Economic Delivery Agent: The largest office markets

FINDING THE COMFORT ZONE Commuter and Customer Confidence Vital to Urban Density

COMMUTERS’ WILLINGNESS to jump on the bus, light-rail car or subway is expected to be a driving factor in repopulating office space in some major North American markets, including Toronto, Montreal and Vancouver. Public transit wariness emerged as a common sentiment among respondents to JLL’s survey of COVID-19-related workplace concerns earlier this spring, prompting the firm’s further examination of potential ripple effects for employers, businesses, parking demand, traffic congestion and the urban environment. “While at first it may appear that only a small number of North American cities have a heavy reliance on public transportation for their workforces, in reality, a considerable portion of the office market is concentrated in such cities,” the report observes. “This concentration of office space and office-using employment in transit-oriented markets highlights the challenge that may accompany a return to work in North America’s largest cities.”

Recent studies in various major world cities have found little evidence to link public transit to COVID-19 clusters. Decline in ridership is apparent, however, with a report from the International Energy Agency citing a 50 to 90% drop globally during the lockdown months, translating to an estimated €40 billion (CAD $60.8 billion) revenue loss for transit authorities in the European Union alone. The perception of risk poses yet one more challenge for Canadian commercial landlords.

Toronto, Montreal, Vancouver, Ottawa and Calgary are listed among 12 markets deemed to be transit-oriented and where approximately one third of the North American office inventory is concentrated. Notably, Toronto and Montreal rank in the top five of the 25 metropolises JLL scrutinizes for the sheer numbers and the percentage of employees reliant on public transit.

More than 13% of the labour force in both urban regions are transit users, or nearly 740,000 workers in Toronto and nearly 468,000 in Montreal. Toronto registers the third highest average tally (after New York and Chicago) of weekday transit trips, at 1.66 million; Montreal has the fifth busiest system with an average of 1.34 million weekday trips recorded.

“People must continue to exercise caution when on public transit because physical distancing will be a challenge,” Christine Elliott, Ontario’s Minister of Health,

acknowledged last spring as the Province released a guidance document for transit authorities. “I urge everyone to follow our public health guidelines. They may seem simple, but they are effective in helping to prevent the spread of COVID-19.”

WELCOMING CONSUMERS A coalition of Canadian business organizations, including the Building Owners and Managers Association (BOMA) of Canada, is similarly emphasizing the oft-repeated mantra of social distancing, hand-washing, vigilant disinfection of frequently touched surfaces and collective obligation for mitigating risks to others. They’ve joined forces to endorse the POST Promise — an acronym for People Outside Safely Together — a voluntary pledge with an accompanying illustrative logo, which businesses serving the public are invited to take to reinforce and signal their commitment to public health.

To do so, they can register online by affirming they will adhere to five principles to safeguard the health of staff and customers, and will make formal efforts to convey supporting information to all users of the venues they oversee. POST Promise declarants then receive confirmatory signage to alert their customers.

“The idea is to create POST Promise as a touchstone. It’s an indication that businesses are aware of their responsibilities, and that applies as much on main street as on Bay Street,” explains Benjamin Shinewald, President and Chief Executive Officer of BOMA Canada, who sits on the board of directors of the new not-for-profit initiative. “It’s not a certification and it’s not a BOMA Canada program. It’s a reassurance to customers, but the logo could also be a reminder to customers that they’ve got an equal role to play in public health.”

Other participating organizations include the Business Council of Canada, the Canadian Federation of Independent Business, the Canadian Global Cities Council, the Retail Council of Canada and Restaurants Canada. Shinewald notes transit authorities would also be welcome to participate since they are literally delivery agents for key players of the post-pandemic recovery.

Accordingly, Ontario’s guidance document outlines how transit authorities can support: smoothly flowing passenger traffic through stations and on and off vehicles; onboard social distancing; heightened sanitation; and ongoing communications with commuters. “This guidance for transit agencies will provide consistent, clear and practical information that transit agencies can use to help stop the spread of COVID-19 and keep Ontarians moving safely,” suggests Ontario Transportation Minister Caroline Mulroney.

COMMUTING CHOICES Along with Toronto and Montreal, the JLL report ranks Vancouver and Ottawa among the 10 major North American urban regions with the highest share of habitual transit riders in their workforces — equating to 11.7% in Vancouver and 11% in Ottawa.

That drops off to 8.8% of the workforce in Calgary and 7.2% of workers in

RESEARCH TO GAUGE RETURNS ON PUBLIC TRANSIT

COVID-19 has forced Canada’s transit authorities to grapple with the twin challenges of public health logistics and declining revenues. The federal government is now commissioning research to assess public transit’s economic impact and the investment returns on public transit infrastructure, along with gaps in spending and service that need to be filled.

Researchers are invited to submit proposals to the Social Sciences and Humanities Research Council (SSHRC) to examine how Canadians’ access to transit affects their economic and social well-being, and related topics such as best practices for transit planning, operational public health standards and the impact of economic downturn. Up to 10 grants of $30,000 will be available for knowledge synthesis projects, which are designed pull together existing research and data from multiple sources in various sectors to produce a comprehensive overview of current status and identify where further action might be needed.

“This project with the Social Sciences and Humanities Research Council will give municipal leaders across Canada new information and tools so they can make smart decisions about public transportation infrastructure that will meet the needs of their communities today and well into the future,” says Catherine McKenna, Minister of Infrastructure and Communities.

Infrastructure Canada’s $33-billion Investing in Canada Infrastructure Program will commit the largest portion of available funds to public transit. A new COVID-19 related stream has also been added to the program, targeting pandemic-resilient infrastructure.

“The knowledge synthesis projects will leverage Canada’s capital in social sciences and humanities research to address changing transit needs and services,” submits Dr. Ted Hewitt, President of the Social Sciences and Humanities Research Council. “The resulting information in areas such as the impacts of COVID-19 and pressing transit, land use, urban planning, and public health and safety questions will help transit users, planning authorities and communities throughout Canada.”

marketmomentum

“It’s an indication that businesses are aware of their responsibilities, and that applies as much on main street as on Bay Street.”

Edmonton. However, less than 5% of the workforce relies on public transit in 10 of the surveyed metropolises, all in the United States.

Traffic congestion gives Toronto and Montreal less flattering standing in the top 10 cities where commuters lose the most time during their annual travels — pegged at 135 hours per year in Toronto and 117 in Montreal. JLL analysts point to potential tightening of that gridlock if more workers switch from transit to personal vehicles.

“Even in cities with lower percentages of transit ridership, any shift in

CANADA RETAINS HIGH GLOBAL RANKING FOR TRANSPARENCY

Canada’s expanding breadth of transparency metrics provides real estate investors with some of the best available insight into the financial performance, environmental, social and governance (ESG) factors, digital adeptness, market oversight and regulatory compliance of their holdings. Ranked fifth out of 99 countries, Canada once again places in the top tier of “highly transparent” nations in the recently released 2020 edition of the JLL/LaSalle Global Real Estate Transparency Index, plotting the comprehensiveness, consistency and accuracy of reporting requirements and options.

“The 2020 Index is launched at a time of massive economic and societal disruption. During times of such uncertainty, the need for transparent processes and accurate, timely data becomes more important than ever,” says Christian Ulbricht, JLL’s Chief Executive Officer. “The current disruption may well force the pace of change. We fully expect the mass adoption of technology, together with advancement in data availability and sensor technology, to accelerate the integration of proptech, helping to boost real estate transparency. The real estate industry is now harnessing huge amounts of data, but we will need to ensure that privacy and security are protected by ethical behaviour.”

The United Kingdom, United States, Australia and France comprise the top four of the highly transparent category. New Zealand, the Netherlands, Ireland, Sweden and Germany also join Canada on the list of top-tier countries defined as the “world’s leading investment destinations.”

That’s based on 210 distinct measures, grouped into six variously weighted categories to derive a score on a scale of 1 to 5, with 1 representing total transparency. With a composite score of 1.51, Canada’s rate of improvement since 2018 is noted for outpacing the global average. Scores within the highly transparent group of nations range from the U.K.’s 1.31 to Germany’s 1.93.

“These 10 markets are pushing the boundaries of transparency through technology, a focus on sustainability, anti-money laundering regulations and enhanced tracking of alternative sectors,” the accompanying report submits.

Sustainability factors, which account for 10% of the total score, contribute to improved results in this biennial index update, with one third of countries registering better scores than in 2018. Nevertheless, the report’s authors express disappointment that scores for sustainability transparency are generally lower than the other five categories — performance measures; market fundamentals; governance of listed vehicles; regulatory and legal; and transaction process.

Canada is among the top six for sustainability transparency. It earns special mention for energy-use benchmarking, ESG guidelines, proptech uptake, and as one of just four countries with financial performance metrics for green buildings (along with France, Australia and South Africa).

Across all global participants, average transparency scores have improved by 1.1% since 2018. That’s progress, but a more moderate degree of progress than the past four editions of the index — in 2012, 2014, 2016 and 2018 — when scores improved by an average of at least 2%.

In contrast, the 2010 index, following the global financial crisis, recorded the most muted improvement in the average score, at 0.7 %, of the past 14 years. With 2020 surveys having been completed in March, just before COVID-19-related shutdowns and associated stresses, analysts are already contemplating what the 2022 index may reveal. commute patterns toward cars could further exacerbate previously existing challenges with congestion and traffic,” they conclude.

This is not the first crisis-triggered decline in transit use during the 21st century, but it is arguably the most universal and long-lasting. JLL analysts foresee an eventual rebound like those following the September 2001 terrorist attacks and outbreaks of other infectious diseases like SARS and H1N1 influenza, and that transit-oriented development will continue to hold sway in the market.

In the shorter term, they predict duallocations or even wider networks of dispersed office nodes, employer-sponsored shuttle services, ride-sharing initiatives and cycling infrastructure investment could all be on the rise. Demand for parking may not subside to the extent that transit-oriented development plans have envisioned, but competing demands for space are expected at street level.

REASSIGNING SPACE “Owners and developers should review existing parking capacity and take into consideration commuters who may want to take advantage of bike and scooter share programs to avoid trains and buses,” JLL analysts advise. “Changes to the pedestrian path could encourage more walking if sidewalks are widened or cleared of obstructions, converted to pedestrian-only traffic or made safer through better sanitation and sidewalk lighting to take advantage of alleyways.”

The International Energy Agency likewise tallies a number of major global cities that are reassigning space previously reserved for vehicle traffic.

“As the COVID-19 crisis disrupts mobility routines, some regional governments and cities are seizing what they perceive as a unique opportunity to promote potentially lasting new mobility behaviours that favour active mobility,” the IEA report states. “Policies being pursued include speed limits and car-free zones in city centres, making road reallocation permanent and investing in new infrastructure such as bicycle lanes, bicycle parking and expanded walkways. Cities are also providing rental services and subsidies for the purchase and maintenance of traditional and electric bicycles.” zz The report, Public Transit Challenges in a PostPandemic World is part of JLL’s 2020 Forecast Series. For more information, see the website at https://www.jll.ca/en/trends-and-insights/research.

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