience Lovers These workers consider work-fromhome as a great way to add flexibility to their working life and enhance their feeling of engagement, fulfillment and empowerment. Half of them already practiced work-from-home prior to the COVID-19 pandemic, compared to a 38% average in the entire workforce. They indicate that moderate home-

EMPLOYEES AND EMPLOYERS LOOK FOR BALANCE A new study from the global staffing firm, Robert Half, finds that approximately one third of professionals currently working from home due to the pandemic would look for a new job if called back to the office full time. More than half of all employees surveyed (51%) said they prefer a hybrid work arrangement, where they can divide time between the office and another location. Yet, workers were also hesitant about working from home full time, worried about relationships with co-workers suffering (39%), fewer career advancement opportunities due to a lack of visibility (21%) and lower productivity at home (16%). The online survey was developed by Robert Half and conducted by an independent research firm from March 9-16, 2021. It includes responses from more than 500 workers 18 years of age or older at companies in Canada. The survey points the way for organizations to perhaps offer more flexibility as workers may not be ready to return to the office. Respondents said their company can best support them with freedom to set preferred office hours, employer-paid commuting costs, a personal, distraction-free workspace, relaxed dress code and employer-provided childcare. “As we reimagine the future of work, now is the time for managers to engage in mindful discussions with their teams to determine what they most want and need,” advises David King, Canadian Senior District President of Robert Half. “Establishing a return-to-work plan that prioritizes employee health and well-being and fosters a strong corporate culture can help bolster retention and recruitment efforts.” For more information about Robert Half, see the website at www.roberthalf.ca. –REMI Network

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post-pandemicoutlook BATTLE FOR TALENT REACHES HOME FRONT A study surveying 145,000 home-based employees around the globe has revealed many are feeling isolated while working remotely for extended periods. Analysts with Leesman, a firm that measures employee experiences, caution that employers risk dismantling years of organizational development if they ignore these stressors. “In times of change, employees need to know what to expect from their workplace when the turbulence ends,” says Dr. Peggie Rothe, Chief Insights & Research Officer with Leesman. “Without this clarity, employers risk losing those employees that they have spent years developing. And as the global pandemic and the remote working revolution together have removed the geographic boundaries previously limiting organizations’ talent strategies, we are approaching a new war for talent.” The research is published in a recent report entitled Your Workplace of the Future. It offers the following insights from the ongoing home-working study: • more than a third (33.7%) of employees reporting that the ability to learn from others is not supported when working remotely;

working — one or two days per week — is the right balance since they enjoy going to the office to connect with others with whom they share a common DNA. Experience lovers tend to have management responsibilities, value their work community, and like being visible and rewarded.

• nearly half (43.9%) do not agree that their home environment supports informal social interaction; • 28.2% cannot agree that their home set-up allows them to collaborate on creative work; • more than three in 10 (30.2%) dispersed employees feel disconnected to their organization; and • 27.8% are unable to maintain a healthy work-life balance. “Executive leadership teams must get to grips with how their employees’ experiences, attitudes and expectations have changed and ready their strategies for where employees will be based in the future,” said Tim Oldman, Leesman founder and Chief Executive Officer. “Employees’ demand for clarity and certainty will only increase as global vaccination programs ramp up, so clear plans, evidenced with frontline employee experience data, will be more in demand than ever before.” For more information, see the website at www.leesmanindex.com. –REMI Network

Wellness Addicts These workers put their work-life balance and health first. They were already accustomed to remote-working patterns pre-pandemic, with 53% practicing workfrom-home compared to a 38% average in the entire workforce.

Free Spirits These workers want full flexibility and typically only ask for freedom f r o m t h e i r e m ploye r. T h ey a r e accustomed to working remotely, and 17% already practiced work-fromhome three days a week prior to COVID, versus a 10% average in the entire workforce. They are more apt to work for large companies in nonmanagerial positions, place a high priority on their family and be less engaged in or fulfilled by their jobs. They are perfect candidates to live outside the city since they only go to the office when absolutely necessary. They also express more fear of the COVID-19 virus, are risk averse and expect their employers to maintain the new working routines imposed by the pandemic. zz

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They want to take care of their health and well-being by reducing their commute. When they do go to the office, they expect an extensive range of services. They perceive the office as something of a consumer commodity — picking those working life facets they cannot find at home, such as well-being, culture and sports amenities. Wellness addicts tend to be more numerous in the digital and tech industry.

The complete text of Shaping Human Experience, A focus on hybrid work and four emerging worker profiles can be found at www.jll.ca/en/trends-andinsights/research.

THE NEXT

DISRUPTION COVID-19 Offers an Instructive Exercise for Climate Change Upheaval By Barbara Carss CANADIAN COMMERCIAL real estate assets are comparatively less exposed to the dire physical threats that extreme weather poses or has already served up in other global regions. Industry insiders suggest that could make the COVID-19 pandemic an even more instructive trial run for the ancillary risks the sector is likely to face due to climate change. Brewing calamities will bring economic and 24 April/May 2021 | Canadian Property Management

social upheaval fa r beyond their meteorological track, and a growing pool of investors is look ing for evidence that asset and proper ty managers are prepared to respond. “2020 was a year that saw ESG (environmental, social, governance) reporting move to centre stage. In the same way that, 15 years ago, discussion around LEED certification really morphed from ‘Should we do it?’ to

‘It’s the new norm’ so, too, will ESG r e p o r t i ng b e c o m e a p e r m a n e n t component of our industry,” observed Paul Morassutti, Vice Chair, Valuation and Advisory services, with CBRE Canada, during the online release of the fir m’s 2021 Market Outlook. “Let’s talk about how climate risk could impact underwriting and even capital f lows. Ever y institutional investor pays very close attention to

esg the reversiona r y va lue a nd thei r ability to exit in 10 years, 20 years or 30 ye a r s. It [cl i m at e r isk] w i l l absolutely be on everyone’s radar by then, which means it should probably be on ours now.” Tu r n i ng to t hose i nst it ut iona l investors, MSCI analysis estimates that 6% of the value of the Canada Property Index, or nearly $9.5 billion wor th of directly held assets, is vulnerable to the physical forces of climate change or the related stresses of an imperative transition to a lowcarbon economy. Speaking during the virtual results presentation of the index’s 2020 investment returns (see story, page 6), Bryan Reid, Executive Director of Real Estate Research with MSCI, outlined how the index currently scores on two separate risk matrices. These matrices gauge: the potential for on-site physical damage tied to the occurrence of an extreme climatic event; and the economic costs and regulator y constraints that could come into play to meet emission reduction targets and other required responses to a climate crisis. Results are then combined to tally the total value at risk. Overall, Canada’s global latitude and roster of inland cities serve it well. Across the entire index of 2,356 assets predominantly dispersed in nine major urban centres, the vast share of value at risk — nearly 5% of t h e i nd ex’s c a pit a l va lue — i s attributable to transition factors. HALIFAX MOST EXPOSED Assets located in Halifax stand out for a higher degree of physical risk, equating to nearly 10% of asset value exposed to the possibility of coastal flooding and/or tropical storms, while Vancouver ranks as the next most vulnerable host city with just less than 5% of value at risk to coastal flooding. In contrast, assets in Toronto are most insulated, with 4.43% of value deemed at risk and less than 0.5% of value at physical risk. “The physical risk for Canada is pretty low relative to some other countries. When we run other countries through this model, what we tend to see is that increased coastal flooding, fluvial flooding and tropical storm risk are the highest drivers of physical value at risk,” Reid reported. “In terms

of ex t r e m e h e a t , t h e p o t e nt i a l temperature rises aren’t as high [in Canada] as in some of the other more sout herly locat ions so t he costs associated with cooling buildings is not as high as what we might see in places like Phoenix. In fact, the lower prevalence of extreme cold days [with climate change] is also likely to offset a little bit and reduce the running costs of some of the assets as well.” Reid characterizes the physical risk analysis as a “high-level snapshot” and notes that additional risks may emerge that will need to be weighed. Morassutti leans to an upside interpretation. “If you look at any list of the global cities that are most vulnerable to either coastal flooding or warming, you’ll see many familiar places: New York; London; Miami; Boston; Phoenix; Hong Kong; Shanghai; Tokyo; but no Canadian cities,” he reiterated. “That is not to say that we will not be impacted. We will, but the effects of climate change will not be felt evenly. That may result in a recalibration of how global capital views those markets, and that may very well be to the benefit of major Canadian markets.” However, pointing to other trends outside Canada, Colin Lynch, Head of Global Real Estate Investments with TD Asset Management, reminded investors, owners and managers that transition risks could arise with little advance notice. “In 2019 and 2020, we’ve seen governments make regulations in reaction to a lot of social pressure around real estate, and that is something that we all have to be cognizant of going forward,” he reflected during a panel discussion on the Canada Property Index investment results. FOCUS ON TRANSITION ADVISED ESG is steadily gaining traction as a means to steer investors and guide asset and property managers on both physical and transition risks. Also contributing to the panel discussion, Deborah Ng, Head of Responsible Investment and Director, Total Fund Management, with the Ontario Teachers’ Pension Plan Board, maintained that both groups have already successfully subscribed to ESG benchmarking and reporting so the next steps are simply to stretch those applications further. She ident i f ies net-z ero ca rbon emission as the logical goal post for quantifying transition risks, while urging more contingency planning around physical risks.

“Real estate made a link between sustainability and managing energy and water use very early on because it was a value driver; because it attracted and retained tenants and actually resulted in the ability to command better rents. There is a lot of empirical evidence to support that,” Ng asserted. “The gaps are in thinking about transition — how are properties preparing themselves for potential regulations to be net-zero or potential pressures from tenants so the tenants themselves can achieve their net-zero goals? — and thinking through physical risks and how they impact property, whether that’s flooding or increased heat that’s going to require more HVAC.” Ontario Teachers’ and its real estate arm, Cadillac Fairview Corporation, use hazard assessment modelling for the latter exercise to derive 10-, 20- and 30-year projections of the gamut of extreme climatic events that could potentially engulf each asset. Meanwhile, Ng warns that investors and property/ asset managers will likely have to respond to regulatory dictates and absorb transition costs sooner still. “COVID was disruptive for sure, but netzero and the transition to a low-carbon economy is going to be incredibly disruptive for real estate. Looking forward, there needs to be a lot more understanding from real estate managers of embracing technology. How do you harness technologies — smart metering, battery storage, deep lake cooling — to make buildings more sustainable?” she said. Ng frames ESG as an increasingly critical tool to both support investment decisions and hold asset managers accountable. “We’ve seen a lot of disclosures — what’s being tracked? what’s being monitored? what’s being targeted? Now, there’s going to be a lot more focus on performance, and how that performance compares relative to peer groups or relative to this low-carbon or net-zero trend mission that is underway,” she submitted. “Despite the fact that investors are having to deal with a lot of short-term challenges now as a result of COVID, they really haven’t lost any focus on the longterm climate risk. In fact, I’d say that over the last year we’ve even seen increased interest in profiling and understanding climate risk,” Reid concurred. “There isn’t a trade-off between near-term and long-term risks. Risk management is definitely getting a lot more scrutiny across the board.” zz Canadian Property Management | April/May 2021 25

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s facility managers observed World FM Day on May 12, the predominant topic of conversation in the industry remained the effects and implications of the pandemic. Having spent most of 2020 adapting to changing safety protocols, the implications for facility design, construction, and maintenance are still top-of-mind. For the most part, repair maintenance activities have carried on throughout all the pivoting, adapting, shutdowns, lockdowns, and “new normals”, having been deemed essential and, therefore, exempt from some of even the strictest lockdown situations across the country. They faced the outbreak directly, with all the modifications to safety protocols that involved. Now, as vaccines roll out and local and regional economies start to emerge from hiding, such companies

provide useful examples to look to for reinvented approaches to safety, project delivery, coordination, and customer service. What has changed? Neil Winters, service manager at Flynn Group of Companies, had a front-row seat to some of those changing processes and their impact on facility management and repair and maintenance services. “It’s a little different now,” he understates. Indeed, most companies not involved in food preparation and delivery, handwashing previously received virtually no procedural attention, and soldiering through a cough or cold was a badge of honour. Last year, we all suddenly received refresher training on how to wash our hands,

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and it now seems like the phrase “social distancing” has always been with us. Facility management and its associated trades have seen their share of changes. For repair and maintenance crews at Flynn Group of Companies, interacting with customers has indeed become “a little different”. “Some of the in-person things changed,” Winters says. “We used to make a point of meeting the customer, shaking hands, giving our business card. It was part of our customer service process. Now there’s access protocols. The only time we go inside the [customer’s] building now is for essential leak investigation. And that only happens after we’ve made contact with the customer over the phone and we’ve decided we really need to get inside to have a look. So we’re asking a lot more questions when the call first comes in, and we’re deciding some of those things before we even arrive.” Technology to the rescue Years ago, Flynn began developing its own mobile technology to meet the needs of their customers and employees. Founded in 1978, Flynn is now the leading contractor in North America for the total building envelope. Their suite of apps, built and maintained by an in-house development team, includes a service call request app, and a “coaching” app that pairs experienced tradespeople with rookies during their first months on the job. “We’ve always pushed communication,” Winters says. “We have the Flynn service app, where you receive the service call, make contact with the customer, document the work, take photos, and sent a report to the customer all from the app.” The original intent was to drive performance and develop people, but during the pandemic, the technology has paid off in new ways. “All the things we did before that really set us apart, well, now it just looks like common sense. Of course you would send photos from your phone, and of course [the customer] would want to tap to schedule a repair.” Like many companies with pre-existing processes and technology well-suited to the new reality and customer

www.FlynnCompanies.com expectations, Flynn has been able to adapt faster and easier. “These are things that now are going to be expected,” adds Winters. What’s next Some things from the pre-pandemic world won’t change. “There’s so much for facility managers to worry about. Furniture, flooring, HVAC systems, cleaning, to name a few. Honestly, when they call a company like Flynn, they’re doing it because they know we’ve got our safety culture, the right processes in place, and the right trained people.” They can keep their focus on the long-term health of the building.” Flynn’s Service department tagline, “We have you covered, coast to coast,” reflects the company’s national coverage and all-hours response capability. This past year, it may also have reflected a certain peace of mind, as, like many other companies across North America, Flynn was well-equipped to meet a challenge few saw coming.

GREEN SWEEP Securities Regulators Scrutinize ESG Investing

By Lynn McGrade, Kathryn Fuller, Sienne Lau and John Stanley THE ONTARIO Securities Commission and the British Columbia Securities Commission are currently performing desk reviews of registrants identified as participants in ESG investing. Fund managers, portfolio managers and exempt market dealers should be prepared to respond on their ESGrelated portfolio and fund management, compliance and marketing and disclosure practices. Misleading practices may result in regulatory enforcement action and investor claims for misrepresentation. As retail and institutional investors continue to incor porate ESG (environmental social governance) factors into their investing philosophies, many new products and services purporting to meet investors’ ESG needs have entered the market. The Canadian Securities Administrators (CSA) has k icked off an initiative whereby regulators such as the Ontario Securities Commission and the B.C. Securities Commission are conducting ongoing desk reviews or sweeps of the ESG practices of select investment fund managers, portfolio managers and exempt market dealers. These registrants have been identified as participants in ESG investing because they manage and/or offer ESG investment products or offer advisory services with an ESG element. These reviews have generally focused on two areas: • whether ESG factors have been integrated into the registrant’s service offerings; and • marketing practices and materials relating to a registrant’s corporate 28 April/May 2021 | Canadian Property Management

brand, including marketing of key people and product lines. Securities regulators wish to confirm that the representations registrants are making about the incorporation of ESG principles in their investment decisionmaking processes are consistent with their actual policies and procedures. Both continuous disclosure documents and marketing materials are being exam ined. To do this, securities regulators have contacted registrants with a questionnaire seeking information on the following topics: PORTFOLIO/FUND MANAGEMENT ESG investing • Information about ESG products that the registrant offers to clients and/or ESG concepts that it integrates into its investment process. • Information on the features of ESG products that the registrant offers to clients, such as investment objectives, methods used to consider ESG issues, active ESG screens and percentage of portfolio holdings expected to adhere to ESG objectives and restrictions. ESG principles and metrics • Information about specific ESG principles, such as the United Nations Principles of Responsible Investment, to which the registrant adheres, and whether the registrant employs any quantitative or qualitative ESG metrics. ESG firm framework • Information about the registrant’s

approach to applying ESG principles and metrics; whether a third-party vendor is used for ESG data, research or analysis; the nature of the registrant’s E SG p ol icies a nd pro c e du r es (including whether policies exist on active ownership and proxy voting); and the manner in which the registrant engages with issuers and industry groups on ESG-related matters. COMPLIANCE ESG oversight framework • Information about how the registrant conducts ESG compliance, including the personnel involved in ESG oversight, whether the registrant’s board of directors receives reports of ESG compliance, and whether staff are trained and/or required to be accredited on ESG matters. MARKETING AND DISCLOSURE ESG marketing • Information about the types of marketing that the registrant uses to promote ESG investing, the degree of oversight applied to this marketing, and how alignment is ensured between ma rket i ng st atement s a nd t he registrant’s ESG processes, policies and procedures. ESG disclosure • Information about the type, frequency and dissemination of the registrant’s ESG disclosure, including whether educational materials about ESG investing are provided to interested investors.

esg In addition to this questionnaire, securities regulators are reviewing registrants’ websites and other publicly available materials and may follow up with questions, regardless of whether the registrant is part of the broader desk review. STANDARDS FOR DISCLOSURE In the absence of a standardized framework for ESG disclosure or even a standardized glossary of ESG terms, securities reg u lators a re concer ne d about greenwashing — a term for when investors are misled or deceived about the environmentally responsible nature of a registrant’s products, aims and policies. Securities regulators want to ensure that a registrant’s marketing claims regarding ESG practices align with the registrant’s actual portfolio management practices or fund investment objectives. Although there is no specific standard regulating ESG disclosure, the CSA has existing tools to address this issue. In addition to the requirement in National In s t r u m e n t 31-103 Regis t ra t io n Requirements, Exemptions and Ongoing Registrant Obligations that all registrants must deal fairly, honestly and in good faith with their clients, there are specific rules that apply to marketing prospectusqualified mutual funds: Paragraph 15.2(1)(a) of National Instrument 81-102 Investment Funds ( N I 81-10 2) s t a t e s t h a t s a l e s communications must not be untrue or misleading. Section 13.1 of the Companion Policy to N I 81-102 l ists some of t he circumstances in which, in the view of the CSA, a sales communication would be misleading. An example of a misleading statement is one that lacks t he expla nat ions, qua l if icat ions, limitations or other statements that are necessary or appropriate to make the statement not misleading. OSC Staff Notice 81-720 Report on Staff’s Continuous Disclosure Review of Sales Communications by Investment Funds states that sales communications should not contain statements that are vague, exaggerated or that cannot be verified. In addition to the risk of regulatory enforcement action from misleading marketing materials, ESG claims in fund d i s clo su r e d o cu m e nt s (such a s prospectuses and offering memoranda) that do not correspond with actual portfolio management activities may

expose a fund manager to investor claims for misrepresentation. Disclosure documents should be closely reviewed to confirm the manager has accurately described the ESG philosophy and process used by the fund. Further, managers may wish to consider ESG risk disclosure, explaining that the manager’s view of ESG may not align with the view of all investors and that the manager’s ESG screens may eliminate investments that could outperform investments that satisfy the screening requirements. U.S. REFERENCE POINT South of the border, the U.S. Securities and Exchange Commission (SEC) has conducted a similar green sweep. The SEC has examined whether U.S.-based investment f i r ms a re accu rately d isclosi ng t hei r E SG i nvest i ng approaches and whether they have implemented policies, procedures and practices that align with their ESGrelated disclosure. SEC staff observed instances in which i nve st m ent a dv is e r s, r eg ist e r e d investment companies and private funds, a mong ot her ent it ies, prov ide d potentially misleading statements regarding ESG investing processes, lacked ESG policies and procedures despite claiming to have such policies, and failed to have compliance programs that were reasonably designed to guard against inaccurate ESG disclosures and marketing. The SEC also noted a number of practices it considered to be particularly effective and reasonably designed. These included having simple and clear disclosure regarding the registrant’s approach to ESG investing; explanations rega rding how investments were evaluated using global ESG frameworks; policies and procedures that addressed ESG investing and covered key aspects of the registrant’s relevant practices; and compl ia nce person nel t hat were knowledgeable about the registrant’s specific ESG-related practices. These findings of the SEC are a helpful indicator of what Canadian securities regulators may find favourable or unfavourable in their ESG reviews. EU DISCLOSURE RULES The European Union took a step closer to harmonizing its framework for ESG disclosure when Level 1 of the Sustainable Finance Disclosure Regulation

(SFDR) came into effect on March 10, 2021. Level 1 SFDR requires certain financial market participants, such as asset managers and financial advisers whose business is in the European Union, to provide mandatory ESG disclosure on their websites and pre-contractual information communications. These financial market participants must post their policies on integrating sustainability risks in their investment decisionmarking processes or advice, or explain their non-compliance. As part of the European Union’s 2030 Agenda for Sustainable Development, SFDR is intended to help investors make informed investment decisions and to prevent greenwashing. Level 2 of the SFDR will be phased in starting on January 1, 2022. Level 2 SFDR will require in-scope financial market participants to provide ESG disclosure in periodic reports and to ensure their ESG disclosure complies with regulatory technical standards. ESG disclosure mandated by SFDR m ay h elp C a n a d ia n r eg ist r a nt s understand regulatory expectations and provide a useful reference point for developing an ESG compliance regime in Canada. KEY TAKEAWAYS • Canadian securities regulators are reviewing registrants’ ESG disclosure and marketing materials to ensure that they are consistent with registrants’ actual ESG policies and practices. • Disclosure that could potentially mislead investors into believing that a reg ist ra nt’s E SG p ol icies a nd procedures are more stringent or effective than they actually are could expose that registrant to regulatory enforcement and potential liability for investor claims of misrepresentation. • All registrants that participate in ESG investing need to ensure that they have clea rly def ined ESG policies and principles and that their disclosure documents and marketing materials align with these policies and principles. zz Lynn McGrade and Kathryn Fuller are partners practicing corporate law with a focus on investment management, Sienne Lau is a senior associate and John Stanley is an associate with Borden Ladner Gervais LLP. For more information, see the website at www.blg.com. Canadian Property Management | April/May 2021 29

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SHIFT SHOCK Industrial Properties Shoulder More Tax Burden as Jurisdictions Update Assessments By Barbara Carss SPIKING PROPERTY tax tolls on light industrial facilities are considered a near certainty for ratepayers in Calgary and many municipalities of British Columbia’s lower mainland. Economic fallout from COVID-19 is shifting more of the tax burden to this flourishing group of assets via the mill rate, while also driving up the tax rate — presenting a double-whammy of consequences in jurisdictions that update valuations annually.

The assessed value of Calgar y industrial property has risen 6%, on average, against a 5.5% drop in value across the entire non-residential tax base, bringing dramatic tax increases for some properties even before any tax rate adjustment comes into play. Industrial values have likewise increased in the range of 10 to 15% in Vancouver and surrounding municipalities, while office and retail values have slipped about 5%.

“The valuation date for the 2021 assessment roll was July 1, 2020, just a few months after the March lockdown here, but there was no real pause at all that we observed in rental rates or in valuation parameters for industrial properties,” David Howard, Senior Director, property tax, with Altus Group in Vancouver, reported during a recent online discussion of industrial property tax trends in three markets experiencing Canadian Property Management | April/May 2021 31

propertytax

“If you’re projecting taxes three to five years out and you’re assuming a 3 to 5% annual increase, you are going to be in for a big surprise.” a boom in the warehouse/distribution and logistics sector. “So we’re in an environment now where we have one property type increasing significantly and other property types decreasing.” Meanwhile, Ontario’s postponed reassessment will insulate property owners in the Greater Toronto Area from a similar shock in the short term. Many commercial and industrial ratepayers should actually enjoy a tax decrease this year following the Ontario government’s commitment in last fall’s 2020 provincial budget to harmonize the business education tax (BET) tax rate at 0.88% for 2021, e quat i ng to a n est i mated $450-million tax cut province-wide. Nevertheless, property tax specialists warn of a looming spike in light industrial assessment rates with the first post-pandemic evaluations. “We’ve seen property values increase 100% from 2016 [the base date for the last assessment] to today, and with hotel, office and retail performing less strongly, this shift in tax burden is going to be real,” observed Jason George, Vice President, property tax, with Altus Group in Toronto. “If you’re projecting taxes three to five years out and you’re assuming a 3 to 5% annual increase, you are going to be in for a big surprise.” CALGARY Calgary’s most recent shift in apportionment is layered on previous destabilization that saw downtown office values diminish from 32% of the non-residential assessment base in 2015 to just 18% by 2019. In turn, the City of Calgary ratcheted up the tax rate to balance out the loss of approximately $250 million in revenue due to that drop in value, thus redistributing that tax burden to all other non-residential property classes. “From 2016 to 2019 we saw a 56% increase to the non-residential tax rate,” 32 April/May 2021 | Canadian Property Management

recounted Josh Weber, Senior Director, property tax, with Altus Group in Calgary. “The City had to look at how to fix this problem because there was no view in sight for increasing the assessment base or seeing downtown values come back.” A solution — moving a larger share of the total tax burden to the residential tax base — was adopted for the 2020 tax year, resulting in a 12% cut to the non-residential tax rate last year. However, a subsequent drop in most non-residential values necessitates an 7.3% upward readjustment for 2021. “Last year’s gain is close to washed out,” Weber lamented. Compounding that are varying but generally consistent year-over-year gains in value for both A and B grade industrial assets. It’s estimated that 54% of properties are in line for tax increases of up to 10% solely attributable to revenue-neutral tax shifts, while another 35% can expect a 10 to 20% jump. That’s nearly 4,800 properties out of a total of 5,300. In addition, there are 400 outliers set for tax increases greater than 20%, including 119 properties that will see spikes in excess of 30%. Notably, among properties of 100,000 square feet or larger, Altus reports A grade facilities registered an average 24% yearover-year surge in assessed value, while B grade facilities posted a smaller, but still sizeable 13% year-over-year average uptick. Weber theorizes that’s linked to 17 transactions of light industrial properties last year, or roughly double the usual trade volume. “Essentially, this has come down to a specific class of property that is really going to be witnessing the brunt end of this increase,” he said. “With the increase in sales, the City has gathered more market intel. Typically, sales in Calgary come in around $500 million in total value and this year we came in at $880 million.”

The City of Calgary has committed to provide some tax relief again in 2021 through its non-residential phased tax program (PTP) — a measure first invoked in 2017 to counter some of the tax shift from downtown office buildings to other types of non-residential properties. This year, a $13-million pot has been allocated to hold increases to the municipal portion of the tax levy to no more than 10% above the amount calculated in 2020, excluding any PTP credit advanced at that time. Businesses defined as having experienced “the most significant property tax increases for 2021” will be eligible. “For the property owners who are experiencing heavy increases on the tax side, this has been a way to mitigate that when there are no other answers to be had,” Weber reflected. “The problem is, a component of it comes from the City’s rainy day fund and we just don’t know how long that’s going to last, or where it comes from. The sustainability is just really not known.” GREATER VANCOUVER AND FRASER VALLEY In B.C.’s lower mainland, David Howard notes that assessors generally applied higher rental rates and lower cap rates on warehouse/ distribution facilities this year to derive yearover-year per square foot value gains in eight of nine municipalities surveyed. Only Vancouver remained on par with 2020 assessed value at $380 per square foot, while assumptions of double-digit rental rates and sub-4% cap rates — previously common only in Vancouver — underpinned jumps of 5.2% to 16.8% elsewhere. “As you move away from the city of Vancouver and out into the Fraser Valley, this is where we’re observing increases on average of about 15%” Howard said. The average increase was below 10% in Burnaby, Chilliwack and Abbotsford, and above 12% in Richmond, Delta, Coquitlam, Langley and Surrey. For ratepayers, much will depend on whether properties are categorized in Class 5, which specifically covers manufacturing and distribution uses, or in the catchall Class 6 for other business purposes. Additionally, since municipalities set two distinct tax rates for the two classes, other discrepancies can come into play separate from assessment-related tax shifts. This year, warehouses in Class 5 will typically experience more moderate shifts since value increases have occurred more uniformly across the entire tax class, whereas warehouses grouped with other kinds of

propertytax commercial properties in Class 6 are more likely to get walloped. For example, Howard cited a Surrey warehouse that sustained an 11% year-over-year assessment-related tax increase due to its Class 6 status. “The tax rate there [in Surrey] is already lower for Class 5 and we’re forecasting it to decline even further so that same warehouse, if it was in Class 5, would have taxes that are 18% lower than the warehouse that is Class 6,” he advised. “It’s very important for the owner or taxpayer to know which class they are in and to audit that class to make sure it is accurate. It’s BC Assessment that establishes the tax rate classification based on use of the property or at least on what they feel the use of the property is.” Looking ahead to 2022, he foresees more of the same when values are re-pegged to a July 1, 2021 baseline. Industrial sales prices over the past 10 months have generally sur passed properties’ assessed values, and recent leasing deals are also resulting in higher rents than assessors assumed last year. “Again, if you’re an industrial warehouse that’s Class 6 and you’re grouped together with retail and office, I’d be concerned,” Howard cautioned. “I don’t think the same increase in value is occurring for those property types.”

GREATER TORONTO AREA Jason George likewise traced an upward trajectory for light industrial sales values and rental rates in the Greater Toronto A rea. Average net rent increased from $7.43 per square foot in 2018 to $10.33 in the first quarter of 2021, while average sales prices rose from $217.19 per square foot to $310.16 in the same time period. However, proper ty tax is still appor tioned according to assessed values from January 1, 2016. “In short, there will be no swings in tax burden for the 2021 tax year,” George affirmed. This year represents the fifth year of a n or iginally intended four-yea r assessment cycle, and the 2021 Ontario budget, released in March, announced plans to stretch it still further. COVID19-related upheaval prompted the initial postponement of the 2020 reassessment, which would have pegged assessments to values as of January 1, 2019. That reassessment has now been pushed until at least next year as the provincial government continues an ongoing review of property assessment and taxation, meaning that new evaluations for tax apportionment purposes won’t be in place before 2023.

“Shortly after the pandemic took hold here, the Province announced that it was going to postpone the reassessment to maintain stability. So stability has turned out to be a blessing for industrial properties that have seen quite significant i n c r e a s e s i n v a l u e ,” G e o r g e acknowledged. “Stability is probably not very good if you’re in hospitality or some retail sectors. In those cases, you’re not looking for stability or for your taxes to be based on 2016 market values.” Looking to the future, he foresees many light industrial facilities will be taxed on par with suburban office buildings once the delayed reassessment occurs given that values for the two property types are now unprecedentedly in accord. He also suggests that the 2016 post-reassessment fallout for the highend commercial strip along Toronto’s Bloor Street holds ominous portent for owners of warehouse/distribution and logistics facilities. “ Ret a i l rent s were i nc rea si ng dramatically — $300 per square foot and even higher — and then when the assessment roll was returned, those properties saw 100% increases,” George said. “This is likely going to happen to industrial properties the next time these properties get reassessed.” zz

MANITOBA EDUCATION TAX REBATE COMES WITH RENT FREEZE Rental housing landlords in Manitoba will receive a 25% rebate on education property taxes this year, representing the first step in a provincial promise to remove education costs from the property tax base. As announced in the 2021 Manitoba budget, that comes with a halt on allowable rent increases until 2024 in order to ensure that tenants can capture flow-through benefits from the resulting operational savings. “If material improvements are made to a property, landlords will still be able to apply for an above-guideline rent increase,” the budget document advises. “The education property tax rebate amount received by landlords will be considered prior to approving an above-guideline rent increase.” The Manitoba government estimates about $248 million from the education levy will be returned to taxpayers this year through 25% rebates to residential/farm ratepayers and 10% rebates to commercial/industrial ratepayers. Tax filers can also still claim existing education property tax credits, but eligible amounts will be reduced by 25%. Education property tax has additionally been frozen at 2020 levels in tandem with the government’s commitment for an extra $23 million in grants to the province’s various school districts. Ultimately, school districts will give up their taxing authority when the government fully implements its plan to directly fund education. “Manitoba is the only Canadian jurisdiction that determines school taxes at the local level, which creates an uneven playing

field across the province,” Manitoba Premier Brian Pallister noted earlier this spring as he outlined the plan. “As we phase out the education property tax, we will ensure a more equitable system is in place to fund Manitoba’s education system and support students.” Residential/farm ratepayers are also promised a 25% rebate on their 2022 education property taxes, but the budget document is silent on future considerations for commercial ratepayers. For 2021, it explains that the latter group is receiving a proportionally smaller refund due to other offsetting factors including: various new business tax measures in the 2021 budget; the nearly $500 million that has been available through “broad-based and accessible business support programs in response to COVID-19”; and the fact that education property tax is a deductible business expense. Meanwhile, the budget document presents two slightly different rationales for the two-year freeze on allowable rent increases — linking it to the tax rebate for landlords and framing it as COVID-19 relief. “The annual rent guideline will now be frozen through 2022 and 2023 to help Manitoba renters catch up after the pandemic,” Manitoba Finance Minister Scott Fielding stated in his budget speech. –REMI Network

Canadian Property Management | April/May 2021 33

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Ian (far left) and Bruce McDonald (far right) have been Co-Presidents & CEOs of Black & McDonald since 1997. Here they are pictured with their dad and uncle,W.L. and H.J. McDonald.

A CENTURY OF SUCCESS Celebrating Black & McDonald’s 100-Year Legacy

F

rom its origin in 1921 as a Toronto-based electrical contractor, Black & McDonald has evolved into a multi-trade service provider with 30+ offices operating throughout North America. Built on the founding principles to “Do Things Right” and “Deliver Lasting Value,” the familyowned company now completes over $1.5 billion in sales per year and employs more than 5,000 people from coast to coast. Reaching the 100-year mark is a great achievement for any business, and for Black & McDonald, it is a testament to the people, partnerships and meaningful moments that continue to shape its legacy — one that began as a two-man operation in 1921 when founding partners William R. Black and William J. McDonald launched their electrical wiring service. “So many people have contributed to make this achievement possible,” said Ian McDonald, Co-President & CEO. “For the past 100 years, the support from our employee group, our client base, our suppliers, and the communities in which we operate, has been incredible. We are very appreciative of this support and we will strive to continue to be worthy of it going forward.” Rapid growth through the decades For two decades, World War I veterans William R. Black and William J. (W.J.) McDonald enjoyed success together as electrical contractors serving small businesses and households in the Toronto area. When Black passed away

in 1946, W.J. took over sole proprietorship and was later joined by his sons, John and Bill, in the 1950s. By the early 70s, Black & McDonald had grown out of its humble roots into a national network of Canadian offices offering a range of services that included electrical and mechanical contracting, sheet metal fabrication, HVAC and refrigeration maintenance and repair, and utility contracting. This expansion continued through the 80s with the addition of design engineering and facility management and operations capabilities. By the mid90s, Black & McDonald had entered the U.S. market with utility construction and asset management services. Today, the multi-trade company fulfils all building lifecycle needs and holds facility management contracts for multiple operations, including hospitals, museums, airports, industrial plants, office complexes and military bases. Led by third generation family members Ian and Bruce McDonald, it continues to adhere to the same core values that steered it so successfully in the beginning: to provide a quality service at a fair price and to treat people respectfully. Looking ahead, Black & McDonald envisions a continued path of planned growth and profitability guided by a promise to put customer satisfaction and quality first; to remain true to its longstanding code of business while honouring a commitment to health, safety and environmental responsibility into the next century and beyond.

SPONSORED CONTENT

100 YEARS OF MILESTONES 1921: W.R. Black and W.J. McDonald form partnership in Toronto. 1946: W.J. McDonald acquires 100% ownership in Black & McDonald. 1950: Black & McDonald enters the ventilation and A/C markets. 1955: Corporate headquarters opens at 101 Parliament St. in Toronto. 1955: Quebec office opens. 1957: H.J. and W.L. McDonald assume leadership. 1958: Black & McDonald enters the plumbing and heating markets. 1971:

Atlantic region business activity begins.

1973: B&M enters the utility market. 1973: Operations begin in Western Canada. Black & McDonald’s first corporate headquarters at 101 Parliament Street.

Success driven by adaptability, innovation and staying true to its founding principles

1977: Vancouver and Dartmouth offices open, establishing coast to coast presence. 1984: B&M secures its first Facilities Management contract at Commerce Court in Toronto.

Black & McDonald has experienced continued change in its 100-year history, surviving the Great Depression, WWII, several recessions, and now a pandemic. The ability to adapt quickly, develop new services effectively, and remain on the cusp of new technology has been central to its success. Today, Black & McDonald proudly offers multiple products and services in the following core areas:

1990: Offshore energy business begins operations in Atlantic Canada.

• Electrical and Mechanical construction services – Black & McDonald provides turnkey solutions for a wide range of applications including commercial buildings, institutional facilities, airports, mission critical data centres, hospitals, pharmaceutical, transit & transportation, water & wastewater treatment, oil & gas, mining, manufacturing, utilities, power generation and renewable energy across North America.

2013: Women’s College Hospital redevelopment begins; B&M awarded 30-year FMO contract.

• Utility Construction – Serving both private and public sector clients, Black & McDonald has extensive experience in substation design, construction, retrofit, repair and maintenance, including testing and commissioning. We provide construction services for overhead and underground transmission systems, fibre optic cabling, construction of stations, municipal installations, and their related civil construction. • Facility Services – Black & McDonald has extensive experience in operating and maintaining a diverse portfolio of facilities across both the public and private sectors. B&M’s experience covers a varied cross-section of facility types, including commercial offices, healthcare environments, major transportation hubs and airports, cultural facilities, life sciences laboratories, municipal government properties, educational institutions, data centres, utilities infrastructure, and major manufacturing and distribution plants.

1997: Ian and Bruce McDonald assume leadership. 1997: B&M begins operations in Kansas City, U.S. 2008: B&M begins first public-private partnership project at the Kelowna Vernon Hospitals in B.C.

2019: B&M awarded major public-private partnership (P3) contract in Ottawa as part of the Innovate Energy Consortium under the Government of Canada’s Energy Services Acquisition Program (ESAP). 2021: B&M celebrates 100 years of excellence.

For more information on how Black & McDonald can serve you, please visit: www.blackandmcdonald.com.

A Behind the Scenes look at the Ronald McDonald House Facilities May 27th, 2021 @11:30am

Keeping families close

June 17, 2021

MACNAB VIRTUAL TOUR CITYHOUSING HAMILTON July 29th, 2021 @11:30am

WHO’S WHO 2021

PRESENTED BY:

SPONSORED BY:

SPONSORED CONTENT

ADVANCED TECH OFFERS AN EDGE IN 2021 by Peter Altobelli, vice president and general manager, Yardi Canada Ltd.

Commercial real estate shows promising signs of emerging from the restrictions imposed by the pandemic. Many asset managers and investors are now seeking clearer visibility into their portfolios to support enhancements with fact-based decisions. Achieving these objectives will depend largely on property management technology capable of aggregating and analyzing data related to revenues, debt, risk, occupancy, sales and more.

Cloud-based asset management platforms, for example, automate deal pipeline management, portfolio health visualization, space availability viewing, risk analysis, budgeting and construction project management. The most advanced systems connect all operations on a single connected, integrated solution that is able to consolidate data, delivering portfolio-wide predictive insights and prescriptive recommendations. Predictive tools available in the marketplace give property owners/manager and tenants valuable new insights into local conditions that shape leasing decisions. Smart building security systems leverage artificial intelligence and machine learning to control property access. Data analytics and predictive modeling can help determine “optimal asset allocation for mixed-use developments at a high level, as well as provide more detailed insights into the composition of unit mixes for a property” and offer insight into potential opportunities notes the “2021 Emerging Trends in Real Estate” report, a survey of the North American real estate industry conducted by PwC and the Urban Land Institute. Data analytics’ potential, the report adds, “will only grow with the larger data sets which makes it even more important for real estate companies to focus on properly collecting and structuring their data.” AI assists with any number of property management operations, including tracking energy consumption, an important consideration for ESG strategy. AI can help drive better performance through lower utility, energy and equipment maintenance costs; maintain a degree of tenant comfort that reduces service calls and increases retention; and comply with

38 April/May 2021 | Canadian Property Management

regulatory requirements. Property managers can also use AI for accurate lease abstractions, automated underwriting and valuation models, market demand and value predictions, due diligence, precise marketing, sales and acquisition targeting and better identification of risks and trends, among other things. Nimble companies, not necessarily the largest ones, will be the most efficient and forward looking operators in 2021 and beyond. Powerful property management platforms can help them formulate new strategies for portfolios and identify additional markets or locations for investment opportuni-ties. They can use data analytics and predictive modeling to determine optimal asset allocation, obtain detailed insights into the composition of unit mixes for a property, and make more accurate financial projections. Automated technology platforms also help property management workers do their jobs better by reducing manual tasks, which provides more time to formulate strategy, serve tenants and execute other value-add activities. Sophisticated property management solutions’ ability to accurately model asset values or the potential returns of future development represents a competitive advantage. Used effectively, they can help property owners increase rents, lower costs and increase asset value. The continued development and adoption of artificial intelligence and predictive analytics platforms will further enhance efficiency, employee productivity and customer service across real estate operations in Canada.

For more information about Yardi please contact (888) 569-2734 or visit yardi.com

TOP

TEN

OWNED & MANAGED IN CANADIAN REAL ESTATE

OFFICE OWN & MANAGE

MILLIONS OF SQ. FT.

RETAIL OWN & MANAGE

MILLIONS OF SQ. FT.

APARTMENT OWN & MANAGE MILLIONS OF SQ. FT.

Oxford Properties Group

16.886

Choice Properties Real Estate Investment Trust

42.950

Starlight Investments

53.925

CAPREIT

40.616

Boardwalk Rental Communities

28.000

29.000

Homestead Land Holdings Limited

23.453

First Capital Realty

19.991

Realstar Management

21.260

12.023

Crombie REIT

17.047

Hazelview Investments Inc.

20.096

11.089

Cadillac Fairview Corporation Limited

16.746

Skyline Apartment REIT

17.793

Ivanhoé Cambridge

14.285

Killam Apartment REIT

15.574

H&R REIT

13.704

Mainstreet Equity Corp.

12.448

Oxford Properties Group

13.665

Drewlo Holdings Inc.

10.536

INDUSTRIAL OWN & MANAGE MILLIONS OF SQ. FT.

OTHER OWN & MANAGE

MILLIONS OF SQ. FT.

Pure Industrial Real Estate Trust

22.000

CAPREIT

28.278

Summit Industrial REIT

20.346

Nadlan-Harris Property Management Inc.

10.800

Choice Properties Real Estate Investment Trust

17.450

StorageVault Canada

9.100

Dream Industrial REIT

16.115

Comfort Property Management Inc.

7.200

Cominar REIT

15.252

Killam Apartment REIT

5.288

QuadReal Property Group

14.544

Oxford Properties Group

13.866

NorthWest Healthcare Properties

3.660

Manulife Investment Management

11.571

Brookfield Property Partners L.P.

1.802

Prologis

11.000

PRO REIT

0.723

H&R REIT

9.276

Concert Properties Ltd.

0.691

Allied Properties REIT

0.510

Manulife Investment Management

14.124

RioCan REIT

33.459

Canderel

13.571

SmartCentres REIT

31.868

Allied Properties REIT

12.851

CT REIT

Morguard

12.621

QuadReal Property Group Cominar REIT H&R REIT

10.740

Cadillac Fairview Corporation Limited

10.291

Brookfield Property Partners L.P.

8.839

WHO’S WHO 2021 * JUNE ISSUE

CAM-CPM_ Ads_2.25x2.25_March_2020.indd 1

2020-05-26 2:41

SPONSORED BY:

TOP

TEN

OWNED IN CANADIAN REAL ESTATE

OFFICE OWN ONLY

MILLIONS OF SQ. FT.

RETAIL OWN ONLY

MILLIONS OF SQ. FT.

APARTMENT OWN ONLY

MILLIONS OF SQ. FT.

Healthcare of Ontario Pension Plan Inc.

12.370

Healthcare of Ontario Pension Plan Inc.

12.450

Healthcare of Ontario Pension Plan Inc.

17.440

Crestpoint Real Estate Investments Ltd.

5.700

Crestpoint Real Estate Investments Ltd.

4.000

Westcliff

1.215

I.G. Investment Management, Ltd.

3.083

I.G. Investment Management, Ltd. 3.611

Lanesborough Real Estate Investment Trust

1.053

QuadReal Property Group

1.473

Manulife Investment Management

3.020

I.G. Investment Management, Ltd.

0.951

Ivanhoé Cambridge

1.425

Automotive Properties REIT

2.500

Sabjoy inc.

0.950

Northam Realty Advisors

1.200

Choice Properties Real Estate Investment Trust

2.240

Oxford Properties Group

0.834

SmartCentres REIT

2.216

QuadReal Property Group

0.762

Westcorp Property Management

0.644

ViveRE Communities

0.452

Choice Properties Real Estate Investment Trust

0.200

Crown Property Management Inc.

0.416

Concert Properties Ltd.

0.366

Ivanhoé Cambridge

2.023

Nexus REIT

0.358

Nexus REIT

1.189

Tower Building Management

0.250

Fronsac REIT

0.922

INDUSTRIAL OWN ONLY

MILLIONS OF SQ. FT.

OTHER OWN ONLY

MILLIONS OF SQ. FT.

Crestpoint Real Estate Investments Ltd.

16.100

Fronsac REIT

6.296

Healthcare of Ontario Pension Plan Inc.

12.000

Ivanhoé Cambridge

1.782

Ivanhoé Cambridge

8.353

Oxford Properties Group

0.910

I.G. Investment Management, Ltd.

0.088

7.689

Lanesborough Real Estate Investment Trust Imperial Equities

0.062

Nexus REIT

1.596

Imperial Equities

0.961

Shelter Canadian Properties Limited

0.035

Concert Properties Ltd.

0.921

Northam Realty Advisors

0.762

Manulife Investment Management

0.645

Armadale Property Management Inc.

0.307

7TH ANNUAL WHO’S WHO

A ranking of the Canadian condo industry’s major players and portfolios PA R T O F T H E

* June Issue P A R T

O F

T H E

SPONSORED BY:

TOP

TEN

MANAGED IN CANADIAN REAL ESTATE

OFFICE MANAGE ONLY

MILLIONS OF SQ. FT.

RETAIL MANAGE ONLY

MILLIONS OF SQ. FT.

APARTMENT MANAGE ONLY

MILLIONS OF SQ. FT.

BGIS Global Integrated Solutions

104.405

BGIS Global Integrated Solutions

78.475

MetCap Living Management Inc.

18.464

The DMS Group

CBRE Limited

52.582

CBRE Limited

57.762

16.960

Sterling Karamar Property Management

Colliers International

30.768

Colliers International

12.432

14.589

BentallGreenOak (Canada) Limited Partnership

22.200

BentallGreenOak (Canada) Limited Partnership

10.900

Greenwin Inc.

13.495

Société de Gestion Cogir

GWL Realty Advisors

18.355

Epic Investment Services

7.384

13.448

Briarlane Rental Property Management Inc.

Triovest Realty Advisors

15.172

Morguard

7.311

13.275

Epic Investment Services

9.428

Warrington PCI Management

7.800

Avison Young Real Estate Management Services

5.637

Gateway Property Management Corporation

8.253

Avison Young Real Estate Management Services

7.300

McCor Management (MB) Inc.

4.910

Park Property Management Inc.

8.224

Triovest Realty Advisors

Brookfield Property Partners L.P.

7.277

Choice Properties Real Estate Investment Trust

4.776

Devon Properties Ltd

7.731

GWL Realty Advisors

4.750

7.442

INDUSTRIAL MANAGE ONLY

MILLIONS OF SQ. FT.

OTHER MANAGE ONLY

MILLIONS OF SQ. FT.

CONDO MANAGE ONLY

MILLIONS OF SQ. FT.

CBRE Limited

28.617

BGIS Global Integrated Solutions

36.780

CBRE Limited

23.993

Crossbridge Condominium Services Ltd.

84.715

Harvard Property Management Inc.

2.551

Del Property Management Inc.

67.500

Wilson Blanchard Management Inc.

50.141

Rancho Management Services

41.657

Pacific Quorum Properties Inc.

35.597

ICC Property Management Ltd.

31.530

Icon Property Management

25.200

AWM-Alliance Real Estate Group

23.897

Percel Inc.

16.560

Gateway Property Management Corporation

16.199

BentallGreenOak (Canada) Limited Partnership

27.200

Triovest Realty Advisors

21.009

GWL Realty Advisors

17.774

Avison Young Real Estate Management Services

2.161

Colliers International

15.567

Brookfield Property Partners L.P.

1.812

BGIS Global Integrated Solutions

14.439

The DMS Group

1.580

Realspace Management Group Inc.

7.964

Downing Street Property Management Inc.

0.711

Morguard

6.558

Bayshore Property Management Inc.

0.644

Warrington PCI Management

4.800

Epic Investment Services

4.283

Real Estate 360 Property Advisory

0.495

Apollo Property Management Ltd.

0.464

SPONSORED BY:

CANADIAN PROPERTY PROPERTY MANAGEMENT MANAGEMENTWHO’S WHO’SWHO WHO2021 2021 OFFICE TOTAL SQ. FT. MANAGE (MILLIONS)

OWN

INDUSTRIAL BOTH

MANAGE

OWN

RETAIL BOTH

MANAGE

BGIS Global Integrated Solutions

234.099 104.405

14.439

78.475

CBRE Limited

164.941

28.617

57.762

Crossbridge Condominium Services Ltd.

84.715

Choice Properties Real Estate Investment Trust

72.580

CAPREIT

70.357

Del Property Management Inc.

67.500

52.582

OWN

APARTMENT BOTH

MANAGE

OWN

CONDO BOTH

MANAGE

0.910

3.490

0.500

0.090

17.450

4.750

2.240

0.619

42.950

0.200

0.844

40.616

28.278 67.500

62.335

30.768

15.567

12.432

2.135

1.433

BentallGreenOak (Canada) Limited Partnership

61.710

22.200

27.200

10.900

1.400

0.010

Healthcare of Ontario Pension Plan Inc.

54.260

Morguard

52.504

Oxford Properties Group

51.049

Wilson Blanchard Management Inc.

50.141

Rancho Management Services

48.486

0.970

0.115

2.379

3.336

GWL Realty Advisors

47.633

18.355

17.774

4.062

7.442

Triovest Realty Advisors

41.328

15.172

QuadReal Property Group

40.638

SmartCentres REIT

37.605

0.240

0.252

Pacific Quorum Properties Inc.

36.934

0.055

0.060

RioCan REIT

36.534 35.821

H&R REIT

33.720

Ivanhoé Cambridge

33.562

ICC Property Management Ltd.

31.544

Manulife Investment Management

30.300

CT REIT

29.000

AWM-Alliance Real Estate Group

28.708

Boardwalk Rental Communities

28.000

Société de Gestion Cogir

27.923

Canderel

26.408

Crestpoint Real Estate Investments Ltd.

26.000

Gateway Property Management Corporation

25.396

Icon Property Management

25.200

Epic Investment Services

24.268

Homestead Land Holdings Limited

23.453

Hazelview Investments Inc.

23.431

Pure Industrial Real Estate Trust

22.000

Killam Apartment REIT

21.611

BOTH

23.993

62.365

34.548

OWN

84.715

Starlight investments

Cadillac Fairview Corporation Limited

MANAGE

36.780 1.987

Colliers International

Cominar REIT

OTHER

8.439

53.925

12.370 4.934

12.000 12.621

6.558

12.450 7.573

16.886

7.311

17.440 13.475

13.866

0.008

13.665

0.023 0.834

4.887

0.910 50.141

0.054 1.473

21.009

0.117

12.023

4.776

0.151

14.544 0.384

2.216

11.089

15.252

0.762 0.154

8.295 35.597

8.353

0.762

16.746

9.276

5.383

0.335

13.704 0.177

2.023

14.285

0.135

1.782

0.014 0.242

14.124

0.645

0.339 2.490

9.480 3.234

10.740 1.425

3.202 31.868 33.459

10.291

41.657

0.048

1.222

2.313 3.942

0.028

11.571

3.020

0.543

31.530 0.085

0.070

29.000 0.855

0.670

1.480

1.806

23.897 28.000

0.489

0.279 13.571

13.448

9.665

4.936

16.100 0.049

1.865

5.008

5.700 0.368

2.177

2.680

4.000

0.213

0.200

0.196

0.127

8.253

4.283

7.384

3.173

0.204

16.199 25.200

9.428

23.453 1.700

0.235

1.400

20.096

0.750

15.574

22.000 5.288

OFFICE TOTAL SQ. FT. MANAGE (MILLIONS)

Realstar Management

OWN

INDUSTRIAL BOTH

MANAGE

OWN

RETAIL BOTH

MANAGE

OWN

APARTMENT BOTH

MANAGE

OWN

21.260 21.029

Brookfield Property Partners L.P.

20.750

7.277

The DMS Group

20.468

0.178

First Capital Realty

19.991

0.682

Sterling Karamar Property Management

19.167 18.464

Apollo Property Management Ltd.

18.332

0.780

Avison Young Real Estate Management Services

18.316

7.300

Crombie REIT

18.000 17.793

Percel Inc.

16.560

Dream Industrial REIT

16.115

Warrington PCI Management

16.000

7.800 0.125

15.158

Allied Properties REIT

14.732

KDM Management Inc.

14.458

0.160

0.180

Northview Canadian High Yield Residential Fund

11.141

Prologis

11.000

Westcliff

10.906

Nadlan-Harris Property Management Inc.

10.800

0.246

0.628

3.218

5.637

14.589

0.100

2.282

13.932

0.464 2.161

17.047 0.128

0.117

0.347

13.495

3.378

3.400

0.992 3.083

0.984 7.689

13.275 3.611

0.951 0.196

0.041

12.851

0.023

14.962

1.278

0.029

0.030

0.366

11.328

1.958

4.800

0.005

McCor Management (MB) Inc.

1.802

1.580

16.560

13.705 13.405

1.812 16.960

16.115

13.505 12.448

BOTH

17.793

Shelter Canadian Properties Limited Concert Properties Ltd.

0.599

0.613

1.733

GPM Property Management Inc. Mainstreet Equity Corp.

0.421 1.137

0.953

17.804

SolutionCondo/Rentalys Solutions

OWN

18.464

Greenwin Inc.

15.376

MANAGE

20.346

8.839

0.786

Skyline Apartment REIT

15.334

MANAGE

19.991

MetCap Living Management Inc.

Briarlane Rental Property Management Inc.

BOTH

OTHER

21.260

Summit Industrial REIT

I.G. Investment Management, Ltd.

CONDO

0.029

0.889

0.510 14.428

0.127

1.669

0.408

0.011

0.203

5.306

0.539

3.971

0.425

0.035

0.091

13.500 1.859

0.921

6.977

0.069

0.167

2.355

0.691

12.448 3.366

1.800

4.910

1.019

0.001

1.132

0.233

10.009 11.000

0.941

0.371

0.299

0.236

0.726

7.118

1.215 10.800

Drewlo Holdings Inc.

10.634

Berkley Property Management Inc.

10.488

0.098

Medallion Corporation

10.016

Park Property Management Inc.

9.822

0.050

1.500

0.048

Realspace Management Group Inc.

9.762

1.003

7.964

0.795

Minto Properties Inc.

9.285

0.911

InterRent REIT

9.200

StorageVault Canada

9.100

Downing Street Property Management Inc.

9.044

1.026

3.182

0.860

0.066

Colonnade BridgePort

8.955

3.790

3.468

1.261

0.436

0.250

0.050

0.040

10.536 6.413

0.180

3.555

10.016

0.452

8.224 0.157

0.894

6.871 9.200 9.100 3.199

0.711

CANADIAN PROPERTY PROPERTY MANAGEMENT MANAGEMENTWHO’S WHO’SWHO WHO2021 2021 OFFICE TOTAL SQ. FT. MANAGE (MILLIONS)

Centurion Asset Management Inc.

8.926

GWL Realty Advisors Residential

8.922

OWN

INDUSTRIAL BOTH

MANAGE

OWN

RETAIL BOTH

MANAGE

OWN

0.004

Plaza Retail REIT

8.612

Harvard Property Management Inc.

8.583

1.916

Devon Properties Ltd

8.168

0.225

Davpart Inc.

8.043

SDM Realty Advisors Ltd.

7.585

Skyline Commercial REIT

7.579

Fronsac REIT

7.218

Comfort Property Management Inc.

7.209

Canlight Management Inc.

7.175

APARTMENT BOTH

MANAGE

0.775

1.052

0.026

0.824

7.847

1.425

7.497

2.950

3.450

BOTH

0.141

2.551

1.851 1.100

1.062 0.085

2.715 1.993

Compass Commercial Realty LP

6.302

1.253

A.A. Property Management

6.300

Bayshore Property Management Inc.

6.296

0.352

0.100

0.797

6.296 0.005

2.000

6.643

0.060

3.040

7.200 0.665

0.416

3.914

0.269

0.050

4.000

0.300

0.173 0.300

6.548

0.051

3.274

1.303

0.472 6.300 0.076

M&R Holdings

6.192

Northam Realty Advisors

6.166

1.106

Equium Group

6.100

0.424

Granite REIT

5.900

0.077 1.200

1.247

2.466

0.762

0.276

0.675

0.098

0.356

0.183

0.203

0.054

0.018

5.576

0.644

4.329 0.227

4.757

5.900

Slate Office REIT

5.884

Nexus REIT

5.760

0.057

Shindico Realty

5.607

0.143

5.820 0.358

0.063

0.170 0.138

1.596 0.262

2.096 0.176

0.630

1.189

0.294

0.521

3.074

Artis REIT

5.365

2.651

0.576

2.138

BTB Real Estate Investment Trust

5.323

2.597

1.316

1.410

Osgoode Properties

5.298

Dream Office REIT

5.264

0.136

0.085

0.058

0.578

5.104

5.264

Blackwood Partners Corporation

5.010

2.020

2.113

0.730

Canreal Management Corp.

4.875

0.249

3.423

1.203

True North Commercial REIT

4.798

4.405

0.085

0.922

Crown Property Management Inc.

Real Estate 360 Property Advisory

OWN

7.731

3.652

0.005

7.077

4.673

MANAGE

7.579

6.848

4.547

MANAGE

2.289

0.213 1.478

Globe Property Management

PRO REIT

BOTH

OTHER

8.612

Menkes Property Management Services Ltd.

Skyline Retail REIT

OWN

CONDO

0.147

4.798 4.673 0.468 0.404

2.287 0.025

Meritus Group Management Inc.

4.234

Kevric Real Estate Corporation

4.048

Canadian Urban Limited

4.007

Dayhu Investments Ltd.

3.873

0.010

Aspen Properties

3.800

3.800

1.069 0.179

0.723 0.743

2.558

0.495

4.234 3.665 0.643

0.104 2.081

0.643 3.747

0.279 0.641

0.072

0.044

CANADIAN PROPERTY MANAGEMENT WHO’S WHO 2021 OFFICE TOTAL SQ. FT. MANAGE (MILLIONS)

OWN

INDUSTRIAL BOTH

Prospero International Realty Inc.

3.798

Hollyburn Properties Ltd.

3.734

0.130 0.083

Kelson Group

3.700

0.080

NorthWest Healthcare Properties

3.660

MANAGE

OWN

RETAIL BOTH

0.485

MANAGE

OWN

APARTMENT BOTH

0.983

MANAGE

3.632

Melcor REIT

3.485

1.603

Westcorp Property Management

3.459

0.034

HighPoint Property Management

3.329

Old Oak Properties Inc.

3.112

0.154

KRP Properties

3.109

3.100

Whitehill Residential

3.058 0.400

2.933

0.055

Williams and McDaniel Property Management

2.902

0.102

3.545 3.620

0.208

1.397

0.303

0.277

0.041

0.155

0.807

0.064

0.008

0.150 0.173

0.091

0.075

0.400 0.506

2.000

0.052

0.201

0.708

0.175

0.776

0.113

1.341

0.265

Atlantis Realty Services, Inc.

2.484

0.179

1.469

0.298

0.538

Brown Group of Companies Inc., The

2.475

0.011

Arnon Corp.

2.403

The Enfield Group Inc.

2.382

Greenrock Property Management Ltd.

2.275

2.117 2.013

0.067

0.502

1.279

0.409

0.017

0.009

0.604

0.052 0.117

0.450 0.022

0.130 0.080

0.156

0.450

0.216

1.890 1.861

Tillyard Management Inc.

1.831

0.726

1.010

1.418

0.360

0.057 1.530 1.890 1.890

0.143

1.718

0.095

Guardian Property Management Services Ltd.

1.807

0.002

0.005

Equitable Real Estate Investment Corporation Ltd.

1.798

0.263

0.936

0.046

0.553

Goldview Property Management Ltd.

1.750

0.300

0.150

0.200

BlueStone Properties Inc.

1.745

0.215

0.615

Metcalfe Realty Company Limited

1.741

1.501

0.147

0.092

0.800

0.450

0.455

1.669

1.837 1.349

WJ Properties

1.800 1.100 0.915

1.690 0.138

0.013

0.103

0.022

0.953

0.002

1.800

0.081

0.607

Skywater Property Management

Lameer Management

2.224

1.695

0.314

1.890

1.705

0.266

0.041

2.149

0.002

1.890

1.690

1.266 0.397

0.018

0.005

Lionheart Property Management Inc.

Madison Properties Inc.

0.222

2.500

Brilliant Property Management

Around The Lakes Property Management Limited

0.925 2.652

2.496

Taft Management Inc.

1.474

0.009

2.500

Melchior Management 777 Corporation

0.644

2.886

Automotive Properties REIT

2.151

BOTH

2.200

0.004

Gulf Pacific Property Management Ltd.

O'Shanter Development Company Ltd.

OWN

3.058

2.950

2.257

MANAGE

3.329

Richmond Property Group Ltd.

2.270

MANAGE

3.632

Lawrence Construction/Grant Management

Dove Square Property Management Inc.

BOTH

OTHER

3.660

Shape Property Management Corp.

Royal/Kente Property Management

OWN

CONDO

0.440

0.246

CANADIAN PROPERTY MANAGEMENT WHO’S WHO 2021 OFFICE TOTAL SQ. FT. MANAGE (MILLIONS)

OWN

INDUSTRIAL BOTH

Huntington Properties Ltd.

1.584

BUSAC Real Estate

1.363

0.105

Axwood Enterprises Inc.

1.358

0.354

Tower Building Management

1.275

0.135

Gillin Engineering & Construction Ltd.

1.240

0.647

CaraCo Property Management Ltd.

1.161

0.060

Lanesborough Real Estate Investment Trust

1.141

I.M.P. Group International Incorporated

1.134

York Heritage Properties

1.106

Melcor Developments Ltd.

1.103

Preston Group

1.063

Niot Investments Holdings Ltd.

1.050

Twin City Management Ltd.

1.030

Imperial Equities

1.023

Concorde Group Corp.

1.010

MANAGE

OWN

RETAIL BOTH

0.950

MANAGE

OWN

0.401

BOTH

MANAGE

OWN

CONDO BOTH

MANAGE

0.110

OTHER MANAGE

0.138

0.084

0.415

0.120

0.381

0.355 0.017

0.100

0.068 0.100

BOTH

0.170

0.576

0.066

0.935 1.053

0.250

OWN

0.419

1.194 0.250

APARTMENT

0.088

0.979

0.087

0.756 0.607

0.081

0.341

0.075

0.100

0.900

1.063 0.050 0.051

0.033

0.945

0.961 0.100

Rathcliffe Properties

1.000

Sabjoy inc.

1.000

0.100

Marcarko Ltd.

0.986

Antrev & Associates Inc.

0.942

0.364

Armadale Property Management Inc.

0.933

0.167

Gitalis Group

0.928

0.062 0.540

0.370

0.300

0.600 0.050

0.950

0.986 0.311 0.190 0.240

0.160 0.036

0.159 0.307

0.045 0.276

0.108 0.064 0.100

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46 April/May 2021 | Canadian Property Management

0.276

CANADIAN PROPERTY MANAGEMENT WHO’S WHO 2021 OFFICE TOTAL SQ. FT. MANAGE (MILLIONS)

Merkburn Holdings Ltd.

0.757

Fana Group of Companies

0.750

Bedford Properties & Estates

0.720

Condominium Living Management Inc.

0.518

Aldgate Group

0.485

Parkit Enterprise Inc.

0.465

ViveRE Communities

0.452

Summa Property Management

0.440

Glenview Management Limited

0.407

Goodwood Property Investment Ltd.

0.350

Edie & Associates

0.344

OWN

0.045

INDUSTRIAL BOTH

MANAGE

0.304

0.084

0.229 0.141

Sluis Properties

0.117

Regency Group

0.099

Oak Bridge Properties Inc.

0.014

MANAGE

OWN

BOTH

MANAGE

MANAGE

OWN

BOTH

0.038

0.430

0.035

0.452 0.035 0.024

0.217

0.118

0.087

0.319

0.014

0.014

0.004

0.021

0.325

0.201

0.143

0.170

0.046

Gulf & Pacific Equities Corp.

BOTH

0.465

0.080

Atlas Properties

OWN

OTHER

0.518

0.250

0.241

0.286

0.020

0.250 0.245

MANAGE

CONDO

0.720

R.W. Commercial Property Management Inc.

Leimerk Developments Ltd.

BOTH

APARTMENT

0.750

Gistex

Canahahns Company Limited

OWN

RETAIL

0.019

0.250

0.067

0.132 0.241 0.229

0.016

0.125 0.117

0.007

MetCap_CPM_WhosWho_Supplement_2017.pdf

0.004

0.013

0.027

0.049

0.014 1

2017-03-20

12:28 PM

#1

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CM

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MetCap Living knows the importance of your property investment. With over 30 years in professional property management and experience in owning and managing all aspects of multi-unit housing, we have the expertise to boost your NOI. From Marketing, Leasing, Utilities and Site Management, Collections and Accounts Receivable, we tailor our services to your needs. We manage over $2 Billion in assets owned by private families and institutional investors. Our focus is on revenue growth and vacancy reduction, while maintainting strict control over expenses. We also To ensure the health of your bottom line, contact: Kazi Shahnewaz, Director, Business Development Cell: 647.887.5676 k.m.shahnewaz@metcap.com www.metcap.com

Canadian Property Management | April/May 2021 47

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A brand new day for

FIRST ONSITE

W

ith decades of experience in the field, FirstOnSite Restoration is taking the next step. On March 29, the disaster restoration specialist united its eight sister companies from Canada, the U.S., and Puerto Rico under the singular and evolved FIRST ONSITE name and brand. “FIRST ONSITE is looking to redefine the industry with its unwavering mission to be the first to help, support and lead in the face of disaster,” said Dave Demos, Chief Executive Officer of FIRST ONSITE, Canada. “This shared promise aligns our collective efforts and positions us to be the only restoration partner Canadian businesses and homeowners will ever need.” For more on this industry rebranding, and what it will bring to the property management community, we reached out to Janine Yetke, Canadian Director of Marketing for First Onsite Property Restoration. This is a big move for FIRST ONSITE. It is. And we’ve been looking forward to it for a while. Until now, we’ve been operating under several names, including Quebec’s Restauration PremièreAction, Interstate Restoration, Interstate Hawaii, Trilink Restoration Services, Super Restoration, CATCO, Rolyn and Perfection Property Restoration. Now, we’re going to be known solely as FIRST ONSITE, which will help us form greater cohesion between our 80-plus branches and position the company as one North American force in property restoration.

What was the motivation to rebrand? We’re constantly moving forward as a company and looking for ways to be a stronger restoration partner for our clients. Our brand promise, which we strive to live by, is to be the only partner our clients will ever need. The brand journey we’ve been living for many months continues on as our teams come together under our shared promise. This North American rebrand helps form the foundation for a common operating platform that delivers greater consistency and efficiency between our 2,200-plus team members and for everything we do.

Why is that consistency of service important? We work with a lot of multinational companies that have multiple properties under their portfolio. If they’re working with us, they want to know we’re providing the same project management experience, reporting experience, and onsite responses from one site to the next – even if it’s across the country or the continent. So, it’s the ability to be more consistent in our responses, and draw on the full resources of our company that makes a difference for our clients.

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Can you give us an example of that consistency in action? One of the best examples is our recent work in Texas during the polar vortex storm. This was a huge disaster event with a lot of property and infrastructure damage that required quick and decisive actions. This was an example where having a massive North American network to draw from was very helpful in dealing with that situation. We were able to tap into the full breadth of our people, equipment, and resources to deal with those problems and show our clients the value of having all our brands coming together to make it happen. Similarly, when our Canadian clients suffer losses, they know that we can mobilize anywhere, anytime, and in the case of catastrophes like the wildfire and flooding events in Fort McMurray, with incredible scale. Having a consistent approach, and access to resources and teams across North America provides peace of mind to our clients when they are facing distressing situations.

What’s next for FIRST ONSITE? We are constantly seeking new ways to bring more value to our clients. One of the areas we’re really investing in is the area of preparedness and property resilience, which means working with clients to design and implement emergency preparedness plans so they know exactly how to respond when they’re hit with a disaster and exactly how we’re going to support them every step of the way. We’re also intent on drawing on the depth of expertise within our various industry specialties to meet clients’ unique needs. Besides our scale to handle large jobs and mobilize massive amounts of resources, we have regional expertise in various specialties. With our one company approach, we’re working closely to learn and share skills among our teams. That approach, combined with our local knowledge, allows us to serve our key commercial clients in all asset classes, especially those supporting critical businesses in our communities. So, it’s looking for opportunities like this within our growing network to share perspectives and best practices. FIRST ONSITE [www.firstonsite.ca] is a leader in disaster remediation, property restoration and reconstruction services, helping North America Restore, Rebuild, and Rise after catastrophic events of every kind. Learn more about the FIRST ONSITE rebranding at becomingfirstonsite.com.

HEALTHY MOMENTUM Asset Managers Focus on Wellness Attributes HEALTHY BUILDINGS are moving up the wish lists of institutional investors and office tenants alike. A recent global survey of commercial real estate asset managers finds that COVID-19 has intensified pressure to support physical, social and emotional well-being within the built environment, but that many investors, owners and managers were already embracing healthy building principles ahead of pandemic-triggered challenges. Survey participants collectively held CAD $7.3 trillion (USD $5.75 trillion) in assets under management (AUM) as of December 2020, with a majority confirming that a multiplicity of drivers — COVID-19; general health; tenant satisfaction; market differentiation; reputational benefits — underpin plans to focus on health and 50 April/May 2021 | Canadian Property Management

wellness within their portfolios over the coming year. The accompanying joint report from the United Nations Environment Programme Financial Initiative (UNEP FI), the Centre for Active Design (CfA D) a nd BentallGreenOak (BGO) concludes the growing weight of ESG (environmental, social, governance) criteria in investment decision-making is both the impetus to act and the vehicle to implement and verify health-promoting standards and practices. “Our fiduciary responsibilities are increasingly taking us into new territory that requires attention to the multitude of social factors that impact asset value,” observes Amy Price, President of BentallGreenOak. “Our collective experience with the first modern pandemic

in our lifetimes is teaching us how closely tied investment performance is to operational excellence, tenant engagement and community relationships.” PEGGING VALUE The report defines healthy buildings as those that are designed, operated and managed in a manner that considers occupants’ health, safety and well-being, offering amenities/services to support active lifestyles and connections to nature. These considerations are linked to the S in ESG — the initial that, to date, has been more intangible and with fewer performance indicators than the environmental or governance pillars. However, Massachusetts Institute of Technology (MIT) researchers’ pioneering

esg

“Our fiduciary responsibilities are increasingly taking us into new territory that requires attention to the multitude of social factors that impact asset value.” attempt to quantify the value of healthy building certifications, in a study released just last year, suggests there is good reason for investors’ growing interest. The researchers found that, between 2016 and 2020, buildings with healthy building c er t i f icat ion com m a nde d rent a l premiums of 4.4 to 7%, while 46% of owners/managers reported that certified spaces leased up more quickly than noncertified premises. “Healthier workplaces improve employee productivity and retention, and active buildings and communities deliver societal gains that far exceed their costs,” maintains Eric Usher, UNEP FI Head. “Certifications that have more recently been developed to measure and quantify the benefits of health and wellness are delivering the key strategic guidance and setting the standards to shift the market toward better and best practices.” Drawing on healthy building momentum prior to the pandemic, the UNEP FI/CfAD/ BGO study explores how the past 14 months may have heightened investors’ and building users’ expectations and accelerated industry adoption. In addition to the survey, the report’s authors gleaned insight from 11 prominent real estate industry executives and/or ESG practitioners including Canadians, Jon Love, Chief Executive Officer of KingSett Capital, and Jamie Gray-Donald, Senior Vice President, sustainability and environmental health and safety with QuadReal Property Group. “The pandemic has highlighted the importance of health in real estate and the perils of being unprepared for future events. Both the risks and opportunities provide compelling reasons to develop and implement solutions that uplift our industry,” urges Anna Murray, Managing Director and Global Head of ESG at BentallGreenOak. DEMAND TRENDS As of late 2020, when the survey was conducted, respondents perceive the highest level of demand for healthy

buildings within the office sector and emanating from tenants. Overall, 39% of survey participants report strong demand and 50% report moderate demand across all asset types. Drilling down further, 61% encounter strong demand from office properties, while just 10% do in retail holdings. In fact, nearly three times as many respondents — 29% — encounter no demand from retail properties. Turning to asset managers’ client groups, 37% of survey respondents report strong demand from tenants versus 24% from investors and 21% from asset owners. One in 10 respondents suggest there is no demand from asset owners, while just 3% say tenants are uninterested. The largest share of survey respondents — 58% — are based in North America, from where 45% encounter strong demand and 45% encounter moderate demand for healthy buildings. European-based asset managers report lower levels of enthusiasm, with just 14% seeing strong demand and 71% finding moderate demand. A smaller portion of Asian-based respondents unanimously report interest in healthy buildings, split 50/50 between strong and moderate demand. The vast majority of respondents — 92% — expect demand will pick up over the next three years. That follows a 12- to 24-month period where 87% had already experienced growing demand. In response and preparation, 61% of respondents are using some form of building certification system to identify needs, implement measures and track outcomes. However, just 53% have incorporated health and wellness into their ESG frameworks and reporting. METRICS AND BENCHMARKING “We expected the findings to demonstrate strong demand for healthy buildings, especially given the pandemic, but it also points out the lack of consistency around measuring and reporting the impacts of

these initiatives,” says Joanna Frank, President and Chief Executive Officer of CfAD, which is also the developer of the Fitwel certification system. “There’s a clear case for standardizing benchmarks to track performance.” At least 50% of survey respondents track a dozen different metrics deemed to be related to health and well-being. Tenant satisfaction surveys are the most commonly accepted evidence of effort — tracked in 79% of cases. Emergency preparedness planning and indoor air quality testing are the next most prevalent indicators, tracked by 74% and 68% of respondents respectively. Other indicators include: proactive planning exercises for pandemics and natural disasters; metrics to gauge supports in the surrounding locale such as Walk Score, Transit Score and access to highquality outdoor spaces; and measures such as water quality testing and the availability of health programming. Fewer than 40% of respondents tracked Bike Score, cleaning audits or access to nutritious food. Nearly three quarters of survey respondents are GRESB participants, marking it as the most widely adopted ESG assessment program, followed by LEED, which 68% of respondents employ, and Energy Star, with 61% uptake. Fitwel emerges as the most common certification scoped specifically to healthy buildings, with 47% of survey respondents on board. Meanwhile, 39% have adopted the WELL Building Standard. Indicative of Canadian survey participation, BOMA BEST makes a proportionally strong showing with 37% of respondents adhering — notably surpassing the 29% of survey respondents that have adopted the United Kingdom’s BREEAM assessment method. Nevertheless, Usher notes the complementary synergies of all such programs, and reiterates that a bolstered S also has positive ramifications for the E and the G. “This investor/manager focus on health and wellness nests within a range of other UNEP FI activities such as assessing and communicating the holistic impacts of finance decisions, and steering insurer risk management and underwriting practices in support of the UN’s Sustainable Development Goals,” he says. zz The complete text of A New Investor Consensus: The Rising Demand for Healthy Buildings can be found at https:// centerforactivedesign.org/new-investorconsensus. Canadian Property Management | April/May 2021 51

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SHORT-TERM PAIN Vaccinations Expected to Re-motivate Vacationers By Erin Ruddy ALTHOUGH SOME INDUSTRIES have made gains in the COVID-19 era, the majority have not been so lucky. Among them is the short-term rental sector. With cities worldwide caught in a cycle of locking down and gently loosening the reins, travelling has been wrought with challenges, making it nearly impossible for anyone to leave home. A new report from the U.S.-based revenue management platform, Beyond Pricing, sheds some light on the uncertain months ahead for the hard-hit sector. “While we expect the travel industry to have stops and starts in 2021, with different geographies and sectors of the industry reacting, adapting and recovering at different paces, we see a steady, upward trend in travel and spending moving forward,” says Julie Brinkman, Beyond Pricing’s Chief Executive Officer. “We are overall optimistic about the future and growth of the travel industry in general and the short-term rental market in specific.” A year ago, there was little reason to be so optimistic. When the pandemic first began its sweep across the Asia-Pacific region in February 2020, the travel industry suffered an abnormal rise in cancellations, followed by a significant decrease in the pace of bookings as lockdowns and restrictions were put into place. By mid-March, the short-term rental sector was suffering noticeably. Defined by the City of Toronto as “all or part of a dwelling that is rented out for less than 28 consecutive days,” short-term rental units are available everywhere housing exists through sites like Vrbo and Airbnb. Last summer saw some markets 54 April/May 2021 | Canadian Property Management

pick up as people sought to escape their confinement. “The first markets to see an uptick were coastal, drive-to and non-urban markets where consumers could travel and have an entire short-term rental to themselves in order to avoid contact with others,” the Beyond Pricing report states. That demand continued into the fall as remote work and schooling capabilities coupled with lower rates, typical of September and October, helped entice some travellers to extend their short-term stays. However, a second wave of COVID-19 once again undermined that activity. “The total amount of reservations in Canada in 2021 to date is down 30 to 40% compared to 2019 levels, continuing the trend of depressed demand experienced in 2020,” Brinkman reports. “While regional destinations easily accessible by vehicle have been performing really well recently, the near closure of the U.S.-Canada border has brought serious consequences to some of the frequent destinations of U.S. travellers.” That includes Whistler, where occupancy slid by 30% with a corollary 35% decline in rental rates. Cities located relatively near the U.S.-Canadian border are also suffering from the travel restrictions “Overall, pacing occupancy and average daily rate (ADR), won’t resemble last year’s numbers until July,” Brinkman projects. “Toronto, Montreal, Vancouver and Quebec were the most sluggish markets in Canada in terms of bookings per listing over the winter months, while the less urban areas of Owen Sound, Canmore and MontTremblant were doing the best.” Beyond Pricing’s analysts remain

optimistic about the continued progress of vaccination programs in Canada and outside its borders. Projections for the remainder of 2021 include: • The short-term rental sector will see an increase in demand with remote work and distance-learning continuing to prevail. • People will likely favour small rental properties over big hotels to avoid hightraffic public areas. • Lead times between bookings and occupancy will remain truncated. (In 2020, lead times shrunk by half). • People will continue to book short-term rentals, but at a slower pace than in previous years. • Property managers and owners of shortterm rentals will need to settle on less profit during the high season due to cancellations and discounts provided in 2020 that will need to be honoured. • Property owners should brace themselves for a possible continuation of cancellations throughout 2021. • If they haven’t already, they should consider adjusting booking projections and cancellation policies to be more flexible. • Property managers will need to consider diversifying their offerings by providing more long-term stay options to help stabilize their portfolios. zz Erin Ruddy is the Editor of Canadian Apartment. The complete text of Beyond’s Short-term Rental Industry Trends Report can be found at https://blog.beyondpricing.com/ beyonds-short-term-rental-industry-trendsreport-2/.

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Fast Fast Fast Company Company Company Editor-in-Chief Editor-in-Chief Editor-in-Chief BOMEX 2021 includes...

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ACKNOWLEDGEMENT, INTROSPECTION, ACTION Commercial Real Estate Confronts Its Historical Hierarchies By Barbara Carss COMMERCIAL REAL ESTATE investors, owners and managers are acknowledging that entrenched social inequities undermine their workforces, their tenants and the value of their portfolios. With both the COVID-19 pandemic and watershed events arising from systemic racism galvanizing their attention in 2020, senior executives and ESG (environmental, social, governance) practitioners with prominent Canadian companies have been grappling with how to rebalance hierarchies, broaden input, expand opportunities and reap returns from the resulting dynamics. Panellists participating in two recent online industry discussions outlined some of their efforts thus far, affirming that there is still much to learn and do. Institutional investors’ growing reliance on ESG benchmarking presents one obvious avenue to measure companies’ tangible commitment to diversity and inclusion, and to analyze and compare organizational performance. However, to date, reporting and assessment have been more tied to environmental imperatives. 56 April/May 2021 | Canadian Property Management

“The S is really hard,” mused Dan Winters, Head of the Americas for GRESB, during last fall’s Canadian release of 2020 ESG results for commercial real estate portfolios. “You hear this all the time: Let’s focus on the E, and we can metric it and we can figure that out. The S is tricky.” Property and asset managers sharing insight during a Buildings Week panel discussion sponsored by the Building Owners and Managers Association (BOMA) of Greater Toronto similarly noted that they are on something of a learning curve. While the industry’s endorsement of diversity and inclusion is certainly not new, and has often been tied to goals for attracting, nurturing and retaining adept, fresht h in k ing person nel, pa nell ists concurred that the year’s melding of homicidal racism and universal outrage pushed the issue to the forefront of their consciousness. “We’ve all started having some conversations that I think needed to be had,” observed Nata Sutic, Director of

Operational Excellence with QuadReal Property Group and current BOMA Toronto Chair. “We’ve had more conversations about: How do we hire people and who do we hire? We’re t h i n k i ng about ou r ow n bia ses, perhaps, and biases that are really built into our systems a nd how we’re operating.” LEADERSHIP & EXTERNAL INFLUENCES Panellists pointed to the guidance and di rections they a re getting from internal leadership and inf luential clients. Kevin Hardy, Vice President and Head of Oxford Properties Group’s Toronto office division, reports that Blake Hutcheson, President and Chief Executive Officer of Oxford’s pension fund parent, OMERS, has set the tone for the organization — for example, augmenting a l ready ex isting com m it ment s a nd obje ct ives by retaining outside expertise to provide awareness and training sessions. “Our teams are still a little too white and little too male, but I think there is

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“Many real estate executives had a bit of an reckoning this year. There’s a recognition that we’re behind on diversity and inclusion.” progress being made on all of this,” Hardy said. “I am encouraged by just the sheer amount of discussion and openness. People now desire to have these talks and I think that will lead to more and more, better and better change.” Marlene Farias, Vice President, central region, with Triovest Realty Advisors, identifies the Healthcare of Ontario Pension Plan (HOOPP) as an influential client that has been ahead of the recent impetus in viewing diversity and inclusion as an indicator of high performance and investment growth potential. Like Oxford/OMERS, Triovest is also bolstering internal resources and adjusting strategic planning. “Our shareholder core group of companies launched an executive learning series where they bring education and awareness around D&I topics and educate their leaders in higher positions so we can have the tools to lead our teams and move the needle,” she said. “In 2021, we’ve committed to develop a roadmap, where we plan to have a facilitator with the executive team to look at what we need to do to strategically implement more D&I within our workforce.” From an institutional investor’s p er sp e ct ive, A nd rew Ga r ret t , Executive Director, Real Estate, with t he I nvest ment Ma nagement Corporation of Ontario (IMCO), is both privy to evidence that diversity boosts performance and in a position to forcefully convey that message to t hose who se ek busi ness a nd /or c a p it a l . No t a bly, d ive r sit y a n d inclusion was in the scoring matrix fo r I M C O’s R F P fo r p r o p e r t y management services for its Canadian retail assets last year. 58 April/May 2021 | Canadian Property Management

“Of the 15 bidders that went through something like a six or seven-month process bidding on this opportunity, n o t s u r p r i s i n g l y, t h e h i g h e s t performing team had a very diverse executive team,” Garrett recounted. “It was quite apparent to us that the high-performance culture always kind of shows up when you have a team on which everyone doesn’t necessarily always look the same.” In turn, that insight gets channelled to other decision-making processes where I MCO hold s sway, such a s it s representation on boa rd advisor y committees for real estate private equity firms. “As they are coming across project opportunities, it is incumbent on me to ask questions about the teams and the oppor tunities, a nd how they a re impacting their communities and interests,” Garrett said. Property managers are likewise applying those questions to tenant engagement programs whether that’s through surveys to glean wider input, events — “That could be a little more inclusive, celebrating everyone’s cultures and holidays,” Farias suggested — or support to address shared social goals. “There can be philanth ropy or volunteering where these values allow you to partner on a personal basis with the potential occupants of a building. There is going to be lots of opportunity there to develop more engagements,” Hardy projected. ESG APPLICATIONS Meanwhile, ESG practitioners are pondering how they might address some of the stresses COVID-19 has highlighted, and how to develop and quantify the metrics to support that

effort. Ridhima Nayyar, Manager of Sustainability with RioCan REIT, sees GRESB and the collegiality of Canadian GRESB participants as key catalysts. “With COVID, I think we all have figured out that we are going through a social crisis. Up until now, we have been talking about E and G, but now a big focus is on the social aspect,” she reflected during the GRESB results panel discussion. “We want to work not only within our own organization, but also with our peers to move this ESG movement to another level. GR ESB is one platform that has brought these social issues that our industry currently faces under one umbrella, and I think that can take our awareness to another level.” “Many real estate executives had a bit of an reckoning this year. There’s a recognition that we’re behind on diversity and inclusion,” agreed Jamie GrayDonald, Vice President, Sustainability and Environmental Health and Safety, with QuadReal. “We don’t even have the data on diversity and inclusion that any Fortune 500 companies have so we’re catching up on that.” That could align well with what Winters has typified as the GRESB journey, in which participating companies initially sign on to meet their own corporate responsibility requirements, get further e n g a g e d i n t h e p e e r- t o - p e e r benchmarking aspects of the program, and then realize the risk management and value enhancement benefits. Accordingly, Garrett contends that expectations are already shifting from due d il igence to cult ivat i ng opportunities. “Historically, we were a little more focused on risk. Diversity/inclusion, especially in the U.S. portfolio, it’s risk [management] against discrimination lawsuits; it’s risk [management] against property damage and social unrest from a real estate perspective. Part of the movement and focus now has changed the lens so people feel diversity/ inclusion is a growth area. It’s not as fear-based,” he submitted. “Looking forward, as a long-term holder of assets in thriving cities, we need there to be cohesion; we need there to be inclusion. We need cities to be magnets for global talent so, for the long-term, we have a vested interest in inclusion. The ways it’s starting to manifest are pretty significant.” zz

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