CPM October 2022

Page 1

CANADA $15.00 OPERATIONAL RESILIENCE HUMAN RIGHTS DUE DILIGENCE CLIMATE ANALYTICS PREDICTIVE MAINTENANCE EASING TECH ADOPTION HOUSING AFFORDABILITY Publication Agreement #40063056 FOR BUILDING OWNERS, ASSET AND PROPERTY MANAGERS VOL. 37 NO. 4 • OCTOBER 2022 PART OF THE PART OF THE STRATEGIES & SAFEGUARDS Enabling Nimble Response
Ecopilot® is AI for real-time HVAC energy e ciency. Improve tenant comfort. Reduce GHG. Save time & money. REDUCE CONSUMPTION, COMPLAINTS, COSTS. GET A FREE BUILDING ASSESSMENT. ENERGY SAVINGS GUARANTEED. Meet more smart customers at www.ecopilotai.com For us, this project has been one of the easiest to implement, with the best ROI. ‘‘ Pat Poirier, Manager of Engineering & Sustainability HOW MUCH WILL YOU SAVE? 19% 28% 20% 31.8% 22% 24% CAMPUS LAB SCHOOL MURB OFFICE HOTEL NATURAL GAS NATURAL GAS NATURAL GAS NATURAL GAS NATURAL GAS NATURAL GAS

VOL. 37 NO. 4 OCTOBER 2022

Editor-in-Chief Barbara Carss barbc@mediaedge.ca

Publisher Sean Foley seanf@mediaedge.ca

Art Director Annette Carlucci annettec@mediaedge.ca

Graphic Designer Thuy Huynh

Contributing Writers Brian Bosscher, Larry Green, Brendan Murphy, Lian Plass, Jason Reid, Spenser Robinson, Drew Sanderford, Arnie Wohlgemut

Production Coordinator Ines Louis Inesl@mediaedge.ca

National Sales Bryan Chong bryanc@mediaedge.ca Ron Guerra rong@mediaedge.ca Jason Krulicki jasonk@mediaedge.ca Melissa Valentini melissav@mediaedge.ca

Digital Media Director Steven Chester stevenc@mediaedge.ca

Circulation circulation@mediaedge.ca

Alberta & B.C Sales Dan Gnocato dang@mediaedge.ca

editor’snote

ACTUARIAL DATA IS SCARCE, but the chances of shared billing with a hurricane seem to be higher for people whose names begin with certain letters in the mid section of the alphabet. (I, for example, offers a smaller selection of name options than the consonants in its vicinity.) Foreseeably, though, the world’s Zacharys, Yvonnes and Xaviers could find themselves in a fairly regular rotation of notoriety with the emergence of a movement to name heat waves.

Proponents of the concept — which saw Zoe debut as the inaugural pilot in Seville, Spain in the summer of 2022 — maintain it could be an effective communications tool, signalling to the public and a range of required responders that a seriously threatening event is on its way or in progress. For now, however, the World Meteorological Organization (WMO) is not among the supporters. In a July 2022 statement, it underscored that a methodology for naming heat waves would have to be based on wide scientific and intergovernmental consensus.

“There is currently no agreed international system or protocol for naming or coordinating the naming of heat wave events,” the WMO advises. “Caution should be exercised when comparing or applying lessons or protocols from one hazard type to another due to the important differences in the physical nature and impacts of storms and heat waves.”

Well, that’s the thing with risk. It frequently catches a lot of people off guard when it first materializes, and sometimes the threats mount more rapidly than the pace of ameliorating protocols. As much as preparedness is the foundation of crisis management, a bit of troubleshooting is almost invariably necessary. (Here’s where the experts would emphasize that solid emergency preparedness planning puts the resources in place to enable inspired troubleshooting.)

President Kevin Brown kevinb@mediaedge.ca

Group Publisher Sean Foley seanf@mediaedge.ca

Accounting Vanessa Carauana vanessac@mediaedge.ca Michele Therien michelet@ mediaedgepublishing.com

TEL: (416) 512-8186 • FAX: (416) 512-8344

Published and printed six times yearly as follows: April/ May, July, Sept, Oct/Nov, Dec by MediaEdge Communications Inc. 2001 Sheppard Avenue East, Suite 500 Toronto, Ontario M2J 4Z8 (416) 512-8186 Fax: (416) 512-8344 e-mail: circulation@mediaedge.ca

Subscription Rates: Canada: 1 year, $60*; 2 years, $110*

Single Copy Sales: Canada: $12*

Outside Canada: US 1 year, $85 International $110

*Plus applicable taxes

Reprints: Requests for permission to reprint any portion of this magazine should be sent to info@mediaedge.ca.

Copyright 2022

Canada Post Canadian Publications Mail Sales Product Agreement No. 40063056 ISSN 0834-3357

Authors: Canadian Property Management Magazine accepts unsolicited query letters and article suggestions.

Manufacturers: Those wishing to have their products reviewed should contact the publisher or send information to the attention of the editor.

Sworn Statement of Circulation: Available from the publisher upon written request. Although Canadian Property Management makes every effort to ensure the accuracy of the information published, we cannot be held liable for any errors or omissions, however caused. Printed in Canada

When crisis takes the form of a finite event, evaluation and synthesis of the “lessons learned” is a key element of developing preparedness for next time. That kind of reflection becomes more challenging and involves a multiplicity of more factors when the suddenly accelerating risk also appears to be chronic.

Commercial real estate managers and investors and their analytics providers are confronting that scenario in trying to gather, manage and interpret data to assess climate risk and asset-level and portfolio-wide resilience. The Urban Land Institute and LaSalle Investment Management have recently joined forces to examine the scope and usefulness of currently available climate risk analytics products and to identify gaps to be filled. Some of their findings are highlighted in this issue.

We also introduce two recently released guidance documents from the Building Owners and Managers Association (BOMA) Canada focused on: developing operational resilience to respond to and recover from disruptive events and forces; and upholding human rights within business practices and relationships.

Barbara Carss barbc@mediaedge.ca

Canadian Property Management | October 2022 3

Focus: Protection, Mitigation & Recovery

6 Climate Risk Analytics: Several products have emerged to track a range of physical risks, but inconsistent data poses challenges for investors trying to interpret and apply it.

12 Operational Resilience: A number of interconnected elements contribute to how well buildings can withstand shocks and recover to full capacity.

14 Human Rights Due Diligence: Commercial real estate is exposed to legal and reputational risk across its immense web of employees, clients, contractors, suppliers and service providers.

26 Cyber Safeguards: Residential record-keeping can be an attractive target for ransomware and other malicious infiltrations.

30 Mould Menace: Infestation can be entrenched before it is discovered.

Articles:

17 Predictive Maintenance: Artificial intelligence brings applications that can maximize operational efficiency and reduce costs.

20 Tech Adoption Pitfalls: Planning, collective learning and organizational innovation support uptake.

24

CRE’s Economic Impact: Direct, indirect and induced contributions to Canadian GDP rival that of oil and gas.

28 Housing Hurdles: Rising interest rates and a sluggish supply chain create added complications for generating more supply.

contents
RJC Engineers rjc.ca Portland Park Village - Roof Replacement and Reserve Fund Studies | Toronto Building
Building Envelope Assessment & Remediation Structural Restoration Due Diligence/Pre-Purchase Assessment Property Condition Assessment Structural Engineering Roof Consulting
Departments 3 Editor’s note
Science & Structural Engineers
DIVERSIFIED CONSTRUCTION ASPHALT PAVING CONCRETE PAVING SITE servicing LANDSCAPE CONSTRUCTION BUILDING RESTORATION WINTER SNOW SERVICES service@forestgroup.ca 416.524.3000 24 HOUR EMERGENCY SERVICE www.forestgroup.ca

PLOTTING CLIMATE RISK

Analytics Still Evolving as Demand Ramps

Up

The Urban Land Institute (ULI) and LaSalle Investment Management have jointly produced a comprehensive look at the emerging field of climate-risk analytics, exploring the complications and challenges for both risk modellers and interpreters of data. The following is an excerpt from the resulting report, How to Choose, Use and Better Understand Climate-Risk Analytics – Editor.

PHYSICAL CLIMATE RISK is an anticipatory or forward-looking risk that inherently entails greater uncertainty and less consensus than backward-looking catastrophic risk modelling. Risks to real estate arise from changing patterns of extreme weather and climate, and can be both acute and chronic.

Acute physical risks refer to increased frequency and severity of extreme weather events, such as cyclones, hurricanes or floods. Chronic physical risks refer to longer-term shifts in climate patterns (e.g., sustained higher temperatures) that may cause sea-level rise or chronic heat waves. In both cases, physical risk arises from systematic, non-stationary, non-linear changes in weather patterns.

An array of climate analytics data, software and consulting services have emerged in response to the changing

climate and the attendant shifts in policy frameworks, the regulatory environment and growth in investor focus on environmental, social and governance (ESG) issues. These data providers offer a wide range of commercialized science applications designed to help institutional real estate managers identify, measure and describe physical risk at the asset and portfolio scales.

Investors today face a number of challenges related to physical risk, including a lack of clear industry norms or guidance relating to the following:

• Selecting physical-risk climate science data providers that are aligned to business needs;

• Evaluating the products and the complex science underpinning them; and

• Integrating this information into real estate life-cycle decisions.

This analysis draws on in-depth consultation with users and providers of climate-risk analytics software to address four questions.

How do physical risk analytics firms measure climate change and what do they measure?

Data providers tend to measure physical risk across multiple typologies of extreme weather hazards. These hazards include drought, earthquake, storm surge, flooding, hail, heat, hurricane/typhoon, landslide, tornado, tsunami, wildfire, wind and extreme weather.

Climate-risk models vary in nature and composition. They tend to use various types of base data (event, weather) from different sources, including the Intergovernmental Panel on Climate Change (IPCC), various national databases and private databases.

6 October 2022 | Canadian Property Management

These different types of data are cleaned, focused (hazards included/ excluded), and processed using a variety of geospatial techniques, many which are proprietary. In addition to different base data and geospatial processing techniques, data providers tend to integrate expectations about the future by including representative concentration pathways (RCPs) in their climate models. RCPs are scenarios of global warming that each have different potential impacts on the future likelihood of a climate peril.

How are real estate investment firms assessing and addressing physical risk data?

When comparing data providers, investors report inconsistency in risk assessments or risk scores for the same asset relative to the same hazard type (e.g., tropical

cyclone or pluvial flooding), posing challenges in property acquisitions and dispositions, valuation and understanding value at risk. The size of differences between risk scores for the same building can range from small to great orders of magnitude.

Inconsistency is scientifically plausible given variation in data and modelling methodologies, and it’s also a reality of scenario analysis while trying to predict an uncertain future. However, institutional real estate managers need to be able to understand differences in approaches so they can articulate outcomes clearly to internal and external stakeholders, as well as to regulators.

To what extent, if any, is current physical risk priced into commercial real estate? The institutional real estate managers

The importance of parking garage restoration

Parking garages – specifically, underground parking garages – face many issues during their use that can cause structural damage and affect the life of the concrete. These can include delamination from salt, chemicals, vehicle fluids, general wear and tear, as well as damaged columns and soffits, and other outside factors (e.g., erosion, ground shifts) that negatively affect the life of a parking structure and lead to costly repairs if left untreated.

Parking garage restoration projects can address these issues and mitigate their associated risks, but require experience and attention to detail. Here’s where partnering with a professional engineering team can ensure the project is completed efficiently and with the right materials, methodologies, and technologies.

By developing targeted maintenance programs, property owners can greatly reduce the potential damages and reduce repair costs on parking structures. In this regard, RJC Engineers’ expertise in parking structure durability, structural engineering, functional parking design, and prime consulting helps clients design a comprehensive restoration strategy that increases the value and extends the service life of the parking structure. Visit www.rjc.ca to learn more.

Canadian Property Management | October 2022 7 SPONSORED CONTENT
˃

riskmanagement

generally don’t see physical risk being priced into commercial real estate assets currently, but they indicated that their firms are actively attempting to integrate physical risk into the acquisition, management and disposition process.

Some managers argue that, as a forward-looking risk, physical risk influences discount rates, exit cap rates and expectations about future buyers. Others maintain physical risk should be

integrated into capital expense budgets for resilience or hazard mitigation measures.

At present, there does not appear to be consensus on when or how this integration should occur in valuation methods. Pricing and value-at-risk models are further complicated by the limited alignment between risk scores and the broader challenges related to dealing with risk (known variance) and scientific uncertainty (unknown variance).

How can real estate investors and climate-risk analytics providers improve decision-making?

The interviewees highlight the difficulty of translating complex science about probabilistic future outcomes into investment decision-making. It will be critical to understand and become comfortable with scientific and modelling uncertainty regarding a novel risk. Users and providers of climate data alike acknowledge the need for continued conversation to better understand the nuances of each other’s business processes.

Institutional real estate managers are advised to carefully articulate their use case needs, specifically regarding valuation and value at risk. The data provider community might benefit from sharing more about their approaches and the strengths and limits of models and physical risk data. To the extent these conversations can be continuous and earnest, they will help guide both industries forward.

DATA VARIABLES

As climate modelling advances, climaterisk analytics firms will likely develop more convergent models and views. Scientifically, more is known about some hazards than others, making it easier to develop consensus on some predictive modelling. For example, coastal-flooding risk predictions have lower variance and greater accuracy relative to other perils, whereas pluvial (rain) flooding and wildfire have higher variance based on existing data and models.

Climate analytics firms are using different base data, proprietary data processing techniques and different expectations about the future to generate physical risk predictive models. Some firms use government data sets, whereas others rely on proprietary data sets from insurance firms or use machine-learning techniques to simulate data. Although each firm stives to use the best available data, modelling techniques and metrics to make the most accurate predictions, current variables create significant friction for users.

In addition to the wide variation in risk scores, institutional real estate managers identified the challenge of receiving singlepoint estimates to describe physical risk. They acknowledged the benefits of simplicity in a single score, but also wanted to understand the degree of confidence in the estimate.

INVESTOR PRESSURES

Those at the early stage of working with

8 October 2022 | Canadian Property Management

riskmanagement

physical risk data are often pressed to convince senior management that physical climate risk is a novel and material risk to their businesses and portfolios, and to concurrently identify the best tools for that task and demonstrate their utility. They are working to identify where within acquisitions, valuation and asset-level business planning processes physical risk assessment can add value, and are striving to integrate traditional real estate due diligence and value estimation techniques with physical risk measures.

Investors with more experience are providing training and guidance on physical risk to acquisition and asset management teams. They are developing screening and due diligence tools across the value chain and making space for discussion of valuation related effects relative to physical risk.

scores for the same asset. Managers also signalled that they strongly consider resilience-oriented capital expenditures in value estimates, believing that future buyers will want to acquire hardened or adapted assets.

It is clear that climate-risk metrics need to be converted into financial terms to be useful to investment managers. However, moving from the metrics of meteorology, hydrology and atmospheric science to the world of discounted cash flow analysis is not yet a straightforward exercise. zz

Custom Design, Premier Manufacturing.

Spenser Robinson is a Professor and Director of Real Estate at Michigan Central University, Drew Sanderford is a Professor and Director of the University of Virginia’s Center for Real Estate and t he Built Environment. Lian Plass is Senior Manager with ULI’s Urban Resilience division. The complete text of How to Choose, Use and Better Understand Climate-Risk Analytics can be found at https://knowledge.uli. org/reports/research-reports/2022/how-tochoose-use-and-better-understand-climaterisk-analytics.

Custom Design, Premier Manufacturing.

Custom Design, Premier Manufacturing

Regardless, many firms simply want easy-to-understand data. Some are identifying the array of hazards they can analyze with different data providers, trying to understand underlying data used in the tools they can purchase, and are navigating how those tools incorporate time, forecasts and representative concentration pathways into real estate analyses. Others have selected a single provider, preferring depth of knowledge about one provider’s strengths and weaknesses over survey knowledge of many.

Interviewees consistently agreed that current asset values are not reflecting physical risk, but that it will become a material factor in commercial real estate prices in the not-too-distant future. Many institutional real estate managers indicated they anticipate that prices will, in the near term, reflect increasing levels of understanding and a greater ability of researchers and investors to translate science into practice. Some investors, typically the more advanced in this process, indicated their exit prices would be influenced by assessments of 2040 or 2050 risks.

There is a lack of consensus about how or where physical risk is best included in value estimates. This could be due to differing views on where physical risk plays a role in discounted cash flow (DCF) valuation assumptions — where institutional real estate managers described translating physical risk into asset-level discount rates, reversion cap rates and expectations about future buyers.

Each of these three factors is related to timing and can be complicated by the limited consistency between risk

CELEBRATING OUR 30 TH ANNIVERSARY

At Premier Elevator, our in-house design and engineering team works closely with our committed sales consultants to consistently provide the highest level of customer service and support while focusing on quality. Our fully equipped wood shop, metal fabrication department and finishing studio alongside our mirror and glass division creates the most efficient work environment enabling us to pass the savings on to our customers.

At Premier Elevator, our in-house design and engineering team works closely with our committed sales consultants to consistently provide the highest level of customer service and support while focusing on quality. Our fully equipped wood shop, metal fabrication department and finishing studio alongside our mirror and glass division creates the most efficient work environment enabling us to pass the savings on to our customers.

At Premier Elevator , our in-house design and engineering team works closely with our committed sales consultants to consistently provide the highest level of customer service and support while focusing on quality. Our fully equipped wood shop, metal fabrication department and finishing studio alongside our mirror and glass division creates the most efficient work environment enabling us to pass the savings on to our customers.

Visit www.premierelevator.com for inspiring ideas just for you.

Visit www.premierelevator.com for inspiring ideas just for you.

Visit www.premierelevator.com for inspiring ideas just for you.

Canadian Property Management | October 2022 9
Untitled-5 1 14-03-26 3:39 PM

‘TIS THE SEASON TO PROTECT YOUR ROOF

“The winter is going to beat up your roof, and there's no way to avoid that,” says Tyler Mills, Service Manager with Flynn Group of Companies. “What you can do is catch and prevent roof deficiencies before things turn ugly.”

Mills says not a year goes by without Flynn hearing at least a few stories about building roofs that collapse with little warning because nothing was done to protect them against winter conditions, and they were taken for granted.

“That has a way of making front page news, not to mention opening property managers up to expensive repairs and injury liabilities,” he adds.

Safeguarding a roof over the winter begins with recognizing the risks. They include:

Snow and ice loading: Canadian winters can leave roofs buried under heavy snow and ice. When left to pile up, this extra weight can significantly strain a roofing system and cause catastrophic component failures.

“As a property manager or building owner, it's critical to understand what loads your roof can tolerate, especially now that we’re experiencing more extreme weather,” says Mills. “The design

of a building in the eighties may not be appropriate for what's happening around us now, so you can’t take that resiliency for granted.”

Fortunately, roof snow removal is relatively straightforward, and a service offered by many roofing specialists.

Freeze/thaw cycles: Some Canadian regions are susceptible to frequent freeze-thaw cycles. For example, at his home in Kelowna, BC, Mills says conditions can swing rapidly between cold and warm up to 30 times over an average winter. This results in large volumes of snow that accumulate, melt, and freeze numerous times over a roof and trigger any number of problems.

“All that expanding and contracting is hard on your roofing components. Also, you’re not always getting proper drainage because you have ice or snow all over the roof blocking the drains.” He explains. “If that water freezes back into ice, it’s a lot heavier than snow and it becomes a problem.”

Safety hazards: Rooftop gardens and social spaces are nice amenities for building occupants. Still, adding ice and snow to the environment introduces opportunities for injuries and roofing

IS NEVER KIND TO ROOFING SYSTEMS. NO MATTER THE AGE, MATERIALS, OR QUALITY OF INITIAL CONSTRUCTION, FEW BUILDING TOPS MAKE IT OUT OF CANADA’S COLD SEASONS WITHOUT A SCRATCH. NEGLECTING THIS FACT CAN LEAVE PROPERTY MANAGERS VULNERABLE
SAFETY ISSUES AND COSTLY REPAIRS, BUT THE
RISKS
BE
system damage. WINTER
TO
GOOD NEWS IS THESE
CAN
OFFSET BY UPFRONT CARE AND MAINTENANCE.
SPONSORED CONTENT

Winter is not an ideal time to be making repairs to a roof. Property teams that leave roofing upgrades and repairs to the colder months may face steeper prices and more logistical challenges, not to mention higher

Unkind repair conditions: not an ideal time making repairs to a roof. Property teams that leave roofing and repairs to the months may face prices and more logistical challenges, not to mention higher safety risks for anyone who takes the job. Here again, it’s wise to trust roofing professionals who are trained for adverse job conditions.

Getting ahead of winter Canada’s cold seasons take their toll on roofs. Side-stepping the risks associated with excess snow and extreme temperatures requires seasonal inspections and preventive maintenance.

“It’s a best practice to conduct a roof inspection and required maintenance at least once a year, but that’s not being done in a lot of cases,” says Mills. “Property teams are very busy, so roof maintenance can sometimes slip under their radar. Also, there’s a tendency to believe that a new roof can be left alone for several years with no maintenance, but the winter is hard on every roof, no matter how long they’ve been up there.”

maintenance goes a long way towards protecting one’s investment, and most warranty programs require inspections at

True, it can be difficult for owners of new (or relatively new) roofs to justify spending more money on a maintenance program. Also true, however, is that regular maintenance goes a long way towards protecting one’s most warranty programs require inspections at least twice a year.

In short: it pays to take winter seriously. That means taking stock of the roof's condition and acting quickly to required upgrades or repairs. Here again, it is beneficial to partner with a roofing specialist who knows what to look for and can deliver a custom preventive maintenance program that will stand up to Canadian winters.

In short: it pays to take winter seriously. That means taking stock of the roof's condition and acting quickly to required upgrades or repairs. Here again, it is beneficial to partner with a roofing specialist who knows what look and can a custom preventive maintenance program that will stand up to Canadian winters.

“No two maintenance programs are to alike,” adds Mills. “You need a person up there who knows what doing and can tell you exactly what kind of repairs are needed. They’ll also have the specialized tools and processes to get the work done.”

“No two maintenance programs are going to be alike,” adds Mills. “You need a qualified person up there who knows what they’re doing and can tell you exactly what kind of repairs are needed. They’ll also have the specialized tools and processes to get the work done.”

Connect with Flynn Group of Companies today. Visit www.FlynnCompanies.com

“The winter is going to beat up your roof, and there's no way to avoid that. What you can do is catch and prevent roof deficiencies before
www.FlynnCompanies.com or
Connect with Group of today.
call 1-877-856-8566.
SPONSORED CONTENT
“The winter is going to beat up your roof, and there's no way to avoid that. What you can do and prevent roof deficiencies before things turn ugly.”

PERSEVERANCE PLAYBOOK

BOMA Canada Releases New Technical Guidance on Operational Resilience

FIVE INTERCONNECTED elements of operational resilience underpin recently released technical guidance for assessing and responding to building-level risk. The Building Owners and Managers Association (BOMA) of Canada outlined the basic concepts during recent crossCanada workshops, underscoring that operations teams carry key responsibility to safeguard building occupants, facilitate business continuity and protect asset value.

“Members of the commercial real estate community have a significant role in learning how to be resilient — through awareness, education and industry transformation,” Susan Allen, President and Chief Executive Officer of BOMA Toronto, and Benjamin Shinewald, President and Chief Executive Officer of BOMA Canada, affirm in their joint forward to the new guidance material.

It’s a follow-up to an earlier BOMA Toronto effort, which focused on the corporate rationale for resilience and portfolio-level policies related to development and investment management. Seven subsequent years of climatic evidence and lived experience are now factored into a

refined set of considerations for property managers and operators entitled, Resilience in the Commercial Real Estate Industry, Protecting Value for an Uncertain Future. Operational resilience is defined as the ability to withstand shocks and stresses and return to normal capacity as quickly and efficiently as possible. As stated in its preface, the guidance document is intended to provide operations managers with “simple guidance in recognizing and understanding operational risks, treating them and communicating this up the chain in a way that the corporation can interpret and use”. It delves into five identified elements or “drivers” of resilience and references supporting resources and technologies for applying resilience processes and measures in buildings.

FIVE ELEMENTS

For operations managers, resilience planning begins with an assessment of risks tied to a building’s physical location. That could be vulnerabilities directly on the site, such as the propensity for flooding or a tenancy that could attract potentially volatile demonstrators, or risks to offsite

infrastructure and services on which the building relies. The process of identifying “reasonably foreseeable consequences” can then inform budgeting and bigger picture decisions about asset retention or disposition.

The next element or “driver” considers occupants’ priority needs and how they could be met if normal building functions are disrupted. This is tapped as a particularly pertinent issue for multifamily buildings hit with power outages, but it is insight that could sway commercial leasing decisions, which tenants are expected to increasingly demand.

“For tenants, conducting the dependency mapping exercise can be extremely valuable on its own. It will assist in business resilience planning and provide insights that can drive the better use of existing space or the search for new space,” the guidance document notes.

Tenants are also at the heart of the third element of operational resilience planning, dubbed “incident sequencing”, which begins with the assumption of normal system failure and then strategizes how to recover and resume operating capacity in the way that best serves priority needs and business

12 October 2022 | Canadian Property Management

continuity. This will require an understanding of what is most essential for tenants’ continued operations to identify what contingencies might be put in place prior to an unexpected disruption, and to create a ranking and schedule for restoring systems.

The fourth element considers security requirements. “These functions are essential during normal operations and they remain essential during and following an incident, even as the operating context changes,” the guidance document reiterates.

Finally, the guidance emphasizes the importance of an integrated approach to resilience planning, highlighting the interconnected nature of systems and system failures. Operations managers are also encouraged to consider the life cycle costs of resilience and view it as an aspect of building performance.

SYNERGY WITH SUSTAINABILITY

These five drivers line up with recommended resilience planning steps for development and asset management, but typically with more variables in play for operations managers. However, increasingly sophisticated data collection and analytics should ease the task.

“The challenge that operations managers face is that each operation, property, location and tenant is different. So, while we can template much of the corporate resilience practice, we can’t do the same for operational resilience,” the guidance document acknowledges. “We already collect much of what we need to understand our risk exposures, providing an auditable trail of evidence for routine filings and declarations of how the property portfolio is affected by climate change and other contextual trends.”

Key contributors to the technical guidance further unpacked recommended approaches this fall during BOMA Canada’s half-day workshops in Vancouver, Calgary, Winnipeg, Toronto and Halifax. That included: Alexander Hay, an engineer, consultant and adjunct professor with University of Toronto’s Centre for the Resilience of Critical Infrastructure; Chris Snider, head of sales and distribution with Zurich Insurance Group’s risk services in Canada; Steve Horwood, vice president, business development with the mechanical/ electrical services firm, Ainsworth; and Howard Lu, head of sales and distribution at Ainsworth.

The guidance document contends that most operational resiliency measures are either cost-neutral or aligned with

RISK ASSESSMENT CONSIDERS

PEOPLE, DATA AND FACILITIES

In order to be able to complete a risk assessment, a facility manager should have senior management’s financial support and commitment to see the assessment as part of the business impact analysis and business continuity strategy.

The facility manager must also be willing to carve out time and resources towards meaningful progress. Having a set of goals that can help to track advancement is imperative. However, not all the steps are needed at the beginning.

A facility manager needs to build internal relationships with:

• Human resources to support facilities expansion concurrent with company growth;

• The IT department for technology integration;

• Finance to assist with the implementation of capital planning and funding;

• Purchasing for vendor management and procurement services; and

• The production department to support the creation of the final product.

A facility manager needs to build external relationships with:

• Engineering consultants to provide advice and services related to facility operations and improvements;

• Maintenance contractors to provide services in support of the business continuity program;

• Suppliers of materials and products for daily operations; and

• Regulators and inspection services to remain in code and regulation compliance.

When approaching the risk assessment, use the three most valuable asset categories of every business. In each of the three categories, ask: What are the primary threats that should be addressed, and what is the effect on the business if the threat is

budgeting that may already be in place for sustainability objectives. While clarifying that resiliency and sustainability are distinct characteristics, it argues that they are symbiotic and with positive ripple effects beyond any one building.

“We can regard them as two faces of the same coin. Neither gives rise to the other, but cannot exist without the other,” the guidance document declares. “When an

realized? This will help identify the first steps or areas to evaluate and the level of importance.

People

People deliver services and bring ideas and creative energy to all elements of a business. They need to feel safe in and around the facility. For example, they expect a manager to have control over who and what enters the building. This control, to a varying degree, might be needed to protect the production environment and to secure inventory and intellectual property.

Data

This is information about what the business does, how it is operated and what future plans may arise, either in digital or physical form. Information is becoming increasingly more difficult to protect and preserve. Facility managers may not have the responsibility to protect against an outside cyber attack, but they can protect the space in which this data is housed. From physical access control and protection from natural disasters to climate-controlled server and data processing rooms, these all are part of the risks that require reviewing.

Facilities

This is where the business is conducted, where people and data are woven together to form the tapestry of the business. Risk within the facility can also extend to the suppliers. The challenge for facility managers is to look past typical building elements, such as roofing and windows, or services such as power, HVAC, and water. The risk could be caused by a natural hazard, but also poorly thought-out design.

Arnie Wohlgemut is the senior consultant and president of KP Mylene & Associates, a leadership development and facilities management consulting company. For more information, see the website at www.kpmylene.com.

operation, or business, is resilient, it actively contributes to, and influences, the resilience of its neighbours and the surrounding community.” zz

The technical guidance document, Resilience in the Commercial Real Estate Industry, Protecting Value for an Uncertain Future, can be found at https://bomacanada.ca/ resources/publications

Canadian Property Management | October 2022 13
riskmanagement

SUPPLY CHAIN SCRUTINY

Human Rights Due Diligence Aligns with ESG

A NEW PRIMER ON human rights due diligence urges commercial real estate operators to consider how contracting, purchasing and leasing can intersect with abuse, exploitation and discrimination. The guidance — from the Building Owners and Managers Association (BOMA) of Canada in collaboration with the business and human rights (BHR) legal specialist, Josh Scheinert — examines the industry’s exposure to legal and reputational risk across its immense web of employees, clients, suppliers, contractors and service providers, and advises how to strengthen accountability and transparency in business procedures.

“No property owner wants its building built by victims of human trafficking. No property manager wants to procure supplies

manufactured with forced labour. No owner/manager wants its property being the site of human rights abuses,” Scheinert and BOMA Canada President and Chief Executive Officer Benjamin Shinewald reiterate in their introduction to the newly released guide, Human Rights & Commercial Real Estate.

Real estate’s reliance on global supply chains and its diverse range of activities in development, investment and building management/operations nevertheless present a vast breadth of opportunity for one of those scenarios to occur. The guide cites some examples, including a 2019 case where a cleaning contractor in southern Ontario was found to be controlling and exploiting workers trafficked from Mexico and several incidences of security guards

behaving unlawfully while working in commercial properties.

BHR frameworks respond to a growing body of existing and expected legislation, as well as companies’ environmental, social and governance (ESG) directives and general societal demand for ethical conduct. The key concepts are set out in the United Nations guiding principles (UNGP) and the Organization for Economic Cooperation and Development (OECD) guidelines for multinational enterprises, stating that businesses have a responsibility to respect human rights and that individuals or groups must have access to a remedy if their rights have been violated.

That flows through to expectations that human rights abuses should not arise from direct business activities, nor be tolerated or

14 October 2022 | Canadian Property Management

overlooked in business relationships. To meet that standard and demonstrate good faith, companies are advised to have a human rights policy, a process for analyzing and addressing potential contraventions, and a grievance mechanism.

The United Kingdom, France, Australia and California are among the jurisdictions to have enacted legislation that requires businesses to monitor for and disengage from human rights abuses in their supply chains, and the Canadian government has signalled its intentions to pass a similar law. Additionally, there are import restrictions on goods produced with child labour or tainted with other human rights violations and the threat of civil litigation.

The guide breaks down concerns for building owners, property managers conducting business within Canada and property managers with a global portfolio, suggesting some basic questions to garner a more informed profile of the contracted workforce, tenant base and sources of procured goods. It also outlines some strategies for preventing human rights abuses — including contractual obligations for vendors and suppliers, lease instruments and third-party

audits — along with a template for the human rights due diligence process.

Prospective adopters of BHR frameworks are warned upfront that it will take time and resources to thoroughly scrutinize the supply chain and perhaps reassess some traditional business practices and relationships. It’s recommended that companies establish a committee or taskforce to lead the work, consult with stakeholders and be committed to responding to what the process reveals.

“Human rights due diligence is not a check-box exercise to be performed as a matter of course and cannot be designed as such. Businesses must be prepared to adapt if it’s determined a potential activity poses a human rights risk,” the guide advises.

Scheinert and Shinewald suggest the payback can be measured in risk mitigation

and in opening up the opportunities that come when people are better positioned to live peaceably, work safely, contribute economically and prosper.

“Engaging with BHR concerns is first and foremost about showing leadership on core moral issues,” they maintain. “Compliance with BHR obligations requires time, effort and money. However, BOMA members can take great pride in the result, including operating businesses that take a stand for what is right — contributing to fairer and more just workplaces and societies; and safeguarding the rights of those upon whom the success of our businesses is built.” zz

The Human Rights & Commercial Real Estate guide can be found at https:// bomacanada.ca/2022-human-rights-guide.

Canadian Property Management | October 2022 15
SALTO delivers the most convenient, flexible, and secure access control solutions for all types of industries. SMART ACCESS CONTROL SOLUTIONS C M Y CM MY CY CMY K riskmanagement
“Engaging with BHR concerns is first and foremost about showing leadership on core moral issues.”
16 October 2022 | Canadian Property Management Raymond Carmichael established this company in 1922. Spanning four generations, Carmichael has nurtured passionate engineers, technicians, systems designers, and technical advisors whose collective goal is to support our valued clients. 905 625-4701 | www.carmichael-eng.ca DELIVERING QUALITY SOLUTIONS FOR OVER A CENTURY • HVAC Services • Predictive Maintenance • Energy Management & Audits DELIVERING QUALITY SERVICE AND SOLUTIONS FOR OVER A CENTURY • Building Automation Systems • Chiller & Boiler Services • Mechanical Retrofits A lot has changed since 1922, but not our dedication to excellence

BREAKDOWN BREAKTHROUGHS

AI Enables Predictive Maintenance

THE WAVE OF APPLICATIONS

that will leverage artificial intelligence (AI) and machine learning (ML) to automate basic tasks will disrupt every industry imaginable. Intelligent buildings are no exception — bringing forward key use cases in the areas of maintenance, energy management, financial analytics and experience orchestration.

Predictive maintenance relies on reactive analytics, as well as multiregression analysis and convolutional neural networks (CNNs). Regression

analysis is a form of supervised ML that predicts the effect that one variable has on another based on how the two variables correlate. CNNs also depend on supervised ML, but are specifically designed for image recognition.

Predictive maintenance can be characterized as a suite of software and platforms tools that leverage data from control and automation systems, distributed sensor networks and external business intelligence to provide signal from noise estimates of when a system is expected to break down.

The growing demand for greater visibility and control around system and machine health, in conjunction with the increasing availability of emerging technologies, has led to a consistent cycle of innovation and progress around predictive maintenance. This approach effectively identifies the likely issue and estimates the system’s life expectancy given the occurrence of that issue.

Most applications of AI for predictive maintenance in buildings are aimed at reducing labour costs, downtime and the overall duration of the maintenance

Canadian Property Management | October 2022 17
The Continental Automated Buildings Association (CABA) commissioned researchers to examine the uptake of artificial intelligence (IA) and predictive maintenance applications in smart buildings. The following is an excerpt from the report’s executive summary – Editor.

process. This is largely achieved by predicting a potential system failure and dispatching technicians before that failure occurs. Doing so will likely translate to fewer hours spent diagnosing the issue and fewer dollars spent replacing machinery that could have otherwise been fixed.

OBSERVATIONS FROM THE STUDY

• For many building types, installing a predictive maintenance system is a prerequisite to delivering safe and compliant operation. As technology evolves, buildings, especially missioncritical buildings and hospitals, will need to adopt predictive techniques to deliver uptime assurances. From a regulatory perspective, advancements in technology tend to invite additional compliance regulations as a safeguard to delivering an acceptable service.

• As tenant expectations evolve and seamless experiences become prioritized, uptime guarantees will grow into a basic expectation. The survey of building occupants and operators shows that about 65% of buildings in Canada and the United States today have instituted some form of maintenance guarantee. In 5% of cases, buildings will go as far as to pause and reduce rent payments until the issue has been resolved.

• Building operators struggle with paying for and integrating and procuring technology. The lack of capital to invest in purchasing and integrating predictive maintenance systems is the most cited reason inhibiting operators from investing. Delivering innovative pricing solutions, out-of-the-box solutions and low-code/ no-code applications can help mitigate these issues and catalyze sales.

• Further protocol consolidation and data labeling standardization is needed. Buildings have trouble adopting a standard data labeling or naming convention, though organizations like Brick and Project Haystack seek to address this issue. Overcoming this barrier will be key to simplifying the integration and data management process.

• For maintenance personnel, job security fears must be addressed by considering the effect of predictive maintenance — i.e., the reduction of monotonous work, the simplification

of repair tasks and the elimination of operator rounds. In addition, technology providers should opt to reference machine learning and predictive analytics over artificial intelligence, which may carry a negative connotation.

• For management, owners and decisionmakers, communicating operational benefits in terms of return on investment will be key to adoption. This includes expected costs and returns, as well as the estimated payback period. Delivering servitized offerings that reduce the need for data skills or integration efforts will be necessary to help building customers realize value.

VALUE CHAIN CONSIDERATIONS

The evolution of maintenance management in buildings presents an opportunity for building operators to save on capital and operating expenses while also providing their tenants and customers with a seamless experience. The adoption of predictive maintenance in buildings has sweeping effects for every player in the intelligent buildings value chain. Capitalizing on these opportunities will require agility, collaboration, and the development of a new approach to selling.

For original equipment manufacturers (OEMs), maximizing the value of the data produced from building appliances and equipment is key. Although it might seem counterintuitive, enabling open ecosystems and interoperability between devices and systems will help in strategic positioning

For software providers to profit from predictive maintenance in buildings, they must first have a thorough understanding of the pain points, barriers to adoptions and preferences of different intelligent building types. This information can then be used to improve the offering to cater to target audiences.

Much like software providers, service providers have a lot to gain from the evolution of maintenance practices in buildings. By connecting to a building’s real-time condition monitoring data and, in some cases, directly to the BMS, service providers can analyze this information, produce relevant work orders and dispatch the designated maintenance technicians to fix the problem.

Lastly, building owners and property managers need to prioritize predictive maintenance systems to maximize uptime, operational efficiency and tenant satisfaction.

CATALYSTS AND OBSTACLES

Significant catalysts are pushing the intelligent building community towards widespread adoption of predictive maintenance technologies. The most prominent of these are the promised return on investment stemming from the reduction in operating expenses, capital expenses and unplanned downtime.

There are also some critical hurdles that technology providers need to overcome if these predictive systems are to achieve the success this research proposes. First, it is important to mitigate building operator fears concerning loss of employment. These systems work to eliminate tedious tasks, not replace the role of technicians.

Another hindrance is the ability to communicate value in terms of return on investment. Many businesses have trouble contextualizing costs and benefits to the prospective client they are selling to. In the age of smart systems, life-cycle returns are important tools in deciding on investments.

Lastly, a major barrier to adoption is the need to include systems integrators and a long integration cycle to realize any real benefits. Solutions such as lowcode development environments or standards bodies are optional ways forward to reduce dependency on systems integrators.

The evolution of AI and predictive maintenance in buildings will create a massive opportunity for companies across the value chain. However, for this to be realized, collaboration among different hardware, software and services providers is necessary. Collectively, these vendors need to emphasize interoperability and open ecosystems, respect data security and privacy concerns and forge new data sharing partnerships that could eventually turn into additional streams of income. zz

More information about CABA’s landmark research project, AI and Predictive Maintenance in Intelligent Buildings, can be found at www.caba.org/product/ predictive-maintenance-and-ai-in-intelligentbuildings-2022.

18 October 2022 | Canadian Property Management
changemanagement

AVERTING TECH AMBIVALENCE

Stakeholder Involvement Key to Successful Adoption

Findings from JLL’s 2022 Future of Work survey reveal that property and facilities managers are typically eager to embrace new technologies, but are largely at an early stage of investment and implementation. On average, survey respondents — representing nearly 1,100 real estate players in worldwide markets — had adopted four of 15 anchor technologies projected to be integral to the hybrid workplace and smart, sustainable, resilient buildings. However, 78% of respondents are aiming to have at least 10 of the technologies in place by 2025 and 40% intend to implement all 15 within the next three years. The following excerpt from the JLL report, Technology and innovation in the hybrid age, offers insight on navigating that process – Editor.

SELECTING THE RIGHT technology tools is a dynamic process. In the same way that online conference software cannot guarantee a fruitful meeting, off-the-shelf tech tools cannot deliver superior performance on their own. Companies that aspire to make the most of their tech investments face some common pitfalls in the technology adoption process.

To begin, they need effective metrics for measuring success that relate to core objectives. For example, “Deploying 10 tech

applications this year” is not an effective metric because the sheer number of techs is not a goal to achieve.

Rather, technology is the means to achieve underlying goals such as: improve collaboration; enhance culture; increase satisfaction; reduce operational costs, etc. An effective metrics system should address the fundamental problems, accommodate a range of potential scenarios and maintain flexibility in the constantly changing business landscape.

The following are considered anchor technologies for hybrid work and smart, sustainable, resilient buildings:

• Remote-working technology

• In-office collaboration technology

• Workplace experience apps

• CRE data warehouse

• Coworking and flex space management

• Touchless access

• Digital connectivity and infrastructure

• Sustainability and environmental control

• Predictive facility management

• Portfolio data analysis

• Health-tech well-being solutions

• Occupancy and environmental sensors

• Smart contracts

• VR (virtual reality) immersive meeting

• Robotics for cleaning, maintenance, security

20 October 2022 | Canadian Property Management

The passive consumer mindset, which views technology as a one-off purchase from service vendors that is then bolted on to the current workflow, is another barrier. Technologies may be of limited value until the processes around them are thoroughly reconsidered. Successful digital transformation requires enterprises to proactively seek new possibilities beyond existing practices by designing systems and processes around technologies available.

Hybrid work cuts across work, workforce, workplace and portfolio decisions and, by nature, it involves multiple functions of a firm, including business units, human resources, finance, IT, business intelligence and real estate. Isolated decision-making can result in duplicated or misaligned investments, under-utilization and the inability to pool sufficient resources to make the investment meaningful. Leading companies are forming focused work groups, incorporating all impacted divisions, to set hybrid work goals and design strategies together.

Technology solutions are only able to fulfill their promises, whether that is better information, analytics and benchmarking, reduced time and resources or enhanced services, if they achieve significant employee buy-in and fully replace previous processes. They should be easy to use and accessible to the non-technical workforce.

Tools that aren’t user-friendly and intuitive — such as workplace experience apps with multiple log-ins or extensive form-filling — or require technical skills to navigate, frequently have low uptake, resulting in duplicated procedures or administrative workloads.

Similarly, companies need an integration strategy to avoid fragmentation and complicated procedures around multiple siloed technologies, and they should select products that provide analytics functions. Often, companies make big investments to collect and capture data and then fail to effectively use it to automate processes or support decision-making.

CRITICAL CAPABILITIES

There is more to technology than technical capacity. Companies need to nurture four critical capabilities to harness technology for innovation and long-term value:

Strategic Planning

Developing an actionable strategic roadmap to align the company’s technology and real estate capacities with the short- and longterm business goals they need to support — such as enhanced productivity, talent

retention and attraction, and financial performance — is crucial to enabling the success of new working styles and workplace configuration.

The roadmap should clearly identify key stakeholders, assess budgets and personnel resources and maintain the flexibility to handle a constantly changing business and technology landscape. The ability to create a plan that integrates requirements from across the business — including leadership teams, HR, finance, IT and CRE — is core to successful strategic planning.

Collective Learning

The willingness and ability to leverage technology and data-intensive insights across the organization is vital to building an innovation culture and ensuring technologies are fully integrated and utilized. The “as a service model” empowers frontline business units outside of IT to take the lead in hunting for tech solutions that work best for them. For example, that could be space utility sensing and analytics tools for the CRE division.

This involves a long-term program to build digital proficiency through coaching employees to assimilate new technological skills and, more broadly, nurturing a culture where bottom-up technological innovation and experimentation are encouraged. The latest advancements in workplace technologies can then be proactively monitored and considered with rich domain expertise.

Technology Management

Configuring a robust and dynamic technical architecture to implement, operate, integrate and optimize technological products, processes and services lays the foundation for workplace automation and intelligent decisionmaking. Managing a growing tech stack puts a priority on integrating traditionally siloed real estate data assets, facility management software platforms and other digital tools. Building in-house technology expertise at the same time as partnering with external advisory services is an effective way to upgrade technology management capability and facilitate successful technology adoption.

Organizational Innovation

The ability to introduce new production or managerial models is a key factor in how resilient a company is when facing changes. The lack of organizational innovation capability is among the top reasons for

failed technology adoption. Organizational innovation creates new roles and new collaborative networks, allowing companies to drive enterprise-wide buy-in to the digital future of the workplace, acquire appropriate capital and talent, form cross-functional collaboration and remove institutional obstacles.

SELECTION CRITERIA

With the technology roadmap guiding implementation, technology products can be acquired through various channels, directly from vendors or through outsourced tech consultancy services. There are nine key considerations when selecting products:

Business Fit: how well will the functions and features of the technology product support business needs?

State-of-the-Art: does this product employ cutting-edge technological components to power its services?

Cybersecurity: are systems secured to ensure operational integrity and safety of the data?

User-Friendliness: could the technology support multiple easy-to-use interfaces that deliver a seamless experience to nontechnical users?

Implementation: does this product provide customer success programs to guide deployment and help train users?

Integration: how well can this technology be integrated with other tools or platforms?

Upgradability: could the product evolve with future business needs and new frontiers of technologies?

CRE Expertise: does the vendor specialize in designing and implementing CREspecific solutions?

Vendor Reliability: is there a solid relationship with the technology provider to grow together and handle unforeseen scenarios with trust? zz

The c omplete text of Technology and innovation in the hybrid age can be found at www.us.jll.com/en/trends-and-insights/ research/real-estate-technology-in-thehybrid-age

Canadian Property Management | October 2022 21
changemanagement

Integrated

VV

hether your building is new or old, office or residential, high-rise or warehouse, there is no getting around the need to respond swiftly and responsibly in the event of an emergency.

When a fire happens, the occupants and the building itself are immediately put at risk. The extent of a fire’s growth and spread will vary from incident to incident, but the way your building’s safety systems respond and protect will play a major role in determining how severe a fire might be. The original systems will have been intended to provide a measure of protection, but what if your building’s design has changed?

Or, what if a new system has been added that’s not compatible with an older system? Unfortunately, this is a regular occurrence as technology evolves and buildings undergo renovations, design changes, and conversions.

The solution? Assess the safety features in your facility and conduct an Integrated Systems Test. It’s the only way to ensure your building’s protection features are operating as they should…with no gaps.

“IST is a test method or process used in buildings to verify and document that all fire and life safety system interconnections work—and work correctly in conformance with their design criteria,” explains Matthew Hopley, Alberta Branch Manager at LRI Engineering Inc. “This includes the more obvious systems like sprinklers and fire alarms, but it also includes interconnections between less obvious things like door release hardware, elevators, audio/visual systems and specialized smoke control systems.”

Gone are the days when individual fire protection and life safety systems were installed and tested in isolation; today, it’s about testing interconnections and ensuring all protection features are working as a collective whole.

“Unlike the way things used to be done, when individual systems were commissioned from various trades and designers and not necessarily evaluated in concert, IST mitigates the risk that there will be gaps in your systems,” Hopley says. “A good comparison is that you can tune up an instrument individually and it may sound right, but once you try and

have an orchestra play a song together, the conductor needs to make sure everyone sounds good as a group.”

Changing Codes & Building Designs

IST is highly recommended in cases where older buildings have been upgraded to meet new Building Codes, or when the tenancy has changed requiring a complete re-evaluation of the building’s protection features. The consequences of not implementing a thorough systems test could result in ineffective fire protection, exposing the owner to significant risk.

“If the interconnections between various protection features fail to operate as designed, the result could be catastrophic,” Hopley says.

For example, as the nature or amount of combustibles changes or the nature of the occupants requiring protection changes, the need for effective fire suppression and compartmentalization can change as well. Increases in combustible loading can result in a fire suppression system which no longer discharges

Increases

All
Systems Testing (IST) helps ensure your building’s fire and life safety systems are operating as they should
SYSTEMS GO SPONSORED CONTENT

sufficient water which may result in the sprinkler system being unable to control or suppress the fire. At the same time, different, unaware, or more vulnerable occupants in that same building will need to evacuate. If the passive fire protection systems do not hold back fire and smoke from the overwhelmed sprinkler system which can’t control the fire, then there is significant risk to both the occupants and first responders.

IST can be used as a tool to ensure that the relevant systems function together properly. Combined with solid advice on the ongoing adequacy of those fire and life safety systems can close the loop and help a building owner or manager understand that their building is up to the challenge.

In other words, for aging buildings and those that have undergone renovations or a change in tenancy, there’s a real need for property managers and owners to consider the impact these changes may have on the adequacy and functionality of the fire and life safety systems, either through IST or more fulsome design or hazard reviews. Additional consideration should be given to how these systems are intended to function during an emergency, and not just if they work at all.

“During the test, it’s good to have a knowledgeable person helping judge whether or not the systems will still protect occupants and assets to an appropriate degree,” he says. “This helps ensure each system is doing the job it was intended to do to keep tenants safe, and that organizations don’t take on unacceptable risk.”

Timeline & Process

The current standard for when to conduct an IST is prior to first occupancy in new buildings, with the second iteration required one year after that. Subsequent rounds of testing are needed at intervals not exceeding five years.

In terms of process, IST involves three stages beginning with a preliminary planning phase. “This is when the integrated testing coordinator works with the design professionals to develop an integrated testing plan,” Hopley says. “Following that, there is the implementation phase during which the test plan is executed. This is when the systems are tested and documented by the coordinator with the relevant stakeholders involved. The final phase is the documentation phase when the coordinator develops and issues the requisite documentation to record the completion of the test plan and the accompanying data and results.”

Getting the right advice and conducting the right inspections and testing, including IST, is key to maintaining a safe, compliant building, and minimizing risks to your assets.

For more information, contact the Fire and Building Code Engineers at LRI – www.lirfire.com

SPONSORED CONTENT
unacceptable

Economy CRE DRIVES GDP

Direct, Indirect and Induced Impact on Canadian

COMMERCIAL REAL ESTATE

(CRE) is a Canadian economic driver on par with the oil and gas industry, economic analysts conclude. A new report, commissioned by the NAIOP Research Foundation, estimates CRE made a $148.4 billion total contribution to Canada’s gross domestic product (GDP) last year when factoring its direct, indirect and induced impacts — beginning with $78.2 billion of direct GDP output and nearly 373,000 equivalent fulltime jobs within the industry.

That’s derived from six envelopes of economic activity: construction and capital investment in each of the office, industrial, retail and multifamily asset classes; property management and operations within existing CRE inventory; and commercial brokerage services tied to leasing and asset transactions. Researchers with Altus Group Economic Consulting also considered how social and economic trends might affect each of those elements of CRE’s multi-faceted whole.

“The commercial real estate sector could be vulnerable to long-term impacts related to the [COVID-19] pandemic such as the demand for office space that will continue to evolve with hybrid work practices and the demand for retail and industrial space that will continue to evolve with shifts in e-commerce trends. High inflation and rising interest rates have also increased costs for new commercial real estate development,” the report notes. “Notwithstanding these risks, nonresidential investment is generally holding up and leasing activity related to new buildings is robust.”

NEW CONSTRUCTION

Among the CRE asset classes, industrial and multifamily are the predominant economic engines, together accounting for 68% of direct investment in new construction and about 55% of direct investment in renovations and retrofits. On the job front, that translates into 60%

of the person years of employment that construction supported in 2021.

More than $16 billion invested in industrial construction last year continued a five-year growth trend in the sector and created 60,630 direct jobs. On the transaction side of the equation, about $16.7 billion worth of deals was a 92% year-over-year increase and accounted for more than 37% of CRE sales value in 2021.

Even more investment went into multifamily construction — exceeding $24 billion — representing 37% of construction spending for the year and directly employing 90,760 workers. Investors also acquired about $13.2 billion worth of multifamily apartments, equating to more than 29% of CRE sales value for the year.

Adding in $12.8 billion in the office sector and nearly $11.8 billion in the retail/ hospitality sector, new construction and renovation/retrofit spending surpassed $65 billion in 2021. That was weighted about

24 October 2022 | Canadian Property Management

55% in favour of new construction, but office stands out for a greater share of renovation/retrofit activity occurring within existing inventory — equating to more than $8 billion in investment.

“Office construction is highly skewed toward renovation/retrofit because of the important contribution of tenant improvements,” the reports states. “The proportion of investment in new buildings has gradually increased since 2018, but will likely subside in the next few years. Postpandemic trends may decrease the need for new office space at the same time as many office users find that adapting their spaces to emerging new working realities requires capital investment.”

That plays out in job numbers with 29,890 tied to office renovations and retrofits last year versus 17,590 in new office construction. In contrast, new construction generated nearly 115,000 jobs across the three other asset classes compared to 80,000 related to renovations and retrofits.

EXISTING INVENTORY

Commercial brokerages enjoyed a 20% year-over-year lift in fee collection last year.

Nearly $9.5 billion in earnings — up from $7.9 billion in 2020 — also marked a fiveyear high. Fees hovered in the $8.1 billion range in 2018 and 2019, and tallied about $7.3 billion in 2017.

“Broker fees are typically generated based on transaction volumes, and the rise in broker fees in 2021 is related to the strong recovery in the number of transactions,” the report advises.

That was seen in a 67% year-over-year increase in total sales value, which rose from $26.5 billion in 2020 to $44.5 billion in 2021. Meanwhile, brokerage operations accounted for 48,670 jobs last year.

Management and operations of the existing inventory encompasses the multi-disciplinary tracks of property and asset management, involving building operations, finance and investment and tenantfacing pursuits. It is proportionally the biggest spender among the six categories of CRE activity, supports the most employees and makes the heftiest contribution to GDP, which represents the final value of goods produced and services rendered.

For 2021, that’s about $72.3 billion in direct spending, $46.3 billion in direct GDP and 81,580 direct jobs.

Compared to construction or brokerage services, property and asset management have a disproportionately positive influence on employment in other sectors from which products and services are procured. That’s estimated at 219,430 indirect jobs — a multiplier effect of nearly 2.7 — representing slightly more than half of all indirect employment attributed to the CRE industry. That flows through to $13.58 billion in indirect labour earnings and nearly $21.5 billion in indirect GDP.

Property/asset management actually spurred better paying indirect jobs, at an average of $61,887 per worker, than directly within the CRE sector. Looking at direct jobs, average per worker earnings in 2021 were $79,600 in construction/renovation versus $56,877 in management and operations.

CRE construction generated roughly 181,000 indirect jobs or 75% the amount of direct jobs. That represents $12.94 billion in labour earnings or an average of $71,484 per worker. zz

The report, Economic Impacts of Commercial Real Estate in Canada, can be found at www.naiop.org/canadiancontributions22.

INTEREST RATE INFLUENCES

Rising interest rates have commercial real estate players adjusting their expectations about cap rates and internal rates of return. A majority of participants in Altus Group’s recent survey of industry insiders foretold the latest 75 basis point (bps) increase in the Bank of Canada’s overnight rate — taking it up to 3.25% — and nearly one quarter anticipate a further uptick before the end of 2022.

The survey distills input from 126 respondents, including investors, developers, lenders and brokers/consultants, who were queried in August for their readings on how market trends are flowing through to real estate values. Generally, survey participants perceive a riskier environment, with 88% of respondents concluding a recession is somewhat or very likely within the next six months, but there is ongoing consistency in the assessment of stronger and weaker performing asset types.

“Respondents overwhelmingly indicated that they believed cap rates will increase for office and retail assets in both major urban and secondary markets as a result of rising interest rates, while they were less sure when it came to industrial and multifamily residential assets, particularly in major urban markets,” states the summary of survey findings. “Survey respondents also agreed that assets in secondary markets are more vulnerable to rising cap rates as a result of increases in interest rates.”

Among investors, lenders and broker/consultants, 90% of respondents foresee higher cap rates on office assets in major urban markets, while 97% project higher office caps in suburban and secondary markets. A more sizeable minority predict stable cap rates for industrial (41%) and multifamily (35%) located in major markets.

Within secondary markets, 20% of respondents suggested industrial cap rates will hold steady and 17% voiced that expectation for multifamily cap rates. Meanwhile, 80% anticipate rising cap rates on retail assets in major urban markets and 95% make that prediction for secondary markets.

Most investors and lenders concurred they now apply a higher internal rate of return to assess the viability of an asset, but, again, are more likely to do so for office and retail properties, and in secondary markets. Notably, 39% of respondents report they have not adjusted internal rate of return expectations upwards for industrial and multifamily properties in prime markets.

Developers express the most confidence in multifamily rental and mixed-use projects in prime markets with around two-thirds of those surveyed saying they have not adjusted discount rates for those types of initiatives. That slips to 57% for condominiums in prime markets and down to 50% for new condo projects in secondary markets.

In keeping with that finding, just 6% of developers said they might respond to future pressures by increasing the portion of condos relative to rental units that they’ll bring onto the market. However, 17% would consider increasing their planned quotient of rental units relative to condos.

“Some of the most interesting data to emerge was learning what strategies developers may deploy as a result of the rising cost of new real estate development associated with interest rate hikes and a possible recession, including that almost one-fifth (17 %) of developer respondents have yet to form a strategy at all, ” the survey summary reiterates.

Passing costs through to buyers was the most cited tactic with 44% of developers saying they would increase unit prices. Upwards of one-third suggest they’ll pull back on development activities — pausing projects, reducing the number of projects or cutting back on land acquisition — while others said they’d attempt to maintain current prices for buyers through reduced unit sizes (29%) or lower quality construction (11%).

For more information about the Altus investment trends surveys, see www.altusgroup.com/data-analytics/investment-trends-survey.

Canadian Property Management | October 2022 25
industryclout

CYBER SAFEGUARDS

Residential Record-keeping Holds Allure

for Malicious Players

CONDOMINIUM corporations have an obligation both to protect residents’ information and to safeguard the corporation’s financial records, meeting minutes and governance documents. Since these are now overwhelmingly kept in an electronic format, the Condominium Authority of Ontario (CAO) instructs that condo corporations must “protect records against unauthorized access and have data recovery capabilities”.

Vigilance against cyber-attacks is a key component of that responsibility. Boards and property managers are strongly encouraged to educate themselves about cybersecurity in general and to understand the cyber risks that they are most likely to encounter.

RANSOMWARE

Ransomware is one of the top threats. It is a form of malware designed to encrypt files, rendering them unusable to the person trying to access them. The ransomware perpetrator will demand ransom, often money or some other financial asset, in exchange for decryption.

Condominium and rental housing administrators can be particularly attractive to cyber-attackers because these organizations store so much personal information — possibly including their residents’ bank account or credit card numbers, e-mail addresses, phone numbers, license plate numbers, etc. As well, these organizations are likely to be holding some, or many, documents that could not be replicated if they were lost.

The most common ransomware techniques used by intruders include:

• E-mail phishing campaigns. These send out a malicious file or link, which will be deployed when someone clicks it on. They may also include precursor malware, which enables the attacker to use someone else’s email account to target more victims.

• Remote desktop protocol (RDP) attacks. RDP lets people access files and data from virtually anywhere. Cyber-criminals may try to guess as many password combinations as possible, or purchase credentials illegally, to infiltrate the remote network.

• Software vulnerabilities. Cyber-criminals can take advantage of security weaknesses in software to deploy ransomware.

Cyber-hackers are generally envisioned to be malfeasant outsiders, but organizational insiders can also wreak havoc. For example, an aggrieved employee could delete files, change passwords or steal information.

PROTECTIVE MEASURES

Two-factor authentication (2FA) is an extra layer of security that makes it more difficult for unauthorized individuals to gain access to accounts, databases and software systems. It essentially requires users to enter two pieces of information — a password that they have memorized and a one-time code — in order to access a platform or data.

The code is usually accessed through the user’s smartphone. This way, even if someone does guess a password, they would still need to obtain the phone and see the unique code to get the data.

This simple step is highly effective and it costs the user nothing to implement. In 2019,

26 October 2022 | Canadian Property Management

FOILING MASTER KEY FUMBLES

Master keys are becoming passé in multifamily buildings as electronic alternatives offer more secure and convenient means of access that provide centralized, documented tracking of every entrance and exit from every keyed spaced.

The multifamily housing industry has been sent a very loud and clear message over the years regarding the importance of apartment key control. Many large legal judgments have been made in favour of victims because of negligent control and use of master keys.

Access to units is routinely required for maintenance, emergency response and to ensure regulatory compliance around health and safety issues. Lost or misused master keys can result in major expense — for example, if lock systems must then be replaced in a large number of units — liability and reputational damage.

Software-enabled electronic key cabinets can manage more than 500 keys at a time and can integrate a camera to capture check-ins and check-outs. Electronic systems create an easily accessible

FORESEEABLE DARKNESS

Power failures are a reasonably foreseeable emergency. As such, policies, procedures and documentation of prevention and mitigation efforts are already commonly required in multifamily buildings.

Property managers and building staff should be familiar with response procedures, have supplies on hand and ensure emergency backup systems will function as required before a power outage occurs. Here are some considerations for an active risk management plan:

Portable lighting

Building supervisory staff such as superintendents and front desk security should have rapid access to emergency-use flashlights, complete with spare batteries. Be sure to test the batteries as part of a routine blackout preparation checklist.

Emergency generators

The Ontario Fire Code mandates a weekly 15-point inspection to check for leaks, corrosion and other potential issues, along with a monthly start-up to test that the emergency generator is functioning. Both processes must be documented.

As part of the building’s preparedness plan, it’s recommended to check and log the emergency generator’s fuel levels every 30 days to make sure that the tank is always at least 80% full. Diesel fuel tanks typically

Google found that SMS-based multi-factor authentication successfully blocked 100% of automated bots, 96% of bulk phishing attacks and 76% targeted attacks. Although those efficacy rates may have declined over the past

digital trail to follow where keys have been used and who has used them. This can also protect staff or contractors against mistaken or false claims that they have caused damage or stolen property from tenants’ units.

The systems give property managers the means to remotely control and monitor access to the building. As well, electronic key systems with biometric reading technology can assign unique identification to each staff member or can be programmed to admit designated contractors into locked utility areas such as HVAC and elevator control rooms, allowing for around-the-clock access to quickly address issues as they occur.

The preceding is provided by Traka, part of the Assa Abloy Group specializing in key management systems. For more information, see the website at www.traka.com.

have a protective spill moat, designed to hold 110% of the volume inside the fuel tank in order to capture and contain leaks or spills. This moat must be kept empty and unobstructed, and never used for any kind of storage.

In high-rise buildings, domestic water pumps should be connected to the emergency generator so that residents will continue to have water service during a power interruption. Typically, the pressure in incoming municipal water supply is adequate to circulate it through low-rise buildings.

Communications

Staff should be trained on how to operate the building’s emergency voice communications and what to say. These procedures should be covered in the building’s emergency response plan. Both the fire alarm system and emergency voice communications system are connected to the emergency generator and will continue to function when the power fails. Even if the generator fails, backup batteries will keep fire alarms operational.

Jason Reid is Senior Advisor, Fire and Emergency Management, with National Life Safety Group in Toronto. For more information, see the website at www.nationallifesafetygroup.ca.

three years, 2FA is still one of the easiest and best cyber defence mechanisms to employ.

On a related note, property management and building staff should not have universal access to the corporation’s files. They should

only be able to access tools or information that they need to have in order to do their jobs. This helps ensure sensitive information doesn’t get into the wrong hands and reduces potential damage caused by ill-willed employees.

Anti-virus software will help to limit the impact of a virus. It provides an extra layer of protection so that even if malware gets onto a computer, it can be detected and removed before critical damage is done.

It’s also important to update the computer’s operating system or software program as soon as possible after receiving a prompt. Developers release updated versions of systems to address bugs, minimize security vulnerabilities and introduce new features. Continuing to use an older version of a program increases vulnerability to viruses or threats that exploit or take advantage of recently identified security flaws.

Cyber insurance aligns with the Condominium Authority of Ontario’s instructions related to mitigating and transferring risk. The insurance covers items such as regulatory defence expenses, legal and civil damages, forensic investigations and crisis management costs, which could save condo corporations or property management companies thousands of dollars. In addition, cyber liability coverage pertains to legal fees and judgments in cases where owners or tenants sue for damages caused by a cyberattack. zz

Brian Bosscher is the President and founder of Condo Control, a software company providing web-based communication, management and security services for condo corporations and home owners’ associations. For more information, see the website at www.condocontrol.com.

Canadian Property Management | October 2022 27
security&safety

to Persist HOUSING HURDLES

Supply-Demand

Imbalance Expected

RISING INTEREST RATES and a sluggish supply chain pose added complications for new housing development, but industry insiders and economic analysts alike maintain that Canada’s market fundamentals should reward investors in the longer term. Speaking during the Bloomberg online Canadian finance conference earlier this fall, commercial real estate players assessed the opportunity and tallied some of the current challenges, while one of Canada’s top housing strategists outlined the federal government’s efforts to invigorate producers and stabilize consumers.

“Correcting the supply-demand imbalance is the best way to restore affordability,” asserted Romy Bowers, President and Chief Executive Officer of Canada Mortgage and Housing Corporation (CMHC). “We need to create more homes for Canadians to buy, but we also need to create more rental units for Canadians to live in across all price points.”

Recent CMHC analysis concludes that approximately 3.5 million additional dwelling units are needed to meet demand and pull prices back into closer alignment with purchasers’ and tenants’ incomes. That underpins a federal target for 400,000 housing starts annually, which is roughly double the current Canada-wide level.

The private sector is tapped for a crucial role in filling that gap, given that it builds 95% of the housing coming onto the market. However, it’s a performance expectation that’s intrinsically tied to development costs, the availability of labour and the receptiveness of the local governments that control planning and permitting.

“Demand is so high, there should be a supply response, but that supply response is not happening,” Bowers mused. “So we have to, really, as a country, look at what is preventing the supply response and

take actions urgently to address those issues.”

ENCUMBRANCES AND EFFORTS

From developers’ perspective, Brian Rosen, President and Chief Executive Officer of Colliers Canada, cited some common encumbrances, including prolonged timelines for obtaining development approvals, and development charges and fees that drive up costs. Varying planning requirements, political agendas and staff resources present lesser or greater hurdles across a myriad of urban municipalities, but opposition from local residents and/or politicians is typically universal.

And, if the slow process and persistent conflict seems tiresome, so, too, can be the resulting output.

“You end up with a very binary effect — you get a tower or you have a single-

28 October 2022 | Canadian Property Management

family home, but there’s a lot of stuff in between [those two forms] that can be done,” Rosen observed.

Recent and perhaps future interest rate increases bring higher costs for borrowed money, changing the break-even point for new projects. For condo developers, that also comes with concerns about consumers’ buying powers.

Bowers confirmed that CMHC’s revised outlook, slated to be released in October, would chart a year-over-year average national decline in house prices in the range of 10 to 15%. That’s steeper than the 5% projected earlier this year, but she placed it in the context of “rapid, unsustainable price increases” over the course of 2020 and 2021 and maintained there’s little fear of a crash.

“We believe there is a very significant supply shortage in Canada and there is significant demand that is being unfulfilled,” she reiterated. “In our view, the supply-demand mismatch is what is going to sustain the housing market in the long term.”

The dynamics are the same in the rental housing market.

“There’s a direction multifamily rental rates are headed and it’s not a downward direction, which is tough on people from an affordability standpoint,” Rosen said.

Through its financing arm, Bowers reported CMHC is striving to “keep the construction pipeline going” as inflationary pressures subvert developers’ pro formas and undermine project viability. Meanwhile, to tackle lamented obstacles in the development approvals process, CMHC has been tasked with rolling out the new Housing Accelerator Fund for municipalities — $4 billion over five years, promised in the 2022 federal budget — aimed at spurring the construction of 100,000 new housing units.

“We hope that this incentive will provide municipalities with the support to break down local-level barriers that do exist to supply creation,” Bowers said. “This funding could be used to accelerate permitting processes or to modernize planning processes. It could also be used to educate local residents about the benefits of more density in their communities and more transit-oriented development.”

INVESTMENT PROSPECTS

Investors and developers are already enjoying success and foreseeing strong

continuing demand for the latter. Michael Emory, President and Chief Executive Officer of Allied Properties REIT, sketched out trends in Montreal, Toronto and Vancouver where urban mixed-use development is flourishing.

He suggested the prominent presence of post-secondary institutions and knowledgebased organizations draws a constant supply of young people to Montreal’s core, nurturing spinoff synergies of business start-ups, job growth and demand for housing, retail and leisure pursuits.

Along with the noticeable towers — including in-progress, purpose-built rental projects that will deliver thousands of new units as they are completed over the next few years — he sees more subtle “soft densification” augmenting Toronto’s supply, while Vancouver continues to churn out new condo and multifamily rental developments.

“There may be some dampening of creation because of interest rates, and because of perhaps inappropriate behaviour on the part of municipalities, but I think Canada will continue to propel forward

because there’s a deep need,” Emory submitted. “Our populations are growing and we do have to find dignified ways of creating living space.”

Rosen concurred that housing is an integral component of what he terms “placemaking” or redeveloping and repositioning areas within the existing urban fabric. He predicted investors will continue to reap strong returns from mixed-use projects that package housing and retail with walkable or easy transit access to residents’ workplaces and other services and amenities.

“That’s where a lot of investment is going to be going — to creating those neighbourhoods where they’re now currently not highest-and-best-use, as well as intensifying and densifying in those areas and transitioning malls and reimagining what retail should look like,” Rosen said. “If you can get in on that, and it may take a multi-year investment, that is a real future growth area for all different types of the asset classes, and that’s where we’re going to see communities thrive.” zz

Canadian Property Management | October 2022 29
affordability

COVERT COLONIZER health&safety

Mould Grows Quickly While Often Eluding Detection

AS MORE STUDENTS and workers return to classrooms and offices, property managers are finding some surprises in spaces that have been vacant or under-occupied for extended periods. Coming out of a stage of partial to full hibernation, buildings are presenting with a range issues from clogged drains to building envelope degradation.

Of these, mould oftentimes goes undetected for the longest period, but it packs a big potential threat. Typically, mould is already a problem before it is discovered.

Dark spaces that do not dry naturally are particularly vulnerable, presenting a challenge for property managers and building owners. Once a spore attaches itself to something and incubates, it can grow within 24 to 48 hours and begin to colonize within one to 12 days. What may have been moisture from a leaky tap can evolve from a minor inconvenience and spread into something much worse.

Mould can be found anywhere where moisture is present, and especially likes to grow in temperatures between 15 to 26 degrees Celsius, where there is dim lighting and little air circulation. Mould spores are known to travel throughout the air, attach themselves to any damp surface and begin to break down the material as it grows.

Mould can occur after any of the following common building challenges: fire; flooding; plumbing leaks; leaky roofs; swollen floorboards/walls; and water-stained ceilings. Although, mould likes to grow on wet cellulose materials, it can go dormant and survive without moisture. It will just continue to feed on materials such as ceiling tiles, wallpaper, carpet, wood, adhesives, paints, upholstery and fabric.

Since mould is spread through the air, the shared HVAC and air systems in larger buildings can pose a risk. Mould mitigation is likewise challenging in spaces such as hospitals and long-term care

homes, office and apartment buildings where more occupants can be affected negatively.

More than two-thirds of respondents to a survey conduced by First Onsite Property Restoration attested to being “freaked out” at the prospect of a mould infestation. Accordingly, mould can be harmful to health, and people with compromised immune systems can be at greater risk.

Many of the symptoms related to mould resemble that of a common cold or allergy, making the appropriate diagnosis more complex. The most common symptoms include wheezing/coughing, watery/red eyes, nasal and sinus congestion, throat irritation, skin irritation, nosebleeds, fever and headaches. In more severe cases, extreme fatigue, memory loss and dizziness can be symptoms.

No building is completely impervious to mould, but through diligence and proper reviews, property managers can safeguard their buildings, businesses and occupants. In commercial properties, it is important to be aware of the environmental triggers that feed mould growth.

Following water damage, proper extraction and drying practices are critical to ensure mould is not allowed to grow. The easiest way to reduce the risk of mould is to ensure that the building is not susceptible to growth. A checklist to help staff or tenants identify the initial stages of mould growth is one simple way to prevent it from becoming a major issue.

Where mould has already presented itself, mitigation specialists can ensure the issue is dealt with correctly and does not get out of hand.

Brendan Murphy is the Director of Client Solutions for First Onsite Property Restoration. For more information, see the website at www.firstonsite.ca.

30 October 2022 | Canadian Property Management
READY TO TAKE THE NEXT STEP IN YOUR CAREER? GET RESULTS. OUR GRADUATES DID. BOMICANADA.CA 400,000+ COURSES DELIVERED 43,000+ CREDENTIALS EARNED 99% would recommend BOMI programs to a colleague. ONLINE PROPERTY MANAGEMENT CLASSES

A healthy roofing system keeps your assets covered.

Flynn assesses and maintains the health of the roofing systems under your care, to protect your assets and help you control your long-term maintenance budget.

A Flynn roof inspection and audit report will identify potential problem areas; our preventive maintenance program can mitigate risk and stabilize your costs.

Get detailed reporting on over 20 aspects of your roofing system’s health, with photos and recommendations. Call Canada’s leading commercial roofer.

WWW.FLYNNCOMPANIES.COM 24-HR EMERGENCY RESPONSE
Issuu converts static files into: digital portfolios, online yearbooks, online catalogs, digital photo albums and more. Sign up and create your flipbook.