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. 34 NO. 3 • AUGUST 2019
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VOL. 34 NO. 3
AUGUST 2019
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editor’snote TRADE, TECHNOLOGY and consumer trends all hold sway over how real estate performs in the marketplace, making it sensitive to multiple levels of decision-making from the geopolitical to the personal. In this issue, we look at some of the dynamics in play and how they're reflected in the workplace, the urban environment and the economy at large. That includes the happy story of the surging tech sector and the ongoing strain of the oil and gas sector's struggles. Toronto, Vancouver, Montreal and Ottawa are ranked in the top 20 North American markets currently experiencing and primed for future technology-centred growth, while Hamilton and Waterloo Region are highly placed in a second tier with the fundamentals to gain and sustain tech talent. This upbeat analysis from CBRE contrasts with JLL's look at a smaller number of real estate markets closely tied to the oil and gas sector, which finds Calgary and Edmonton trailing the recovery of energy hubs in the United States. The comparative strengths of Canadian and U.S. markets also line up with the costcompetitiveness of key resources. American producers and their flow-through suppliers are riding the shale boom, whereas it's more onerous to extract Alberta's heavy crude and get it to its market. In turn, the raw input of the tech industry — its workforce's brain power — comes with a favourable exchange rate in Canada. And that brain power is also increasingly sought in other industry sectors, as commercial real estate owners/managers on the proptech learning curve are well aware. Initially harnessed to support energy efficiency and other operational functions, technological proficiency is now evolving into an expected building service that's central to meeting tenants' demands. That tenancy has stratified into what QuadReal's Nada Sutic characterizes as Big-C and small-c customers — a.k.a. the lease negotiators/signers and the workforce those Big-Cs employ and strive to keep happy. Landlords now carry all the conventional obligations to the former and are pressed to appeal to the latter. Russell Whitehead and David Allison offer some suggestions in this issue. Tech's impact on retail and warehouse/distribution properties is growing more apparent. Ray Wong and Kruti Desai make the case that malls and local plazas can still have competitive standing with consumers, but also applaud the forces that are benefiting industrial properties. Meanwhile, the Alberta government is opening the way for a more old-school investment attraction tool, giving local governments the authority to offer long-term property tax concessions of up to 30 years. Barbara Carss barbc@mediaedge.ca @BarbaraCarss
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Canadian Property Management | August 2019 3
contents
Focus: Market Repositioning 6
Urban Allure: Canadian cities, and their real estate markets, are capturing and fostering the high-performance workforce that drives the tech sector.
12 Retail Staples: Whether positioned as a destination or a convenience, food is key ingredient in the remaking of the bricksand-mortar shopping experience. 19 24-7 Image Enhancement: Quick lighting upgrade allows an Art Deco building to step out from the shadows. 22 Defining Demand: Big data underlies predictive behaviour modelling and insight for marketing to likeliest customers. 24 Millennial Spending: The economy-driving demographic is apportioning its budget differently than past generations. 28 Incentive to Squabble: Alberta's new allowance for long-term property tax concessions could spur inter-municipal rivalries and resentment of existing ratepayers. 31 Energy Exposed Markets: Recovery has been slower in Calgary and Edmonton than in U.S. cities enjoying the shale boom. 33 Delivering Designed Performance: ASHRAE's new president calls for a comprehensive support strategy to ensure buildings meet operational expectations. 35 Talent Search: Real estate's core function offers a living lab for human resources strategies.
4 August 2019 | Canadian Property Management
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marketdynamics
ASCENDANT SE Tech Job Growth Ripples Out to Real Estate TORONTO’S ROCKETING tech sector is reverberating in commercial and residential real estate markets. The city spawned more than 80,000 new techrelated jobs between 2013 and 2018 and is positioned third among 50 North American centres analyzed in CBRE’s recently released tech talent scorecard, trailing only entrenched hubs in the San Francisco Bay Area and Seattle. Vancouver, Montreal and Ottawa also place prominently in the top 20, while six other Canadian markets — Hamilton, Waterloo Region, Edmonton, Quebec City, Winnipeg and Calgary — are included in a list of 25 burgeoning nextlevel tech centres. The rankings reflect CBRE’s assessment of each market’s competitive appeal based on 13 variously weighted indicators that collectively present a picture of employment trends and other factors helping to attract and sustain a tech labour force. That encompasses 20 different 6 August 2019 | Canadian Property Management
o c cupat ion s, i nclud i ng sof t wa r e developers, programmers, systems and data managers, and engineers and engineering technicians. As of 2018, about 833,000 Canadians, equating to 5.3% of national employment, and 5.2 million Americans, representing 3.7% of the U.S. workforce, filled such positions. Approximately 37% are embedded directly in the high-tech industry, while the larger remainder hold technical roles in other sectors. Notably, finance, insurance and real estate (FIRE) accounts for 8.3% of all tech positions. Additionally, the high-tech sector has generated a roughly equal number of non-tech jobs in management and support services. “Tech job growth has a multiplier effect in the economy and the influence of tech is reshaping virtually every sector of real estate,” affirms Paul Morassutti, Vice Chairman of CBRE Canada. “Tech talent workers are fuelling innovation and adapting technology within the non-
traditional sectors to increase productivity and strengthen the Canadian economy.” Tech industry tenants reportedly drove 20% of U.S. office leasing activity in the first half of this year. Over the past year in Toronto, CBRE tallies the top five office deals involving tech tenants at collectively more than 1 million square feet of space. That’s primarily destined for two new towers currently under construction downtown: 634,000 square feet in The Well, an Allied Properties-RioCan joint development at 8 Spadina Avenue; and 132,000 square feet in the Ivanhoé Cambridge-Hines project, CIBC Square, at 81 Bay Street. Yet, illustrative of the sector’s sweep, the other major deals are in less conventional nodes, including 145,000 square feet in a older, brick mid-rise building in Toronto’s inner-city Junction Triangle neighbourhood and 101,500 square feet in suburban Richmond Hill. In the same period, the five largest tech office deals in Vancouver accounted for
marketdynamics
ECTOR 671,700 square feet of absorption. The five largest deals in Montreal and Ottawa equate to 380,700 square feet and 188,600 square feet respectively. TALENT POOL INSPIRES INNOVATION The four Canadian cities all surpass the 50,000-worker threshold to meet CBRE’s characterization of a large tech talent labour pool — ranging from 228,500 tech jobs in Toronto to 64,500 in Ottawa as of 2018. While Toronto’s tech sector enjoyed the most intense growth spurt in North America over a five-year period, expanding by 54%, and absorbing the second largest influx of workers in sheer numbers, Ottawa was one of only two surveyed markets to experience a decline in tech employment in the years from 2013 to 2018. (The other, Norfolk, Virginia, was ranked at the bottom of the list, 31 notches below Ottawa’s 19th place.) Despite the slippage of 3,600 jobs, tech talent continues to comprise 9.9% of Ottawa’s total workforce. This makes it the second most concentrated labour pool
after San Francisco Bay Area’s 10%, and ranks as a key impetus for innovation. Like Toronto and Vancouver, the city has also gained an above-average share of residents in their twenties — identified as the critical early-career demographic, which promises years of growing expertise and contribution into the future. T he pace of in-m igration a nd affordability for both employers and employees also figures in projections of the potential for tech-based economic development. Factors such as postsecondary institutions, the match of skills to opportunities and the urban backdrop all contribute to nurturing the workforce and building tech industry scale. “Both large and small markets have their advantages. While large markets tend to have a deeper pool of talent, small markets typically offer business and costof-living savings,” CBRE analysts submit. “Similar traits among markets cause many of them to appear equivalent, but top tech markets distinguish themselves
from the rest with tech clusters and higher concentrations of tech talent.” Because there are fewer per capita than in the United States, Canada’s postsecondary institutions typically loom larger in the economy and social fabric of their host communities. Toronto is deemed a beneficiary of thriving tech clusters linked to the University of Toronto and the University of Waterloo, while University of British Columbia and McGill University are similar triggers in Vancouver and Montreal. Waterloo is most prolific — identified as the pipeline for 314 start-ups that have raised USD $7.4 billion (CAD $9.7 billion) in capital — while McGill can claim bragging rights for 304 start-ups that have raised USD $7.1 billion (CAD $9.4 billion). Toronto and Vancouver both welcomed inbound migration — dubbed “brain gain” — measured as the ratio of new tech jobs to the number of tech graduates from local post-secondary institutions. Canadian Property Management | August 2019 7
marketdynamics SPURT OF CO-WORKING OPTIONS Bargain hunters willing to work in a somewhat unconventional office hub can find a great deal in one of Toronto’s aging industrial pockets. The co-working space broker, Instant Offices, lists a $16 per desk, per month, opportunity in the inner-city suburb of Don Mills among the nearly 130 buildings comprising the company’s Greater Toronto Area portfolio. However, the average cost per desk across all supply is pegged at $790 per month. Eliminating the low-end outlier, advertised co-working space ranges from $200 per desk per month in a Mississauga office park to $1,200 per desk per month in the downtown financial district. The 43 options at $500 or less are relatively evenly split between 21 with convenient access to Toronto’s subway system and 23 in suburban locations. Only eight of the remaining 85 higher priced buildings lack convenient subway connections. Co-working space — and flexible space purveyors — are steadily coming onto the office market. Instant Offices reports a 14% expansion of its Toronto office footprint since the summer of 2018, on par with the company’s momentum in New York City. It also brokers deals for 48 sites in Vancouver, 43 in Montreal, 31 in Calgary and 12 in Ottawa.
Arriving brains helped to fill 22,300 newly created jobs in Vancouver over the 20132018 period, equating to a 42.6% tech job growth rate and propelling the city to number 12 in CBRE’s ranking. In 13th place, Montreal added 16,600 new tech jobs in the same period, representing a 14.6% expansion of a larger workforce. In total, 130,200 tech workers are employed in Montreal versus 74,700 in Vancouver. Tech brains moving to a new city could expect to find the lowest monthly rent in Montreal, pegged at USD $614 (CAD $810). However, even the priciest Canadian rent — Toronto’s monthly average of USD $1,069 (CAD $1,411) — ranks 35th among the 50 cities. Based on average rents and tech wages, Montreal-based tech workers also enjoy the greatest buying power in Canada and the third best of the 50 cities, with a rent-to-wage ratio of 12.6%. Renters in Vancouver would shell out about 20.7% of their earnings for accommodations, while Torontonians 8 August 2019 | Canadian Property Management
Despite shared status for the lowest downtown office vacancy rate in North America, at 2.6%, co-working space in Toronto and Vancouver appears generally more affordable than in major markets in the United States. Vancouver’s listed per-desk rates trail those commanded in Toronto, ranging from a high of $999 (USD $759) to a low of $125 (USD $95) per month. Looking south of the border, per-desk rates top out at USD $2,500 (CAD $3,300) per month in New York; USD $1,220 (CAD $1,610) in Chicago; and USD $1,675 (CAD $2,211) in Washington, D.C.. The crossborder price variation narrows considerably for low priced co-working space with New York’s best deal at USD $150 (CAD $198); Chicago’s at USD $132 (CAD $174); and Washington’s at USD $200 (CAD $264) per desk per month. Meanwhile, nascent Canadian co-working space provider, iQ Office Suites, is venturing into the Ottawa, Montreal and Calgary markets. In total, the company will add another 112,000 square feet of office space as it also expands its existing holdings in Toronto and Vancouver. This will boosts iQ’s capacity to 3,000 desks. . – REMI Network
would pay 20%. Despite higher rents in Seattle, pegged at USD $1,694 (CAD $2,236) per month, tech workers there could expect to spend a lower percentage of their earnings, 17.3%, on rental housing. In contrast, tech workers would have to allot 26.4% of earnings to cover rental housing costs in the San Francisco Bay Area, which posts an average monthly rent of USD $2,856 (CAD $3,770). SPACE AND LABOUR COST SAVINGS Canadian cities are larger than most others in the top 20. Toronto, Montreal and Vancouver are the second, third and fourth most populous (after New York), while Ottawa has the ninth largest population. With approximately 6.4 million residents, the GTA is two and half times larger than the San Francisco Bay Area and nearly nine times larger than Seattle. However, across the 50 North American markets, the differential in currency value serves up the lowest combined labour and space costs for employers in Ottawa, Toronto,
Vancouver and Montreal. CBRE plots the cost of a 500-person tech firm occupying 75,000 square feet from a high of USD $59.4 million (CAD $77.2 million) in the San Francisco Bay Area to a low of USD $28.6 million (CAD $37.7 million) in Montreal. The biggest chunk of Canadian savings is found in labour costs. Based on CBRE’s estimates, rent would account for a varying proportion of combined labour and space costs, ranging from 8.4% in Vancouver to 5.7% in Ottawa. In Toronto, space represents 6.8% of the projected combined costs, and would be 57% cheaper than an equivalent amount of space in the San Francisco Bay area or 26% cheaper than the same office footprint in Seattle. Labour costs would be nearly 48% lower than in the San Francisco Bay area or nearly 41% lower than in Seattle. Start-ups or expanding companies might find it somewhat easier to secure office space in Seattle, which recorded a 9.4% vacancy rate in the first quarter of 2019 versus Toronto’s 7.1% vacancy. San Francisco presented a lower vacancy rate, at 6.1%, and the second highest average asking rent of the 50 cities at USD $68.88 (CAD $90.92) per square foot. Favourable cost comparisons also underpin Canada’s prominence in the list of 25 second-tier markets poised to ascend. Hamilton and Waterloo Region are ranked second and third, after Tucson, Arizona, and just ahead of Las Vegas. The two key regional anchors of the Greater Golden Horseshoe boast a combined tech workforce of nearly 39,000. Following 52% tech job growth in the 2013-18 period, Hamilton now hosts 18,100 tech workers; Waterloo’s tech workforce expanded by 40%, reaching 20,500. “Opportunity markets offer quality labour pools and affordability that supports rapid scalability,” Morassutti says. “These markets can be ideal for small-scale operations, start-ups and tech jobs with nontech employers like banks, media and service firms.” Edmonton is ranked ninth on the next-25 list, while Quebec City, Winnipeg and Calgary are clustered in the bottom quintile. Calgary has the largest tech workforce — at 38,500 — of any of the 25 cities, but it’s one of two, along with Birmingham, Alabama, that lost tech jobs in the preceding five-year period. zz The complete text of 2019 Scoring Tech Talent can be found at www.cbre.ca/en/global/about/ media-center/tech-talent-report-2019
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Q&A CASH MANAGEMENT CHALLENGES Financial solutions for residential property stakeholders
Residential property stakeholders face a broad range of cash management challenges. Whether related to collecting payments, managing funds, or minimizing the risks of fraud, there are no shortage of considerations. Yet while financial considerations are key, they can be hard to tackle without the right services, advice, and expertise.
10 August 2019 | Canadian Property Management
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Here to discuss some common cash obstacles and available solutions is Nancy Matheos, Assistant Vice President and Deputy Manager with Canadian Western Bank. What are among the most common cash management issues for property managers, owners, or board members? CDIC [Canadian Deposit Insurance Corporation] coverage is certainly number one as they all have requirements to have all or a vast majority of their funds covered. Every property manager/ board we have dealt with has had the same concern keeping reserve funds separate from their operating and finding highinterest vehicles that can be separate, flexible, and offer some liquidity for reserve funds. Another common challenge is being able to auto-debit renters or residents (in the case of condominiums) and pull one-off payments as needed, as well as deliver convenient and effective timing to deposit monthly where cheques are still collected.
What about on the regulatory side? Regulations are always changing in this industry. That's where working with a third-party financial partner can be extremely helpful in understanding how regulations may impact one's cash flow and getting the best insights and advice to move forward responsibly.
What are the risks of not handling these cash management issues effectively? The most obvious risk is financial loss, but there's also the risk of losing tenants, whether they have been with you for years or new tenants. Owners also risk receiving a Special Assessment to Owners if reserve funds are not managed well and a need arises.
How does one begin to address these challenges? The challenges are common, but each property is unique. Ultimately, when we meet with new condo clients, we try to understand the whole picture, from the
number of units they manage to what the long-term needs and goals are for the group. You need to do that high-level review of the whole business and the people, and not just the finances, so you can plan accordingly, optimize interest, and ensure the safety of your funds.
What financial products/services are available to assist with that? Canadian Western Bank, Canadian Western Trust, and Valiant Trust can all hold funds covered under CDIC, providing property owners three times of insurance if used fully. As for specific solutions, our business savings account has a very competitive interest rate with full liquidity and no monthly fee. We also offer short and long term GIC’s and our 93 Day Flex Notice Account with very competitive rates and the flexibility to lock it in for a short period of time – all of which can be renamed to reflect Reserve Funds to keep them separate. As for the issues of auto-debit, CAFT is our EFT/Direct deposit system and can be tailored to fit the needs of the condo plan/association, whether that's pulling monthly payments on an automatic schedule; having separate profiles for credit or debit; or the ability to separate profiles for regular fees/ rent, utilities, manual payments, reimbursements, etc. Lastly, we have services like our Remote Deposit Capture (RDC), which gives clients the ability to deposit cheques from the convenience of their office. Additionally, our Business Online Banking platform consolidates accounts to one login so that owners can see all property bank accounts on one platform. Having an informed and future-looking cash management strategy can go a long way towards making the job of a property manager go more smoothly. Nevertheless, busy schedules and knowledge gaps can make this aspect of the role a challenge. Herein, there is value in seeking financial partners who know your business, can ask the right questions, and look out for your best financial interests.
For more information, insights, and advice, visit Canadian Western Bank at www.cwbank.com/find-your-focus Canadian Property Management | August 2019 11
RETAIL STAPLES Food Becomes Consummate Product to Tap Evolving Shopping Habits By Ray Wong and Kruti Desai
Canadian mall operators and their retail tenants increasingly see good reason to build collaborative partnerships in the cause of attracting and retaining customers. There is no single response to the challenges the retail sector now faces, but, rather, a range of possibilities to foster new shopping experiences, target particular demographic trends or tap into underperforming properties' redevelopment potential. Shopping has become a continuum of actions, in which prospective purchasers identify products and compare prices online, pick a venue where they can find their choices in tangible form and perhaps make use of other services and amenities along the way. Successful retailers are fulfilling the needs of customers — in part by shaping customers' view of what they need. The following market analysis from Altus Group provides some examples – Editor. WITH SEVERAL prominent Canadian retailers closing their stores in the last few years and other retailers with a deeprooted history in major markets slimming down their stores, retailers and shopping centre owners have been inspired to 12 August 2019 | Canadian Property Management
reinvent t hei r spaces into more “destination” or “convenience” type retail. Food is a staple of both trends. Larger regional centres are focusing on destination retail, which hosts a variety of niche and regular stores
providing customers with a chance to se e new product s a nd enjoy socia l izi ng, food halls, concerts, exhibits and entertainment. Toronto's Yorkdale Mall is an example, with its addition of a number of luxury brands
assetperformance
RETAIL-INDUSTRIAL GAP WIDENS The MSCI Global Property Index, tracking performance of 55,675 individual real estate assets in 25 countries, shows slipping investment returns for retail properties in 2018. While the index delivered a total return of 7.4% across all properties, there was a wide gap between the top-performing industrial sector, which registered a 13.4% total return and retail's low-end 3.6% return. That lines up with the 2018 results of the Canada Property Index, released last February, which pegged the industrial return at a chart-topping 13.8% — well above the index's total return of 7.4% across 2,424 directly held standing assets. Retail properties, which account for 38.5% of the Canadian index's capital value, trailed significantly with a 4.4% total return. Bryan Reid, MSCI's Vice President, Global Real Estate Research, calls 2018 the first year that evidence validates “concern that some of the technological change helping to drive industrial demand could have a detrimental effect on bricks-andmortar retail”. Until now, retail returns had
such as Tiffany’s, Prada and Gucci. These types of retail stores are often uniquely available in one location in a regional market. Oxford Properties also revitalized its Upper Canada Mall in Newmarket, O nt a r io, last yea r by add i ng a 40,000-square-foot food market concept, “Market & Co”, in an effort to enhance the shopping experience. In this case, food becomes part of the shopping experience. By definition, food is also a consumer product that's required frequently. Convenience retail — typified by
been relatively on par with those for the office and residential sectors. Retail’s weight in the global index is likewise diminishing. As of year-end 2018, retail properties accounted for 24% of the capital value of the index, down from 31% in 2001. Office properties have also lost stature — dropping from 46% of total capital value in 2001 to 39% in 2018. Residential and industrial assets have largely filled the resulting gap. MSCI pegs the 2018 total capital value at USD $1.8 trillion. “These trends are no accident,” Reid maintains. “Real estate has matured rapidly as an asset class and, as part of that process, the sector profile has evolved. As data has become more available and less well-known property types have become more established, investors have increasingly looked to diversify their exposures and gain access to the different risk and return profiles these sectors offer.” – REMI Network
smaller stores located near residential areas that make it easier for customers to get what they need quickly — is responding to growing demand for meals prepared outside the home. Serving as a pickup point for online shopping pu r ch a s e s is a not he r eme rg i ng convenience trend. Other retailers are adopting innovative store designs and retail concepts to drive traffic. Pop-up stores are driving demand for flexible leases and becoming a preferred channel for new retailers to test out different markets and concepts. At the STACKT Market in Toronto, for
example, a vacant plot of city-owned land was transformed into a market offering retail, food, beverage, service, experience and community spaces, along with short to longer-term leases — all housed in shipping containers. Vacant spaces left behind by largeformat retailers are slated to be repurposed for uses such as co-working spaces, medical and dentist offices, gyms, food halls or even community centres. The flexible workspace start-up LAUFT is another new venture in Upper Canada Mall, entering the market in the Greater Toronto Area's 905 region, with plans to expand globally. Shopping centres with direct access to retail, commercial and residential on a single site appear well placed to capitalize on market trends. Malls that a n ch o r m i xe d - u s e d evelo p m e nt exemplify a "live, work, play" model that adds the value of residential and commercial uses while fostering a consistent flow of foot traffic to its retail. Perhaps indicative of investors' growing interest, City Squa re Ma ll nea r Vancouver’s City Hall recently sold for $225 million. INDUSTRIAL UPSHOT Retail sales in Canada experienced strong growth in the past decade, surpassing $600 billion in 2018. That's consistent with total industrial inventory growth, which has climbed to about 1.9 billion square feet over the same period. As e-commerce reshapes logistics processes and drives demand for warehouse and customer fulfillment centres (CFC), continuing digital and technological advancements should push the sector into a new evolutionary phase. Retail space per capita has compressed in many markets over the past decade. Ontario experienced a drop from 19.6 square feet per capita in 2008 to 18.6 square feet in 2017 and British Columbia also recorded slippage from 15.8 square feet to 15.5 square feet per capita. However, as e-commerce logistics services continue to expand, the need for well-situated warehouse space and the construction of new distribution centres is projected to produce significant economic growth in major markets like Toronto, Vancouver and Montreal. L ook i ng sout h of t he border, Blackstone Group put up USD $18.7 billion for an interest stake in GLP's urban logistics properties. That's 179 Canadian Property Management | August 2019 13
assetperformance
Shopping centres with direct access to retail, commercial and residential on a single site appear well placed to capitalize on market trends. million square feet of warehouse space where Amazon and other retailers fulfil their online orders. In Canada, online grocery delivery services are gaining traction in the retail and industrial realm, expanding and developing customer fulfilment centres in major markets. Sobey’s has partnered with Ocado, the world-leading online grocery engine, to create Voilà by Sobeys, an online grocery home delivery service for the GTA, Ottawa, and major cities in Quebec. Amazon’s Whole Foods, Loblaws, Costco and Walmart are among other food retailers that are also providing an omni-channel strategy focusing on scalability through automated customer fulfilment centres and utilizing their physical stores as distribution points. According to Statistics Canada, retail sales (unadjusted) in Canada reached $605 billion in 2018, up 2.7% from 2017, with Ontario at the forefront, mainly a result of higher prices. Alberta also showed growth following declines in 2015 and 2016. E-commerce sales were up by 14.7% to $18 billion in 2018, which represented 2.9% of total retail sales. That growth is
From Boiler Room to Boardroom
DEAL VALUES IN LINE WITH APPRAISALS There’s little cause for concern that appraisers are overvaluing retail properties, a senior estate analyst contends. Will Robson, Executive Director and Head of Real Estate Research with MSCI, points to 2018 transaction data showing that purchase prices more often exceeded the most recent valuation, and cautions that retail REIT performance does not provide a fully comparable picture of directly held assets. He’s responding to grumbling from some market watchers who question the dissonance between share prices and retail appraisals. While noting that appraisers struggled to keep pace with market conditions that are propelling capital growth, sales data indicates they were actually most off the mark on industrial appraisals. Industrial sales values surpassed appraised values by 8.2% last year. The achieved retail premium was a more modest 2.8%. “For a listed security with thousands of sellers agreeing on prices for thousands of identical shares, there is no question about the market price of the security. Negative sentiment about market dynamics can be efficiently transmitted to pricing,” Robson observes. “When it comes to private real estate, however, we don’t have evidence for specific buildings — only that of broadly comparable buildings.” Tracking transaction data over 18 years since 2000, both retail and industrial properties sold below appraised values during the depths of the financial crisis in 2008-2018, but have sold at a premium at all other times. Residential and office properties have consistently traded at a premium. “We can’t observe bids on assets that haven’t sold or those not offered for sale so there is no way to assess the accuracy of the valuations of such properties,” Robson adds. “For assets that have traded, however, it seemed appraisers did a reasonable job.” – REMI Network
projected to continue with Canadian retail e-commerce at $55.78 billion by 2020. That should ripple through to industrial space demand. Consumer expectations for same-day or next-day goods are likely to keep growing, and the lack of well-positioned industrial space is already placing a strain on various retailers and e-commerce giants that depend on a network of distribution centres. At the same time, e-commerce tenants are competing for space with other uses such as data centres, film studios, the cannabis sector, grocery and storage facilities. zz
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The preceding article is drawn from the Altus Group online post, Retail Isn't Dead; It's Just Evolving. Ray Wong is Vice President of Data Operations and Kruti Desai is Manager, National Research Insights with Altus Group Data Solutions. For more information, see https://datasolutions.altusgroup.com
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BUILDING THE GLOBAL REPUTATION OF FACILITY MANAGEMENT The need for quality facility management is pervasive with aspects that touch all our lives – both personal and professional and yet the biggest challenge the industry faces is a lack of recognition.
A good facility manager is unseen - working to ensure the facility is running at full efficiency but prepared for something to go wrong. From cyber-attacks to flooding, emergency preparedness is the hallmark of a successful facility manager, but the more integrated the facility manager’s role becomes in the strategic operation of an organization, the better the results. This is where the Royal Institution of Chartered Surveyors (RICS) comes in. As a global professional body that sets standards, regulates and trains professionals working in the built environment from construction to property management, RICS is in the unique position to bring global perspectives to the industry. “As a third party, RICS is able to bring associations and organizations together to build a global understanding of what FM is,” explains Steve Morris, Head of the FM Sector for RICS. “We want to show the benefit of bringing the FM sector into the boardroom for a seat at the table – highlighting the added productivity that could be gained as FM becomes a part of decisionmaking. This approach started a few
years ago with our collaboration agreement with IFMA and we are now starting to see the results of this collaboration success.” Recognition is building for the need to have qualified property management to ensure real estate assets are protected and investments are sound. Adopting the common use of standards, training and terminology will build leadership in the FM sector as those holding investment portfolios welcome qualified professionals into the boardroom. Once in the boardroom, facility managers can ensure best practices are built into the design and management of assets at every level. “FM touches every point of our lives and working activity in one form or other. It impacts how we go about our lives on a day-to-day basis with an aim to ensure there is as little disruption as possible. And while a big part of this is delivered by facility managers, it also involves many who have not yet realised they are delivering FM,” says Morris. IFMA and RICS are collaborating on training, events and implementing a system of strategic thinking in the delivery of facility management, which is best disseminated from the
boardroom. In 2018, we released the Strategic FM Framework, professional guidance for all levels in facility management from novice to professional. It introduces a common approach for strategic leadership and outlines the role and scope of work.
Focus on facility management FM has arguably the longest list of competencies and scope of work within its responsibilities than any other industry. It is a profession that requires a holistic implementation with strategy, tactical management and operational delivery aspects. Weakness in any of the crucial FM skills risks impacting the building system as a whole. Good facility management requires a solid understanding of communications, finance, sustainability, business continuity and more. Morris explains, “FM can deliver best value when implemented as a core consideration from the concept design stage of any built environment project. It provides the best outcomes and return of investment when taking into consideration the full property lifecycle.”
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RICS is in the unique position to bring global perspectives to the industry. A facility manager following the Strategic FM Framework manages a building as a working system that includes the physical aspects and human aspects of the facility. This guidance is for all FM skill levels, from those who are not currently in the FM industry but who either manage their own facilities, or for those who manage facilities for others to professional facility managers who deliver all FM services. It is a platform for all, it provides a common approach for all levels for strategic leadership and understanding of the role and the scope of work of facility management. First and foremost, a facility manager is a project manager. Often the FM delivers a quality service, within budget and on time because facility managers have a diverse range of skills and work hard to live up to high expectations. Despite the quiet success of the facility manager, RICS is working with IFMA to bring these
skills into the spotlight for some welldeserved recognition. As an established global professional body in its 150th year, RICS provides a reputable designation that brings recognition to qualified professionals who have demonstrated competency and leadership in their field. An RICS designation is known globally and professionals who have achieved an RICS status are sought after by international corporations Supporting and providing a platform for qualified facility managers comes with benefits that we will all gladly reap. Found out how you can elevate your career through RICS.
Interested on receiving RICS communication about FM news?
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STEPPING INTO THE SPOTLIGHT
Art Deco Building has Night-time Sparkle to Augment Daytime Charm By Jason Broadhurst A STYLISH ART Deco building in a prime Montreal location provided its n ew ow n e r s , BT B Re a l E s t a t e Investment Trust, with the opportunity for signature headquar ters. After acquiring 1411 Crescent Street — an 85-year-old, low-rise office building with street level retail in the city's historic Golden Square Mile/Mille carré doré — last year, the REIT's own growing staff moved in. The new owners also invested in bringing the building's night-time image more in line with its daytime charm. At the time of purchase, none of t he exter ior l ight i ng was functioning — render ing an architectural gem unremarkable in the da rk ness. Lighting designers wit h t he Mont rea l-base d LED s u p p l i e r a n d s e r v i c e p r ov i d e r, Concept Illumination, helped return the sparkle. "By work ing with the existing dimensions and architectural elements, we have been able to deliver a result that honours the historical significance of the structure," says the project leader, Daniel Herz. "No matter at
what angle you approach the building, it really stands out in its elegance." To do so, 30 existing halogen fixtures were removed and 20 new LED luminaires were installed. The differing widths of the facade columns presented some challenges, but the designers determined they could up-light them in a visually consistent way using two different sizes of architectural linear LED graze fixtures. A 1-foot linear graze was installed for the narrower 3-foot columns; while a 4-foot graze covers off the 6-foot columns. Together, they assemble one foot of space on each side of every light beam. Visually, a single band of light shoots up each column, delivering a uniform look and ensuring there is no residual glare on the neighbouring windows. The warmer light from the 3000-Kelvin static white LEDs chosen for the project helps to enhance the building's art deco features without overpowering them. The beam angle is equally important for showcasing unique architectural elements at the top and the carved features at the base of each building column. Each linear LED luminaire has a
9-degree by 9-degree beam. "The tight 9-degree band of light [side to side] ensures there is no light spilling out on the nearby windows. And a similar 9-degree band [front to back] means the light is projected higher up the building," Herz explains. The project took just two days, but delivered a lasting look in keeping wit h t he build ing's longst a nd ing presence in a dynamic area of the c i t y. B T B R E I T i s h e a r i n g appreciative feedback from staff, clients, the other building tenants and Montrealers and tourists who are just passing by. "We are really proud of the new lighting. The building is illuminated in a very charming way. It looks quite warm and natural," reports David Barbarush, Property Manager for BTB REIT. "Our president, Michel Léonard, is also extremely happy with the final product. It’s great for the image of our company." zz The preceding article was supplied by Concept Illumination. For more information, see the website at https://conceptillumination.com. Canadian Property Management | August 2019 19
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IS AI A PART OF YOUR FUTURE? By Darrell Townson
In the grand scheme of things, Artificial Intelligence (AI) is undoubtedly going to have an impact on some portion of your workday no matter what type of work you do. Now, however, not every business or location is going to have a robotics operation to control day-to-day functions but that shouldn’t stop anyone from considering the ways that AI can be integrated to increase business efficiency or value. Presently, pundits see AI being combined with other advanced technologies such as robotics and 3D printing to lead to more efficient production of goods and services. In fact, it’s been speculated that machines, leaving the more complicated tasks to humans, will replace many routine jobs currently performed by workers. Along this line, and while AI is rapidly becoming prevalent in the medical profession, it’s not impossible to see it playing a role in the everyday business operations of other professions or businesses. Think about equipment being able to diagnose problems and then having the ability to self-repair certain issues, and subsequently provide alerts or diagnostic information for those issues that it can’t. In 2018, PwC — a global research firm — offered eight predictions about how AI was likely to develop over the course of 2018, with implications for business, government and society. According to them, the trends they identified at that time — including AI’s true workforce impact, was a call for all companies to focus on responsible AI and emerging threats around cybersecurity and national competitiveness. Those two aspects were expected to take a giant leap forward in 2019 along with AI increasingly moving from the lab to offices, factories, hospitals, construction sites and consumers’ lives. To develop their 2019 report, PwC surveyed more than 1,000 US business executives at companies that are already investigating or
implementing AI. As a result, a full 20 per cent said their organizations plan to implement AI enterprise-wide in 2019. Additionally, 27 per cent had already implemented AI in multiple areas and another 15 per cent plan to deploy it in multiple areas. Sixteen per cent were expecting to implement pilot projects and another 22 per cent were actively investigating the use of AI in their businesses. As a result of their research, and in a nutshell, PwC assessed that for businesses considering AI, “it's time to scale up or give up.” They report that the leading companies are already starting to move their AI models into production where they will run operations to enhance decision-making and provide forward-looking intelligence to people in every function. So how does AI converge with building automation and service levels within those buildings? As our buildings become more and more sophisticated so to must those who manage the buildings. Building operators and facility managers need to continually upgrade their knowledge in the areas of trends and emerging technologies. For example, elevator automation has already evolved to manage loads and energy consumption and soon to be gone are the days of simply selecting up. Building service levels now include interactive robotics providing direction and answers to questions of guests entering the building. The challenge going forward will be in finding a balance between these emerging technologies and the legacy systems requiring knowledge of mechanical systems that are being replaced by that technology. Today, building portfolios consist of structures reflecting a myriad of systems all requiring new and somewhat unique skill sets. Consequently, we cannot forget about the importance of the existing skill sets of yesterday simply because future technology is taking hold of our newer buildings. Training and education on emerging technology such as AI, as well as maintaining a foundational knowledge in boilers and chillers, is important in the management of buildings today and into the future. So be forewarned; ignoring the future is as much a folly as forgetting the past, therefore if you’re serious about AI, start now to formalize your approach and develop company-wide capabilities so successful (and smaller) projects can be replicated and built into a greater whole. Darrell Townson, writer and graphic designer for BOMI Canada. For more information about courses and industry credentials in property and facility management contact BOMI Canada at 416-977-8700 or www.bomicanada.com
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POPULATING THE VERTICAL VILLAGE Big Data Defines Demand for Mall-anchored Mixed-use Development By David Allison Big data specialist, David Allison, has drawn a speculative picture of the constituency most likely to be attracted to retail-anchored mixeduse development. A proprietary database built from details of what survey respondents value, want, need and expect from life underpins his modelling of predictive behaviour. This is refined to 10 archetypes based on respondents' patterns of agreement across 380 questions. These are dubbed "valuegraphics" — positioned as distinct from demographics based on shared traits like age, gender or income. The following is an overview of four archetypal groups he projects will drive demand in the "vertical village" – Editor. IN CITIES, TOWNS and suburbs across Nor t h A mer ica, shopping malls with large outdoor parking lots are being redesigned as self-contained villages. The parking is moved, in some cases underground, and the land is repu r p ose d for resident ia l condominium towers and apartment block s, of f ice complexes a nd reinvigorated main streets. "Vertical village" is used here as shorthand for “a high-density, mixed-use urban complex with a revitalized shopping mall anchor.” In essence, it's a community 22 August 2019 | Canadian Property Management
complete with housing, amenities and services, anchored by a big mall. For many prospective residents, the convenience is attractive and the community aspect feels really nice. Based on a sample of 1,850 North Americans, those prospects can be broadly defined as: local experience chasers; workaholic investors; creative savers and city-loving environmentalists. Local Experience Chasers The local experience chasers are 32% of the audience of people who indicated they are
interested in the idea of life in a vertical village. They have earned this label because while they literally chase experience after experience, they like to have all those experiences close to home. Paradoxically, they want to do the same things they love again and again. They are loyal to things that trigger a sense of belonging. They see a vertical village as both an alternative lifestyle and as providing easy access to the amenities that meet their social and belonging needs. The idea of multipurpose living is attractive to them. They like the idea of not having to go far to get
demandprofile what they need; proximity to restaurants is particularly appealing. Financial security is on the radar for these people, but they have bigger priorities — specifically, their social life. Similarly, possessions are only of interest if they are related to their social activities and experiences. Politics is of no interest, except perhaps if arises in the guise of a new social experience. Then local experience chasers might become loyal political volunteers. Workaholic Investors Workaholic investors, 19% of the target group, are motivated to benefit themselves. It’s likely they see a place in the vertical village as an investment so they are thinking long-term about all the component parts of the offering. They are most likely to be attracted to the close proximity of amenities. They like the idea of how that would save time. However, they may be concerned that excess amenities — pool, fitness centre, community room — would increase the price. Being career-driven, and clocking close to 80+ hours a week, they are unlikely to be in a committed relationship. They are attracted to material possessions as a way to display their success. Who else lives in the building could be attractive to them, especially if there’s potential for career advancement thanks to a run-in in the elevator or perhaps more formalized networking events.
“Vertical village” is used here as shorthand for “a high-density, mixed-use urban complex with a revitalized shopping mall anchor.” a vertical village will minimize waste and reduce their carbon footprint, and they find these ideas to be highly motivating. They see this style of community as being better for the environment than other kinds of developments. They believe in personal awareness and responsibility, and they are very aware of their carbon footprint. They love city living, but appreciate and value parks and green spaces. They would be attracted to private or shared spaces that allow them to grow some of their own food. They are very attracted to diversity and are highly educated. They are extremely loyal, and though unlikely to be political on
Creative Savers Creative savers, representing 16% of the target group, are attracted to living in places that will foster their own creativity. They are very attracted to the notion that this community is likely to appeal to a diverse group of people. They’re less likely to be attracted to shopping for the sake of shopping, but they are likely to be very attracted to the convenience of living close to the shops, services and amenities they need. They are likely to be light workaholics (60+ hours a week), but they don’t consider all the time they spend working as a negative thing. Because their pursuit involves being creative, they don’t necessarily think of it as work. The data indicates they are keenly aware that their creatively centred life can be a financial challenge, and they have reacted by becoming more frugal with their spending. This crossover results in a person who is, at times, struggling financially, but is happy to make sacrifices to adjust accordingly. City-loving Environmentalists City-loving environmentalists, accounting for 15% of respondents, are likely to perceive that
general matters, they will become intensely and actively political over issues that matter to them — like climate change. Each one of these groups has a distinct set of values, wants, needs and expectations. They make decisions all day long based on these values. Real estate developers and managers can benefit from taking note. zz David Allison is a consumer behaviour analyst and principal behind the Valuegraphics Database. The preceding ar ticle is excerpted from his report, When Shopping Centers Become Vertical Villages, Who Wants to Live at the Mall? For more information, see https://valuegraphics.com.
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Canadian Property Management | August 2019 23
DISCERNING DEMOGRAPHIC Millennial Spending Trends Not So Frivolous By Russell Whitehead Analysts with Colliers recently examined the spending habits of the 25-to-34 age cohort since the turn of the 21st century and identified some patterns that debunk sweeping characterizations of the group known — and sometimes derided — as millennials. Looking at broad categories of "responsible" and "irresponsible" spending today's 25- to 34-year-olds spend more on both fronts than their equivalents in 2000. However, responsible spending accounts for a larger share of the increase. Education, retirement savings, health care, childcare and groceries now represent about 34% of millennials' outlay, while 15% of spending is typified as irresponsible, going toward restaurants, airplane travel, entertainment outside the home, vacation accommodations and alcohol. The following excerpt from the Millennials Then and Now report takes a closer look at those choices and how they flow through to real estate – Editor. MILLENNIALS now spend 53% more on restaurants than Canadians of the same age cohort did in 2000. Spending on airplane travel also grew by 38% in the same period. Despite the tendency for millennials to seek experiences rather than material goods, spending on entertainment away from home decreased by 24% and alcohol spending dropped by 18%. The growth of home media streaming options could be one of the reasons. The reduction in alcohol spending could be due to millennials leading the health and wellness trend across 24 August 2019 | Canadian Property Management
the country and/or in channelling spending to quality, seen in growing demand for craft brewery product, versus quantity. This age group now spends nearly double on education than in 2000. Tuition fees are growing across the country, yet the increasingly competitive labour market has made continued education more essential now than ever. Perhaps more surprisingly, millennials allocate 45% more of their wallet to retirement savings. Although childcare is a relatively small portion of the average millennials’ wallet,
spending grew by 25%, while health care spending grew by 36%. Interestingly, 18% less of millennial spending is attributed to groceries even though Statistics Canada data includes online purchases in this category. Intuitively, this seems in sync with the steady decline in floor space the sector occupies and the rise in alternative services such as convenient food delivery and meal kits. EVOLVING RETAIL SPACE For retailers, the impact of these changing
demandprofile money at restaurants rather than the next big concert. One specific retail concept that has been rapidly growing, partially in response to these shifting spending habits, is the food hall. Food halls are not food courts. Rather, think of a food truck festival under a roof with an attractive communal dining area, which is licensed to serve alcohol and often paired with live music, art shows, and other public events. They are generally around
10,000 square feet in size with eight to 12 local vendors rather than national tenants. The concept is proving to be extremely popular throughout North America. zz Russell Whitehead is a Planning Consultant with Colliers, based in Vancouver. The complete text of Millennials Then and Now can be found at www.collierscanada.com/en/commercialproperty-research.
HOUSING UNDERPINS WEALTH AND DEBT By Don R. Campbell, Jennifer Hunt and Rebecca Wissink
spending patterns is important. With their refined culinary tastes, and awareness of health issues and the importance of organic, fresh food, millennials may continue to contribute to the growing popularity of smaller, efficiently conceptualized grocery stores. The more successful grocery stores, moving forward, are also likely to offer delivery, click-and-collect, prepared meals and meal-kits. The health and wellness trend among millennials is expected to continue, and likely carry on with Generation Z. Boutique fitness studios have been popping up all over cities across Canada and some fitness studios are now partnering with local restaurateurs to create a more social exercise experience, where people can go for a workout and then grab a smoothie or healthy meal afterwards. Millennials continue to seek out novel dining experiences, perhaps spending their
Older millennials are beginning to hit the key milestones of adulthood like having their first child and purchasing their first home. The youngest millennials are still about 10 to 12 years from reaching the average age of a first-time homebuyer. As of June 2018, Statistics Canada reports 27.5% or the population or approximately 10.1 million people were born between 1981 and 1996. Approximately 35% of these young adults live with their parents, but 16% are identified as household heads. In April 2019, Statistics Canada released an economic study that focused on comparing millennials to other generations of Canadians. Contrasting millennials with the prior generation, the study found millennials have more assets and wealth, along with more debt, than Gen-Xers did. Within the cohort itself, there are significant differences between wealth and debt. Millennials who have invested in the housing market and are educated or live in either Toronto or Vancouver (due to rising property values) are better off. Overall, educated millennials make more money than the Gen-X cohort did, but their debt-to-income (after tax) ratio has reached 216% for millennials, which far exceeds 125% for young Gen-Xers or 80% for young baby boomers in earlier eras. Mirroring society at large, the gap has widened between the wealthiest and poorest within the generation. The richest 10% of millennials hold 55% of the generation's wealth—typically tied to housing assets. Once in the housing market, particularly if they are living in Vancouver or Toronto, this niche appears to be accumulating wealth in the same way prior generations have. However, they carry a much greater debt load. An evolving perspective on the signifiers of material success has contributed to the boom of the sharing economy, including co-living arrangements and office sharing. When millennials purchase a home, they are often either buying properties with a rental suite or are arranging for roommates to help pay the mortgage. One commentator has labelled this "house hacking", which is "a mix between buying a personal residence and an investment property." Of the 90% of millennials who rent, overwhelmingly the group wants to meet specific objectives within their rentals. Many will choose to pay a premium to rent in the right location, sacrificing square footage to be close to amenities, transit or work, instead of paying the same monthly mortgage costs for older, outdated homes in the suburbs. Suggestions for attracting a millennial renter include offering bike storage, electric vehicle charging stations, and co-working spaces in the building or a dedicated workspace in the unit. Make the space as smart as possible with upgrades to programmable thermostats and security systems, which can be activated remotely through an app. Millennials typically look for excellent WiFi, but care little for landlines or cable television. Millennials also value sustainability. Amenities such as urban gardens, gyms with yoga space and communal kitchens have been geared specifically toward millennials. Social media is a must for attracting millennial renters. Landlords are encouraged to:1) communicate with tenants by text; 2) eliminate paperwork; and 3) expect rent to be digitally transferred. Assume that prospective tenants will have conducted their own online research about landlords and properties. Make sure cell numbers are included in advertising. Millennials may lose interest if they have to communicate to a landline and are unable to send texts. The preceding article is excerpted from The Millennial Report, a research publication from the Real Estate Intelligence Network (REIN). For more information, see www.reincanada.com
Canadian Property Management | August 2019 25
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ERASING TRACKS: TACKLING THE DE-ICING DILEMMA Winter conditions can wreak havoc on any environment; but in the case of commercial properties, it can be a downright headache for cleaning professionals. And while there are any number of extra challenges to deal with during Canada’s frosty season, few beat the hassle of cleaning tracks left by guests coming in from the cold. “From a janitorial perspective, it can be a bit of a nightmare,” says Nate Clemmer, CEO of Secure Winter Products. “When we ask cleaning crews what the worst part of their day is, many of them say it’s dealing with the mess people track in from the snow, which can leave entrance ways, restaurant lobbies, or office floors looking like an old-school chalkboard.” “It’s not a good first impression,” he adds. By and large, these visible tracks are a result of using chloride salt de-icing solutions to melt outside ice and snow. Once applied to outdoor walkways and roads, the granular material finds its way through the front doors where it accumulates on interior flooring. “It’s a big issue for cleaners,” agrees Mark Warner, CMI Education Manager with ISSA Cleaning Management Institute. “When those salts get tracked into a building, that crystalline
can imagine what it does to the inside of $2,000 backpack vacuums and $10,000 automatic floor scrubbers. It just eats them up.”
material can cause damage in the flooring, whether by cutting up the fibers on carpeting, scratching hard surfaces like terrazzo or marble, or attacking the finishes on expensive flooring.” Moreover, he adds, salt particles can damage cleaning equipment from the inside out, leading to costly repairs and replacements: “We all know how corrosive salt can be. So you
Safety first Left unchecked, winter tracks can pose considerable health and safety concerns for building occupants and staff. “If that material gets tracked in and it’s still in its granular form, it can be like walking across a floor of marbles,” Warner explains. “More importantly, salt-based ice melters are hygroscopic, which means they attract moisture out of the air. So the residues that are on the indoor floor are actually creating an excessive amount of dampness, and because of that, a lot of building owners and cleaners will report that their floors seem excessively slippery.”
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“When we ask cleaning crews what the worst part of their day is, many of them say it’s dealing with the mess people track in from the snow, which can leave entrance ways, restaurant lobbies, or office floors looking like an old-school chalkboard.” – Nate Clemmer, Secure Winter Products New approaches The cleaning industry has a knack for solving old problems with fresh innovations. And when it comes to tackling winter tracks, Clemmer and his team at Secure Winter Products have developed one such solution called Entry®, a chloride and residue-free, liquid ice melt product. With a pH value similar to water, Entry® is designed to evaporate rapidly upon use and prevent re-freezing to temperatures below 20°C. This affords cleaning professionals a de-icing alternative that not only works quickly when applied, but doesn’t leave visible tracking and all the issues that come with it. “From both a liability and asset preservation perspective, that’s a big deal,” says Clemmer. Certainly, Entry®’s chloride-free formulation makes it particularly appealing to building owners and managers. Over time, he explains, chloride salts can cause damage to metals and concrete, as well as pose risk to plants and pets. By contrast, Entry®’s chloride-free composition makes a significantly lower impact on its surroundings. This is particularly important for Canadian cleaning crews who must apply (and re-apply) de-icing products ad nauseam during the long winter seasons, but don’t want to do so at the expense of eroding their natural and physical assets. Asset protection notwithstanding, Entry® is also readily biodegradable. And as the first ice melt in the world to receive Green Seal® certification, Clemmer notes, “From an environmental perspective, Entry® is considered to be the best environmental deicing solution out there.”
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chloridefree.com/commercial.
Cleaning tracks The cleaning industry is on constant watch for solutions that can get the job done better, safer, and with less strain on both schedules and budgets. By working with ISSA to bring such a solution to market,
Clemmer and his team are confident that Entry® provides a liquid de-icing solution that caters to these needs and facilitates a more eco-friendly cleaning strategy. “We’ve worked with ISSA’s Cleaning Management Institute to really understand what the best practices are for cleaning up salts inside of buildings and just how much pain there is associated with this activity,” says Clemmer. “Now that Entry® is out there and making a difference, we’re happy to play a role in tackling one of the most demanding winter challenges.” Nate Clemmer is founder and CEO of Secure Winter Products.
INVESTMENT LURES
CAN SPUR LOCAL RIVALRIES Alberta Opens Potential for Long-term Property Tax Concessions By Barbara Carss LOCAL GOVERNMENTS in Alberta can now offer property tax breaks on commercial and industrial sites for up to 30 years. Newly adopted amendments to the province’s Municipal Government Act extend provisions that were initially devised to support the rejuvenation of derelict brownfields to all non-residential properties. To ta ke adva ntage of the new legislation — which was introduced on June 4th and attained Royal Assent on June 28th — municipal councils will have to adopt a bylaw that sets out parameters for bestowing property tax exemptions or deferrals “for the purpose 28 August 2019 | Canadian Property Management
of encouraging the development or revit a l i zat ion of non-resident ia l properties for the general benefit of the municipality”. Concessions for qualifying ratepayers would be assured for 15 years, after wh ich councils could renew the incentives for an additional 15 years. Alternatively, councils could cancel the incentives at any time if property holders fail to meet the requirements spelled out in the bylaw. “This legislation would empower municipalities to attract investment, create jobs and realize their full economic potential,” Kaycee Madu,
Alberta’s Minister of Municipal Affairs, remarked when the amendments were tabled in the Legislative Assembly. That’s couched as a means to stand out among Nor th Amer ican jurisd ict ions. T he accompa nyi ng government communiqué points to five-year and 10-year programs in neig hb ou r i ng Sa sk at chewa n a nd British Columbia, as well as shorter t e r m i n i t i a t ive s i n Tex a s a n d Louisiana. However, others caution t he new opt ion cou ld agg ravat e imbalances within Alberta. “Definitely, there’s a risk of intermunicipal rivalry,” says Kyle Fletcher,
propertytax Executive Vice President, Prairie Region, for Altus Group’s property tax division. “There is a risk for any city that is not going to implement these changes of losing investment to one that does.” “If a number of municipalities in Alberta adopt this power, it may attract more employment-based development to the province, but there will be less incentive for that development to locate on brownfield sites than is currently the case,” ref lects Luciano Piccioni, President of RCI Consulting, a specialist in brownfield planning and economic development st rategies. “I f municipalities can defer or exempt property taxes on all non-residential development, it will make brownfield sites less appealing to developers.” SHIFTS ENABLE INCENTIVES Few local governments have completed the required steps to authorize property tax incentives for brownfield sites in the 20 months since that enabling legislation wa s a d d e d i nt o t h e Mu n ic ip a l Government Act. Those interested in pursuing the new opportunity will similarly need time to get supporting policies a nd approva ls in place. Knowledgeable observers also speculate that at least one big player is unlikely to make any sudden moves. “The municipality would have to be in a good fiscal position to start offering these kinds of incentives and, right now, Calgary is not,” observes Dave Mewha, who’s based in the city as Altus Group’s Senior Director, property tax. “Keep in mind, the property tax system is a closed circle so when you’re offering an incentive to one ratepayer, somebody else is picking up the cost.” Tax shifts have already walloped many existing commercial ratepayers in Calgary as the sliding assessed value of downtown office towers reallocates the tax burden to smaller and suburban properties. Council recently approved a tax credit program, for the third consecutive year, to soften 2019 shiftrelated tax increases for approximately 12,000 non-residential ratepayers, which city staff pegged at about $10,000 on a property valued in the $5-million range. While it may not be politically opportune for some, or many, local governments to consider locking in preferred property tax rates for a select
INDUSTRIAL MACHINERY TEMPTS NEW BRUNSWICK TAX COLLECTORS
Industrial property assessment will be under scrutiny in New Brunswick during three days of public hearings in early September. A standing committee of the provincial legislative assembly is exploring whether equipment and machinery used in manufacturing and industrial processes should be factored into the assessed value of the property. Earlier this year, an opposition member of the legislative assembly (MLA) withdrew his private member’s bill seeking that outcome through an amendment to the provincial Assessment Act, but then made a motion for the standing committee on law amendments to study the matter further. The committee has now been tasked with making recommendations on “whether to reduce or eliminate any property assessment or property taxation exemptions or benefits that apply to heavy industry”. The cited exemptions apply to features and devices related to production processes within industrial facilities, such as equipment, machinery, systems providing power for industrial operations and crude oil storage tanks at refineries. All are commonly exempted from property tax in other jurisdictions throughout North America. However, the MLA’s motion underscores concerns that “public institutions such as hospitals have much higher assessments than many industrial properties”. Despite the industrial focus, New Brunswick-based property tax consultants with Altus Group maintain that any move to expand the pool of assessable features within a facility will also have cost implications for commercial properties. “The most obvious effect would be higher taxes imposed on many commercial and industrial businesses and their operations,” Rob Newman and Mathieu Maillet concluded in an online commentary on the earlier, since rescinded, private member’s bill. The new impetus via the standing committee occurs within the context of New Brunswick’s minority government. With 22 seats, the governing Conservative Party enjoys a mere one-seat edge over the Liberal opposition’s 21, while the Green Party and People’s Alliance each hold three seats. Notably, both of the smaller parties supported the motion for the public hearings and standing committee report on industrial property assessment. “These hearings will be of interest as ultimately there could be significant consequences to the taxpayers in New Brunswick,” Newman and colleague Justin Babineau observe. “I encourage representatives of heavy industry and municipalities, taxation experts and other stakeholders in our province to provide us with input on the current taxation and assessment system as it relates to heavy industry,” says New Brunswick’s Attorney General and Justice Minister Andrea Anderson-Mason, who chairs the standing committee.
group of investors, the new option positions other municipalities to take advantage of their neighbours’ struggles. For example, Fletcher and Mewha note that tax rates in suburban Rocky View County have been consistently lower than Calgary’s. “Calgary has a disadvantage in competing for development dollars. If Rocky View implemented these kinds of incentives, that would just hurt Calgary more,” Fletcher says. INCIDENTAL FACTOR Enid Slack, Director of the Institute on Municipal Finance and Governance at
University of Toronto’s Munk School of Global Affairs and Public Policy, foresees proper t y t a x incentives inf luencing prospective investors’ choices within rather than between metropolitan regions. Most of the ava i la ble ev id enc e c om e s f r om American studies since property tax incentive programs are more common and longstanding in the United States. From a n e conom ic development perspective, analysts suggest the labour market, transportation networks and corporate income tax typically exert greater sway in location decisions, while property tax is more likely to Canadian Property Management | August 2019 29
propertytax become a consideration after a larger locale is targeted. “The literature is really mixed. One question is: would the business have established there anyway in the absence of a property tax incentive?” Slack muses. “Businesses locate based on a number of factors and I don’t think property tax is the top one.” T h e r e’s a l s o a c o n c e r n t h a t municipalities may undercut their residents and businesses in an attempt to u ndercut each ot her. “ W hen municipalities start to compete by lowering their property taxes, it’s a downward spiral. At the end of the day, services and infrastructure are going to be affected,” she maintains. Thus far, there has been little feedback from Alberta’s commercial real estate industry. “Quite a few other things are happening that have overshadowed this and there aren’t a lot of details yet. Nobody has really raised any specific
issue that has got anybody really on board or really against it,” Mewha reports. I n a n on l i ne resp onse to t he amendment, reviewers from the Fraser Institute agree that municipalities should have more fiscal flexibility, but label property tax incentives “corporate welfare” that unfairly favour certain businesses and land uses. Meanwhile, the Alberta Urban Municipalities Association (AUMA) advises local governments won’t exercise the option lightly given that property tax is their primary source of revenue and property taxpayers are their political constituents. “When considering property tax incentives, municipal leaders must be vigilant in how they apply them to ensure all local ratepayers are treated equitably,” it stated just after the Alberta government introduced the legislation. “AUMA appreciates the province’s efforts to offer an additional
QUEBEC TO TWEAK ASSESSMENT PROCEDURES
Some Montreal property owners could find themselves on short notice ahead of the city's next three-year assessment cycle, which is set to begin in 2020. Proposed changes to Quebec's Act Respecting Municipal Taxation will tighten the timeline for disputing the property values ascribed to smaller apartment and commercial buildings assessed at less than $3 million. Currently, owners of properties valued at $1 million or greater have 120 days from the day the municipality dispatches its assessment notices to request a review of the evaluation. The deadline for the remainder of ratepayers — typically single-family homeowners — is May 1 or 60 days after the mail-out of assessment notices, whichever date is later. Unless modifications to the property trigger a reassessment, Quebec ratepayers only have the opportunity to appeal assessed values during the first year of the threeyear cycle. After the initial appeal period in 2020, Montreal's assessment roll — based on values as of July 1, 2018 — will be largely locked in until 2023. New measures proposed in the omnibus Bill 16, which was introduced in the Quebec legislative assembly last April, would raise the threshold to qualify for the 120day time limit to properties valued at a minimum of $3 million. Meanwhile, owners of larger properties may have to become more proactive about monitoring those values since municipal governments would also gain the flexibility to cease delivering printed assessment notices by mail if the assessment roll is posted on the municipality's website. The timing of the assessment cycle is staggered across Quebec, placing Montreal property owners first in line to be subject to the proposed new rules. Quebec City and several suburban cities near Montreal launched a new three-year run in 2019, while Gatineau's next cycle begins in 2021. Changes to assessment procedures are among a smaller number of amendments in Bill 16 that have implications for commercial landlords. The proposed Act focuses more extensively on the residential sector, including numerous amendments pertaining to procedures of the rental housing regulator, the Régie du Logement, and to the governance of residential co-ownership buildings. Other amendments address the certification of building inspectors and skilled trades on construction sites. After a summer recess, a committee of Quebec's legislative assembly has resumed the clause-by-clause consideration of the bill that began in late May. Montreal's assessment roll is due to be posted later this fall.
30 August 2019 | Canadian Property Management
taxation tool for municipalities and for continuing to respect the principles of local autonomy in how municipalities choose to use those tools.” PROMOTING TRANSPARENCY Alberta municipalities have actually already had an avenue to convey property tax relief for all property types. Section 347 of the Municipal Government Act, which was likewise added as an amendment during recessionary times (1994), gives authority to: cancel or reduce tax arrears; cancel or refund taxes; defer tax collection; or phase in increases or decreases arising from reassessment “if a council considers it equitable to do so”. Some municipalities have used it to support particular projects and/or precincts where they are trying to encourage development. Legal practitioners suggest the new amendment could effectively take precedence, becoming the established and expected mechanism for providing non-residential proper ty tax concessions. That would also be more transparent for prospective recipients and the public at large. “There may be challenges to the way municipalities deal with tax incentives for brownfield and non-residential property if sections 364.1 or 364.2 are not followed,” says Jacquelyn Stevens, a p a r t n e r w it h W i l l m s & Sh ie r Environmental Lawyers who is called to the Bar in both Alberta and Ontario. “The new incentives will require municipalities to establish criteria and create a structured process rather than having a developer approach a municipality and saying: I want to do this; can I get an incentive?” Conversely, it could pose a greater obstacle for redeveloping brownfield sites in municipalities that don’t have incentives in place. “If municipalities don’t feel they need to do anything to support brownfield cleanup, they are unlikely to invest the time and money to establish the criteria and pass the bylaw,” Stevens says. “It becomes an extra challenge, which many municipalities do not have the technical resources to deal with. It’s one more thing on the municipality’s plate for budgets that are already stretched.” “The problem for municipalities r ig ht now isn’t how to p rov ide incentives. It’s how to meet their budget,” Mewha concurs. zz
marketdynamics
FOSSIL
FELLED Energy Exposure Strains Calgary Office Demand
KEY SERVICE centres for the oil and gas industry are at differing junctures in Canada and the United States. JLL’s newly released overview of office and industrial space trends in North American energy hubs contrasts the shale boom bolstering U.S. economic activity with the logistical constraints squeezing Canadian producers — and also flowing through to Calgary and Edmonton’s commercial real estate markets. “Canadian WCS oil has been stuck in transit,” JLL analysts observe in their 2019 Energy Outlook. “There is a lack of capital spending and a struggle to attract foreign investors to the sector until the pipeline capacity and exporting issues are addressed.” The report underscores Calgary’s deep exposure to the volatile sector. Even with the 25% downtown vacancy rate largely attributable to persistent low oil and gas prices and massive layoffs in the sector, energy-related tenants still account for nearly 39% of office occupancy. That’s about 17 million square feet in a total inventory of 43.7 million square feet. Houston also hosts a high concentration of energy tenants, filling 60 million
square feet of the total 168 million square feet of office inventory. JLL analysts lump both cities into the hardhit category, whereas the Dallas and Denver office markets are deemed to be landlord-friendly. Of the latter, Dallas has a relatively small contingent of large energy players, including Exxon, Pioneer and Kosmos, that comprise less than 3% of the city’s more diversified tenant base. Denver has the smallest office inventory at 30.2 million square feet with 1.1 million squa re fe et u nder const r uct ion. Meanwhile, about 430,000 square feet of office space is still under construction in Calgary and 3 million square feet is under construction in Houston. RELOCATION AND DOWNSIZING “While the macroeconomic environments in markets like Houston and Calgary have seen improvements over the last quarter, the office inventories there still struggle and occupiers will retain negotiating leverage in upcoming years,” the report projects. “Weak demand and enormous inventories of vacant space remain.”
Energy firms drove Calgary office leasing deals in the first quarter of 2019, but in a way that had few landlords celebrating. The largest transactions involved companies relocating and downsizing into smaller spaces so that 1 million square feet of leasing resulted in a more modest 381,000 square feet of net absorption. Notably, Nexen left more than twice as much space behind when it moved into 300,000-square-foot quarters in The Bow building. TransAlta similarly filled less than half the footprint it had vacated when it moved into 124,000 square feet in the beltline’s Keynote Tower. Energy firms have dumped 55% of the approximately 2.7 million square feet of sublease space now on Calgary’s market. There has been even greater offloading in Houston, where they’ve contributed nearly three quarters of 7.7 million square feet of sublease space. GULF COAST DRAWS INVESTMENT However, turning to industrial, the dynamics are more robust in Houston. Energy-related tenants have leased 3.1 Canadian Property Management | August 2019 31
marketdynamics million square feet of space since the first quarter of 2018, contributing significantly to 5.4 million square feet of industrial absorption in the same period. Average asking rent in the first quarter of 2019 was USD $5.76 (CAD $7.54) per square foot. The average lease size was more than 82,000 square feet versus 20,000 square feet in Calgary or 30,000 square feet in Edmonton. Much of the Houston activity is tied to petrochemical products rather than resource extraction. “There has been $60 billion in petrochemical investments in recent years along the Gulf Coast and many of these products a re processed, refined or packaged in the Houston area. Additionally, Houston handled over 40% of the nation’s resin exports in 2018 and further growth is expected in the period ahead,” the report advises. That’s a significant part of the bigger national picture. “Since 2010, natural gas from shale formations is driving a projected $204 billion in new capital investment across 330 chem ica l i ndust r y projects,
according to the American Chemistry Council. This processing, refining and packaging of plastics and resins is occurring largely along the Gulf Coast, though significant ethane production will also come online in Pennsylvania in 2021 with the completion of Shell’s $6 billion cracker plant,” the report explains. LOGISTICS AND DISTRIBUTION Industrial also offers a more upbeat story in Calgary, but it doesn’t have an energy narrative. Over the past year, 350,000 square feet of leasing from energy tenants made a fairly modest contribution to 3.3 million square feet of net absorption. The average asking rent for Q1 2019 was CAD $9.35 (USD $7.10) per square foot. “Growth in the industrial sector is strongly centred around it being a desired location for distribution,” JLL analysts conclude. “This can be viewed as cause-and-effect based on a tight Vancouver market, in addition to the geographical location of Calgary, making it accessible to large markets in a 24-hour drive time. Investment in Calgary remains consistent and is
continuing to trend in a positive direction. Again, this investment is focused on speculative-built, institutional grade distribution facilities.” Edmonton industrial facilities have been more conventionally tied to upstream oil and gas production, and have suffered accordingly as energyrelated employment in the sector declined by more than 12% since 2015. Energy-related tenants filled about 750,000 square feet of the 1.6 million square feet of industrial absorption since the first quarter of 2018. As with Calgary, JLL points to the emergence of distribution and logistics to diversify a “highly energy concentrated” tenancy, but projects it will remain a tenants’ market until 2021. Even so, Edmonton’s 5.8% industrial vacancy rate is just 20 basis points higher than Calgary’s and it commanded a higher average asking rent of CAD $9.45 (USD $7.18) per square foot in the first quarter of 2019. zz The 2019 Energy Outlook and other market insight can be found at www.jll.ca/en/trends-andinsights/research.
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transparency
KNOWLEDGE TRANSFER NEEDS NURTURE Operators Often Lack Support to Deliver Designed Building Performance By Darryl Boyce OPERATIONAL performance aligns with the ASHRAE mission of “advancing human well-being.” Many think the "HR" in ASHRAE stands for Heating and Refrigeration. However, it also stands for people. The human resource is the HR at the centre of ASHRAE. Yet, buildings are falling short on operating to the expectations of the building designers and operators. For example: • The Alice Turner Branch Library in Saskatoon is using 58% more energy than the design intent; • The Roblin Centre at Red River College in Winnipeg is using 69% more energy than the design intent; and • The Surrey District Education Centre in Surrey, B.C. is using 203% more energy than the design intent. There are three key reasons why buildings are falling short. First, great designs are not always delivering great operations. Designers are not always focused on operability during the design
process. They need to transfer their great design into effective operations. Great designs warrant great operability. Second, buildings are more complex. Technology is designed to help improve operations, but those expectations can be unrealistic or distorted. In 2010, for example, Carleton University opened a state-of-the-art engineering building with Power over Ethernet (PoE) controls, as well as enhanced sub-metering of equipment, lighting and plug loads. The additional data/information overwhelmed control technicians. Third, operators are lagging behind or simply being overwhelmed. Generally, they do not have the skills to operate today’s buildings and are rarely properly trained at building turnover. Several post-occupancy studies, Do our green buildings perform as intended, the UK-based 1996-2001 PROBE Project and 2006-2010 Low Carbon Buildings Performance identified the following key causes of performance slippage,
resulting in energy consumption being much higher than modeled targets: • buildings were designed with systems that exceeded the capacity of the building managers to operate them. The study found a correlation between building performance and the quality of the management; • systems were complex and/or innovative, requiring several years to refine and understand; and • insufficient commissioning. ASHRAE is not the only organization concerned about the state of building operations. A 2017 IFMA Research study, Raising the Bar: From Operational Excellence to Strategic Impact in FM, concluded that was the single most important challenge facing facilities management professionals. It called on FM to adopt technology more quickly and deeply, but also to move beyond technology as a means to monitor energy consumption to focus on how it could be used to enhance the workplace experience. Canadian Property Management | August 2019 33
industryleadership CANADIAN LEADS ASHRAE FOR 2019-2020
Darryl Boyce has been inducted as ASHRAE president for 2019-20. A mechanical engineer with an extensive background in the planning, management, operations and energy performance of post-secondary education facilities, he is one of approximately 6,000 Canadians among the Society’s worldwide membership of more than 56,000 building professionals. In keeping with ASHRAE tradition, Boyce has a chosen a theme for his leadership tenure: Building for people and performance. Achieving operational excellence. “Let’s talk about what we can do to ensure that people succeed within the buildings we create,” he urged attendees at the 2019 ASHRAE annual conference in Kansas City, Missouri, in June. “The design should reflect the capabilities of the people who will be operating the building. It is crucial to work with building owner-operator organizations to develop strategies that will prepare the operators to effectively operate the building through training, the effective use of the building automation system, as well as analytical and other operational tools.” Boyce is a special advisor to the Vice President of Finance and Administration at Carleton University, and was previously Assistant Vice President of Facilities Management and Planning at the Ottawa-based campus. He has also been a consultant on a range of projects, including the unique SNOLAB scientific research facility in Sudbury, Ontario, which is largely located two kilometres below the earth’s surface in a section of the Creighton mine. He began his career as an engineering technologist after graduating from the British Columbia Institute of Technology in 1973 then, at age 27, enrolled at the University of Alberta where he earned a Bachelor of Science in Engineering. He has filled numerous roles on ASHRAE’s board and committees and is a Fellow and life member. As President-elect, Boyce joined 2018-19 President Sheila Hayter to address the Canadian House of Commons standing committee on natural resources last November. “Darryl Boyce knows buildings well. Very well. He knows how to operate them, how to fix them, and how to ensure optimal performance,” Hayter told the assembled Members of Parliament. “As head of facilities at Carleton University, Darryl was responsible for over 50 buildings, encompassing 450,000 square metres of building space, including labs, residential space, and administrative operations.” Charles Gulledge, Senior Mechanical Engineer with Environmental Air Systems LLC in High Point, North Carolina, now steps into the ASHRAE president-elect position. William (Bill) Dean, a P.Eng and Regional Site Operations Manager with the National Research Council based in Saskatoon, has also been elected as a Vice President for 2019-20.
INCLUSION IN DESIGN PROCESS To ensure that people succeed in the buildings that we create, building operations representatives must be included all the way through the design, not solely at the end of design. The design should reflect the capabilities of the people who will be operating the building so that they are not left wondering: How do I make this work? Additionally, we should: • Establish an effective turnover and orientation training process. • Understand what life is like after the building is handed over. • Design buildings for the occupant operators who will occupy the space. • Evaluate all design decisions for impact on Indoor Environmental Quality (IEQ). • Remember humans, the occupants, are the best sensors of comfort. Analytical/Fault detection software can enhance the operation of building systems. A comprehensive study by the National Research Council in Canada deter m ined that today’s building 34 August 2019 | Canadian Property Management
automation systems generate a lot of data. We just need to use it effectively. It is crucial to work with building owneroperator organizations to develop strategies that will prepare the operators to effectively operate the building through training, the effective use of the building automation system, as well as analytical and other operational tools. The concept of a digital twin could improve the understanding of the building operations as a base model. In the United Kingdom, the Building Services Research and Information Association (BSRIA) operates a program called Soft Landings to “improve the operational performance of buildings and meet the client’s expectations.” In the past year, ASHRAE formed a Multidisciplinary Task Group, Effective Building Operations (MTG.EBO), which will coordinate the activities of multiple technical committees and other stakeholders in the area of training and tools to support the operation of buildings to enhance the indoor environment and use energy effectively. Responsibility will include
suggestions for research as well as the development of technical programs and special publications on effective building operation to achieve quality Indoor Air Quality while not wasting energy. ASHRAE's Building Ad Hoc committee plans to learn from the renovation and upgrades of a real-world building owner dealing with the balance between energy use and indoor environment. The design, construction and transition to operations will be fully documented and will serve as a learning process for our members. The project is also being documented by the Building Owners and Managers A s s o c i a t io n ( BO M A) Re s e a r c h committee as a case study in repositioning of an existing building. LEARN, ENGAGE, ACT ASHRAE members can learn, get engaged and act differently. Get a copy of the new guideline, Designing for Effective Building Operations, which will be available by June 2020. Review the Centre for the Built Environment to understand what people think about working in buildings. Engage with building operators to improve understanding of their problems and develop educational and training programs to reduce the gap between design, construction and operations. Listen to what they are saying. Meet at least once this year to talk about operational challenges. Conduct follow-up discussions one or two years after buildings are turned over. Follow the principles outlined in the new guideline, Designing for Effective Building Operations. Add computer-assisted building operations enhancements into the design program. Transfer the design operational concepts to the operations team. Learn and apply wel l-bu ild i ng f unda ment a l principles to the design. We can and will do better for those who operate our buildings. People must succeed within the buildings we create. Let’s ensure we take the steps to achieve effective operational performance and enhance the operator experience. It’s good for the building. It’s good for the people who live and work within those buildings. And, it’s good for us. zz Darryl Boyce, P.Eng., is Special Advisor to the Vice President of Finance and Administration at Carleton University. The preceding article is drawn from his address following his June installation as ASHRAE President for the Society year 2019-20.
corporateculture
ENTICING
TALENT
Real Estate's Core Function Serves Up HR Insight By Barbara Carss
COMMERCIAL REAL ESTATE’S core function as a provider of workspace serves as something of a living lab for the industry’s own human resources strategies. Building owners/managers are increasingly pressed to meet tenant demand for new kinds of services and technological capability, safeguard business continuity in times of cyber and climatic peril, and deliver a return on investment in the face of a growing array of competition from shiny new towers, co-working space and home offices. In turn, these pressures influence decisions about hiring and staff deployment. “There is quite a lot of fear. Nobody wants to be obsolete,” Michelle Walker, Vice President, Facility Management Operations, with the real estates services provider, BGIS, told seminar attendees at
the REMI Show in Toronto earlier this year. Industry insiders in a variety of roles joined her to discuss the challenges and opportunities for recruiting and fostering required new skill sets. Beyond their own staffing needs, they’ve got a material interest in supporting their tenants’ talent attraction efforts. James Ashley, a Partner with the real estate placement specialists, HighView Partners, steered the exploration of those intertwined mandates — drawing out insight on the evolving workplace and the forces shaping employers’ and employees’ expectations. Advancements in building technology, a cascade of data from an ever-expanding network of collection points and rigorous environmental, social and governance
( E SG) repor t i ng protocols have transformed some of real estate’s traditional tasks, while introducing some time-consuming new priorities. “That’s simply changing the day-to-day roles of staff,” observed Jeff Ranson, Regional Director for the Canada Green Building Council (CaGBC) in Greater Toronto, as he sketched out key trends shaping current and future hiring needs. PRESSURE POINTS Today’s operators and managers are expected to be tech-savvy and customer service oriented. Property managers are typically perceived as the public face of the ownership and the first link to tenants, but innumerable tasks related to budgeting, regulatory compliance and reporting to Canadian Property Management | August 2019 35
corporateculture
“Instead of trying to turn a facilities manager into a data scientist, we added data scientists to our team.” owners/asset managers can keep them at their desks and less visible to tenants. Meanwhile, climate change adaptation now figures prominently on the real estate industry’s to-do list, coupled with targets for deep retrofits and zero-carbon new development. “These are buildings that are going to operate differently. We are going to have to figure out how to manage these things,” Ranson said. “There are a lot of new things that people are going to need to do and know, and the skills are not necessarily there.” Similarly, big data presents a big learning curving as practitioners in all commercial real estate’s disciplines — management, operations, investment, brokerage — strive to understand and manage an influx of information that is both a tool and a commodity. “We have instrumented this society. If you are carrying a smartphone, you are generating data,” advised Murtaza Haider, an Associate Professor in the r e a l e s t a t e fa c u lt y a t Rye r s o n University’s Ted Rogers School of Management. “The amount of data has also resulted in the situation that we are data-rich and insight-poor.” Although property management has long relied on well-rounded generalists, the meteoric pace of change has many employers looking to develop and augment specialized in-house expertise. “Instead of trying to turn a facilities manager into a data scientist, we added data scientists to our team,” Walker reported. She predicts many companies will take the same course. “There will be more changes in the next 10 years than we’ve had in the past decade; 80% of the technologies we’ll be using in 10 years haven’t even been invented yet,” she speculated. 36 August 2019 | Canadian Property Management
TENANT SERVICES DRILL DOWN QuadReal Property Group’s Programs and Operational Excellence division is an in-house resource for the management and operations of a 49-million-square-foot portfolio of office, retail, industrial and multifamily properties that’s also a frontline delivery agent. With smart technology firmly entrenched and producing results on the building operations side of the business, tenant services is the next frontier, unfolding through initiatives like a recently launched tenant app. “Previously, we have really concentrated the technology back-of-house in the elements our tenants don’t see as much. The focus has been on how to make the real estate better and lowering operating costs,” recounted Nada Sutic, the division’s Director. “We’re evolving with the expectations of the people who are coming into our buildings. We want a tenant app so they can self-serve on certain things, but we also want to maintain that personal connection.” Expectations and technology both push and enable building/owners to reach past what Sutic terms the traditional “big-C customer” in the role of tenants’ official representatives to communicate with the building occupancy or “small-c customers” at a more personal level. “A new approach to customer service training is really high on our list,” she said. QuadReal’s mixed portfolio provides the obvious platform to pilot emerging tenantfocused technology in residential properties. However, Walker points to employers’ evolving attitudes to accommodating personal tasks in a workforce now more prone to running errands on a keyboard than on foot and/or to work remotely at all hours from a range of venues. Big-C customers continue to make the spacerelated decisions in commercial real estate,
but they do so with an eye to pursuing those small-c customers themselves. “The lines have blurred,” Walker submitted. “The distance between work life and personal life has almost blended.” EMPLOYER PERSPECTIVE As employers, landlords can often identify with their tenants’ human resources concerns and priorities. Louise Porthouse, Vice President, Human Resources, with Triovest Realty Advisors, is on the frontlines of the war for talent. “There are some incredibly hard-to-fill positions,” she affirmed. “That’s the case even with some junior positions. For example, it’s hard to get good property administrators.” Technology has vastly expanded the reach of job postings and simultaneously opened the channels for a flood of not necessa r ily qua l if ied responses. Accordingly, human resources specialists are called upon to provide quality and quantity control. “We want to create a friction-free process for the candidate, but also for our hiring managers,” Porthouse reiterated. Haider cautions against Artificial Intelligence shortcuts for what’s still a labour-intensive task. Since real data is used to train AI’s algorithms, it could entrench biases into the application vetting process. “I am not a big enthusiast for AI primarily because these things can’t tell you what you don’t already know,” he said. Alternatively, he suggests the field of candidates could be narrowed more easily if applicants were required to fill out a questionnaire in conjunction with submitting their resumes. “It would put some of the due diligence at their end,” Haider reasoned. “We currently don’t use AI. That doesn’t mean that at some point we won’t have to,” Porthouse added. “Right now, I am getting bombarded by tech firms promoting their capability in this field.” Mea nwh i le, a longst a nd i ng multidisciplinary workforce arguably positions commercial real estate well to embrace new business approaches and professional directions. Panellists already espouse compatible philosophies. “Within our operational excellence department we have a focus on communication, collaboration and consistency,” Sutic said. “Diversity of thought is highly valued. It’s how innovation is fuelled,” Walker concurred. “I don’t think it’s about: you were an apple, and now we have to make you into an orange.” zz
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“ I COULD
NEVER LIVE WITH SOMETHING HAPPENING TO MY TENANTS. Ensuring my staff and I always hire Licensed Electrical Contractors for electrical work isn’t only good for business, it’s good for my peace of mind. Hiring a ‘guy’ may seem cheaper, but doing it legally saves my tenants downtime, and saves me from sleepless nights.” -Mark Levinson Property Manager
Mark manages nine commercial properties and is considering using ESA’s time saving Continuous Safety Services. To learn more about your legal obligations and the benefits of CSS, visit esasafe.com/propertymanagers 38 August 2019 | Canadian Property Management