CPM Spring 2023

VOL. 38 NO. 1 SPRING 2023

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 Kristian Arciaga, Peter Dalglish, Jennifer GliedGoldstein, Norman Kahn, Steven Lewis, Kamya Miglani, Temitope Tunbi Onifade, Jasraj Shergill, Helen Tooze, Paulina Torres

Production Coordinator Ines Louis Inesl@mediaedge.ca

National Sales Bryan Chong bryanc@mediaedge.ca

Ron Guerra rong@mediaedge.ca

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

editor’snote

EVEN CLIMATE CHANGE deniers are revising their gameplans in response to mounting evidence of environmental volatility. The one who routinely bombards my in-box with media releases about purported carbon-related spuriousness is now more likely to disdain the cost of transitioning away from fossil fuels than to dispute the preponderance and impact of extreme weather events.

Yet, transition has been synonymous with societal progress and human achievement throughout time. It might be threatening for those heavily invested in fading incumbent philosophies, practices, technologies and/or products, but, historically, arriving successors have opened up new possibilities for the broader public, boosted productivity and generated wealth.

History also shows that costs for purchasers can drop sharply and rapidly as emergent options build scale. The argon and tungsten interests apparently didn’t have the inclination or the resources to bankroll a stealthy campaign against upstart lighting technologies, but what a futile effort that ultimately would have been.

“In terms of market share, the percentage of sales on incandescents and halogens are very minimal at this point,” confirms Linda Conejo, Business Development Manager, with the lighting products and services firm, LEDVANCE Ltd.

Her sector exemplifies one that has adjusted its product lines and production facilities and got on with it (blazing a trail that manufacturers of HVAC equipment and automobiles are also taking). In this issue, we look at what’s coming next as Canada and other countries around the world leverage LED advancement to phase out mercury-containing fluorescent and metal halide lamps.

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Although the momentum for transition arises from myriad individual actions, it’s actually a group process. JLL’s ESG team offers some pointers on how green leases could be a thrust for productive and rewarding landlord-tenant collaboration.

We also look at new guidance from the Canadian Climate Law Initiative on incorporating climate risk management into commercial real estate’s governance structures, and explore the Organisation for Economic Co-operation and Development’s view of Canada’s progress toward net-zero buildings. Turning to other industry challenges and opportunities, we report on the current differing outlooks for multifamily and retail assets, and consider how one essential public facility — the bathroom — could better accommodate people with disabilities.

This year brings the 28th annual edition of the Who’s Who in Canadian Real Estate survey. Thank you to the 210 participants for 2023 and to our indefatigable project manager, Gerald Ngan, for collecting and organizing the results.

Barbara Carss barbc@mediaedge.ca

Focus: Real Estate News & Context

6 Mercury Mitigation: Fluorescent and metal halide lamps set to be phased out of the market.

8 Commercial Complications: Amendments required as new rules for non-Canadian housing purchasers inadvertently disrupt non-residential deals.

10 Climate Risk Governance: Guidance offered for boards of directors, executives and professionals in the commercial real estate sector.

12 Owner-Occupier Collaboration: Crafting effective green leases to tackle ambitious net-zero targets.

15 Who’s Who in Canadian Real Estate: 28th annual survey of the industry’s players and portfolios in the office, industrial, retail and multifamily sectors.

26 Facilitating Equity: Public bathrooms often inadequately accommodate users with disabilities.

30 Department Store Drain: Nordstrom vacates anchor space in prestige malls across Canada.

34 Preferred Assets: Purpose-built rental housing demonstrates growth potential.

36 Peer Scrutiny: The OECD reviews net-zero readiness of Canada’s building stock.

42 Risk-based Oversight: Ontario introduces new approach to enforcing elevator and escalator safety. Departments

3 Editor’s note

DELIVERING

A lot has changed since 1922, but not our dedication to excellence

DELIVERING QUALITY SERVICE AND SOLUTIONS FOR OVER A CENTURY

• HVAC Services

• Predictive Maintenance

• Energy Management & Audits

• Building Automation Systems

• Chiller & Boiler Services

• Mechanical Retrofits

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.

LIGHTING PHASE-OUT LOOMS

Dim Future for Fluorescents and Metal Halides

By Barbara Carss

FLUORESCENTS and metal halides

will be further marginalized in the lighting market with pending amendments to Canada’s regulations governing products containing mercury. Proposed new rules, which were posted in late December for 75 days of public consultation, would block sales of fluorescent and metal halide lamps for general lighting purposes by 2027. As well, high-pressure sodium vapour lighting and horticultural fluorescents would be largely unobtainable by 2032.

These moves align with Canada’s commitment as a signatory to the 2017 Minamata Convention on Mercury, a legally binding international agreement under the United Nations Environment Programme (UNEP), and somewhat lag the schedule for actions in the European Union.

Accompanying regulatory analysis estimates the total package of amendments should result in a 775-kilogram reduction in the quantity of mercury released into the environment during the 10 years from 2024 to 2033. That will also entail a ban on mercurycontaining catalysts in the manufacture of polyurethanes beginning in 2028.

It’s proposed that the manufacture or

import of a range of fluorescent and metal halide lamps would be prohibited as of next January. However, that would come with a three-year transition period in which replacement lamps for existing fixtures could be brought to the market. After that, there would be an additional two years when retailers could sell inventory they hold in stock.

Although the amendments are termed “proposed”, once posted in the Canada Gazette they are nearing their final form. The current step of the adoption process follows after an earlier public consultation in 2018, which informs the amendments and regulatory analysis.

Mercury is a cumulative and lasting toxin detrimental to human and wildlife reproductive and neurological health. It is a transboundary pollutant that can cause harm in areas beyond its country of origin, and is a particular concern in Arctic regions where measured mercury levels in the environment are three times higher than they were in the 1920s. Concomitantly, the regulatory analysis notes a lack of disposal and waste processing facilities for spent mercury-containing products in remote

northern communities, creating increased exposure to risk and more logistical costs and complications for mercury waste handling.

Enacted in 2014, the regulations initially established maximum thresholds for the mercury content in products such as compact fluorescent lamps, (CFLs), T5, T8 and T12 straight fluorescent lamps and cold cathode tubing for signage, and allowed for their manufacture, importation, distribution and use in Canada in the absence of viable mercury-free alternatives. That has now changed due to subsequent advancements in the performance, price competitiveness and availability of LED lighting.

“The transition from mercury-containing lamps to LED technology has accelerated in the past few years,” the regulatory analysis states. “The Department’s [Environment] analysis of benefits and costs estimates that the benefits to the environment and the economy of the conversion to mercury-free alternatives are greater than the costs.”

COST/BENEFITS ANALYSIS

Notably, LEDs promise improved energy performance projected to result in a 4.8% reduction in Canada-wide energy usage and

$3.87 billion in cost savings to 2033. That would further equate to a 4.7 megatonne (MT) reduction in greenhouse gas (GHG) emissions, saving $237.4 million on carbon costs for the same period.

Linda Conejo, Business Development Manager with the lighting products and services company, LEDVANCE Ltd., estimates that recent annual sales of “traditional” lighting products have been falling by 25 to 30%, while LEDs gain market share. She credits energy efficiency incentive programs for much of that momentum in the commercial real estate sector and suggests that the early waves of LED adopters have been largely focused on energy savings and reducing GHG emissions. At the same time, given previous experience with phase-outs of incandescent and halogen bulbs, customers have been monitoring the possibility that more regulatory dictates could be afoot.

“There hasn’t been an official push on fluorescents, but people have already taken that initiative to start replacing their lights,” Conejo observes. “Although it’s technically still a proposal right now, a 2024 start-date for a phase-out will push everyone to start doing this sooner than later.”

The government’s cost/benefits analysis focuses on the upfront costs, lifespan and energy performance of mercury-containing lamps versus the LED alternatives and does not factor in replacement of fixtures, citing an inability to accurately estimate the number of replacements that would be required or the ensuing cost of that equipment.

“Most mercury-containing lamps can be easily substituted for LED lamps; however, some lamp fixtures could need to be replaced to accommodate the switch to LEDs,” the regulatory analysis acknowledges.

Decorative fixtures and other niche lighting applications in commercial buildings will likely pose more complications. For example, the hospitality sector’s widespread use of dimming systems presents a challenge since older systems won’t be compatible with LEDs.

“There will be many fixtures that will have to be replaced,” Conejo says. “Not so much for fluorescents because we do have a lot of the tubes that you can switch out, but a lot of the metal halides will definitely need upgrading. Especially in commercial applications, they’re not a typical bulb — some of them are in very tight spaces so they’re very small. We don’t have direct LED replacements for them.”

Nevertheless, other market trends could be considered in cost assumptions. Separate

from energy costs, retailers relying on increasingly antiquated T12 lamps for display case lighting have seen the price of that product nearly triple in the past two years. As well, supply shortages and associated cost increases are foreseen when EU-based manufacturing of fluorescents ceases in 2024.

“So there’ll be some pushback on having to change the fixtures, but there are other factors that are pushing people to look at doing it sooner rather than later,” Conejo muses.

SOME CONTINUED EXEMPTIONS

The proposed amendments would also reduce the allowed mercury content for three types of lighting products, beginning next January, for the remainder of time they’re available. Although, new cold cathode tubing applications for neon is designated for prohibition, there would be continued leeway to repair neon signs installed prior to Dec. 31, 2023, if they are deemed to have historical value.

Specialty fluorescent lamps used for air and water “purification, sterilization, sanitation, treatment or disinfection” will continue to be permitted with no maximum threshold on the quantity of mercury they can contain. Nor have limits been placed on mercury content in fluorescent lamps

used in the growing of plants even though phase-out start and end dates of Dec. 31, 2028 and Dec. 31, 2031 have been specified.

The latter aligns with expected improving market competitiveness of mercury-free options, such as the LED greenhouse lighting that the Ontario government is targeting in its new energy efficiency incentive programs promised for this year. Conversely, there is no prohibition date for automobile head lamps containing mercury — Conejo notes that incandescent and halogen bulbs still predominate in this market segment — but there is a regulated maximum limit of 10 milligrams (mg) per lamp.

“The Department has researched and assessed technologically and economically viable alternatives to exempted mercurycontaining products and the Government intends to keep removing exemptions where mercury-free alternatives are available on the Canadian market,” the regulatory analysis advises. zz

An overview of the proposed amendments to the Products Containing Mercury Regulations can be found on the government of Canada website at https://canadagazette.gc.ca/rp-pr/ p1/2022/2022-12-24/html/reg1-eng.html

CURVEBALL CORRECTION

Rules Revised to Lift Unintended Obstruction to Commercial Transactions

By Norman Kahn, Kristian Arciaga, Jennifer Glied-Goldstein, Peter Dalglish and Jasraj Shergill

NEW REGULATORY amendments to Canada’s Prohibition on the Purchase of Residential Property by Non-Canadians Act address the rules’ impacts on commercial transactions and property development. The Act prohibits the purchase of residential real estate by non-Canadians, either directly or indirectly, for a twoyear period that began on January 1, 2023.

On March 27, 2023, the Minister of Housing and Diversity and Inclusion introduced amendments which attempt to provide further clarity on this new prohibition. While not all of the submissions from the real estate industry have been adopted, the amendments represent a substantial improvement permitting commercial transactions, which were obviously not intended to be caught by the Act, to proceed without prohibition.

Nonetheless, parties to a transaction involving real estate should still be wary of the Act before proceeding, especially if a residential property may be involved.

Zoning no longer a criteria

Section 3(2) of the Regulation originally prohibited “nonCanadians”, as defined under the Act, from purchasing commercial real estate properties that were zoned residential or for mixed use. Scrutinizing the zoning of a property to define it as a “residential property” also inadvertently captured significant amounts of land used for commercial purposes such as industrial warehouses, manufacturing facilities, office buildings and shopping centres.

Subsequently, Canada Mortgage and Housing Corporation (CMHC) issued a clarification that this prohibition was intended to capture only vacant land that is zoned residential or mixed use. The amendments have now repealed this provision altogether so that the prohibition no longer applies to the purchase of property, whether vacant or not, that does not contain any habitable dwellings and is zoned for residential and mixed use.

Threshold of control increased

The definition of “control” of a corporation or entity in the Regulation limited a far larger group of corporations from participating in real estate transactions involving residential property than what was likely intended. Previously, a corporation was deemed a non-Canadian under the Act if it was “controlled” by more than 3% of non-Canadians. This has now been addressed in paragraph 1 of the amendments, where the threshold for “control” of a corporation or entity was increased from 3% to 10%.

Publicly traded REITs and limited partnerships

The amendments broaden the scope of real estate transactions permitted under the Act for publicly traded entities. Section 2(b) of the Regulation previously excluded publicly traded corporations listed on a designated Canadian stock exchange from the definition of “non-Canadians.” However, this narrow exception failed to also exclude publicly traded non-corporate entities listed on a designated stock exchange, such as Canadian real estate investment trusts (REITs) and Canadian limited partnerships.

Accordingly, these publicly traded non-corporate entities had to meet the control threshold to purchase residential property. Pursuant to the amendments, Canadian REITs and other publicly traded Canadian entities (including limited partnerships) can now participate in real estate transactions that involve residential property, without meeting any control threshold.

Exception for development

The most sweeping change contained in the amendments is the introduction of an exception for the acquisition by a non-Canadian of residential property for the purposes of “development.” The amendments do not define “development,” but CMHC has published a guideline (in the form of Frequently Asked Questions) that sets out criteria and indicia of what could constitute “development.”

The CMHC defines “development” as “the process of evaluating, planning and undertaking of alterations or improvements (with or without a change in use) to a residential property or the land on which the residential property is located and, for greater certainty, includes redevelopment of an existing building.” The key element is the existence of “good faith intention at the time of purchase.”

Purchasers who hold work permits

The amendments revise the requirements for non-Canadians who hold a work permit under the Immigration and Refugee Protection Regulations to become eligible to purchase residential property. Such work permit holders are eligible if they have 183 days or more of validity remaining on their work permit or work authorization at time of the purchase of their residential property, as long as they have not purchased more than one residential property. The amendments remove the previous requirement of having filed tax filings for a minimum period of three years within the preceding four years and having worked full time in Canada. zz

The authors practice real estate law with Aird & Berlis LLP in Toronto. For more information, see the website at www.airdberlis.com.

What is a SMART BUILDING:

Benefits of a SMART BUILDING:

Why BOMA BEST:

SMART

SMART is the future of the built environment. Its success is based on understanding the needs of the owners, managers, and tenants. And realizing the value that technology brings in building performance.

A smart building uses a responsive digital framework to deliver optimal outcomes for building owners, managers and tenants. This is done through understanding current technology and its ability to deliver human-centric built environments focused on user experience, operational efficiency, and energy and cost optimization. A well-managed smart building will provide a sustainable, cost-effective building that is future-proofed and highly responsive to user comfort.

A certified Smart Building will deliver six key advantages:

1. Increased Energy Efficiency

2. Improved Air Quality

3. Enhanced Comfort

4. Tenant Satisfaction

5. Increased Asset Value

6. Future-proofing

BOMA BEST Smart Buildings will be the industry benchmark – defining how building owners and managers can leverage technology to realize significant value in their assets. The certification program doubles as a management tool, guiding owners and managers on a digital transformation within the built environment to optimize operations, drive sustainability, create unique user experiences, and deliver financial value to their stakeholders and customers.

The BOMA BEST Hub will provide users an easy-to-use and accessible tool, allowing buildings to achieve their smart objectives. The Hub includes:

• Dynamic Reporting & Benchmarking

• Interactive Dashboards

• Checklists

• Corporate Document Library

• Recommendation Road-maps

Systemic Governance Approach Recommended to Address Climate Risk WEIGHTY OBLIGATIONS

By Temitope Tunbi Onifade and Helen Tooze

The Canadian Climate Law Initiative has released comprehensive new guidance to help the commercial real estate industry grasp the elements of risk related to the physical threats of extreme and chronic climatic conditions and the regulatory, economic and social upheaval of the net-zero transition. The following excerpt from the executive summary outlines the sweeping scope of those issues and obligations, all of which are discussed in greater detail in the guidance document – Editor.

CLIMATE CHANGE creates risks for Canada’s commercial real estate industry. Boards of directors, management and professionals within the sector will need to understand and deal with the increasing implications of climate change and the net-zero transition, including: the risks; legal duties of those that should manage them; effective governance practices they should embrace; and where and how to leverage the emerging opportunities. There is no generally agreed way to understand and deal with these risks, but there are emerging best practices.

Physical risks including extreme weather events, floods and fires have become differential and compounded. Differential risks arise because some geographical locations are impacted by extreme weather events, floods, fires and other hazards more than others. Compounded risks result from the blurring of the lines between clearly chronic or acute impacts as multiple fires, flooding, extreme weather events and other risks manifest more frequently and sequentially, making them increasingly unpredictable and expensive to manage.

Transition risks result from legal, policy, market, technology, reputational and other

impacts of societal responses on real estate entities, markets and investment. Laws and policies designed to regulate low-carbon transition and the net-zero agenda create most of the market, technology, reputational and other societal-generated risks.

In Canada, specific risk sources include: the Pan-Canadian Framework 2017; statutes to implement it; policy plans expanding on the statutes; and resulting cases, most notably as indicated in the provinces’ Supreme Court challenge, Saskatchewan et al v. Canada, 2021.

Given this variety of risks, the Canadian commercial real estate sector faces systemic

OBLIGATIONS

risks resulting from the combination of multiple physical and transition risks occurring close to one another at an increasingly higher rate. Some of them, mostly physical risks, may be quantified, but others cannot, making it difficult to calculate costs and benefits.

Largely guided by information from disclosure, insurance is the most common short-term means to manage physical risks, based on such information disclosed and the due diligence of insurers, but it is not well equipped to handle the long-term and transition uncertainties. Therefore, the commercial real estate sector must develop a systemic risk governance approach that cuts across societal systems, rather than a limited financial approach.

LEGAL DUTIES

Boards, management and professionals

within the commercial real estate industry must manage systemic risks in line with their current and future legal duties. Legal duties in business are often fiduciary.

They arise from the nature of a relationship between two parties where one — the fiduciary — is in a position of privilege over the other — the company or investment beneficiary — within the scope of their relationship. These fiduciary duties are grounded in common law and statutes, but may also arise from contracts, personal relationships such as in torts, court decisions and voluntary codes.

Duties backed by statutes and other policy instruments come from diverse sources, including climate and low-carbon law, securities law, accounting standards, federal regulation, and voluntary reporting policies. They apply in myriad of ways to the commercial real estate industry.

They are applicable to three categories of commercial real estate entities in Canada: publicly traded companies; financial institutions and investors regulated by the Office of the Superintendent of Financial Institutions (OSFI); and privately held companies. Directors and executives have several duties.

Directors, officers and investors have a duty to be competent, provide leadership to executives and proactively seek to identify, measure and manage climate-related risks and opportunities that are material to their companies. They must ensure that there are clear and feasible governance mechanisms to manage climate-related risks and opportunities, including amending the company’s strategy to reduce emissions throughout the value chain.

They must be quick and effective in addressing concerns that could affect the short-, medium- and long-term viability of their companies. They must be concerned about their contribution to emissions when constructing, running and demolishing buildings and infrastructures, and should be working with suppliers and other key stakeholders to reduce emissions. That demands a quantitative-qualitative risk governance approach to measuring and managing the sustainability of the products they use and create.

TCFD FRAMEWORK

The Taskforce on Climate-related Financial Disclosures (TCFD) informs several governance ideas, which other important organizations such as the World Economic Forum (WEF), build on for managing climate risks. Recommended actions revolve

around disclosure on governance, metrics and targets, risk management and strategic planning.

Although many Canadian companies have adopted the TCFD framework or its versions, there are notable concerns about their quality of climate-related disclosures. For instance, the Canadian Securities Administrators (CSA) observes that 92% of publicly listed companies disclose climaterelated risks, but 41% of those disclosures are vague or use boiler-plate information while 25% of disclosures do not address the financial impacts of the material climaterelated risks they identify.

The CSA is looking toward mandatory reporting and proposing new regulations that will require greater levels of transparency and measurability of net-zero targets and activities. To align, Canada’s commercial real estate sector should plan for mandatory disclosure.

Building on the TCFD and WEF frameworks and the Canadian context, the Canada Climate Law Initiative (CCLI) recommends six enhanced governance practices to guide disclosure and other risk governance actions. These practices are based on corporate governance themes: governance structure; board oversight; risk assessment and management; disclosure; setting targets and metrics; and designing strategy.

As boards, executives and professionals effectively manage climate risks, they should also create new opportunities through resource efficiency, incentives, investment and resilience. These opportunities will help Canada’s commercial real estate sector to cut costs, become more competitive and be positioned to make money while enhancing their reputation, protecting their business and contributing to Canada’s net-zero targets. zz

The Canada Climate Law Initiative is based at the University of British Columbia Peter A. Allard School of Law and Osgoode Hall Law School, York University, and provides climate governance guidance to businesses and regulators. Temitope Tunbi Onifade is a climate and low-carbon law researcher at Canada Climate Law Initiative. Helen Tooze is writing her doctoral thesis at Peter A. Allard School of Law at the University of British Columbia. The full text of A guide to effective climate governance in the Canadian real estate sector: Building for the net-zero future can be downloaded from the REALPAC website at https://realpac. ca/product/climate-governance-guide.

THREE Es FOR GREEN LEASES

Toward Net-Zero Owner-Occupier Collaboration

By Paulina Torres, Kamya Miglani and Steven Lewis

THE LEASING SYSTEM is one of the greatest challenges enroute to building decarbonization. Traditional lease structures create distance between occupiers and owners and make cooperation on building improvements and other sustainability initiatives a fraught practice.

Green lease clauses first emerged more than 15 years ago, yet they remain largely self-defined. There is still no industry-wide guidance on minimum standards.

Lack of transparency and follow-through, legal complexities, split incentives and unrecognized value have remained persistent barriers to green lease adoption. Moreover, legal teams and brokers are often reluctant to agree on green lease terms. Legal teams look to avoid risks as much as

possible, while brokers look to simplify and speed the negotiation process — both often resorting to redlining such clauses without much consideration.

Initially, green leases were proposed as a potential solution to navigating the split incentive problem. That’s where one party, usually the owner, incurs capital expenses for an energy retrofit, while the other, usually the occupier, receives the benefit, e.g., in reduced operating costs.

Meanwhile, organizations across all sectors are increasingly focusing on carbon, in part to respond to existing or looming regulations. JLL’s 2023 Responsible Real Estate Survey found that corporate occupiers are looking to prioritize carboncentered criteria in their next lease.

Green Leasing 2.0 contemplates an owner-occupier relationship based on shared values and expectations for the life of the lease. The model acknowledges that there is no one-size-fits-all approach to successful green leasing, but three key enablers will drive the necessary step change: education; engagement; and shared equity.

EDUCATION AND ENGAGEMENT

Education and communication are particularly critical when either side is less motivated. In general, people are inherently opposed to change and are especially reluctant to accept legally binding terms and conditions if they do not understand their purpose or benefits.

Green Leasing 2.0 is JLL’s vision for how building owners/managers and their tenants can proactively collaborate to reduce greenhouse gas (GHG) emissions and help the commercial real estate industry achieve the ambitious targets for net-zero carbon emissions. The following excerpt from the firm’s recent research report lays out some of the recommended steps – Editor.

Information sharing and communication, particularly around costs, can be a great way to nudge the party to agreement. Stakeholders should understand the cost implications of increasingly stringent regulations. Parties should look to future-proof their leases and ensure that lease language allows for the future actions necessary to comply.

Worldwide, several city governments are invoking carbon pricing and fines as mechanisms to drive down emissions in the built environment. Occupiers are especially vulnerable to such carbon fines, which are often passed through to them as operational expenses. Forward-thinking occupiers are well aware of this vulnerability and are anticipating such regulation and proactively pursing collaborative lease agreements that reduce these cost burdens.

Green leases, in and of themselves, should be treated as a step that outlines the governance structure to ensure that actions are taken and the targets are achieved. Occupiers’ and owners’ green leasing strategies should tie into their entire real estate scheme.

Occupier engagement is part of the value proposition for forward-thinking owners. For occupiers, engaging with their landlords early allows them greater leverage to execute stronger green lease terms and have more influence over improvements to the building throughout their lease.

Leading owners and occupiers are developing site or occupier selection checklists with criteria that puts sustainability at the forefront of the entire leasing process. In Canada, there are examples of occupiers or owners selecting locations or occupants based on which site or party could contribute most to their own ESG ambitions. By contrast, such questions are just beginning to be asked in Asia.

Clauses that formalize regular points of contact — and enable productive engagement — are often the most useful and effective among all green lease clauses. Best practice is for stakeholders to meet at least annually.

SHARED EQUITY

Green leases should exist as equitable forms of contract. This includes cooperation and cost-sharing clauses as well as fair distribution of benefits along with transparency, which all form the base of a well-founded, trustful partnership.

Any capital expense that improves the operational efficiency or reduces harmful emissions or waste from the property will provide benefit for both the owner and occupier. The best way to entice the other party to agree to cooperate is by highlighting that benefit.

Historically, owners have demanded the sharing of data in occupier-controlled spaces, but a more successful route would be if they were to provide reasons why that data is useful:

• If occupiers control utilities, they should collect and share data with owners so that owners can provide the right decarbonization solutions.

• If the owners control utilities, they should be collecting the data and sharing it with occupiers to influence energy-

conserving behaviour. Owners can also offer more favourable lease terms if certain commitments are made to reduce energy usage or can even pair financial incentives with specific key performance indicators.

Negotiations on building improvements often hit roadblocks over costs. JLL estimates that US$3 trillion will be required to retrofit the office stock alone and building owners cannot take this on without help.

Occupiers can work with owners and incentivize building upgrades. They can, for example, agree to sign a lease extension or agree to a higher rent if an owner covers the capital expenditure of a retrofit. For renewable energy, both parties should look to collaborate on its procurement, whether by installing on-site energy or purchasing it off-site.

Building owners have also attracted efficiency investments in space fit-outs by rewarding occupiers who choose a more sustainable design. In some examples, building owners have formulated a decarbonization roadmap that entailed presenting new occupiers with a ‘blank’ space and outlining fit-out options that varied in cost and energy efficiency. The owner then adjusted lease structures and pricing, depending on which option was chosen, to help incentivize the more efficient fit-out.

These types of alternative funding structures are a smart move to make sustainability solutions more financially viable.

FLEXIBILITY AND TRANSPARENCY

Green Leasing 2.0 is not a plug-and-play model and should maintain a degree of flexibility as different organizations have unique objectives, opportunities and challenges that will change over time.

Stakeholders should encourage flexible language where applicable and be ready to lean into alternative forms of agreement when necessary. The key is to think practically about all possible intervention points and consider when is the ideal moment to engage.

Nor are occupiers and owners limited to a single lease event. Agreement may occur outside of the contractual leasing process. Alternative documents include a Memorandum of Understanding (MoU) which is commonly used in the United Kingdom, an Environmental Management Plan or collaboration deeds.

Because a contractual lease can only be amended if there is an expiry or break, alternative documents offer a faster route to collaboration until such an event occurs. These types of documents also allow both parties time to experiment with what is achievable before signing a legally binding lease document.

Transparency is a form of equity and a good way to build trust. This comes through not just data sharing, but also in the owner’s communication of capital projects and pipelines to ensure an occupier isn’t blindsided. In doing so, this opens the door to new cost-sharing opportunities.

This transparency and communication should also involve both parties being able to

accurately record and provide documentation of their share of emission reductions through any procurement of renewable energy. That could be increasingly pertinent as more companies procure real renewable energy through renewable energy credits (RECs) instead of offsets.

In a leased site, neither the owner nor occupier can singularly dictate the environmental or social impact of the building. Both parties are accountable and, as such, are responsible to act.

Green leasing 2.0 is founded on the premise that both owners and occupiers will benefit from such lease arrangements and, in doing so, it mobilizes both parties as partners — taking on the immense challenge to decarbonize the built environment together. zz

Pauline Torres is Americas ESG and Sustainable Research Lead, Kamya Miglani is Asia Pacific Head of ESG Research and Steven Lewis is Global Head of Insight with JLL. The complete text of Green Leasing 2.0, Bridging the owner-occupier divide to deliver shared ESG value, can be found at www.jll.ca/en/trends-and-insights/research/ green-leasing-to-deliver-shared-esg-value-forowners-and-occupiers.

WHO’S WHO 2023

PRESENTED BY:

SPONSORED BY:

CRE TECH OFFERS STABILITY IN TRANSITIONAL TIMES

by Peter Altobelli, Vice President and General Manager, Yardi Canada Ltd.

Canada is known for its multiculturalism. With more than 431,000 immigrants receiving permanent residency in 2022, the growing population is positively contributing to the transformation of commercial real estate. The key question is, will CRE owners be able to monetize this growth and implement the changes needed to achieve short- and long-term success without technology? To manage these demographic shifts, Canadian property management will need to undergo an influx of new technology adoption covering automation, data analytics, and tenant engagement.

Tech acumen and energy efficiency at the forefront

According to the 2022 REALPAC Prospective Survey Results, a staggering 92% of CRE executives agree that there will be more pressure to integrate sustainability information into financial statements. With digitization at an all-time high, how can data be effectively collected and distilled?

Over the last few years, owners have extensively used the ENERGY STAR® Portfolio Manager® online tool to measure and track buildings’ energy, water, and/or waste and materials and calculate an ENERGY STAR score. ENERGY STAR-certified buildings use, on average, 35% less energy than similar buildings. Fewer vacancies, higher rents, better loan terms and lower interest rates than non-certified properties have also been documented. The benefits are clear but challenge lies in centralizing all data points to simplify the performance results.

To help eliminate the manual tasks involved in energy audits and submitting data required for ENERGY STAR® certifications, best in class operators rely on technology built to automate the aggregation, analysis and reporting of whole building data. Such systems are also driven by artificial intelligence that can identify savings in building HVAC energy consumption.

Workspace tech promotes tenant relations

Hybrid is here to stay, and it is causing a historic inversion in the world of corporate occupiers. To enhance office space value and promote better tenant relations, landlords see flexible space as their best solution. High-end technology has helped employers select the right flex space location and space, successfully negotiate leases, and evaluate lease vs. purchase decisions. Businesses that implement an integrated solution for accounting,

data management, reservations, billing and more can increase revenue, optimize productivity and provide an enhanced sense of community.

Understanding the new real estate investment dynamic

Keeping up with technical investment calculations and investor reporting demands is the focus of emerging technologies. Some Canadian real estate investment companies are trading inefficient spreadsheet programs for software solutions that automate the asset, investment accounting and investment lifecycle with a single connected solution.

Consequently, real estate investment managers can expand their investor base and add properties, estimating unrealized gains, and determining ideal buy/sell times without additional staffing. Investors, for their part, can get deeper insights into their investments through a portal, without needing intermediaries or waiting for assistance.

Working smart offers an edge

Property managers need efficiency and service in today’s environment. That means reducing energy use, saving money on equipment maintenance, meeting compliance obligations and satisfying tenants and employers who are no longer bound to a fixed workspace. As this transitional year progresses, strategic thinkers who adopt effective ways to enhance stakeholder relationships, drive down costs and increase asset values will be those best positioned to thrive.

To learn more about your technology options visit Yardi.com.

CANADIAN PROPERTY MANAGEMENT WHO’S WHO 2021

CANADIAN PROPERTY MANAGEMENT WHO’S WHO 2023

CANADIAN PROPERTY MANAGEMENT WHO’S WHO 2023

FACILITATING EQUITY

Public Bathrooms Fundamental to Societal Participation

By Barbara Carss

BAD FORM ABOUNDS in purportedly accessible public bathrooms, whether it’s fixture configurations that don’t suit the needs of people with disabilities or the conduct of able-bodied people who misappropriate the space. Accessibility advocates participating in a recent online discussion highlighted some practical adjustments that could improve safety and convenience, giving people with disabilities more assurance to learn, work, play, enjoy social relationships and contribute to the economic and cultural life of their communities.

“At its core, where we go to the bathroom when we’re away from home is a question about equity and our right to the city,” observed the discussion moderator, Rhonda Solomon, a PhD candidate and researcher at University of Toronto’s School of Cities and Centre for Global Disability Studies.

That has prompted the sharing of details about private bodily functions so that designers, contractors, landlords and property/facility managers can gain a clearer understanding of how best to accommodate — or avoid thwarting — the intended patrons of accessible bathrooms. Julie Sawchuk, a Rick Hansen Foundation Accessibility Certification (RHFAC) professional and author of the resource manual, Building Better Bathrooms , explained some of the practicalities from her perspective as a paraplegic wheelchair user reliant on a catheter to empty her bladder.

“These are uncomfortable conversations, but if you don’t know the whys behind an accessible toilet set-up then you can’t really understand why a set-up just isn’t right,” she said. “I could have filled this presentation with stories of what not to do because that’s primarily what I see.”

Similarly, Michelle Cousins, mother and principal caregiver to a young teenager reliant on a wheelchair, decried the lack of accessible bathrooms properly equipped for children’s smaller physical size and shorter reach. That’s an inadequacy she has encountered even within relatively recently constructed schools where bathrooms comply with adult-sized accessibility standards.

“When I had to approach the school board and say: ‘this bathroom is not accessible’, they were perplexed,” she recounted. “How we do some very intimate tasks is not something that most people talk about. Yet it’s through this vulnerability and this willingness to share that we really educate and inform, and hopefully bring about change.”

BATHROOM BASICS

Sawchuk sketched out some of the basics,

NEW COALITION PROMOTES ACCESSIBILITY IN THE BUILT ENVIRONMENT

Commercial real estate owners/managers, homebuilders and organizations that provide services and advocacy for people with disabilities have joined forces to promote accessibility in the built environment. The newly forged Accelerating Accessibility Coalition (AAC) is particularly targeting new housing construction as an opportunity to incorporate barrier-free universal design principles with minimum extra cost.

“It’s time to unlearn the practices that have established generations of inaccessible design and replace them with inclusive methodologies that reflect the authentic diversity of needs that people with and without disabilities require throughout life,” urged Maayan Ziv, founder and Chief Executive Officer of AccessNow, an app offering navigational support and accessibility ratings.

Her organization is among the AAC’s 21 founding members represented at last fall’s launch event in Toronto. A compendium of those members’ experiences and best practices — dubbed the Accessibility Toolbox — has also been made available as a resource for developers and property managers looking for guidance on accessibility standards and certification and/or connections to organizations involved with people with disabilities.

“Let’s do the right thing today, rather than wait until we’re required to do so. The Accessibility Toolbox makes it easy to take those important first steps,” maintained Jake Cohen, Chief Operating Officer with The Daniels Corporation, an AAC member, which also hosted the event in the company’s World Urban Pavilion community space in the Regent Park neighbourhood.

Choice Properties REIT, BentallGreenOak and Cadillac Fairview likewise figure as prominent commercial real estate players in the coalition. The Toronto District Council of the Urban Land Institute (ULI) will serve as the AAC’s secretariat, while participating accessibility organizations include: the Rick Hansen Foundation; Accessible Housing Network; CNIB Frontier Accessibility; and Community Living Toronto. CivicAction, the originator of the Race to Reduce campaign for commercial buildings, and the University of Toronto’s Faculty of Architecture, Landscape and Design have also signed on.

AAC plans to host a series of events, webinars and workshops in the coming months. That lines up with the agenda of Accessibility Standards Canada, the federal agency tasked with developing accessibility standards and funding related research.

“We are proud to be part of this networking event and are looking forward to advancing discussions on accessibility with AAC members,” affirmed Philip Rizcallah, Chief Executive Officer of Accessibility Standards Canada. “We want Canadians to experience accessibility in a consistent and seamless way, no matter where they live. Collaborations like these are mutually beneficial. They can only lead to a greater positive impact in the lives of all Canadians.”

More information about the Accelerating Accessibility Coalition can be found at https://toronto.uli.org/programs/the-accelerating-accessibility-coalition.

beginning with well-lit identifying signage that includes Braille and is placed adjacent to the door latch for maximum visibility and reachability. Inside, the sink, taps, soap dispenser and hand-drying towels/ equipment should be reachable from a sitting position and all reachable from each

Standards for improved energy efficiency of buildings

Improving energy efficiency of buildings is an important component of Canada’s plan to reach net-zero future by 2050. Better energy performance of buildings can help fight climate change and bring significant cost savings to their owners and occupants.

Energy-efficient solutions and practices can be implemented in the design and construction of new buildings, or during repairs, renovations, retrofits, and recommissioning of existing buildings. CSA Group standards and research support these efforts, offering a holistic approach to:

• Performance and energy efficiency of building systems

other. There should be an adult-sized changing table and an emergency call system.

There should be a minimal height differential between toilet seats and wheelchairs. U-shaped toilets with a space in front allow catheter-users to more easily

• Commissioning of energy and water systems in new and existing buildings

• Building’s envelope thermal bridging

• Energy modeling methodologies

• Interconnection and communication of intelligent buildings’ systems

Some of the CSA standards are being considered for incorporation by reference into the National Energy Code of Canada for Buildings (NECB) and provincial energy codes, including the BC Energy Step Code. Visit csagroup.org/BuildingEnergySystems

CSA Group always strives to provide up-to-date and accurate information. However, no representation or warranty, expressed or implied, is made that this information meets your specific needs, and any reliance on this information is at your own risk. Please contact CSA Group for more information about our services.

“I could have filled this presentation with stories of what not to do because that’s primarily what I see.”

reach between their legs. That should go in tandem with a toilet seat lid that will protect and cushion their backs as they lean backwards. Grab-bars should be installed on both sides of the toilet and the sanitary disposal container should be easily reachable from the toilet.

“Grab-bars serve the purpose of balance,” Sawchuk advised. “If you need one grab-bar, more than likely you would benefit from having the use of two grab-bars.”

The toilet roll holder should be placed so it doesn’t obstruct gripping of the grab-bar or pose a hazard for knocking hands or elbows, and it should be operable with limited dexterity. Uncovered toilet rolls that can be easily dispensed from below the grab-bar or within the grab-bar itself are recommended.

“In commercial set-ups, you always see those giant toilet roll holders, and where are they? Always right above the grabbar,” Sawchuk noted.

Meanwhile, grab-bars calculated to be within an adult’s reach risk throwing children off balance, particularly if their feet can’t touch the floor because the toilet

is geared to an adult’s height. That height differential can also create an added challenge for those, like Cousins’ daughter, who use a transfer board between their pediatric-sized wheelchairs and the toilet.

“I have become the human grab-bar for my daughter,” she said. “There is a gap in public settings between what we need and what we find.”

Among other frustrations, she calls out able-bodied people for using accessible public bathrooms. Although there is general social censure around illegitimately commandeering designated accessible parking spaces, attitudes tend to be more ambivalent if accessible bathrooms are conveniently nearby and unoccupied at the time.

“There is nothing inherent in the design of these accessible bathrooms that safeguards the space for the intended end-user, which is the person with the disability,” Cousins reflected. “We have to rely upon social conditioning and the goodwill of others to make sure they reserve those spaces for those who need it.”

Tr us t.

MEETING MORE COMPLEX NEEDS

Joining the conversation from afar, Karen Hoe, National Development Manager for the Changing Places program in the United Kingdom, briefly outlined her organization’s successful campaign to gain regulatory recognition for accessible facilities that can meet more complex needs.

Since June 30, 2022, specified new buildings or major expansion projects must comply with Changing Places criteria in addition to existing requirements for standard accessible bathroom facilities. That includes: assembly space for a minimum of 350 people; malls with a minimum of 30,000 square metres (322,000 square feet) of retail space; community centres and sports venues with at least 5,000 square metres (54,000 square feet) of floor area; retail stores with a minimum of 2,500 square metres (27,000 square feet) of floor space; hospitals and primary health care facilities; and cemeteries and crematorium buildings.

The new Changing Places standards mandate a space that is at least 12 square metres (129 square feet), accommodating a height-adjustable adult-sized changing table, a ceiling hoist to lift patrons from their wheelchairs onto the changing table and a peninsular toilet so that caregivers could stand on both sides, if necessary. It’s estimated that about 7,000 new Changing Places facilities will be added to the U.K.’s national building stock annually via these standards, augmenting the approximately 1,800 that now exist.

“The Changing Places logo is trademarked. If you see that logo, it’s a guarantee of what you’ll expect to find behind that door when you walk in,” Hoe affirmed.

Accredited facilities are registered and highlighted on a publicly available national map. The Changing Places program is also working with the U.K. government to oversee the design and installation of 600 new facilities, funded with a £32 million (CAD $52 million) allocation in the 2020 budget, and targeting England’s local authorities and motorway service stations.

Sawchuk applauded the United Kingdom’s leading example, but urged building owners/ managers everywhere to proactively upgrade their accessible bathroom facilities ahead of regulatory dictates.

“Kids with disabilities become adults with disabilities, and if you need a changing table then you need a changing table,” she affirmed. “And that means that you don’t have to use the floor or the back of a van or a folding table at an arena.” zz

The 3 Ps OF PROPERTY RESTORATION

Responding appropriately to an emergency and restoring damaged property quickly is essential for all those impacted. Beyond the resources required, such as equipment, materials, and labour, effectively restoring a property requires planning, preparedness, and partnership among stakeholders. This article explores these three critical components to make the restoration process a real success, reducing the impact of a disaster and speeding up recovery.

PLANNING

Planning is a critical component of property restoration. From a physical damage perspective, managing the restoration process is only part of the equation. Is there a contingency plan? Do you know what to do with your staff? Your data? Do you know what to expect from a restoration partner? These are sometimes tough questions that a commercial restoration company with a proven track record can advise on and support.

The other aspect of planning is detailing the roles and responsibilities of each stakeholder, including the property restoration team, building management, and occupants. A disaster response plan should include an emergency response team, evacuation procedures, communication protocols, and pre-identified equipment staging areas. It is important to have facility-specific information

readily available as part of standard operating procedures which identify the specific steps to mitigate damages. It’s important to review and update the plan regularly to ensure it is up-to-date and still relevant.

PREPAREDNESS

While it is impossible to predict when an emergency will occur, it is possible to be better prepared for one. Preparing for a disaster involves having a disaster kit on hand, training staff on emergency procedures and conducting regular safety drills to ensure a coordinated response in the event of a disaster.

In addition to these measures, being prepared consists of having regular property risk assessments, building evaluations, and recommendations for improved safety measures. To reduce the impact of a disaster on a property it is important to uncover leaks, cracks, and other vulnerabilities before the unexpected occurs.

PARTNERSHIP

Finally, having a reliable and strong partner is essential to ensure a smooth and efficient restoration process. The investment of time to fully understand the client’s needs and circumstances only improves the effectiveness of the plan once an emergency occurs. The right property restoration company has significant experience dealing with emergencies and can provide valuable advice and support throughout the year. We become an extension of your team, collaborating with you every step of the way. The more we know about the business and the mission-critical needs, the better we are prepared to help. In times of need, your team knows who to immediately contact to initiate recovery and restoration services to help maintain business continuity.

FIRST ONSITE is a leader in emergency response planning, disaster remediation, property restoration, and reconstruction services, helping clients restore, rebuild, and rise after catastrophic events of every kind. Learn more at www.firstonsite.ca

DEPARTMENT STORE DRAIN

Nordstrom Vacates Anchor Space

By Barbara Carss

in Prestige Malls

NORDSTROM CANADA’S sudden swoosh into the department store drain will leave empty anchor space in some of the country’s top-performing and most prestigious regional malls, adding to a decade of challenges thus far for retail landlords. The U.S. based retailer filed for insolvency protection under the Companies’ Creditors Arrangement Act (CCAA) on March 2 and announced plans to close 13 physical stores by late June. Sales through its Canadian e-commerce platform ceased as of March 3.

“This will enable us to simplify our operations and further increase our focus on driving long-term profitable growth in our core U.S. business,” Erik Nordstrom, Chief Executive Officer, said as the company released results for the fourth quarter of 2022.

“Despite our best efforts, we do not see a realistic path to profitability for the Canadian business.”

Looming closures include six largefootprint Nordstrom stores in enclosed shopping centres and seven mid-sized Nordstrom Rack stores in a mixture of enclosed malls, open-air centres and urban streetfront locations. That will empty out anchor space in five of Cadillac Fairview’s regional malls: Pacific Centre, Vancouver; Chinook Centre, Calgary; Rideau Centre, Ottawa; and Toronto Eaton Centre and Sherway Gardens in Toronto. Oxford Properties will also see vacant anchor space at Yorkdale Mall in Toronto, while Ivanhoé Cambridge awaits the departure of Nordstrom Rack from Vaughan Mills in

the Greater Toronto Area and Calgary’s Deerfoot Meadows.

Nordstrom’s move came just days after the U.S. parent of Bed Bath & Beyond announced the shutdown of 65 outlets throughout Canada, and is the newest in a string of retail closures in recent years. In that context, industry analysts suggest it’s both a shock and a somewhat foreseeable event.

UNEXPECTED VERSUS SURPRISING

“Bed Bath & Beyond wasn’t really a surprise at all. Nordstrom is more unexpected,” observes Lisa Hutcheson, Managing Partner with the retail strategy consulting firm, J.C. Williams Group. “I don’t think we’re surprised, but it’s unexpected that there weren’t more warning signs.”

On the latter front, credit rating service DBRS Morningstar recently downgraded the retailer’s status from positive to stable after lower-than-expected earnings over the past two quarters. In a March 3 statement, DBRS Morningstar projects the termination of Canadian operations will have a positive effect on Nordstrom’s profitability and operating efficiency, but undermine the company’s geographic diversification efforts along with a “lesser extent” hit to its market position and size.

“In aggregate, the closures do not have a material effect on Nordstrom’s overall credit risk assessment because of the relatively small size of the Canadian operations, which account for less than 3% of total sales,” the statement advises.

Looking at the total distribution of stores, Canada accounts for 6% of Nordstroms and fewer than 3% of Nordstrom Racks. However, Hutcheson notes they’re more densely concentrated into a few markets with the six stores in the Greater Toronto Area perhaps eroding each other’s market share as high-end fashion and goods providers.

“I think they have two Nordstrom stores and one Rack store in all of New York City and Chicago only has one Nordstrom store so it’s kind of not a surprise that we just don’t have the density [of consumers] for these big category killers and large-format stores,” she reflects.

Hutcheson attributes the over-abundance in part to a misperception that it could be an easy plug-in replacement for Sears. That’s coupled with the waning stature of department stores in general and the COVID19 pandemic’s wallop to the fashion retail category in particular, making it unlikely that any single contender will arise to fill the void Nordstrom now leaves behind.

“The quick answer is not going to be: Oh, there’s some other amazing retailer that’s just going to fit that space perfectly,” she warns. “I think we’re at a tipping point where the anchor is not going to be an

anchor in the traditional way that we have defined them as department stores or grocery stores. We’re going to start to see them be much more catered to the unique proposition of each shopping centre and the demographic and psychographic needs of those customers.”

As with Target’s insolvency and retreat from Canada eight years ago, affected landlords will now be entering negotiations to see what losses can be recovered from abandoned leases. For now, there are few details of their ranking among creditors.

PIVOT-AND-CHANGE PREDICTED

There are also concerns about possible reduced traffic and associated repercussions for other retailers in the vicinity of shuttered stores. However, Raymond Wong, Vice President, Data Solutions and Research, with Altus Group maintains this group of properties has both the prestige to draw replacement tenants and the depth to weather the loss of an anchor.

“Granted, Nordstrom is a large and significant tenant, but when you look at the number and quality of retailers at malls like Yorkdale, the Eaton Centre or Pacific Centre, they are still going to be a destination for consumers and for tourism as well,” he submits. “This could also mean an opportunity for a retailer that’s looking into Canada, and this would give them an opportunity to get into some of these great retail locations.”

Among some of the touted potential newcomers, Hutcheson reports talk of Primark, a fashion and household goods retailer that has expanded beyond its main base in Ireland and the United Kingdom into the United States and throughout Europe, and Quebecheadquartered Simons, which currently has 16 Canadian stores including six outside Quebec and is already Cadillac Fairview’s tenant in four locations.

As well, both she and Wong cite a burgeoning introduction of mixed uses,

bringing in fitness facilities, professional services and co-working space. To date, that has largely occurred in community and lower-tier regional malls, but sudden emptying of hundreds of thousands of square feet presents an opportunity to test the concept in prime retail real estate.

“It’s not going to be a one-size-fits-all. If I think about the Eaton Centre, it’s really primed for something that’s more entertainment and tourism focused,” Hutcheson suggests. “Other spaces are going to get carved up and there’s going to have to be a lot of creativity.”

“Owners are constantly looking at and getting inquiries from other retailers, whether it’s domestic or on a foreign basis, and they are well-versed with the international retailers that are expanding. So it’s not like they’re starting from zero,” Wong says. “You have a lot of smart owners that will come up with new solutions, new configurations to get that space leased up or reused to ensure there’s alternative income in that space. It will be interesting to see what type of pivot-and-change the space takes.”

He argues retailers will continue to seek out physical retail space where, statistics show, they’re more likely to generate impromptu extra purchases than through e-commerce, while consumers will continue to see in-person shopping as both a practical and social exercise. Elsewhere, the demise of Nordstrom Canada’s online platform could be good news for a handful of prospective industrial tenants and/or landlords positioned to capture rent gains.

“Depending on where the Nordstrom warehouses are located and how they service the client, it may free up a little bit of additional space in a really tight market,” Wong says. “It will help slightly, but the demand is still outpacing the supply so it’s not a significant change in the industrial market.” zz

“The quick answer is not going to be: Oh, there’s some other amazing retailer that’s just going to fit that space perfectly.”

GETTING THE MOST FROM YOUR FACILITY

The importance of working with a trusted multi-trade service provider

In today’s modern, conscientious world, it’s more important than ever to ensure all facets of building operations are functioning at their maximum efficiency. With aggressive ESG mandates, rising utility costs, and the impacts of climate change bringing considerable new challenges to the table, building owners have their hands full—and the costs and implications of a system failure can be devastating. These are just some of the reasons so many commercial property owners are enlisting the support of a trusted facility services provider.

“Today’s building systems are complex and often operate in conjunction with each other,” says Joe Laine, Operations Manager at Black & McDonald G.T.A Service. “When we receive a call day or night, we work with our clients to triage their needs and provide an integrated response. Similar to the way building systems work together as a whole, our licensed technicians

are skilled in their specific disciplines, yet they work as an integrated unit. From the beginning of a call to the follow-up reporting and invoicing, our process is smooth and reliable.”

Whether it’s a healthcare facility, office, warehouse or data centre, the peace of mind that comes from working with a multi-trade service provider can’t be underscored enough. As Laine puts it, “It allows for one contractor to deliver a holistic and coordinated response, freeing up the facility manager or owner to focus on the core business. Our ‘boots on the ground’ services are complemented by a strong support staff and project managers. We work closely with our Energy & Sustainability Team to ensure we maintain and optimize building operations and guide our clients through decarbonization pathways to meet their ESG goals.”

In fact, the adage “An ounce of prevention is worth a pound

of cure” aptly sums up Black &McDonald’s approach to doing business. When meeting with a prospective client, the first step involves reviewing each building system for an overview before developing a custom maintenance plan balanced against the client’s budget requirements.

“Our tailored maintenance programs are automatically scheduled, and our service technicians are professional and knowledgeable,” says Laine. “When we are on site, we are not only a client’s eyes and ears, but also a trusted advisor who can summarize equipment status, review items requiring attention, and provide meaningful recommendations.”

RISKS & REWARDS

Despite being a major cost centre, mechanical and electrical systems tend to go unnoticed—that is, until they fail. When systems suddenly stop working, the costs of reacting to a failure can add up to a lot more than the cost of conducting scheduled repairs or replacements.

“Combining regular preventative maintenance and capital planning for new equipment reduces the risk of catastrophic failure,” says Laine. “It means repairs are completed in a scheduled and controlled environment, reducing after-hours costs and producing better results with minimal downtime.”

On the other hand, failing to maintain or properly address issues as they arise can have serious cost implications. Property managers without a trusted partner can expect costs associated with everything from downtime, to overpaying for repairs, to liabilities if unqualified trades people were unwittingly hired to fulfill the work. Many building owners have found themselves paying for repeat repairs due to unsatisfactory results. As Laine points out, having a multi-trade service provider like Black & McDonald eliminates these risks.

“Through regular maintenance, OEM efficiency ratings can be sustained—which will also help to avoid unnecessary gas and electricity consumption, as equipment ages,” he adds. “We

take pride in being available to answer the phone and direct any type of mechanical or electrical requests to an appropriate team member. Whether it’s a tripped breaker or a broken water main, one phone number makes it simple for you to get the assistance you need.”

NEW WORLD, NEW STANDARDS

If the pandemic has taught us anything, it’s the value of indoor air quality and the need for mechanical and electrical systems that operate at their best. Prior to COVID, these systems were only addressed when there was problem—but those days are behind us.

Today, building owners want to ensure they can provide safe and healthy spaces for their staff, residents, and guests. They’re connecting the dots on how building system performance impacts IAQ, and how proper proactive maintenance is a pathway to guarantee this while providing assurances to the occupants.

As the cost of utilities increases and technology changes, it can be difficult to manage the road forward given the number of options and confusion around incentives and loan products.

“Black & McDonald offers a full range of consultation and technical support to guide and assist you on your journey,” he says. “We’ll develop a tailored solution to meet the specific requirements of your building or portfolio.”

For more info, visit www.blackandmcdonald.com.

Purpose-built Rental Housing Demonstrates Growth Potential FAVOURED FUTURE

By Barbara Carss

PURPOSE-BUILT rental housing is tapped to be a favoured investment asset for awhile yet. Industry analysts cite Canada’s demographic trends and seemingly chronic housing supply-demand imbalance as two fundamentals that should drive robust returns well into the future despite the complications of inflated construction costs and higher interest rates.

Speaking during a recent online overview of current commercial real estate dynamics, Peter Norman, Chief Economist with Altus Group, underscored the expanding market share that purpose-built supply could capture. Over the next five years, it’s projected that, Canada-wide, about 85,000 newly formed households will be taking up the search for accommodations every year — coming into a market where the national vacancy rate sat at 2% in the fall of 2022 and is expected to slip lower.

“It’s for good reason that we’re seeing new supply coming on. It continues to be a market that provides some promise,” Norman said. “It continues to be a market that provides a return and it’s also one that shows that there is further demand for more growth.”

HOUSEHOLD FORMATION TRENDS

New household formation is actually ebbing from an earlier pace of nearly 100,000 new entrants annually while the millennial age cohort was absorbed into the rental market, but Norman argues there is still a lucrative void for purpose-built rental to fill. Now ascendant Gen Z renters are less numerous than their immediate predecessors, but growth is expected to exceed the levels of the 1990s and early 2000s.

It’s also instructive to consider where new renter households are settling, as about one third took over tenancy of single-family

homes over the past five years.

“That is actually the rental asset class which is exploding the fastest right now,” Norman reported. “It is below a lot of people’s radars. A lot of it is repurposing of what were previously owned homes, but it might be investors buying new homes. There are a variety of experiences in that segment.”

Across Canada, 68,000 new purposebuilt rental housing starts last year demonstrated a dramatic uptick in development momentum, accounting for more than half of all multifamily starts.

“That’s in stark contrast to even going back five or 10 years ago when the purposebuilt sector was more like 20 or 30% of a much smaller apartment supply pipeline,” Norman said.

However, recent new construction — averaging out to roughly 41,000 unit starts per year over the past five years — hasn’t

translated into an equivalent gain in the rental universe because demolitions have occurred along with, or as a precursor to, new development. Norman pegs the net addition of new units at closer to 20,000 per year and characterized this as the sector renewing itself. In the process, it’s already re-tilting the balance with rental condominium supply.

“The investment-grade asset that provides a variety of amenities and modern features is a very dominant product in the market,” he maintained. “If it’s competing against 30-year-old buildings; if it’s competing against 25-year-old condo buildings that are owned by individual investors; if it’s competing against carve-outs in singlefamily homes, there’s a lot of room for that investment-grade market to continue to take a larger share.”

OBSTACLES TO OWNERSHIP

Based on conventional turnover patterns, millennials should be exiting the rental market.

“They’re now all in prime homebuying years. Certainly, in the decade ahead, that

will be the predominant influence that millennials will have,” Norman said.

Yet, there are some unprecedented impediments to the traditional generational trajectory. Recent research from CBRE Canada calculates that residents of the Greater Toronto Area need an annual income of nearly $240,000 to affordably purchase a single-detached home at the region’s current average price or earnings of $146,000 for a condominium. The threshold for required annual income is even steeper in Greater Vancouver at $340,000 for a single-detached home or $160,000 for a condo.

“An increasing number of Canadians are being priced out of home ownership and their only option is to rent it,” Paul Morassutti, Chair of CBRE Canada, observed in a recent address in conjunction with the release of the firm’s 2023 Market Outlook report. “Because of this, rents have surged.”

There is broad consensus that more affordable ownership and rental housing is imperative to support and nurture a productive population that underpins a strong and innovative

NEW ARITHMETIC FOR CONDO PROJECT FINANCING

economy. In turn, there is general acknowledgement that it will take some time to resolve a supply-demand imbalance that developed over decades.

For investors looking for long-term sustainable returns, there is limited opportunity to acquire existing multifamily assets, but also assurance for prospective developers that there won’t be a glut of product any time soon.

“Demand is not down. It’s the lack of supply in the marketplace that’s affecting apartment transaction activity,” Raymond Wong, Vice President of Altus Group’s data solutions and research division, advised during his firm’s online presentation.

“It is certainly encouraging that every level of government is finally responding and there are definitely good initiatives underway, but the chances of meeting the proposed target of 1.5 million new homes in Ontario over the next decade stands somewhere between slim and none. We have to do more and, yet, there are really no easy solutions,” Morassutti mused. “If you own apartment buildings, it means continued upward pressure on rents.” zz

More cautious criteria for condo project financing could be upending some development pro formas and constraining housing starts. Results from CBRE Canada’s annual survey of lenders found them generally less open to loans on high-rise condo projects in the fall of 2022 than they had been 12 months ago.

“Headwinds are hitting the condo sector. A tightening in underwriting is on the way,” Carmin Di Fiore, CBRE’s Executive Vice President, debt and structure finance, warned late last year during the online release of the survey results. “Cost-push inflation and rising interest rates are pencilling out very differently compared to previous years.”

In the period between November 2021 and November 2022, high-rise condos shifted from being one of the least worrisome underwriting candidates to midway in the pack of 18 categories of commercial real estate assets. More than 30% of respondents — from a total survey base of 29 companies that collectively hold about $200 billion in real estate loans — expressed reservations versus fewer than 10% naysayers the previous year.

That still gave high-rise condo developments a significant margin of comfort over all types of office properties, hotels and regional malls, but eight other asset classes garnered more favour. That includes three other types of housing: single-family development; seniors housing; and multifamily rental buildings. Notably, the latter shared preferred status with grocery-anchored retail, eliciting no concern from lenders.

Prospective condo developers will now be seeking capital in an environment where 67% of surveyed lenders want more upfront equity and 39% will be looking for unit purchasers to make larger deposits with shortened payment schedules as a condition of financing. Upwards of 25% of survey respondents also indicated they will demand greater development contingencies and fewer presale assignments.

“It could be a game-changer for many projects in the pipeline,” Di Fiore said. “The condo market could see a slowdown based on the changing arithmetic.”

He also foresaw potential hiccups for mixed-used developments given lenders’ considerably less enthusiastic outlook on new office space. Declaring the office development cycle effectively over in most Canadian cities, Di Fiore hypothesized that only a fully pre-leased office project with a credit tenant financing structure is likely to attain lenders’ approval in the current environment.

“Given recent trends toward more mixed-use high-rise developments, there may be a spillover. Those projects featuring an office component will be much harder to underwrite,” he maintained.

Few surveyed lenders suggested that they would exert pressure for loan candidates to scale back the size of their projects or to phase completion over a longer period, leading CBRE analysts to conclude “lenders are adjusting to increased risk solely through financing adjustments rather than to the development process itself”.

NET-ZERO PROGNOSIS

Canada’s Building Stock Scrutinized in OECD Review

ARTIFICIALLY LOW electricity rates and indiscriminate dispersal of retrofit incentives could be undermining efforts to curb greenhouse gas (GHG) emissions from Canadian buildings, a new report from the Organisation for Economic Co-operation and Development (OECD) contends. As part of a biennial review and benchmarking of Canada’s economic performance against

other OECD countries, it scrutinizes progress toward the interim 2030 target and 2050 goal for net-zero emissions and repeatedly highlights how the national patchwork of provincial/territorial regulations and agendas complicates that journey.

“Canada uses large amounts of energy to heat buildings. Hitting emissions reduction

targets will require, along with marketbased incentives, fast adoption of tough energy standards for new buildings and rapid retrofitting of existing ones,” the report advises.

Jurisdictional discrepancies in codes and standards are a well-documented constraint. The report points to the federal-provincial/ territorial commitment to harmonize and

streamline future code development, but also charts the uneven adoption of the most up-to-date model codes. Canada-wide, that currently translates into three different vintages of the model national energy code — 2011, 2015 and 2017 — setting the baseline for new building performance.

ELECTRICITY SYSTEM IMPACTS

Nevertheless, there is always optional leeway to surpass code standards in the design, construction and retrofit of buildings, whereas building owners/managers are generally more captive to electricity market dynamics. The OECD report is critical of the insularity that sees major hydroelectric generators export more low-carbon power to the United States than to other provinces, and it decries regulated rates that undercut the market price and do little to encourage conservation.

The report endorses market-based pricing and time-of-use rates for residential customers. It also underscores the vast investment in renewable generation, transmission infrastructure and energy storage that will be required to comply with Canada’s proposed clean electricity

regulations — which envision a near-zeroemission electricity grid by 2035 — and suggests more interprovincial cooperation could better support economies of scale.

“A small number of interconnectors limit east-west power transmission between Canadian provinces, which have tended to prioritize self-sufficiency in supply,” the report observes. “Implicit barriers to electricity trade between provinces may also influence costs of generating and storing power in the years ahead…Greater electricity trade between provinces could facilitate more competition in markets currently dominated by a small number of large generators.”

Looking to provinces with vast hydroelectric resources, Montreal, Winnipeg and Vancouver figure prominently at the low end of the report’s chart of average residential electricity prices in select North American cities — with Montreal’s rate notably about 80% lower than chart-topping prices in New York City and Boston.

OECD analysts argue that prices more in tune with the market would prompt greater energy efficiency within dominant hydro

power jurisdictions, freeing up supply that could displace fossil-fuel generation in neighbouring regions. That would also garner higher earnings that could be reinvested in retrofit programs. Elsewhere, below-market regulated prices are critiqued for muting carbon prices.

“Carbon cost pass-through ideally reduces the dispatch of carbon-intensive electricity, improves the cost competitiveness of clean energy and encourages power conservation in peak demand periods. Such channels can break down in highly regulated markets, necessitating additional higher-cost policy interventions to stimulate clean energy and encourage energy efficiency,” the report states.

LOW-CARBON LEVERAGE

Turning to where the constitutional division of powers gives the federal government direct influence, the report calls for a ban on fossil-fuel heating in new home construction. It urges the government to facilitate the uptake of low-carbon building materials and products, and recommends scoping residential retrofit incentives more toward low- and middle-income households. Of

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GEOTHERMAL ENERGY SYSTEMS NOW ELIGIBLE FOR TAX CREDIT

The Canadian government has added geothermal energy systems to the list of clean technologies that qualify for a 30% tax rebate. The recently released 2023-24 federal budget also pledges to retain the maximum tax credit at 30% straight through to 2034 rather than paring it back in 2032, as was contemplated when the measure was announced in the fall economic statement last November.

“The federal government is expanding the eligibility for the clean technology investment tax credit to further support the growth of Canada’s burgeoning clean technology sector,” the budget document states. “Expanding eligibility of the investment tax credit to include technologies for geothermal energy projects would generally be expected to help reduce emissions of greenhouse gases and air pollutants by displacing the use of fossil fuels.”

The tax credit applies on qualifying capital costs of a range of low-carbon heating, renewable energy generation and energy storage systems, as well as zero-emission construction machinery and associated charging equipment. Geothermal piping, pumps, heat exchangers, steam separators and electrical generating components are now included in the mix with the condition that the equipment cannot be used in energy projects that co-produce oil, gas or any fossil fuel.

The tax credit for geothermal systems kicks in for purchases made as of budget day, March 28, 2023. The addition of the new category is forecast to cost $185 million over the next five years, increasing to the overall expenditure for the tax credit to $6.9 billion for the period from 2023-24 to 2027-28.

The budget also clarifies that the purchase and installation of low-carbon heating systems are exempt from the tax credit’s labour conditions, meaning that all investors can expect a full 30% rebate. For other categories of investment, such as renewable energy generation or energy storage systems, businesses must ensure that workers are paid “a total compensation package that equates to the prevailing wage” or they will forfeit a portion of the available credit, reducing it to a 20% rebate on qualifying costs.

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potential interest to large commercial real estate players and their service providers, the report also endorses the carbon price contract mechanism that has been proposed as an element of the $15-billion Canada

Growth Fund for low-carbon investment.

OECD analysts predict carbon pricing will continue to push steel and concrete manufacturers toward more innovative manufacturing processes and product

formulas, but urge the federal government to address regulatory impediments and support the market for these key construction materials.

On that front, federal and provincial initiatives to foster hydrogen fuels and technologies line up with emerging lowcarbon steel production, which uses green hydrogen in place of coke-base blast furnaces. Canada is also one of the OECD countries, along with Germany and the United Kingdom, which has pledged through the United Nations Industrial Development Organization (UNIDO) to buy low-carbon steel and cement.

“Ensuring building codes permit the use of safe low-carbon alternatives to new steel and cement could improve recovery of building materials and reduce need for new production. Government procurement of ultra-green buildings and materials will also help test and improve green products and create new markets for them,” the report submits.

It also commends moves to incorporate lifecycle analysis into the model codes. “Lifecycle analysis could improve the environmental impact of building codes in Canada, including by better targeting of renovation rules,” it states.

The report highlights the higher carbon intensity of Canada’s housing stock compared to other OECD countries with similar climates and heating demands, including Sweden, Finland, Denmark and Lithuania, and points to the example of OECD countries like Sweden, Norway, Germany, France and United Kingdom,

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which have either already prohibited or have set deadlines for a ban on fossil-fuel heating systems. Canada is urged to follow suit.

“Without regulatory intervention now, further installation of conventional fossil fuel heating systems may necessitate expensive retrofitting further down the track,” the report warns.

TARGETING INCENTIVES

The report argues that retrofit funds under the federal Green Homes Initiative could be allocated more effectively.

“Many well-off households would likely undertake energy-saving renovations without support. Governments might achieve bigger emission reductions with larger incentives aimed at lower and middleincome homeowners more likely to face financial constraints,” it states.

Similar criticism is aimed at provincial governments that have dismantled energy efficiency incentives for residential customers in recent years and are now broadly conveying rebates to cushion against soaring utility costs.

“While some support was needed to relieve living-cost pressures on vulnerable individuals and families, subsidies also benefitted higher-income households. Equivalent resources, if instead allocated to retrofitting incentives, could have longerlasting impact on energy affordability while also reducing energy-use emissions,” the report maintains.

To support large capital expenditures on emissions reduction and/or enabling technologies, OECD analysts see promise in proposed carbon price contracts, which are described as a means to provide prospective project proponents with more

certainty about future returns on investment. The mechanism, termed “contracts for difference” in the federal government’s proposal, would draw on the Canada Growth Fund to cover the shortfall between projected returns pegged to the presumed carbon price and potential lower actual returns due to a price decline.

This is intended to provide assurance against future regulatory policy adjustments, but would also include conditions for the Canada Growth Fund to share in surplus returns above the projected target. The United Kingdom uses a similar instrument to encourage investments in clean power.

“Regulatory uncertainty can mean that firms delay costly capital expenditures or underinvest in green technologies,” the OECD report observes. “Once put into practice — ideally initially for a small range of investments for which abatement can be estimated and verified — carbon-price contracts for difference should improve the investment climate for green technologies in Canada, motivating abatement in carbonintensive sectors. ” zz

The OECD Canada Economic Snapshot can be found at www.oecd.org/economy/canadaeconomic-snapshot.

FASTER AND FRICTIONLESS CODE ADOPTION PRIORITIZED

A new collaborative code development approach is aimed at achieving faster and frictionless Canada-wide adoption of the most current standards for new construction, fire safety, plumbing and energy efficiency. The Canadian Table for Harmonized Construction Codes Policy and the Canadian Board for Harmonized Construction Codes will bring federal, provincial and territorial representatives together to jointly set strategic priorities and to develop, approve and maintain codes.

The new governance structure arises from the 2020 Canadian Free Trade Agreement to dismantle or reduce administrative redundancies and inter-provincial trade barriers. It replaces the federally directed framework of the Canadian Commission on Building and Fire Codes over the past three decades, in which decision-makers developed model codes that were then handed off to the provinces and territories to be further studied — and potentially revised — before adoption.

“Our government is adopting a more collaborative approach with provinces and territories to harmonize construction codes across the country,” says François-Philippe Champagne, Canada’s Minister of Innovation, Science and Industry. “The new national model codes development system will ensure there is more consistency in innovative building techniques such as helping to meet energy efficiency standards.”

That’s considered particularly integral to achieving Canada’s 2030 target for a 40 to 45% reduction in greenhouse gas (GHG) emissions relative to 2005 levels and the ultimate goal of net-zero emissions by 2050. Canada’s 2030 Emissions Reduction Plan, released in 2022, identifies codes as a key element to help realize envisioned reductions in the buildings sector. However, the 2022 Provincial Energy Efficiency Scorecard concludes that current piecemeal provincial policies are making lacklustre progress toward to those very ambitious objectives.

“We are optimistic that these changes will help in this regard,” notes James Lockhart, Research Manager, Buildings, with Efficiency Canada, the producer of the scorecard. “Increased collaboration between all levels of government, greater consideration of the relationship between code development and implementation of those codes, and clear policy requirements and targets are critical to ensuring that all new buildings are on a path to net zero energy and emissions.”

Iain Stewart, President of National Research Council of Canada, and Laurier Donais, Saskatchewan’s Deputy Minister of Government Relations, will serve as the inaugural co-chairs of the new Codes Policy Table. The National Research Council will also co-chair the new Codes Board with a peer from the provincial/territorial delegates, while every province and territory will be represented on both entities.

“This will provide the framework for provinces, territories and Canada to work collectively to meet the needs of all Canadians in a timely manner,” Donais says.

“We look forward to continuing to work with provinces and territories in the transformed national model codes development system, to make advancements in key code priority areas such as climate change,” Stewart concurs.

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“Governments might achieve bigger emission reductions with larger incentives aimed at lower and middle-income homeowners.”

OUTCOME-BASED OVERSIGHT

Ontario Introduces New Approach to Enforcing Elevator and Escalator Safety

By Barbara Carss

A NEW OVERSIGHT regime for Ontario’s elevators and escalators came into force on March 1, bringing shorter timelines for rectifying an extensive list of designated high-risk deficiencies and the potential for more shutdowns. For the regulator, the Technical Standards and Safety Authority (TSSA) of Ontario, the new compliance standards are another step in the evolution of an inspection and enforcement model that is grounded in a hierarchy of risk.

Dubbed an “outcome-based” approach, it devotes the most resources to the issues that pose the greatest or most prevalent threat to the public, and pays the closest attention to owners/operators of elevating devices with the weakest safety records. The frequency of periodic inspections are already based on license holders’ risk profile, but the TSSA is now attaching a risk rating to the deficiencies inspectors may encounter.

The new compliance standards set out high-risk hazards and a stipulated period — from zero to 14 days — for correcting them. Less onerous inadequacies will be flagged as medium- or low-risk items that owners/operators will be expected to address within 90 days, but there will be no follow-up inspection on the TSSA’s part.

“The compliance standard is a key tool in our transformation to become an outcomebased regulator,” Sandra Cooke, the TSSA’s

Ontario Electricity Rebate accounts for largest portion of spending

Manager of legal compliance, observed earlier this winter during a webinar about the looming changes. “It helps owners and contractors and our inspectors focus on high risk. What we’re ideally hoping is that those things that are identified on the compliance standard will be dealt with long before TSSA shows up on a periodic inspection.”

Ontario’s spending watchdog calculates Class B commercial electricity customers will realize an $8.4 billion subsidy over 20 years through the transfer of a major share of renewable generation costs to the provincial tax base. A newly released report from the Financial Accountability Office (FAO) of Ontario pegs the total cost of nine provincial energy subsidy programs at more than $118 billion for the 2020-21 to 2039-40 period, with the largest portion of that ascribed to the Ontario Electricity Rebate (OER) for residential, small business and farm customers.

really serious safety elements that we as an industry have agreed on. We’re being transparent here: this is what they are; this is what everybody needs to be focusing on.”

The provincial outlay for subsidies will diminish annually as renewable generation contracts expire, dipping to about 10% over the next 10 years then falling sharply and dissipating entirely over the remainder of the 2030s.

HIGH-RISK DEFICIENCIES

The compliance standards are embedded in inspection protocol and real-time reporting tools so that any findings of non-compliance will automatically be logged in the TSSA’s database and prompt a work order. Some of the identified deficiencies could trigger an immediate shutdown of the elevator, or a bank of elevators.

The slate of high-risk deficiencies was developed from the TSSA’s historical data and with the aid of modelling software to forecast the likelihood of a failure and the potential safety repercussions associated with each non-compliance scenario. Elevating device manufacturers, engineers, technicians and building owners/managers were also asked for input.

For the purposes of the report, the FAO lumps Class A commercial customers, with an annual average energy demand of 1 megawatt, in with industrial consumers. Together, those groups are projected to receive a $7.2 billion subsidy over the 20-year period of the renewable cost shift. Small business customers will be eligible for an estimated $24.3 billion via the OER during the same timeframe.

Many of these pertain to the condition of the brakes or hydraulic system, controller, governor, hoist way, landing and car doors. The remainder are tied to a 14-day schedule for repairs or replacement.

In 2021-22, the renewable cost shift — which removes approximately 85% of the costs for 33,000 wind, solar or bioenergy generation contracts from the electricity rate base — resulted in a 16% average hydro bill reduction for Class B commercial customers paying the global adjustment on a volumetric per-kilowatt-hour basis, and a 14 % average reduction for Class A customers with the option of participating in the Industrial Conservation Initiative.

“We’ll be back on day 15 for a follow-up and if they’re not completed at that time, they (elevators) will be removed from service,” Roger Neate, the TSSA’s Safety Director for elevators and amusement devices, affirmed during the webinar. “These are the

For small business and residential account holders, including the multiresidential rental and condominium sectors, the FAO confirms that future costs will be lower than was envisioned under the previous government’s pricing scheme.

Checklists for each category of elevating device — hydraulic elevators, electric/traction elevators and escalators — have been promised to summarize the key requirements for both owners/ managers and their contractors. Industry service providers perceive they should be helpful for contract management and quality assurance.

OWNER OBLIGATIONS

“Owners should be thinking about their elevators. They’re an important aspect of the building, and the owner and the contractor

It would have seen electricity rates jumping 6% annually from 2022 to 2028, following a four-year period in which increases were kept on par with the inflation rate. In contrast, the current government has said it intends to hold increases to 2% annually.

Programs to address energy poverty accounted for $694 million in provincial spending or about 10% of the subsidies for 2021-22. This includes the energy portion of the Ontario Energy and Property Tax Credit (OEPTC) and the Ontario Electricity Support Program (OESP), which provides monthly on-bill credits for residential ratepayers with low to moderate incomes.

During the 20 years from 2020-21 to 2039-40, the FAO projects approximately $13.7 billion will be allocated to the energy portion of the OEPTC, which applies on heating fuel costs as well as electricity. The tax rebate amount, which topped out at $243 for eligible claimants in 2021-22, is indexed to the rate of inflation, underlying the FAO’s projection that it will

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In contrast, the OESP, which provides direct on-bill credits ranging from $35 to $113 per month for eligible customers, is not indexed to inflation and is projected to represent a smaller portion of total subsidies over time. In 2021-22 it accounted for 2.5% of Ontario electricity subsidies versus a

“The FAO projects that annual OESP spending will decline by $99 million from $181 million in 2020-21 to $82 million in 2039-40,” the report states. “Changes to the credit amounts and income brackets can be made through regulation, which the Province has done only once (in 2017) since the creation of the program in 2015. Consequently, the FAO has assumed no change to the credit amounts or income brackets over the 20-year review period. If the Province does change the credit amounts or income brackets, then the cost of the OESP will increase.”

“What we’re ideally hoping is that those things that are identified on the compliance standard will be dealt with long before TSSA shows up on a periodic inspection.”

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need to be working together and responsible for potentially deficient items,” says Tiffany Chan, Senior Consultant with KJA Consultants Inc., an engineering firm specializing in elevator design and maintenance management. “Checklists and a breakdown of these high-risk compliance items can give the owner a better picture of what can happen and what is happening with elevators in the industry.”

Building owners’ elevator maintenance contracts will typically entail a monthly or quarterly check of all the items highlighted in the new compliance standards and any adjustment or repairs that are revealed to be necessary. Only certified and licensed technicians can conduct this work, which must be recorded in a logbook kept in the elevator machine room. Building owners carry the ultimate responsibility for the safety of their elevating devices, but contractors and the technicians they employ are compelled to meet industry safety standards as a condition of their licenses.

“We want owners to be engaged in the safety of their device,” Neate stressed. “It’s important that you check the log book because that’s how you’re going to know if these things are being completed and being completed at the frequency that they’re supposed to be.”

The risk prioritization approach now comes with an honour system for building owners/managers to address less pressing

deficiencies. As well, compliance standards are meant to be dynamic so additional items could be flagged as high-risk in the future.

“We are going to be doing a safety audit program where we will be auditing these things that are low and medium risk to see how the enforcement is going,” Cooke reported. “The primary responsibility for compliance lies with the owner/ operator and so we’re not following up, but there’s an expectation that you want your elevator to be safe, you want your elevator to be compliant.”

There’s also a hint of some flexibility on compliance orders if repairs or replacement can’t be completed within 14 days due to uncontrollable supply chain or labour pressures. For example, more than 14 days would typically be needed to replace an elevator’s hoist ropes.

Although Neate reiterated to webinar attendees that owners/operators and their contractors should generally be aware of and proactively repairing or replacing deteriorating equipment before a TSSA inspector has to issue an order, Chan advises that sudden events can sometimes come into play. That could be flooding or unexpected water infiltration from elsewhere in the building, vandalism or sudden knocks inside the elevator cab or to the hallway door.

“Let your inspector know what the situation is. We do understand there are

supply chain issues and your inspector will make accommodation for you in those circumstances,” Cooke said.

ONGOING VIGILANCE REQUIRED

The TSSA’s outcome-based model brings differing value for service depending on where owners/managers and their elevating devices are plotted in the risk spectrum. For example, the fee structure for annual licenses was revised in 2021 to bundle in the cost of a periodic inspection and one follow-up, which were previously separately billed services. However, risk-based scheduling means that many elevators are not inspected that frequently.

“So you’re paying for something you’re not going to get. You’re financing somebody else and you’re not getting that service,” contends Ray Eleid, Chief Executive Officer of Solucore Inc., an elevator and escalator consulting firm.

He suggests a vigilant approach to maintenance contracts will be even more important in buildings that the TSSA has categorized as lower risk and placed on a lengthier inspection rotation. Meanwhile, when it comes to responding to compliance orders, a full-service contract may offer more cushion against extra costs than a contractor-based contract with fees for specified extra services.

“It’s extremely important that owners call their contractors right away so these issues can be resolved within the compliance window,” Chan says. “Depending on the existing maintenance contract between the building owner and the elevator contractor, some of these items will be covered under their maintenance contract so that would just be a matter of ensuring that the contractor completes it as part of the maintenance contract. However, if there are re-inspections required past the first follow-up, then there would be additional costs for the TSSA services.” zz

More information about the TSSA compliance standards can be found at www.tssa.org/en/ elevating-devices/compliance-standardselevating-devices.aspx.

“We want owners to be engaged in the safety of their device. It’s important that you check the log book.”