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editor’snote COMMERCIAL REAL ESTATE investors, owners and managers have a long history of successes attributable to their efforts to identify and unlock value in places that others have overlooked. A philosophy that’s entrenched in how the industry views its physical assets hasn’t yet been so widely applied to its human capital, but the newly launched CREED Council is an insider-led proponent for that approach. An acronym for commercial real estate equity and diversity, the CREED Council arrives with senior executive presence from the industry’s many synergistic elements — development, property management, brokerage, finance and supporting technical and professional services — and declares that a multidisciplinary economic player must draw on the input of varied experiences and perspectives to respond to and flourish in an evolving society. Founding members advise that will be achieved through concerted efforts to understand the barriers to industry entry and advancement that some face and others impose, and through measureable actions to recruit, nurture and promote diverse personnel and leadership candidates. “This is for the real estate industry by the real estate industry. We need to change the system for our own ends,” says Sunita Mahant, Head of Global Initiatives, Diversity, Equity and Inclusion and Senior Director of Legal Affairs with Ivanhoé Cambridge, and a member of the CREED Council’s board of directors. “This is what’s going to give us, as an industry, the edge that we need.” In this issue, we report on the CREED Council’s vision for collaborative advocacy and resources to support meaningful change. We also continue to chronicle the unfolding repercussions of COVID-19, including outlooks for the industrial, hotel, multifamily and office sectors entering a period of vaccination passports and a tentative return to long sidelined activities and interactions. Some day, historians will no doubt find greater context in the past 18 months and link them to the genesis of noteworthy movements and events. For now, the pandemic is both an increasingly wearisome canvas for our daily lives and a learning exercise ahead of perhaps even bigger challenges. What first called for troubleshooting and crisis response has long since given way to adaptive solutions, new strategies and critical reassessment of the former status quo. And that all circles back to the CREED Council’s prioritization of diverse perspectives and experiences. Barbara Carss barbc@mediaedge.ca @BarbaraCarss
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Canadian Property Management | September 2021 3
contents
6
CREED Council: An industry-led push for equity, diversity and inclusion in commercial real estate management, operations and investment decision-making.
8
Industrial Overdrive: Capital continues to flow into the industrial sector as availability rates tighten, rents climb and cap rates compress.
12 Booked for Comeback: Hotel sector makes tentative gains with expectations for better prospects heading into 2022. 16 Campus Complement: Purpose-built student accommodation poised to fill void in the Canadian housing market. 18 Transferrable Ambience: Designers apply retail’s bricks & mortar successes to office space. 20 The New Normalization: Revised benchmarking methodologies take account of lower occupant densities in pandemic-era office space. 26 Municipal Repair Backlog: Asset condition assessment finds much of Ontario’s key municipal infrastructure requires attention. 29 Heatwaves Spark Cooling Pressures: Ontario updates regulations governing temperature control in long-term care homes. 30 Climate Change Prognosis: Intergovernmental Panel on Climate Change delivers bleak forecast of fallout from increasingly frequent and extreme weather.
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DO THE MATH
CREED Council Speaks Up for Equity, Diversity and Inclusion By Barbara Carss
TYING CORPORATE pledges to measurable actions has been a proven formula for navigating change and opening up new business opportunities in commercial real estate. Industry insiders involved in many of those initiatives — whether related to sustainability, proptech or other kinds of repositioning and investment strategies — are endorsing the same tactics to broaden the base, leadership structure and decision-making insight of the real estate workforce. “We need to give diversity, equity and inclusion the space it belongs in our industry,” says Sunita Mahant, Head of Global Initiatives, Diversity, Equity and Inclusion, and Senior Director of Legal Affairs with Ivanhoé Cambridge. “Some of our industry leaders have put this at the forefront. It is a business priority; it is built into their strategic plans today. But I think we are lagging behind. If you take a look at the industry as a whole, and compare 6 September 2021 | Canadian Property Management
ourselves to other industries, we have a lot of work to do.” She and other likeminded proponents have coalesced into the recently launched CREED (commercial real estate equity and diversity) Council — which officially delivered a call to action via an introductory online forum and panel discussion earlier this summer — to build a supporting network and offer resources. Thus far, the CREED Council’s 22-member volunteer board of directors is influentially placed in senior management roles in property management, development, leasing, finance/ investment and various professional support services, and 12 organizations, including commercial real estate companies, industry associations and service providers, have also signed on as partners in the effort. REBALANCING THE WORKFORCE Joining Mahant in the panel discussion, Sonny Kalsi, Chief Executive Officer of
BentallGreenOak (BGO), outlined his company’s hiring policy, adopted in 2020, requiring that two-thirds of new employees be women or minorities. Given the turnover of approximately 100 to 150 staff annually across the property management/property fund firm’s employment base in Canada, the United States, Europe and Asia, he sees the policy as an instrument to meaningfully rebalance the composition of BGO’s workforce and make it more reflective of the general population. “Unfortunately, this is an industry that has not been super diverse,” he said. “There are a lot of things that you can and cannot control as a company. You can control who you hire. You can control who you promote. You can control what opportunities you make available.” Dismissing the perceptions of observers who would ter m t he i n it iat ive “revolutionary”, Kalsi suggests it’s more straightforwardly “math” since women
humancapital make up 50% of the population and visible minorities account for 40% of the U.S. population and more than 52% in Toronto, where one of BGO’s four key global offices is located. The mandate is also in keeping with the kinds of key performance indicators that real estate owners/managers typically apply to track progress on strategic priorities. “Inherently, we need to put quantitative measures in,” Kalsi maintained. “Ultimately, everything we all do for a living is very quantitative. It’s how we do the things we do, and how our success is measured.” WIELDING INFLUENCE Additionally, Mahant calls for dedicated resources both to translate strategic plan statements into measurable actions and to promote those goals and actions across all business and operational divisions. She also notes that companies like Ivanhoé Cambridge, the real estate arm of Caisse de dépôt et placement du Québec, and BGO, the real estate arm of Sun Life Financial, can wield the clout of their institutional connections. “Just like any other business strategy in the real estate sector, we need to invest in who is going to execute this plan. You can have the best strategy in the world, but having an intentional people strategy is how we’re going to succeed,” she urged. “We have so much power and ability to influence. I think it starts with these conversations with the partners that we sit with, where we invest our money, who we’re partnering with, and really sitting down and making sure that our goals and our values are aligned.” Pino Di Mascio, Head of Impact Strategy and Delivery with Dream Unlimited Corp., tallied the many contractors, suppliers, skilled trades and labourers involved in construction and operations, all which present opportunities for real estate companies to persuasively makes their preferences known. “One of the unique aspects of our industry is that we can be involved in this on two different fronts,” he said. “That can be thought through in social procurement strategies so that the partners that we’re working with understand what our values are, and we encourage them to work towards similar goals and objectives.” ADVANCEMENT PATHWAYS Turning to the other front, he addressed career development within real estate organizations. Dream, a real estate investment trust (REIT) with more than $12 billion in assets under management
throughout North America and Europe, has labelled its own in-house program, “Diversity, Inclusion and Advancement” to emphasize that the executive ranks particularly require attention. “You can see lots of organizations are starting to become better at reflecting the broader diversity at a full organizational level. Once you get into more senior manager roles, it is less diverse,” Di Mascio said. “There are less opportunities, and creating those pathways in organizations is extremely important.” Tridel Corporation, a Toronto-based developer specializing in high-rise condominium projects, also moved to make those pathways more transparent. As a third-generation member of the company’s founding family, Andrea Del Zotto, Director and Executive Vice President, reflected on some of the distinctive aspects of family businesses and some of the common scenarios that any company might encounter in adjusting its corporate culture. Clear statements of Tridel’s criteria for advancement and the company’s behavioural code are part of a package of new measures it has introduced in the months since several galvanizing motivators in 2020. That includes both the homicidal racism of George Floyd’s murder in Minnesota and racial harassment much closer to home with a series of hateful messages left on Toronto construction sites. In response, Tridel revised its established marketing tagline from “Built for Life” to “Built for Respect” and began scrutinizing its own management practices with the help of an outside consultant. “When we started, it was the senior level of leadership participating in something called an IDI assessment, which is intercultural development inventory, and it’s a tool that measures how well you’ve developed your intercultural skills,” Del Zotto recounted. “In our recruitment and hiring, we’ve created an accountability network. Our communications are now audited for diversity, and we are looking at targets for underrepresented groups and then measuring against those targets.” REDEFINING MERITOCRACY Many commercial real estate companies are now similarly grappling with acknowledging and counterbalancing biases in recruitment, promotions and allocation of professional opportunities. The panellists all agreed that the industry’s traditional view of meritocracy needs to be revised to account for the challenges — or
lack thereof — candidates have faced and surmounted to arrive at their current standing. “Much of the first step toward creating inclusion has been about understanding biases and maybe understanding that we carry more than we thought we did. So we can look at how we interview or how we recruit or how we deal with eliminating some of that stuff. That’s the first step,” Di Mascio advised. “The one after that is acknowledging the systemic barriers that actually exist that prevent true meritocracy from being realized.” Kalsi credited BGO’s hiring policy for creating the parameters in which candidates with non-conventional qualifications can gain employers’ attention — maintaining that those “who went to the right schools and had the right internships” and have “really, really relevant experience” have the advantage of being conspicuous, but aren’t necessarily more promising. “The easier thing to do is hire [candidate] A. The harder thing to do is give [candidates] B or C a shot and help them grow, and that’s what we’re going to continue to push ourselves to do,” he affirmed. BUILDING MOMENTUM AND CONSENSUS Early participants in the CREED Council see it as a mechanism for building industry momentum and consensus around pursuing and achieving equity, diversity and inclusion — perhaps somewhat in the way that collegial yet competitive programs like GRESB and race2reduce have supported industry efforts in ESG and climate action. “We should be working very closely across companies, across the industry, to help each other, push each other. If we can achieve those quantitative outcomes, then it challenges others to try to do the same or do better.” Kalsi said. “We have a lot of great organizations within our industry and I think CREED will be very helpful for all of these organizations to help us move forward and build better,” Mahant concurred. “We’re all starting at different places and points, but we all have to make a conscious effort. We’re already perhaps being reactive, not as proactive as we like to think we should be,” Del Zotto mused. “It’s not easy. It’s uncomfortable at times. It’s awkward and you’re afraid of saying the wrong thing. I would say: Get comfortable with discomfort and just do it.” zz For more information about the CREED Council, see the website at www.equitymatters.ca. Canadian Property Management | September 2021 7
reboot&recover
PANDEMIC
PERFORMERS Industrial Vacancy Tightens, Rental Rates Climb
By Barbara Carss INVESTORS PURSUING industrial properties can typically expect returns of 2 to 3% in the current environment of scarce supply, climbing sales values and escalating land prices. CBRE reports continuing cap rate compression during the second quarter of 2021, with the national Class A rate nudging below 4.8% and bottoming out at 3.25 to 3.75% in Vancouver, Toronto and Montreal. Market analysts anticipate more capital flowing into the sector as vacancies tighten and rental rates rise. Nationally, CBRE’s second quarter statistics peg the average industrial availability rate at 2.3%, the average net rent at $9.82 per square foot and the average sales price at $184.73 per square foot. Metrics for Vancouver and Toronto outperform the national benchmarks on all those fronts, with the average sales price hitting a chart-topping $400 per square foot in Vancouver. Ottawa surpasses the national average for rental rates and sales value, while Montreal, Waterloo Region and 8 September 2021 | Canadian Property Management
London, Ontario record below-average availability rates. “We’ve never really seen lease rates and land move in such a quick accelerated manner on the industrial side, especially what we’ve seen over the last 12 to 15 months,” Werner Dietl, CBRE President and Chief Executive Officer, observed during a webinar earlier this summer. “In all of our major markets across the country we have a supply and demand imbalance. We’ve started creating some new models looking at where industrial leasing rates could go and we’re well into the [$] midteens per square foot, net. If you factor that with where we see land going right now, we’re in uncharted territory. But we do think there is additional depth of demand just given how low our vacancies are.” SUPPLY SHORTAGES Quarter-over-quarter availability shrank 60 basis points (bps) in Vancouver, 50 bps in Montreal and 40 bps in Toronto to sub-1.5% levels in all three markets. Halifax and
Calgary registered even sharper quarterover-quarter dips, as Halifax’s availability rate fell 130 bps to hit 3% and Calgary’s dropped 120 bps down to 6.6%. More than four million square feet of industrial space was absorbed in Calgary during the first half of this year, surpassing the combined total for 2019 and 2020, and representing the most uptake in two consecutive quarters since 2005. About 27.1 million square feet of new industrial space is currently under construction Canada-wide, equivalent to about 1.4% of the existing national inventory. Roughly one third of that space is slated for the Greater Toronto Area, where it will add negligibly to the 802 million square feet now comprising the industrial market. The rest is largely concentrated in Vancouver (5.5 million square feet), Montreal (4.5 million square feet), Ottawa (2.8 million square feet), Calgary (2 million square feet) and Edmonton (1.6 million square feet). Earlier this summer, analysts warned that available space is nearing depletion in
reboot&recover Vancouver, Toronto and Montreal if leasing activity continues at the recent pace. Diminishing supplies of zoned land and soaring construction costs further complicate delivery of new product and fuel foreboding about inflation. “We don’t have enough space to accommodate business demand and can’t build new space fast enough,” Paul Morassutti, Vice Chair of CBRE’s valuation and advisory services, noted upon the release of Q2 2021 stats. “We’re at the beginning of a new cycle. What will businesses do and what will happen to prices for consumers when the supply of industrial space dwindles? We’re about to find out.” INFLATIONARY PRESSURES Continuing that discussion during CBRE’s summer webinar, Benjamin Tal, Deputy Chief Economist with CIBC World Markets, outlined potential precursors to an inflationary era. Those include: a looming post-pandemic spending surge as Canadian households and businesses find avenues for an estimated $230 billion in accumulated cash; rising costs for raw materials; supply chain disruptions that create extra costs; and rising wages as many service sector employers compete for labour. Already, inflation has surpassed Bank of Canada and U.S. Federal Reserve Board projections. “On a month-over-month basis, prices are rising faster than expected,” Tal said. “That could be short-lived. Within six months it could have eased again. But there is a risk that it will last longer, and that’s the key risk facing the commercial real estate industry.” Among factors favouring stability, he predicts commodity costs will moderate as world trade reopens and the supply chain smooths out, and that wage escalation may flag with the termination of the government’s COVID-19 relief programs. Tal also sees the Bank of Canada’s hints that it will begin to phase out pandemic-prompted quantitative easing in the second half of 2022 as a timely step to head off inflationary momentum. The greater threat, he suggests, is that more severe interventions could be necessitated at a later date, catching consumers and borrowers off guard. “The issue is not inflation; the issue is high interest rates. To me, the number one risk is to what extent inflation will be sticky and not go down,” Tal asserted. “The focus should really be on the sensitivity of the consumer to high interest rates and the recessionary risk due to that.”
POSITIVE EXPECTATIONS FOR MULTIFAMILY ASSETS Multifamily assets were central to improving investment performance expectations during the second quarter of 2021. Recently released results of the REALPAC/Ferguson Partners Canadian Real Estate Sentiment Survey show industry executives in a more upbeat mood than in the spring of 2020, with 70% of respondents indicating market conditions were somewhat or much better than 12 months earlier and 40% suggesting asset values were somewhat or much higher. Survey respondents plotted their overall level of confidence at 72 on a scale of 100. That’s up significantly from Q2 2020 when the index score was 46. The gap between reality and possible prospects also narrowed dramatically, as respondents gauged their confidence in current (Q2) conditions at 71, versus 73 for future conditions. One year earlier, there was a 29-point spread in the two assessments. Looking to the future, 73% of respondents expect market conditions will be even better by Q2 2022; 51% foresee an increase in asset values; 30% anticipate greater availability of debt capital; and 60% expect greater availability of equity capital. Only 9% of respondents predict real estate values will be somewhat lower by Q2 2022, while 40% foresee values will remain relatively constant. That’s a more optimistic perspective than in Q4 2020 when 35% of survey respondents foresaw somewhat or much lower real estate values by year-end 2021. Nearly three quarters of respondents are looking forward to somewhat or much better market conditions over the next 12 months, while only 1% perceive market conditions will be somewhat worse. Even so, additional insight from more than 50 commercial real estate executives reveals a more uneven assessment. Select unattributed quotes typically convey more favourable endorsements for industrial and multifamily assets than for office and retail, along with projections for a slower post-pandemic rebound in the latter two sectors. While real estate insiders note that multifamily income yield had slipped over the previous 12 months, investors remain focused on strong market fundamentals. The spectre of renewed immigration activity, college and university students returning to the renters’ marketplace and continued financial barriers to home ownership bolster the mid- to longer-term outlook. “The apartment sector feels like a tale of two markets. The apartment valuation market is reaching new heights and, at the same time, market apartment earnings are falling. Buyers are seeing a clear path to the under 30-35 cohort returning to the rental market as vaccines roll out. Current weakness is simply attributed to young people waiting out the pandemic at their family’s home. Canada remains in a housing crisis driven by a lack of supply,” one insider observed. For more information about the REALPAC/Ferguson Partners Canadian Real Estate Sentiment Survey, see www.realpac.ca. –REMI Network
UPBEAT TRENDS For now, Morassutti characterizes real estate market trends as upbeat, citing the 25% gain for the TSX REIT index in the first half of 2021, net asset values that are “absolutely going in the right direction” and strong activity in the capital markets. “If you look at the property level, fundamentals in virtually every sector in Canada are improving,” he said. E-commerce is tagged as a continued driver for the warehouse/distribution and logistics sector, as CBRE projects about 100 million square feet of additional space will be needed globally within the next four to five years to accommodate online retailing needs. In Canada, Dietl speculated that developers will have to at least double their typical annual output to keep pace with demand. He also drew parallels with mounting pressures for housing supply. “It feels like we have similar trends on industrial and residential now. We have a
supply and demand imbalance across the whole country,” Dietl mused. “We can’t build it fast enough. We can’t seem to find ways to deal with the pricing on construction and land, and this is putting extraordinary pressure on lease rates and negotiations and how we’re going to solve for that in the short term.” Meanwhile, as forecasted even in the most sluggish quarters of 2020, investors are now deploying capital with zeal — targeting both the obvious performers and emergent specialized asset classes. “Every fund out there wants highquality logistics and multifamily, but there’s not enough of it in the world to buy and, if you are buying in those sectors, you’re buying 2 and 3% returns, which are not high enough for most funds,” Morassutti submitted. “That’s why we think, first of all, capital will go back into the office market, and why we think momentum in the alternatives will continue. The yields are better.” zz Canadian Property Management | September 2021 9
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NO HOLIDAY FOR THE HOTEL SECTOR Occupancy and RevPAR Prospects Brighten for Q3 and Q4
CANADIAN HOTELS still aren’t making the Dean’s list for investment performance, but market analysts appear confident that rallying conditions are pushing the sector in a positive direction. Colliers’ review of trends in the second quarter of 2021 gauges investor sentiment at a C+, while Avison Young’s mid-year C a na d a hot el m a rket su m m a r y u nder scores exp e ct at ions for improvement in Q3 and Q4. Both reports examine the interplay of COVID-19-related depressants that will have to lift before occupancy levels, revenue per available room (RevPAR) and average daily rates (ADR) can recover to pre-pandemic levels, and 12 September 2021 | Canadian Property Management
acknowledge that will take some time to fully occur. However, the steady increase in Canada’s vaccination rates, rebounding domestic travel and prospects for the return of cross-border and international visitors are all cause for optimism. The United States also provides some indication of expected demand once pandemic-related restrictions ease. “In the U.S., Memorial Day occupancy and RevPAR numbers were better than those posted during the 2019 Memorial Day holiday weekend, reaffirming that when it comes to travel, people are looking to make up for lost time,” Avison Young analysts observe. “This is a trend
that will likely also take place in Canada, but several months behind the U.S.” The firm’s proprietary analytics platform, which measures the weekly influx of people into downtown Toronto, Vancouver and Montreal, shows that the three cores are becoming more active, suggesting an associated pickup in dema nd for hospita lity ser vices. Combined with national survey findings that 59% of prospective vacationers intend to do so within Canada this year, the sector is considered well positioned to attract a restless population that’s still hesitant to go farther afield. “ T he leisu re s e g m e n t o f t h e hospitality industry will likely have the
reboot&recover quickest recovery, while markets that rely on cor porate book ings will struggle until organizations relax business travel restrictions,” the Avison Young report projects. “We expect a nice rebound in drive-to leisure demand this summer, but we’ll be watching business travel trends in the fall,” Colliers Canada analysts concur. “We view international business travel and international convention/conference business at the most risk through the medium-term and this will be a drag to major urba n ma rkets a nd la rger conference box hotels.” VANCOUVER LEADS RECOVERY Thus far, Vancouver is seeing more noticeable activity, while Toronto’s longer-lasting lockdown measures are considered a major factor in the city’s weaker numbers. Averaged across the six major markets Avison Young surveys — Vancouver, Calgary, Edmonton, Toronto, Ottawa and Montreal — it charts an occupancy rate of 36.% for June 2021, more than 50% lower than in June 2019. Only Va ncouver su r passed t he national average, registering a 44.8% occupancy rate. Toronto’s hotel rooms were approximately one-third full, at 33.4%, while bookings were scarcest in Montreal, with an occupancy rate of 27.2%. Average RevPAR for the six markets remained below $50, or 66% lower than it had been 24 months earlier. Again, Vancouver was the only market where RevPA R exc e e de d t he aver age. Nevertheless, it was more than 72% short of Vancouver’s June 2019 benchmark, which was then just shy of $250. E conomy, m idsca le a nd upper midscale accommodations are showing the best recovery. Occupancy levels are highest in this service bracket — at roughly 40 to 43% — and the gap from June 2019 bookings and revenues is the narrowest. As of June 2021, economy and midscale hotels were about 38% below June 2019 occupancy rates and lagged June 2019 RevPAR by about 49%. Meanwhile, luxury hotels were still nearly 73% below the occupancy rates they achieved in June 2019 and more than 78% behind on RevPAR. That said, hotels in the luxury, upper upscale and upscale bracket have slipped from a much greater original height and are still outdistancing their more
affordable counterparts for RevPAR. For luxury hotels, RevPAR was at nearly $300 in June 2019, while upper upscale commanded about $200. Both segments enjoyed occupancy rates in excess of 80%, whereas the pre-pandemic rate for economy hotels hovered around 60%. The looming expiry of pandemic relief programs is now causing some wariness across all hotel market segments. Currently, the Canada Emergency Rent Subsidy (CERS) and Canada Emergency Wage Subsidy (CEWS) are scheduled to end Oct. 23 — timing that overlaps with the off-season for leisure travel. The spectre of a fourth wave of COVID outbreaks, also a feared possibility for fall, would likely delay resumption of business travel. “Hoteliers emphasize that they require 30 to 35% occupancy for limited and select-service, and 40 to 45% for fullservice, to break even on their costs. With Vancouver the only market above 40% occupancy in June 2021, and Toronto, Ottawa and Edmonton just above 30%, the hospitality sector is trending toward that break-even point,” the Avison Young report surmises. CONVERSIONS CONTINUE On the investment front, trades have picked up somewhat after the 2020 lull. Colliers Canada blames a paucity of debt financing for stifling transaction activity, but notes that equity capital is “generally bullish” and vendor-take-backs have facilitated some deals. Q2 saw $548 million in transactions, pushing the 2021 first half total to $748 million. “The average deal size is under $8 million given most trading activity is smaller assets in secondary/tertiary markets,” Colliers analyst recount. “Assets that are selling in urban markets have principally been for conversion to an alternate use.” In the latter category, 26 properties, largely located in Ontario and British Columbia, were sold for conversion to social housing, seniors housing or other residential uses. That includes the Best West er n Plus Uptow n Hot el i n Vancouver, the Super 8 Downtown Toronto, the Lakeview Signature Inn Calgary Airport and the Carleton Suite Hotel in Ottawa. Representing a different, non-urban l o c a l e , t wo r e s o r t p r o p e r t i e s encompassing 250 suites in Ontario’s Lake Simcoe/Georgian Bay area also
sold for conversion for a combined price of $60 m illion or approximately $240,000 per suite. Notable traditional trades during the first half of 2021 include the Four Points Hotel and Conference Centre in Gatineau, Quebec; Irwin’s Mountain Inn in Banff, Alberta; the Ambassador Hotel and Conference Centre in Kingston, Ontario; and the Hilton Garden Inn Saskatoon Downtown. “No significant discounts on pricing were evident a mong t he not able transactions that did occur during the first half of 2021. For now, assets are unlikely to trade unless buyers are willing to pay close to pre-COVID-19 asset values, but this could change depend i ng on t he t i m i ng of t he withdrawal of government support for the sector. The market could look completely different if owners aren’t able to service their debt,” Avison Young analysts contend. “Distressedasset sales have not been a major factor to date, but will be something to keep an eye on in the second half of the year and into 2022.” GLOBAL OUTLOOK The outlook on Canadian hotels is generally in sync with international trends, as findings from JLL’s recently released global hotel investor sentiment survey mirror much of the optimism about vaccine rollout and rebounding business and leisure trends. The report tracks an increase in investment activity, with USD $30 billion deployed in the first half of 2021 and 71% of survey respondents stating intentions to be net buyers this year. Among the COVID-19-triggered obstacles, 43% of respondents have encountered more difficulty obtaining debt financing than during the preCOVID era. Meanwhile, 70% foresee a three- to four-year timeline before RevPAR returns to 2019 levels. zz Colliers’ INNvestment Canada Hotel Report Q2 2021 can be found at https://www. collierscanada.com/en-ca/research/innvestmentcanada-hotel-report-q2-2021; Avison Young’s Canada Hotel Market Mid-Year 2021 Review can be found at https://avison-young.foleon. com/ca-marketing/canada-hotel-market-midyear-2021-en/main/; and JLL’s Global Hotels Investor Sentiment Survey can be found at www.jll.ca/en/trends-and-insights/research/jllglobal-hotels-investment-sentiment-survey. Canadian Property Management | September 2021 13
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BACK TO SCHOOL Student Housing in a Post-COVID World By Erin Ruddy FALL IS HERE and university towns are about to get busy. This is great news for local business owners who’ve been fighting to stay afloat through the pandemic, but for residents wary of COVID-carrying newcomers, it’s nothing to rejoice about. Nor is it for the hapless students who arrived to a barrage of “No Vacancy” signs. “This is a real issue,” says David Hutniak, Chief Executive Officer of LandlordBC. “Finding suitable offcampus housing has been a serious struggle this year for post-secondary students, particularly in Victoria. In Vancouver, we’re not hearing about the same level of challenges as what we’re seeing in Victoria, but there is still a real need for more rental housing.” Adding to the list of issues, University of Victoria’s longstanding practice of 16 September 2021 | Canadian Property Management
guaranteeing on-campus housing to firstyear students had to be put on hold due to uncertain provincial guidelines when the application process first opened. “Then there was the unexpected growth in UVIC’s student population, which now sits at roughly 20,000,” Hutniak recounts. “With close to 80% of that number coming from outside Victoria — a city that’s had persistently low vacancy rates for many years prior to the pandemic — there’s simply not enough off-campus housing to fill the need.” Hindered by nimbyism, municipal inertia, and what Hutniak refers to as “a City Council that does not appreciate the significant costs and risks that go with building and operating rental housing,” rental developers and lenders have been hesitant to commit to future purpose-built rental developments. There are also
pressures in the secondary market (i.e., basements suites and single-family homes), which represents a large proportion of the rental universe. “We’ve seen shrinkage in that market as many homeowners with secondary suites or revenue properties have increasingly chosen to capitalize on the ridiculously hot sales market and sell,” he says. “Combine that with what appears to be an unfolding phenomenon that the new buyers of these homes are not interested in being landlords and there’s less of this rental than there used to be.” Meanwhile, COVID posed additional challenges for landlords, who were suddenly faced with an eviction moratorium, rent increase freeze and constantly changing health and safety guidelines. When balanced against increasing costs, including taxes,
reboot&recover insurance, utilities and maintenance, it all conspired to push them out of the industry for good. “When they looked at the risks and rewards associated with being a landlord, there were better places to invest their money without as many challenges,” Hutniak submits. “This is a very concerning trend, especially in a small market like Victoria that’s so dependent upon the secondary market and not creating anywhere near enough new purpose-built rental.” PURPOSE-BUILT POTENTIAL Rental housing shortages certainly aren’t confined to the west coast, and some experts argue that more purpose-built student accommodations (PBSAs) are needed wherever colleges and universities exist. A recent market report by BONARD on behalf of Alignvest Student Housing concludes Canada has, proportionately, far less student-geared housing than other comparable nations, despite being one of the fastest-growing destinations for international students. Exceeding both the United Kingdom and the United States in terms of annual growth, fulltime enrollment in Canadian institutions has grown by 18% since 2010/2011, and all signs indicate they will continue to attract foreigners seeking a quality education. “There is definitely room for more development,” says Trish MacPherson, Partner at Alignvest Student Housing. “Purpose-built student accommodations are highly desirable versus generic rental housing because they are tailored to students and typically located within a ten-minute walk of campus — or as we like to put it: the duration of three songs.” Unlike generic apartments, PBSA buildings offer residents the opportunity for privacy and community, with single rooms within a shared suite ranging from two to six bedrooms. The student-geared amenities include common kitchens, laundry rooms, games rooms, bicycle sheds, car parking, outdoor areas, party rooms and gyms, and residents can choose ensuite or shared bathrooms depending on their budget and preference. “The pandemic situation strongly affected student socialization, which is an important part of the added value offered at PBSAs,” says MacPherson. “Secondyear students coming out of residence, or for those who missed out on the first-year experience in 2020/2021, will benefit
FUNDAMENTAL DRAW By Barbara Carss Strong fundamentals continue to draw investors to the purpose-built rental housing sector despite a pandemic-related squeeze on already tight margins. “There’s just an insatiable demand amongst institutional capital to be in the multifamily space, to have a higher allocation to multifamily space than they have traditionally had, and to own really good product,” Paul Morassutti, CBRE Canada’s Vice Chair, valuation and advisory services, observed earlier this summer during a webinar examining Canadian commercial real estate dynamics. “Buying brand new apartment buildings, certainly at scale, is virtually impossible so there’s now this desire to create product. If the initial returns are skinny, I don’t think they care because, down the road, they will own the type of assets that they’d like to own.” Proponents with shallower resources and/or shorter horizons for investment returns have a tougher business case. Citing a recent report from the consulting firm, Finnegan Marshall, which found that construction costs rose by 53% over the past five years, Morassutti estimated that additional increases in development charges, contributions procured through Section 37 of Ontario’s Planning Act and spiking land prices have actually pushed up costs by as much as 75% since 2016. Typically, developers need about a 3% gain in revenue to balance out a 10% jump in costs. “On the condo side, revenue has also increased, so the condo industry has been able to absorb a lot of these costs and
from being close to school in a new building surrounded by their peers where they can access built-in services and supports.” Though off-campus PBSAs are traditionally more expensive than on-campus and other non-commercial student residences, MacPherson says their added value is reflected in continued high occupancy levels and the ever-increasing interest shown by investors. Currently, Alignvest’s properties are more than 95% occupied and, all tolled, account for about 4,700 beds. Despite COVID, the company recently expanded with three major acquisitions since March 2021: THEO in Ottawa (507 beds); Preston House in Waterloo, Ontario (310 beds); and Bridgeport House, also in Waterloo (485 beds). “This is a stable, resilient sector that has really proven itself,” MacPherson
continue forward,” Morassutti acknowledged. “The pressure has been most acute on the purpose-built rental side and that’s because, even pre-pandemic, the returns for that type of development were very skinny. You have a combination of construction costs going up and revenues not moving so it is really making a lot of these pro formas difficult to pencil out.” Rental revenue slippage is expected to be short-lived once COVID-18 wanes. Looking farther into the future, homeownership affordability barriers are likely to keep a growing portion of urban dwellers in rental accommodations. Morassutti also speculates that many of today’s asset-rich homeowners will feed an uptick in demand for purpose-built projects that offer secure tenure. In particular, he points to a largely uncounted but presumed significant cohort of near-retirees who have inadequate savings for the future. “I think a lot of those households will cash out of their houses and move into rental product, and they’re not going to move into a 400-square-foot condo with an owner who can evict them at any time,” he submitted. Flight to the suburbs, or even farther afield, is likewise projected to abate as urbanites are again immersed in the lifestyle that drew them downtown in the first place. “The cities are back,” asserted Benjamin Tal, Deputy Chief Economist with CIBC World Markets. “The premium of living in a city, when the city is shut down, is zero. When you open back up, the premium is all of a sudden much more significant.”
asserts. “COVID created a lot of challenges, but students still wanted to be near each other, safely partaking in normal activities. Our properties were able to facilitate that.” Whether it’s to offset housing need in areas lacking in rental units, or to deliver that coveted student-life experience, the consensus according to the BONARD report, is that the Canadian off-campus PBSA market is poised for growth: “Despite the prevailing uncertainty around the education sector over the past year, it is thought that Canada’s position as an established education market and its low student housing provision rate will allow the sector to grow substantially once the pandemic is curtailed.” zz Erin Ruddy is the Editor of Canadian Apartment. Canadian Property Management | September 2021 17
reboot&recover
LESSONS FROM
THE NEW SHOPPER Retail Experiences Applied to the Office
By Rebecca Melnyk comes to integrating technology within a space to make a seamless environment,” Wilkinson acknowledged, but she expects the move to hybrid offices will push and accelerate uptake. One early example is Ontario Power Generation’s transformation from a cubicleintensive head office to an open, tech-filled space with a variety of seamless working environments like bookable private booths. JUST AS bricks-and-mortar stores embraced experiential retail to entice consumers who might otherwise shop online, organizations are looking for ways to entice remote workers out of their homes and back to the office. The Interior Design Show Spring Resiliency Conference examined some of the possibilities with the aptly titled seminar: How Retail Design Should Be Inspiring The New Workplace. “The retail we knew before, which was really just the place to go for a transaction, has changed just as the workplace will change going forward,” maintained Suzanne Wilkinson, a Principal with the design firm, Figure 3. “The heads-down work is going to happen at home so the purpose of the office is really going to draw people and communities together so we can share our values with one another and create the relationships that build loyalty [to] an organization.” She and colleague, Mardi Najafi, Figure 3’s Director of Retail Design, explored how their firm’s proprietary principles, which translate brands into physical spaces, might be applied in office settings. “The unconscious desire to connect influences how we act,” Najafi advised. With this human-centred approach in mind, retailers like Starbucks placed its tables at the forefront to enable prime peoplewatching and to inspire passersby to step inside. Others carve out social spaces, like the interactive auditoriums in select Apple stores, to demonstrate how to use products and create space for people to meet and to find informal lessons. Looking to an office scenario, the Winnipeg-based law firm Thompson 18 September 2021 | Canadian Property Management
Dorfman Sweatman moved its lunchroom to the reception area and makes other office space available for community events. The design, which is accented with local stone, timber and artwork, eschews the typical formality of a legal firm in favour of a bright, open and social environment. EXCITING TARGET GROUPS Meanwhile, design and furnishings can trigger emotional connections and memories. In stores, Najafi explained, the goal is to excite retailers’ target groups and turn them into brand ambassadors via Instagram and other platforms. “This has been a key element, which has reduced ad costs — using the airwaves of social media to broaden brand experience, not just visual, but multi-sensory,” she said. Engaging and unique in-store experiences have been key to drawing customers. Najafi cited examples such as LiftLab, which offers build-your-own lipstick, or Urban Runners, which recreates textures and surfaces of urban locales to help customers test the performance of shoes they try on. Canada Goose goes a step further, harnessing technology to create cold fitting rooms that replicate harsh winters. Innovative retailers have also integrated digital into the shopping experience — for example, so that shoppers can employ virtual reality to envision furniture in a space before making a purchase. This leverages the shopper’s own devices for a frictionless journey from the order all the way to checkout. For now, most workplaces aren’t this advanced on the technology front. “Obviously, there is a huge expense when it
CONNECTING WITH A MISSION Najafi looks to a digitally savvy “new shopper” who demands convenience, has a shorter attention span, favours authentic connections and expects brands to deliver on their promises as the prototype for today’s in-store customer base. “The new shopper is not about accumulating points and getting free promotions,” she contended. “They are all about connecting with your brand from a mission standpoint.” When applying this concept for organizational purposes, the message is geared to employees. For example, at the Princess Margaret Cancer Foundation’s Project Sunrise — which set out to create an environment that inspires employees and reflects its mission: “to cure cancer in our lifetime” — visual reminders of the team’s fundraising efforts light up the space through screened stories of patients. “It’s a very focused approach, but also through messaging, which can be very important to inspiring people every day to stay on task, stay devoted and keep being inspired and working in a healthy environment,” Wilkinson said. Retailers constantly refresh their environments, knowing that human beings are “hardwired to seek out the new.” In the workplace, that calls for adaptation in step with organizational change, and providing space staff can tailor as they progress through projects, from the collaborative research stage to more focused work. zz Rebecca Melnyk is the Editor of Canadian Facility Management & Design.
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THE NEW NORMALIZATION REALPAC Adapts Methodologies for Pandemic-Level Densities By Barbara Carss EFFECTIVE benchmarking almost invariably entails an extra layer of analysis to account for variables — in climate, occupancy and/or function — that can skew building-to-building comparisons. Enhanced standardized methodologies for gauging energy-use and water-use intensity are now freely available for building owners/managers seeking a consistent, accurate and userfriendly tool to reckon key variables and assess performance across their office building portfolios. 20 September 2021 | Canadian Property Management
Newly released updates to the REALPAC normalized energy-use intensity (NEUI) and normalized wateruse intensity (NWUI) methodologies further refine formulas that were initially developed to support benchmarking efforts that the prominent Canadian commercial real estate organization sponsored last decade. Namely: the 20 by ’15 campaign, a national challenge to achieve an average annual energy-use intensity of 20 equivalent kilowatt-hours per square foot (ekWh/ft2/yr) by 2015;
a n d R E A L PAC ’s 2 01 2 w a t e r benchmarking pilot, which analyzed at least 12 months of water-use data from 83 participating office buildings. Those normalization methodologies have proved instrumental for pegging baseline performance and measuring energy and water-saving progress in a Canadian office inventory scattered across six climate zones, and exhibiting a range of operational pressures and functional constraints. However, the 2021 versions address some emerging needs.
benchmarking “COVID-19 exposed that the original methodologies had reduced effectiveness in the evaluation of building performance in periods of very low occupant density,” reports Nea l Bach, P resident of Energ y Profiles Limited, which led the update project. “Years of analysis of hundreds of buildings a lso revea led ot her opportunities for improvement. Both methodologies have been rebuilt to provide renewed clarity on building performance in the present day, and to unleash the next wave of investment in energy, water and carbon reductions over the coming decades.” Similar to the originals, the updated NEUI and NWUI methodologies begin with a calculation of actual energy-use or water-use intensity. They then apply a series of adjustments to achieve a normalized reading that accounts for asset-specific variables in energy and water demand due to local climate conditions, occupant density and operational timeframes, as well as anomalies such as exceptional energy and/or water demand in enclosed parking areas, data centres, call centres, fitness facilities and restaurants. Along with Energy Profiles Limited, a 17-member subcommittee stacked with engineering, smart analytics and building performance expertise from REALPAC member companies and industry service providers reviewed and provided comments on the updated baseline model, adjustment factors and computation tool. The latter produces the normalized readings — in an ekWh/ft 2 or litres per square foot (L/ ft 2) metric — after users input the required information. Among changes to the 2021 version, the new NEUI differentiates vacant space, where landlords have flexibility to curtail heating and cooling, from unoccupied sublets, where they are obligated to condition the space. It also introduces new options to determine normalized energy-use intensity in l e a s e d s p a c e w it h lowe r- t h a n accustomed (versus pre-pandemic) occupant densities.
“Both methodologies have been rebuilt to provide renewed clarity on building performance in the present day, and to unleash the next wave of investment in energy, water and carbon reductions over the coming decades.” upta ke of energy and water-use benchmarking and yield further insights and spinoff benefits from an expanded universe of participants. For example, normalization factors to recognize exceptional energy and water-use have proven fruitful for reaching and encouraging owners/managers who might otherwise be reluctant to divulge actual consumption or compare performance
against a greater number of more conventional office buildings. “Many landlords have concerns regarding their office buildings being ‘special’ or ‘different’ and thus not being eligible to participate due to factors such as tenant energy or water consumption,” R EA LPAC’s stated under pinn ing principles acknowledge. “The REALPAC
FOSTERING CONFIDENCE This all aligns with REALPAC’s goal to provide a transparent, simple and credible tool that can facilitate wider Canadian Property Management | September 2021 21
benchmarking NEUI and NWUI methodologies must therefore be broadly applicable and inclusive of most, if not all, types of office buildings and tenant mixes.” The methodologies are offered as a tool to support building and portfolio ow n e r s / m a n a ge r s w it h i nt e r n a l benchmarking exercises and are not currently part of any formal voluntary or mandated energy or water benchmarking and reporting program. However, given the profile of REALPAC’s membership, which includes many of Canada’s largest commercial real estate companies and i nvest ment a sset m a nager s, t he normalization methodologies have been influential in generating a growing pool of consistent data that can inform a range of E SG (env i ron ment a l, so cia l, governance) initiatives. “Creating solid and trusted metrics is critical for successful energy, water, ca rbon a nd waste re duct ions. REALPAC has been the leader in the field for commercial properties and this is great progress on the alignment of met r ics so t hat d i f ferent organizations can all talk the same language,” observes Andrew Pride, an
CONTINUED GROWTH IN GRESB PARTICIPATION GRESB, the global assessment of environmental, social and governance (ESG) performance for commercial real estate portfolios and infrastructure assets, has recorded another impressive surge in participation for 2021. A 26% gain in reporting entities follows an 18% increase in 2020. “We are pleased to see such a high level of participation in this year’s GRESB benchmark coverage, particularly considering the business disruptions we have all experienced over the past year and a half,” says Sebastien Roussotte, Chief Executive Officer of GRESB BV. The 2021 real estate results, slated to be released later this fall, will draw from a database of 1,520 entities collectively reporting on 117,000 assets valued at USD $5.7 trillion. Participants include 1,187 non-listed property funds, 326 listed companies and REITs and seven governmental entities. A 24% increase in respondents this year — up from 1,229 in 2020 — also boosts the numbers of assets in the database by nearly 22% and the value of assets under of management by nearly 19% compared to 2020. Meanwhile, another 31 funds joined GRESB’s infrastructure fund assessment, lifting 2021 participation to 149, while 132 assets were added to the asset-level assessment. The latter exercise now encompasses 558 assets located in 69 countries and collectively valued at USD $738 billion. GRESB’s investor membership now stands at 140 institutional and financial investors with more than USD $47 trillion in assets under management. They mine the data to monitor the performance of their holdings and to inform their investment decisionmaking. “Increased engagement with a standardized benchmark demonstrates a strong industry commitment to ESG transparency and collaborative action,” Roussotte maintains. – REMI Network
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e n g ineer a nd energy ma nagement specialist who serves as Chair of the National Research Council’s standing committee on energy efficiency in buildings. “The updated metrics are especially timely with so many partially occupied buildings due to COVID-19. It would be great to see the normalization methodologies extended to other property sectors and to include waste also.” REALPAC hints that could be a possibility, and the computational tool may be augmented so that users will be able to calculate carbon emissions associated with their energy and water-use intensity. “The REALPAC NEUI and REALPAC NWUI methodologies will be updated periodically over time through feedback and review from industry to ensure that they remain current and valuable to users,” affirms K ristopher Kolenc, REALPAC’s Research and Sustainability Ma nager. “ T he met hodologies a re currently only designed for commercial office buildings, but may be expanded to other asset classes in the future.” zz For more information about the new energyand water-use intensity methodologies, see REALPAC’s website at www.realpac.ca.
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PANDEMIC RELIEF FOR LANDLORDS AND CONDO BOARDS Balancing today’s financial and tenant challenges Being a landlord can be a challenge during the best of times. Throughout the pandemic, however, financial hardships and logistical obstacles have added to the stresses (and costs) of landlords and boards of directors responsible for managing residential and commercial properties. It’s no stretch to say that the pandemic has elevated the risks (and headaches) of being a landlord. Today, landlords, boards and property managers face more challenges on every front, including: • Stressed tenant relations: The landlord-tenant and condominium owner and board’s relationships have been under considerable strain for the past year and a half. On one side, there is a significant number of renters and owners who have faced -- and continue to face -- legitimate financial challenges that make
it difficult to pay rent or condominium fees resulting in defaults and arrears. On the other side, however, are landlords and boards with their own critical expenses to bear. Both parties are doing what they can to weather the storm, but competing financial challenges created by pandemic conditions have added tensions to the relationship. • Health and safety necessities: Keeping renters and condominium owners safe has remained a top priority throughout the COVID-19 pandemic. That said, investing in enhanced cleaning programs, health and safety technologies, staff training, and other measures, in addition to regular overhead for property maintenance, repair and emergencies, adds considerable expense and cost to operations. Absorbing these additional costs can be difficult, particularly during the pandemic when landlords are unable to collect full rent. • Increased maintenance costs: The pandemic has underlined the need for reliable ventilation systems and consistently healthy indoor air quality (IAQ). In response, many apartment owners, condominium boards, and stakeholders have invested in more effective HVAC systems to keep their occupants safe. Paying for these upgrades or retrofits may be a necessity, but it’s stretching maintenance budgets to their limit and in some cases beyond.
SPONSORED CONTENT • Maintenance backlogs: A number of non-critical repairs and replacements have been put on hold over the last year and a half. Once we are past pandemic conditions, however, those same maintenance tasks will be waiting. Recognizing this, landlords, boards and property management teams will face a tsunami of increased costs as they struggle to remobilize people and resources to tackle this inevitable backlog. • Limited contact: Social distancing protocols have made it more difficult for landlords and boards to interact directly with tenants and unit owners. And while e-mails, phone calls, and video streaming do the trick, lack of face-to-face contact and social distancing makes it hard for property managers and maintenance contractors to do their jobs effectively and efficiently, and often at additional time and cost. Landlord and Condo Support These are difficult and costly days to be a landlord. And while Canada is making progress in its fight against the pandemic, property managers of every kind will likely find themselves balancing financial anxieties and tenant relationships well beyond the crisis. “The landlords have been giving relief to the tenants to help them survive, and many will need to continue doing this as the economy takes time to recover,” says Winnie Tsui, Director of Operations with Living Properties, a GTAbased property management firm. “Having said that, it’s likely that landlords will still have trouble collecting full rent even after the pandemic and, at the same time, maintaining operating costs, repairs, maintenance, and any number of expenses.” It’s enough to make any building management professional lose sleep. The good news, adds Tsui, is that landlords have access to their own supports: “Our President has insisted that our primary obligation is to share the burden with our landlord clients through this difficult time, which is why we’re prepared to offer new
clients up to 30% discount on our services for two years.” Think of Living Properties as a “one-stop property solution,” she continues. With its team of certified and experienced property managers, the firm provides a full suite of services, from leasing to rent collection to back-office accounting, unit inspections to maintenance management, managing inspections, regulation enforcement, and beyond. Living Properties management package comes with 24/7 access to emergency service and support for all aspects of a tenant’s move-ins and move-outs, including conducting reference checks, arranging move-out/ move-in dates, and issuing collection and evictionrelated notices, when needed. “The job of a landlord is always changing, which means we’re always keeping an eye on evolving regulations and trends, and employing the latest technologies and systems, to help landlords stay ahead,” adds Tsui. “This 30% discount for new clients is just another way we’re helping them respond to today’s challenges,” she adds. Experience is also an asset, especially as landlords look ahead at post-pandemic recovery. Established in 1983, Living Properties’ team has spent decades helping clients navigate an ever-changing landscape. Over those years, the firm has also aligned itself with industry partners, becoming a fully-licensed member of the Condominium Management Regulatory Authority (CRMAO) and the Canadian Condominium Institute (CCI), and a member of the Association of Condominium Managers of Ontario (ACMO) and Federation of RentalHousing Providers of Ontario (FRPO). “We have the best resources for the landlord, and we offer a very competitive rate; but more importantly, we believe in applying a personal approach to property management that benefits both landlords and their tenants,” adds Tsui. Living Properties Inc. is a full-service property management company providing investors, property owners, and condominium boards with peace of mind and quality service since 1983. Learn how new clients can receive 30% off Living Properties’ services. Visit www.livingproperties.com or call 905-477-2090.
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CIVIC BACKLOG Ontario Monitoring Body Finds Municipal Asset Condition Wanting
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ntario’s civic building inventory has fallen the farthest behind on capital repair and renewal among seven categories of municipal infrastructure assets scrutinized in a recently released report from the Financial Accountability Office of Ontario (FAO). The analysis, which is part of the FAO’s efforts to identify vulnerabilities to climate change hazards, concludes that about 55% of total municipal infrastructure is in a state of good repair, but fewer than 42% of the assets in the “other buildings and facilities” category merit that rating. That encompasses a varied roster of social housing, government administrative buildings, cultural/recreational/sports venues and solid waste handling facilities with a current replacement value (CRV) pegged at nearly $75 billion. These assets represents about 15% of the total value of locally held infrastructure throughout the province. Additionally, many large buildings such as transit terminals and water/wastewater treatment plants are itemized in other infrastructure asset categories. The FAO estimates the current replacement value of all of Ontario’s municipal infrastructure at approximately $484 billion. Roads represent the largest share of that tally, at $130 billion or 27% of CRV, followed by wastewater infrastructure (20%) and potable water infrastructure (17%). Transit accounts for the smallest portion — 2% — of infrastructure value. However, nearly 30% or $1.8 billion worth of assets in this category are identified as “building-type” structures, including commuter stations, routeside shelters, garages and other maintenance/ storage depots. Within the buildings/facilities category, approximately 122,770 social housing units are valued at more than $23 billion. Administrative headquarters and cultural/recreational/sports venues each carry a CRV of more than $19 billion, with the remaining assortment of buildings for justice, health, social services or solid waste management purposes estimated at $13 billion. Reflective of broad-based municipal responsibilities, building/facility assets include 1,332 community centres, 813 libraries, 382 museums and archives, 76 galleries, 184 materials recovery facilities, 129 composting facilities and 18 anaerobic digestion facilities. Meanwhile, illustrative of the ongoing challenge to manage solid waste and resultant
greenhouse gas emissions, Ontario municipalities currently own 242 dump sites, 181 active engineered landfills and 625 inactive engineered landfills and dumps, which are also tallied in this category. INCONSISTENT DATA Province-wide, the FAO concludes there is a $52-billion backlog of required spending based on 2020 costs for bringing assets to a state of good repair. That presumption is drawn from multiple sources: municipally supplied data and/ or local asset management plans (AMPs) where available; Statistics Canada’s Canadian Core Public Infrastructure (CCPI) survey; the Ontario Ministry of Municipal Affairs’ Financial Information Return (FIR); and the Ontario Ministry of Infrastructure’s Municipal Asset Inventory. FAO researchers then derived their own scale to support more consistent interpretation. Notably, too, no condition data was available for more than $47 billion worth of infrastructure assets, or roughly 10% of the total CRV.
“There is a considerable degree of uncertainty associated with the reported condition data. In some cases, reported condition data was based on engineering site inspections, while in other cases the data may be imputed based on the asset’s age or may simply reflect the municipality’s judgement in the absence of a site inspection. Additional uncertainty comes from the standards by which condition is assessed across municipalities. For example, an asset assessed to be in ‘Good’ condition in one municipality might be assessed as ‘Fair’ based on another municipality’s framework,” the report acknowledges. “To account for this uncertainty, the FAO defined a broader boundary for the condition of each asset. For instance, an asset reported as ‘Good’ could take on a condition from ‘Very Good’ to ‘Fair’. Based on this approach, the FAO developed a range of condition estimates.” The report also reminds municipal officials that they now have less than 10 months to meet the first reporting deadline in a 2017 Provincial regulation, which mandates them to prepare publicly available asset management
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plans that report the condition of their current infrastructure assets, projects future needs and sets out a strategy for capital upkeep. These are to be filed by July 2022 for core assets related to water, wastewater, storm water, roads and bridges/culverts , and by July 2024 for non-core assets, which include other buildings/facilities. STATE OF REPAIR Generally, the FAO analysis found that potable water, wastewater and storm water infrastructure is in the best condition, with more than two-thirds of assets in the three categories classified in good state of repair. After the civic building inventory, roads are in the next worst shape on a percentage basis, with more than 56% considered in an inadequate state of repair. On a dollar basis, roads account for 41% of the spending backlog, requiring an estimated $21.1 billion of capital investment to achieve a full state of good repair. Buildings/facilities are estimated to need a $9.5-billion capital injection, equating to 18% of the spending backlog.
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Roads and buildings/facilities also emerge notoriously when viewed in terms of the ratio of required repair costs to the current replacement value of all assets in the infrastructure category. The average ratio across all assets in all categories is 11.9%, while the ratio is 17.2% for roads and 13.5% for buildings/facilities. “The backlog-to-CRV ratio indicates the relative state of disrepair of assets. The higher the share, the worse condition assets are in,” the FAO report explains. Interestingly, too, while transit and bridges/ culverts contribute relatively modestly to the overall spending backlog — with 2% and 8% quotients respectively — their backlogto-CRV ratios are much more pronounced at 11.3% and 11%. Potable water infrastructure has the lowest backlog-to-CRV ratio at 7.3%, with ratios for wastewater (8.8%) and storm water (9.8%) on the next rungs up. Regionally, the Greater Toronto Area boasts both the highest percentage of assets deemed to be in a good state of repair (62.3%) and the lowest ratio of repair backlog-to-CRV (9%). Ottawa has the most catching up to do with just 38.7% of infrastructure assets considered
in good repair, while the collection of counties making up the neighbouring Kingston-Pembroke region registers the highest backlog-to-CRV ratio at 19.7%. “Keeping assets in a state of good repair helps to maximize the benefits of public infrastructure, and ensures assets are delivering their intended services in a condition that is considered acceptable from both an engineering and a cost management perspective,” the FAO report advises. “Maintaining public infrastructure in a state of good repair is generally the most cost-effective strategy over an asset’s life cycle, but is not the only consideration for asset managers with multiple budgetary priorities. However, further postponing repairs raises the risk of service disruption and increases the costs associated with municipal infrastructure over time.” ■ ___________________________________________ THE COMPLETE TEXT OF MUNICIPAL INFRASTRUCTURE: A REVIEW OF ONTARIO’S INFRASTRUCTURE AND AN ASSESSMENT OF THE STATE OF REPAIR CAN BE FOUND AT W W W.FAO-ON.ORG/ EN / BLO G / P UBL IC AT ION S / MUNICIPA LINFRASTRUCTURE-2021.
FACILITIES MANAGEMENT
COBBLED COOLING New LTC Mandate Stops Short of Central Air Conditioning BY BARBARA CARSS
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eatwave conditions and rudimentary cooling fallbacks posed challenges this summer in some Ontario longterm care (LTC) homes that do not have central air conditioning. As reported to the REMI Network, staff in at least one such facility dumped the collected condensate from portable air conditioners down sinks or toilets in residents’ rooms — a practice deemed to present a low risk for the spread of Legionella bacteria, but, nevertheless, far from the preferred maintenance standard. “A best practice would be properly draining that water somewhere, but that might not be considered practical if this is just an interim measure before a central air conditioning system is installed,” observes Brennan Ficko, a project manager and environmental and risk management professional with Pinchin Ltd., a consulting firm specializing in environmental services. REGULATORY REQUIREMENTS The regulation, which came into force in the spring of 2020, stipulates that longterm care homes must provide access to cooling from May 15 to September 15, and on any other day when Environment Canada forecasts the outdoor temperature will reach at least 26 degrees Celsius or when interior temperatures climb to that level. However, there is still no requirement for air conditioning in all residents’ rooms. As mandated in the regulation, long-term care home license holders must prepare a written prevention and management plan for heat-related illnesses, which is to be evaluated annually and revised as necessary. Plans must identify and outline protocols for responding to heat-related risks, including staff responsibilities, monitoring and cooling equipment/ systems and communication strategies. The new regulation continues to exempt operators from installing central air
conditioning if they provide one dedicated area per every 40 residents where temperatures are kept at “a comfortable level for residents”. However, unlike the previous circa-2010 rules, it stipulates that these areas must be maintained with a mechanical air cooling system. Operators are now additionally required to take temperature readings in various areas three times daily, including: at least two resident bedrooms in different areas of the building; a common area on every floor of the building; and every dedicated cooling area, where they exist. Temperatures are to be recorded every morning, afternoon and evening, and retained in a log for at least one year. “The ministry requires homes without air conditioning in all resident rooms to submit their temperature log daily for any resident room that does not have air conditioning,” says Donette Stoll, a spokesperson with Ontario’s Ministry of Long-term Care. “To ensure all homes are following this regulation, the ministry has a robust temperature monitoring reporting process. Should residents and visitors to homes have concerns, including if the temperature at the home is uncomfortable, they can make complaints to the ministry for an inspection. The ministry follows up with homes regarding hot weather related complaints.” PROBLEMATIC LOGISTICS Commenting on a REMI Network news item from May 2021, which outlined details of the new regulation, one LTC employee chronicled the problematic logistics in her workplace. “They have installed portable air conditioners at the end of each hall that we, the staff, empty three times per shift for each air conditioner unit,” she reported. “That means lugging at least 10 to 15 litres of water to the closest resident room and
dumping this container of water into the toilet or sink, while spilling water on the floor, as it is very awkward to manage.” Air quality specialists advise there is little risk of airborne infections spreading this way. Legionella bacteria, which causes a pneumonia-like illness considered most threatening to people with chronic health conditions and compromised immunity, typically flourishes in warm stagnant water, but infiltrates the respiratory systems when it is inhaled from mist or vapour. “When it comes to Legionella, the risk comes from aerosolization of the bacteria and breathing it into your lungs,” Ficko affirms. “There is little to no risk from Legionella associated with condensate water from a regularly emptied condensate drain pan of a properly maintained portable air conditioner,” Stoll concurs. Nevertheless, health care and seniors’ advocates point to the current development of national long-term care standards as an important step to support rigorous monitoring and enforcement of mandated operational requirements. Dr. Samir Sinha, Director of Geriatrics for the Mount Sinai and University Health Network hospitals and Director of Health Policy Research with the National Institute on Ageing, chairs the Health Standards Organization (HSO) committee leading the work. "The COVID-19 pandemic has brought decades-old health, safety and accountability issues in Canada's longterm care system to public attention. Systemic reform is imperative in order to improve health outcomes and the quality of life for long-term care residents and their families, and the working conditions for LTC staff,” he asserts. “Standards can become the new basis of care and work standards, regulation and enforcement mechanisms, and even legislation.” ■ www.REMInetwork.com
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PROGNOSIS
Scientists Examine Physical Factors of Climate Change CANADIAN REGIONS will experience climate change fallout differently, but a global consortium of s c ient ist s is wa r n i ng r e sid ent s everywhere that severe conditions and extreme events are going to be more frequent and intense. The Intergovernmental Panel on Climate Change’s (IPCC) recently delivered compendium of physical science factors and their projected outcomes is the first installment of a three-part assessment report planned for release before the end of 2022. The report — which is the product of 234 researchers based in 66 countries and was subject to more than 78,000 expert and government review comments prior to public release — synthesizes findings from a range of scientific disciplines and draws on ongoing advancements in global and regional climate simulation to track the evolving momentum of climate change. It outlines expected impacts of 1.5-degree and 2-degree Celsius increases in the global mean temperature and details the weather-related forces most likely to be in play in regions and topographies worldwide. “The innovations in this report, and advances in climate science that it reflects, provide an invaluable input into climate negotiations and decisionmaking,” says Hoesung Lee, the Chair of the IPCC, which is a United Nations body, established in 1988 to provide world leaders with regularly updated scientific insight on the risks and implications of climate change. “We now have a much clearer picture of the past, present and future climate, which is essential for understanding where we are 30 September 2021 | Canadian Property Management
headed, what can be done and how we can prepare,” concurs Valérie MassonDelmotte, Co-chair of the working group that produced the new report. A “virtually certain” shift toward warmer temperatures is projected across North America, whereas current wet or dry propensities are expected to become even more pronounced. I n C a na d a , scient ist s for ese e accelerated warming in the far north with attendant thawing of permafrost, glaciers and polar ice releasing vast stores of sequestered carbon that further escalates damaging trends. Western provinces are in line for harsher droughts and heightened forest fire risk, while increased precipitation spurs more river and flash flooding to the east. Pacific and Atlantic regions will be vulnerable to a deemed “virtually certain” rise in sea level, causing more flooding in low-lying areas and more erosion, particularly along sandy shorelines. Threats to ocean ecosystems also have flow-through risks for coastal populations and key economic sectors. For now, scientists are somewhat less definitive about changes in wind speed and related eventualities. “Tropical cyclones, severe wind and dust storms in North America are shifting toward more extreme characteristics, with a stronger signal toward heightened intensity than increased frequency, although specific regional patterns are more uncertain,” the report notes. Meanwhile, cities are identified as the hotspots of climate change where built form, human activity and sparse vegetation combine to engender urban heat islands. Urban dwellers are expected to suffer amplified daytime temperatures
and enjoy a lesser degree of nighttime cooling. They could be exposed to higher levels of air pollution due to heat-related increases in ground-level ozone, and flash flooding is likely to be more problematic as impermeable surfaces channel cascading water to lower-lying catchments. Although these trends are already well established, scientists now have “high confidence” they will worsen. “Compared to present day, large implications are expected from the combination of future urban development and more frequent occurrence of extreme climate events, such as heatwaves, with more hot days and warm nights adding to heat stress in cities,” the report states. “Climate change is already affecting every region on Earth in multiple ways. The changes we experience will increase with additional warming,” reiterates Panmao Zhai, Co-chair of the IPCC working group. In laying out the extent of the challenge, the scientific team seeks to bolster commitment for an aggressive response. Following this study of the physical science basis for climate change, the pending two reports in the series will focus on adaptation and mitigation. “Stabilizing the climate will require strong, rapid and sustained reductions in greenhouse gas emissions and reaching net zero CO2 emissions,” Zhai urges. “Limiting other greenhouse gases and air pollutants, especially methane, could have benefits both for health and the climate.” zz The complete text of the Intergovernmental Panel on Climate Change report can be found at www.ipcc.ch/report/ar6/wg1.
ReVision 2021 NXTEK Forum November 9, 2021
What will the recovery look like? What have we learned? What is next? BOMA Toronto’s 2021 NXTEK Forum is a full-day hybrid event designed to maximize the attendee experience both in-person and virtually! Hear from industry experts and early adopters who have harnessed technology to operate their buildings safely and efficiently. Here are a few highlights: Kick off Keynote
Closing Keynote
Jim Carr, Chief Innovation Officer, BentallGreenOak
Paul Finkbeiner, Executive Vice President & Global Head of Real Estate, London Life/Great-West Lifeco Inc.
Opening Executive Panel: How did we fare? Industry leaders are back to unpack the impact COVID-19 has had on technological innovation. Moderator
Neil Lacheur, Executive Vice President, Avison Young
Panelist
Dennis Lopez, CEO, QuadReal Property Group
Panelist
Brian Rosen, President & CEO, Canada, Colliers International
Save the date! The NXTEK Forum is November 9, 2021 Visit our events page to register @bomatoronto.org In-Person: Members: $199, Non-Members: $299 Virtual: Members: $79, Non-Members: $129 * BOMI Accreditations: 8 CPD credits
Stay tuned for additional program highlights!
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