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Procurement HFCs Phase Out Real Estate Trends
Timber vs Concrete: The Debate Continues
2019-10-02 3:45 PM
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FEATURES
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And in this corner… As interest in tall timber buildings gains momentum, a dust-up between the two age-old building materials of wood and concrete is also brewing. By Rhys Phillips
To Housing and Beyond Opportunities in Vancouver’s real estate market. By Mark Hannah
Customerdriven Demand Shaping Canadian Real Estate Companies are adapting their developments and spaces to offer the top-quality amenities and services that users demand. By Andrew Warren
Spray Foam Insulation, Evolved An HFO awakening sees the phase out of HFCs. By Doug Kramer
Departments Building.CA explore OAA Headquarters The association’s renewed HQ is designed to achieve net zero carbon status, and meets the 2030 Challenge a decade early.
read Exposed Wood in an Indoor Pool? Yep, You Can Do It. The benefits of using exposed wood in indoor pools and what to keep in mind when doing so.
05 06 08 11 33 41 44 46
Editor’s Notes Market Watch Legal Briefs Powers That Be In Their Words Site Visit Spec Sheet From the Bullpen
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Volume 69 No. 5
Editor in Chief Peter Sobchak Art Director Roy Gaiot Legal Editor Jeffrey W. Lem Contributors Mark Hannah, Hugh F. Kelly, Anita Kramer, Doug Kramer, Megan J. Lem, Shannon Moore, Ben Myers, Rhys Phillips, Kevin Powers, Andrew Warren Customer Service / Production Laura Moffatt, 416 441 2085 x104 Press Releases pressroom@building.ca Circulation Manager circulation@building.ca Sales Manager Faria Ahmed, 416 441 2085 x106 fahmed@building.ca Vice President & Senior Publisher Steve Wilson, 416 441 2085 x105 swilson@building.ca President, iQ Business Media Inc. Alex Papanou Design Consultation BLVD Agency
Building magazine is published by iQ Business Media Inc. 101 Duncan Mill Road, Suite 302 Toronto, ON M3B 1Z3 (416) 441 2085 x104 info@building.ca www.building.ca SUBSCRIPTION RATE: Canada: 1 year, $30.95; 2 years, $52.95; 3 years, $64.95 (plus H.S.T.) U.S.A.: 1 year, $38.95 USD. Overseas: 1 year, $45.95 USD. BACK ISSUES: Back copies are available for $15 for delivery in Canada, $20 USD for delivery in U.S.A. and $30 USD overseas. Please send prepayment to Building, 101 Duncan Mill Road, Suite 302 Toronto, ON M3B 1Z3. Subscription and back issues inquiries please call (416) 441 2085 x104, e-mail: circulation@building.ca or go to www.building.ca Please send changes of address to Circulation Department, Building magazine or e-mail to addresses@building.ca Building is indexed in the Canadian Magazine Index by Micromedia ProQuest Company, Toronto (www.micromedia. com) and National Archive Publishing Company, Ann Arbor, Michigan (www.napubco.com)
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Stressed Out
By the time this issue hits the streets, it will only be a few days before the 2019 Federal Election, and what many in our industry are waiting to see is what, if anything, the winning party will do to address a relatively new-ish top-of-mind issue to most Canadians: housing affordability and supply. Across the real estate spectrum, builders to sellers and everyone in between are urging the federal parties to commit to policies that will help remove barriers and reduce the cost of home ownership. First on almost everyone’s list: revise the Office of the Superintendent of Financial Institutions’ (OSFI) mortgage stress test to take into account its impact on different real estate markets across the country. According to many observers, the past year illustrates that the only thing the mortgage stress test has done is restrain activity in markets like Vancouver and Toronto, taking many homebuyers out of the market because traditional lending markets are closed to them, and therefore leading to a rise in an unregulated lending market, resulting in greater consumer and market risk. Groups, such as the many realtor associations from Canada’s largest markets, are urging candidates to view the stress test as a flexible policy and adjust it based on changing economic trends and interest rates. “We believe in responsible lending and regulation, but there’s a balance. The stress test is causing more harm to hopeful home buyers than it needs to. It’s hurting affordability and stifling people’s ability to meet their housing needs,” said Ashley Smith, president of the Real Estate Board of Greater Vancouver. “With increasing pent-up demand and accelerated price growth, recent policies focused on demand such as the mortgage stress test have made home ownership less attainable,” said Michael Collins, president of the Toronto Real Estate Board (TREB).
Peter Sobchak Editor in Chief We welcome your feedback. Send your questions and comments to psobchak@building.ca
Housing suppliers aren’t the only ones calling for meaningful action to increase accessibility. Similar sentiments were expressed by real estate development professionals in the P wC Canada/ ULI 2020 Emerging Trends in Real Estate report. Survey respondents rated construction, material and land costs, along with approval processes, as top development issues in 2020. Many of these are supply-related issues where governments can play a role, especially given the opportunity to do more if governments and the real estate industry embrace the mutually-beneficial approaches to housing supply issues through transit-oriented development policies and increased density allowances around transit hubs. “There is a better way to achieve a responsible use of land that addresses affordability concerns, and it's not from current attempts, like the stress test, to temper demand," says Richard Joy, executive director of Urban Land Institute (ULI) Toronto. “We need innovative solutions for supply constraints and city building issues. I expect the real estate industry will be waiting to see how future developments will be impacted after Canadians go to the polls in October.”
Building.ca
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market watch Spotlight: Resale Housing Market
Of these factors supporting Canadian housing activity, the decline in mortgage rates is arguably the most important development since the release in June of CREA's most recent forecast. The decline in the benchmark five-year mortgage rate has marginally relaxed the B-20 mortgage stresstest, which has dampened housing activity more than other policy changes made in recent years. Home sales have improved by more than expected in recent months and there are early signs that home price declines in the Lower Mainland of British Columbia and across the Prairies may be abating. Meanwhile, home prices are re-accelerating across Ontario's Greater Golden Horseshoe region. Strong economic fundamentals, previously unexpected declines in mortgage interest rates and stronger than previously expected housing market trends in British Columbia and Ontario have resulted in CREA upwardly revising forecast home sales in 2019 and 2020. Nonetheless, the overall level of national sales activity this year and next is anticipated to remain below
50,000 45,000 40,000 35,000
10-year monthly moving avg.*
30,000 25,000
* Canada: seasonally adjusted
6
January
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
20,000
Source: CREA
Canadian home sales
According to the Canadian Real Estate Association (CREA) — which has updated its forecast for home sales activity via the Multiple Listing Service (MLS) Systems of Canadian real estate boards for the rest of 2019 and ahead to 2020 — economic fundamentals underpinning housing activity remain strong outside of the Prairies and Newfoundland and Labrador. Population and employment growth have both remained supportive and the unemployment rate remains low. At the same time, expectations have become widespread that the Bank of Canada is unlikely to raise interest rates over the rest of the year and into next. More importantly for home buyers and housing markets, longer-term mortgage rates have been declining. Among those that have declined is the Bank of Canada's benchmark five-year rate used by banks to qualify mortgage applicants. Additionally, the federal government has recently launched its First-Time Home Buyer Incentive, a shared equity program in which the federal government finances a portion of a home purchase in exchange for an equity share of the home's value.
Monthly home sales*
Revised home sales forecast shows swings between provinces
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Sales are forecast to continue to improve through 2020, albeit slowly.
at $491,000 amid diverging trends in eastern and western provinces. In line with the balance between supply and demand across the country, average prices in 2019 are expected to fall in British Columbia, Alberta, Saskatchewan while rising in Ontario, Québec and the Maritimes. In keeping with an elevated inventory of listings relative to sales, the average price in Newfoundland and Labrador is anticipated to fall for the fifth consecutive year. Sales are forecast to continue to improve through 2020, albeit slowly. National home sales are forecast to rise by 7.5 per cent to 518,100 units next year, with most of this increase reflecting a weak start to 2019 rather than a significant change in sales trends out to the end of next year. Indeed, an anticipated increase of 14.3 per cent in British Columbia's sales returns activity
Canadian residential prices
Residential average price**
$700,000 MLS® HPI Aggregate composite benchmark*
600,000
Average**
500,000 400,000
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
200,000 2005
Source: CREA
300,000
15 10 5 0 -5 -10 CA bc ab sk mb on Qc nb ns pe nf
August 2019 vs August 2018
January * Seasonally adjusted
in line with the province's 10-year average. Ontario and Québec are predicted to see sales rise by about seven per cent in 2020, while activity in Alberta will recover by about five per cent compared to 2019. The number of homes trading hands in other provinces is predicted to edge up or down only marginally. The national average price is forecast to advance by 2.1 per cent in 2020 to $501,400, remaining below its 2017 level. Average price trends across Canada in 2020 are generally expected to be more moderate versions of those in 2019, with small declines in Alberta, Saskatchewan and Newfoundland and Labrador, and modest gains in Ontario, Québec and the Maritimes. In British Columbia, the average home price is expected to stabilize next year following this year's decline.
Year over year % change
levels recorded prior to the implementation of the B-20 stress test. National home sales are now projected to recover to 482,000 units in 2019, representing a five per cent increase from the fiveyear low recorded in 2018. While this is an upward revision of 19,000 transactions compared to CREA's previous forecast (85 per cent of which is due to upgraded British Columbia and Ontario forecasts), it represents a return of activity to its 10-year annual average. It also remains well below the annual record set in 2016, when almost 540,000 homes traded hands. Notwithstanding the upward revision, the forecast for 2019 on a per capita basis remains the second weakest since 2001. British Columbia is expected to continue to weigh on national figures in 2019, with a decline of 5.4 per cent compared to 2018. This is expected to be more than offset by gains in Ontario (+8.3 per cent) and Québec (+9.7 per cent). British Columbia, Alberta, Saskatchewan and Newfoundland and Labrador are all forecast to come in at or near multi-year lows in 2019. By contrast, Manitoba, Québec and New Brunswick are expected to set new annual sales records. Activity in Ontario is forecast to be in line with the 10-year average for the province. The national average price is still projected to stabilize in 2019, though with a small 0.5 per cent increase compared to the previously forecast 0.6 per cent decline. The national average home price is projected to come in
** Actual - not seasonally adjusted
Building.ca
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legal Briefs Frustrating but not Frustrated
The classic “ frustration” argument being trotted-out by overstretched buyers not being able to finance closings. By Jeffrey Lem and Megan Lem
Jeffrey W. Lem is Editor-in-Chief of the Real Property Reports and the Director of Titles for the Province of Ontario. The opinions expressed in this article are personal to the author and not attributable or referable to the government of the Province of Ontario.
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Megan J. Lem practices corporate securities law at Kirkland & Ellis LLP and is called to the bar in New York and Ontario.
There is an ancient tenet of contract law known as “frustration” which can be used to cancel an otherwise binding contract. Greatly simplified, this doctrine provides that if there is a situation where, through no fault of either party, unanticipated circumstances occur which make it all but impossible to fulfill the contract, then the contract can be cancelled, with no liability on either side. In Taylor v. Caldwell, the famous 1863 U.K. case widely said to be the progenitor of all frustration cases, a fancy concert venue was rented-out to host a specific gala musical performance but then suddenly and mysteriously burned down to the ground on the eve of the event. When the owner of the venue asked for payment nonetheless, the musical performers argued that the rental contract was frustrated because the unanticipated intervening catastrophic fire made it impossible to host the concert at the now charred remains of the venue. The court concluded that the contract had been frustrated, and therefore cancelled, with no party liable to the other. Fast forward 150 years to the other side of the Atlantic, where the Ontario Court of Appeal, in the 2019 Roskaft v. RONA Inc. case, held that an employment contract can also be “frustrated” where a regular employee suddenly becomes totally debilitated, with no realistic likelihood of returning to work within any reasonable period of time. In this case, the employment contract was frustrated, and the employer was relieved of common law notice and severance obligations to that long-time employee. In both cases, frustration assumes that the parties have not otherwise considered the possibility of such an event happening and have not otherwise made alternative arrangements in case of such events. So, for instance, in Taylor v. Caldwell, had the parties contracted for alternative venues or alternative dates or insurance in the case of casualty (as
is likely the case with more modern concert hall rental contracts), the court might not have been so fast to conclude frustration. While the doctrine of frustration has been well established in common law for over 150 years and has application in almost any kind of contract imaginable, a couple of recent Ontario court decisions have confirmed that buyers cannot use suddenly falling market conditions as an excuse to declare their real estate purchase contracts frustrated. While such a conclusion might be seen by most Building readers as trite, it did not seem to deter at least a couple of Ontario lawyers from arguing frustration to try and break ill-timed purchase contracts for their buyer clients. In Bang v. Sebastian, a 2018 Ontario case involving a Mississauga resale, the clearly over-extended buyer contracted at what was arguably the height of the market in 2017 for the purchase of two properties from two separate vendors. She sold her existing home and managed to close one of the new properties, but then, apologetically, turned to the un-closed vendor and explained that her inability to get suitable financing in a falling market meant that her contract with that vendor was frustrated and, therefore, she would not be closing and would like her deposit back, with no further liability. In Paradise Homes North West v. Sidhu, a 2019 Ontario case involving a Brampton new-build, the first-time homebuyer contracted, again at what was arguably the height of the market in 2017, for the purchase of a pre-construction townhome. He made most of the deposits but then defaulted on the final deposit and again on closing. He too explained that his inability to get suitable financing in a falling market meant that his contract was frustrated and, therefore, he would not be closing and would like his deposits back, with no further liability. The buyers’ remarkably similar “frustration” arguments in both cases failed
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Ontario courts not buying the “frustration” and “duress” arguments.
miserably. Although decided by different judges, both decisions, significantly paraphrased, focused on the fact that the risk of falling markets cannot be something that reasonable people would consider an “unanticipated circumstances” resulting in an impossible contract. In the Mississauga case, the judge was critical of the buyer for alleging “unanticipated circumstances” when the buyer deliberately deleted the financing condition in order to make her offer more attractive — how can difficulty
obtaining financing be an “unanticipated circumstance” to a buyer who had an express financing condition?! In the Brampton case, the judge was critical of the buyer for alleging “unanticipated circumstances” when the buyer was himself a graduate business student. How can difficulty obtaining financing be an “unanticipated circumstance” to a buyer who studied business?! The Mississauga case also had an interesting twist: the buyer argued that she only
deleted the financing condition “under duress,” presumably from the vendors and agents who advised her that her offer won’t be competitive if conditional on financing in a hot market. Duh! No kidding! While contracts can be cancelled if signed “under duress,” this type of defense is rare and limited for the proverbial signing “with a gun (a real gun) to one’s head” scenarios. The court rightly distinguished the very real economic pressures of a hot market from the “unfair, excessive or coercive” conduct that is required for true duress and refused to entertain the buyer’s argument that she signed “under duress.” On the one hand, the development and construction industry can be reasonably comforted by these Ontario decisions. On the other hand, the very fact that many of the deals signed-up in 2017 are not closing (many 2017 pre-construction contracts are only now closing), and buyers are even thinking that such arguments like “frustration” and “duress” are worth litigating are, well, cause for pause.
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By participating in the Enbridge Savings by Design Workshop, we were able to discuss real costs of choices, both for construction and long-term operating. The overall building massing and layout was set by very complex program and siting restrictions, so the areas in which we benefited greatly were in rethinking storm water management on site, window type and performance, exterior wall assembly, and healthy materials. The mechanical engineering part was also indispensable and so instructive; highlighting important and easy changes, discussing more complex upgrades, and understanding the long-term and performance impacts of our systems, both as climate change worsens and as building systems need replacement and upgrades. The Enbridge charrette provided the perfect opportunity to make clear and informed choices that brought our project to the next level of energy, health and operating performance. It saved construction and operating costs and made for a healthier building. — Chantal Cornu, LGA Architectural Partners
In 2018, Evergreen Brick Works was in the midst of an ambitious effort to transform the historic Kiln Building – and make it carbon neutral by using the right energy at the right time. Early in the process, Enbridge led a Savings by Design workshop for the project. On a fast track project, this provided a tremendous opportunity for the integrated design team to reflect on the early trajectory set in the project, and obtain informed perspectives from invited experts on enhancing it. The workshop also provided a spring board to brainstorm how the Kiln Building project could serve as a catalyst to transform the entire Brick Works campus to be carbon neutral, which has been a longstanding vision of Evergreen. The Savings by Design workshop struck a great balance between both blue sky and detail level thinking. It was informative, fruitful, and an overall positive experience. We’d highly recommend Enbridge’s Savings by Design workshop program for anyone thinking about making more sustainable buildings. — Drew Adams, Associate, LGA Architectural Partners
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a
powers that be Affordable Housing if Necessary, But Not Necessarily Affordable Housing Canadians want more affordable housing — as long as it’s not near them. By Kevin Powers
Kevin Powers is managing principal of Project Advocacy Inc., a subsidiary of Campbell Strategies, and is focused on helping project developers facing public and government opposition. Find him at www.projectadvocacy.ca or email him at kevin.powers@ projectadvocacy.ca
Affordable housing is having a moment. Research conducted by Abacus Data on the eve of the Federal Election ranked housing affordability fifth among voter concerns, just short of perennial frontrunners, healthcare and taxes. The media is filled with stories of Canadian families struggling to get by. Today, more than 1.7 million Canadian households spend more than 30 per cent of their income on housing. In only three per cent of Canadian neighbourhoods can an individual earning minimum wage, working full-time hours, afford to rent an average two-bedroom apartment. Yet, the cost of accommodation is constantly on the rise. Buying a home in Canada is increasingly out of reach for average Canadians. The three major political parties are promising to come to the rescue with a variety of policies to build more housing, increasing supply and lowering prices. The NDP have the most ambitious plan for a crisis they say is out of control. Leader Jagmeet Singh is promising to build 500,000 affordable housing units across the country. Trudeau’s Liberals are promising a portion of $20 billion in social infrastructure will go to new investment in affordable housing. Andrew Scheer said a Conservative government will help get new homes built across this country by addressing housing shortages and affordability issues on the demand side of the economic equation. “We need to address the supply side of it as well,” he said to a group of homebuilders. “That means we need to make it easier for people like you to build more homes.” To listen to the politicians or to read the headlines, it appears Canada has reached an inflection point. Housing prices are out of control, and most people in Canada finally agree we need to build more affordable housing. The problem is most people don’t want it built anywhere near where they live. An IPSOS poll for the Toronto Real Estate Board in 2018 tried to parse
out exactly what types of new dwellings could feasibly be built, and where. Want to build a single-family home within 500 meters of your average Torontonians’ home? 45 per cent of residents would oppose it. And that’s the best-case scenario. As the density of the proposed new construction increases, so does the opposition. Want to build a small condo apartment building? 67 per cent would oppose it. A high-rise? Forget about it. 76 per cent of Torontonians oppose them. Apply these numbers in urban areas across the country and it becomes very hard to find room for 500,000 new units to solve our affordability crisis. You can’t fault federal leaders for trying. But the problem lies in the cognitive dissonance between the federal and municipal level, or when people think about the good of the country versus their own good. So even though the overwhelming majority of Canadians favour new construction to address worsening housing affordability — 87 per cent in the IPSOS poll — most residents will fight to keep it from being built near where they live. Plenty of research has been done on why people oppose the construction of highdensity residential infill. The reasons range from economic, aesthetic or lifestyle concerns to worries about the impacts on public services. Whatever the reasons, their resistance to new residential development is partially the reason why housing is becoming increasingly unaffordable for millennials and new residents. Cities must grow and evolve over time to remain vibrant places of commerce and culture. The ensconced residents who resist change risk the long-term viability of the very cities they are trying to protect. This upcoming election has shown us that the majority of Canadians understand this in principle, if not in practice. Until that changes, affordable housing’s moment may last a lot longer than this election cycle.
Building.ca
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And in this corner‌
As interest in tall timber buildings gains momentum, a dust-up bet ween the t wo age - old building materials of wood and concrete is also brewing.
By Rhys Phillips
Building.ca
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Economic discourse is rife with the nouns disruption and transformation. One of the more intriguing tussles is between two of our oldest building materials, wood and that old Roman staple, concrete. The specific circumstance is the recent bevy of eye-catching proposals and demonstration buildings pushing mass wood structures well over current six-storey code limits. These new taller wood buildings and pending regulatory changes now pushes mass wood or “tall timber” into the core market for concrete and steel. On March 18 of this year, Michael McSweeney, president and CEO of the Cement Association of Canada (CAC) issued a press release critical of the B.C. government’s push for tall timber up to 12 storeys before the NBCC 2020 revisions are complete. In addition to citing a lack of “significant evidence” on claims of seismic safety, he questioned tall wood’s professed environmental superiority and its stimulation of wood jobs in distressed resource communities. On the latter, he stated this would only “rob Peter to pay Paul.” Perhaps somewhat beside the point, he also argued the 18-storey Brock Commons at UBC was really a “composite building” with a concrete plinth, elevator/stair shafts and floor coverings. (Fire risk was absent although this was raised earlier by the Canadian Precast/ Prestressed Concrete Institute in March, 2015 when Québec issued guidelines for 12-storey mass timber buildings.) A month later, the CAC issued a second release on construction de-carbonization, calling out governments for “placing big bets on one particular strategy: building with more wood.” It also summarized the Winnipeg-based
14
International Institute for Sustainable Development (IISD) think tank’s study, titled Emission Omissions: Carbon accounting gaps in the built environment. Funded by the CAC, the report critically re-examines existing life cycle assessment/analysis (LCA) models and concludes that wood provides, McSweeney argues, “no guaranteed outperformance on carbon compared to other materials.” Indeed, under one of six IISD scenarios, concrete comes out ahead. To better understand the debate, we conducted two in-depth interviews: the first with Richard McGrath, Director, Codes and Standards, and Adam Auer, VP, Environment and Sustainability at CAC; the second with Peter Moonen, Municipal Affairs and National Sustainability Manager with the Canadian Wood Council. On some issues there is agreement or at least quite clearly different perceptions of what is going on. Some clear agreements and disagreements Auer argues Canadian governments are actively promoting wood substitution in tall buildings with millions of dollars allocated with each federal budget. The Federal government’s high profile $39-million Green Construction through Wood Program (GCWood2017) only last spring awarded $4.1 million to George Brown College’s 10-storey tall wood building. Rubbing salt into concrete’s wound, the funding announcement again touted wood’s superior environmental performance and its ability to create jobs. Moonen concedes he is not aware of similar programming for other building materials.
Interestingly, both sectors accept off-site prefabrication and particularly modularization as the future. Not only will this significantly decrease urban disruption and respond to increasingly tight construction sites, says Moonen, it will allow for super-low tolerances. Digital software permits detailing down to each bolt allowing for fully or partially manufactured and assembled components in a controlled factory environment. Buildings will be “assembled” on site over weeks not built over years and will require fewer construction workers at a time when trades shortages are becoming critical. While tall wood has a leg up in this area, McGrath points out that prefabrication is decades old in concrete. It also has the advantage of being able to encase all services fully protected from fire and the elements. The future may be New York’s 27-storey Marriott Hotel to be assembled over 90 days from stacked concrete modules, albeit shipped in from Poland. While McGath references Habitat 67 as a precedent, tall concrete modular construction may be even rarer than similar wood projects. The two sectors clearly disagree, however, on what motivates a sectoral debate. McGrath believes, given wood’s current limited share of tall buildings, that displacement of concrete is not a motivating concern. Moonen believes otherwise, arguing “concerns” over fire risks and higher insurance costs, for example, arise from the sector’s fear of market share loss. Indeed, McSweeney’s “Peter/Paul” comment only makes sense if a shift within aggregate demand takes place.
October/November 2019
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We fail materials; materials don’t fail us. The debate is also taking place as the revised 2020 NBCC and the American-based International Building Code (IBC) move to permit 12-storey (composite) tall wood buildings and provinces with municipalities already approving tall wood buildings using site-specific amendments. Finally, one wonders how much Alphabet’s eye-catching proposal dominated by tall wood-based architecture on Toronto’s harbour covering from 12.8 to even over 80 hectares, is worrying the CAC. That said, there are a number of core areas where the interviewees revealed significant substantive differences including safety, de-carbonization, costs and economic impacts. Wood vs Concrete: Safety Concerns about the safety of tall wood structures go to the heart of potential tenants’ acceptance. One survey found 68 per cent of respondents remained sceptical. While McSweeney focused on seismic concerns, McGrath raises two concerns with fire. The first is that fire risk is much higher during wood-based construction resulting in insurance rates seven to10 times higher. “This is why with our code process,” he says, “we had to institute a myriad of additional fire code provisions in addition to the building codes to manage the increased risk on these very susceptible combustible construction projects.” More generally, he argues “you are adding fuel to the fire, whereas concrete absorbs a fire’s heat with a given fuel load and the internal temperatures are lower for a concrete
Building.ca
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Pollux Chung
structure than they are for an exposed wood structure.” To be fair, his key concerns are with exposed wood and with jurisdictions approving tall timber projects without necessarily following the pending 2020 NBCC. Conversely, in addition to believing the fire issue promotes unfounded fears to protect market share, Moonen points out that tall wood’s focus on prefabrication means actual construction time is considerably shorter and insurance cost is but a small consideration. More importantly, research supports wood’s strong fire performance, well understood by fire officials. Indeed, he says, all materials undergo “rigorous ordeals” before being approved. Hundreds of firefighters toured and were briefed on Brock Commons. Of note, City of Surrey Fire Chief Len Garis co-authored a March, 2017 article with journalist Karin Mark in the journal FIREFighting in Canada outlining wood’s safety. He quotes Vancouver’s past Chief (now Whistler’s Fire Chief) John McKearny: “From a fire standpoint, the building’s fire-resistant materials, sprinklers and layering of fire protection systems will make Brock Commons one of the safest buildings in the city.”
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While McSweeney raised concerns about approving tall wood in a highly active seismic zone prior to the new code, in our interview McGrath focused more on clarifying what the new provisions will permit. 12 storeys for all-wood buildings will cover only fire while under structural provisions, buildings greater than six storeys in high seismic zones and over 10 storeys in non-seismic zones will require concrete foundations/ podiums and cores to resist lateral seismic loads. Buildings higher than 12 storeys will need special alternative solution permits. “If you can produce a design and demonstrate that you’ve provided equivalent safety in your 17- or 18-storey structure that you would have in your 12-storey building, you are allowed to build it,” he concedes. Moonen strongly defends the seismic performance of wood, arguing it absorbs rather than transfers energy while concrete does the latter. He references considerable successful testing of wood’s seismic performance using shake tables, one replicating the power of the 1995 Kobe earthquake on a full-scale seven-storey mock-up. The key point for all materials, he says, is the quality of the architect, engineer and contractor.
“We fail materials; materials don’t fail us,” he concludes. Wood vs Concrete: Climate Change and CO2s Without doubt, governments and media take as a given wood’s considerably better performance on greenhouse emissions. This, argues Auer, is being “increasingly challenged” by even environmental advocate. The IISD study concludes, he says, that when a full and proper LCA is applied, “up to almost 3/4 of a wood product’s carbon footprint might not actually be accounted for in the common life cycle assessments.” IISD’s six tested scenarios, taken together, show no product has a marked advantage. Those championing wood’s carbon benefits, he adds, also “discount…. the strategies to improve the carbon footprint of cement and concrete” which he followed with a list of such achievements. He also argues materials are but a small contributor while building performance will play a much more substantive role in reducing emissions. Moonen disagrees, saying “When buildings have been compared or wood, steel and concrete is being compared with each other
October/November 2019
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Pollux Chung KK Law
with the same structure, wood comes out with a lower life cycle impact.” When asked for actual studies, he cites Substitution effects of wood-based products in climate change, written by eight international scientists including Carolyn Smyth of National Resources Canada, which examined 51 LCA studies. While over 90 per cent favoured wood, however, the report found significant variations in the level of benefit, signaled the need for further work on carbon loss during harvesting and estimated only a minor emission reduction through substitution. Moonen dismisses the IISD report’s pro-concrete scenario as based on “completely outlandish” assumptions given Canada’s impeccable forest management regime. But he does concede additional refinement of LCA models may be required. Wood vs Concrete: Cost Again, governments and media frequently suggest tall wood is a cheaper option. Not true, say Auer and McGrath who point out that wood requires considerable adaptation and all tall wood demonstration buildings have received some public subsidies. Concrete also has a cross-country presence while
tall timber producers are fewer (there are currently three cross-laminated timber producers in Canada with one more soon to open). Moonen agrees with Auer’s point that there are just too few tall wood structures to settle the point. There is, however, an important caveat. Although Karim Khalifa, Alphabet’s director of innovation at Sidewalk Labs recently told the Globe and Mail that mass timber is indeed more expensive, it is still in its infancy. Like solar and wind technology, as the market expands and more producers emerge, there could be significant reductions in cost. Wood vs Concrete: Economic impact McGrath and Auer strongly assert that the CAC is not concerned about potential loss of market share. That said, the CAC’s March release and McGrath’s own statement that “The idea of artificially suppressing jobs in one sector to create a few jobs in another is not a net gain in job creation” does suggest a zero sum game at play. Moonen does not see it quite the same way. He argues the real opportunities for job expansion will be
THIS spread The 18-storey Brock Commons tower on the University of British Columbia campus, built with cross-laminated timber, is a hybrid building that has two concrete core pillars. Above: Hines’s plans for Toronto’s emerging Bayside community include T3 Bayside, a 10-story timber office structure designed by Danish firm 3XN.
increasing value added manufacturing while strict public forest management controls will cap wood’s market penetration. The Future Barring a major Hindenburg-type disaster, tall wood’s share will grow, albeit primarily as composite wood/concrete structures. Increased modularization will help concrete compete while also offering an economic wedge into the under six-storey market as it has already done through Marriott’s smaller hotels. And as McGrath and Moonen both admit, significant work remains to drag the conservative construction sector fully into the 21st century.
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To Housing and Beyond Opportunities in Vancouver’s Real Estate Market By Mark Hannah
Vancouver’s red hot residential real estate market has been on a long bull run dating back to the recovery following the global financial crisis of 2008. Over the past 12 months, however, the residential real estate market has faced significant challenges, with substantial price decreases and millions of dollars in lost equity. So, has the bubble finally burst? In order to understand the nature of a bubble, we must first understand its beginnings. The real estate market in Vancouver has seen constant growth throughout its history as well as a high degree of resilience:
even the Great Recession seemed to merely pause the city’s decade-long price appreciation. From 1999 to 2009, for example, the average value of a detached home in the city increased by a whopping 95 per cent, according to the Greater Vancouver Real Estate Board, and its more recent history is even more explosive, with prices increasing a further 140 per cent from 2009 to 2017. This equates to a 13 per cent annual increase in house prices over eight years. Even with the recent house price correction, the net price increase is still 120 per cent over 10 years, or about 8.5 per cent annually.
Mark Hannah is Managing Director at Nicola Wealth Real Estate and is an industry veteran with nearly 40 years of experience in commercial real estate. He oversees the acquisition and management of a $3.5 billion real estate portfolio throughout Canada and the U.S. for Nicola Wealth Real Estate, the in-house real estate division of Nicola Wealth.
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Aside from
The Warning Signs Over the past 12 months, the negative press on the state of the Vancouver residential market has dominated the headlines and will likely continue to do so over the next year.
To date, the average home price in Vancouver has dropped more than 16 per cent since May of 2018, most significantly seen in the Lower Mainland and West Vancouver markets, according to the Vancouver Courier. Highend luxury homes are being sold for less than half of the original asking prices, and a report from CBC found that over $89 billion in home equity vanished over the past year in the Greater Vancouver region. Since late 2017 and early 2018, there were numerous warning signs of an impending market correction. Some of the key economic factors that acted as early warning signs were the Bank of Canada’s decision to raise rates, a significant increase in land prices and increased construction costs due to inflation and U.S. tariffs on raw building materials. Aside from the economic factors, all three levels of government played an unintended role in the current decline of the housing market. The governments enacted a series of polices that adversely impacted homeowners in the Vancouver area in an effort to suppress the sky-high residential market and increase affordable
Canadian population growth Net international migration annual average ’13 — ’18
100,000 80,000 60,000 40,000 20,000 0 20
toronto
montreal
Vancouver
calgary
winnigeg
edmonton
ot tawa
halifax
housing. Examples of government legislation included the Mortgage Stress Test, Foreign Purchaser Tax, a higher Property Transfer Tax, the Speculation and Vacancy Tax and a cap on Annual Rental increases, all of which placed significant financial stress on many homeowners. The proverbial cherry on top of the cake was the proliferation of sensationalized articles on the alleged illicit money laundering taking place across Vancouver, especially within the residential real estate market. When these warnings, factors and public discussions are considered, it’s no wonder why so many developers placed new projects on hold. Silver Linings However, all is not lost for Vancouver’s real estate market, as there are numerous positive sectors that developers and investors should not overlook. One of these sectors is commercial, which has remained resilient despite the sell-off across its residential peer. In fact, from 2017 to 2019, approximately 30 per cent of all real estate transactions in Greater Vancouver took place in the commercial sector, say the Altus Group and Greater Vancouver Real Estate Board. Furthermore, Vancouver’s commercial real estate boasts some of the lowest vacancy rates when compared to urban peers across North American markets. When using vacancy rates as a measure of market strength, the region’s industrial and office markets also sit at record-lows — 1.5 per cent and 4.5 percent, respectively — with strong annual absorption, according to Mortgage
Source: The Conference Board of Canada,Q2 2019
Vancouver being one the world’s most desirable cities to live, there are a series of key factors that helped create the booming market. The first factor simply stems from supply and demand. Over the past few years, a series of bureaucratic decisions hindered the approval of sufficient new development permits, meaning that demand has never been fully met and supply has been restrained for some time. The second factor relates to low interest rates. Recent and historically low rates helped affordability with lower priced debt across all buyer categories and, consequently, contributed to lower debt payments. When coupled with less stringent lending practices in an already strong market, many buyers were able to rationalize larger purchases. Considering this wealth of evidence, it’s surprising that the residential real estate market’s correction didn’t happen earlier.
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U.S.
North American vacancy rate comparison Office
12.2%
Retail
8.8%
8.8%
7.1%
Industrial
4.0%
Multifamily
Canada
Source: CBRE Research, CBRE Econometric Advisors and Canada Mortgage and Housing Corp., Q2 2019
Broker News. Aside from record-low vacancy rates, Vancouver’s office real estate sector also has a compelling present and promising future. According to Colliers International’s Greater Vancouver Area Industrial Market Report and Office Market Report, the sector currently has 2.8 million square feet of office space under construction and a further 420,000 square feet is expected in 2020. This exponential increase in square footage is largely due to the changing mosaic of industries that demand office accommodation. Over the past decade, forestry, mining and financial tenants have given way to tech companies. Major U.S. companies like Amazon, Facebook, Google, Microsoft and WeWork have all entered the city’s market. Developed closer to home, Vancouver has also become one of Canada’s major tech hubs, with many startups — especially in the technology, advertising, media and information industries — flooding the city and demanding that office real estate adapt to suit their needs. In fact, nearly 40 per cent of strata sales or leasing in Q4 2018 came from tech tenant demand. This
Office
11.3%
Retail
3.4%
Industrial
3.1%
Multifamily
2.4% 0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
Notes: Industrial figures are availability rates; Retail rates are composite figures including neighbourhood, community and strip assets; Canadian multifamily figures as of October 2018
flood of new, homegrown and further afield tech tenants not only impacts office space demand, they also have a major impact on employment growth. This, in turn, translates to increased demand for owned and rented residential real estate. With an increase in companies looking for rental spaces and a finite amount of
space available, rental prices have surged. From 2017 to 2019, the average office rental rate increased by 16 per cent. When ownership and rental variables are combined, prices have increased 15 per cent in the past year and 27 per cent over the past two years, says Altus Group in an Investment Trend Survey.
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Key Strategies The strength of non-housing real estate sectors in the city has created enticing, lucrative and stable opportunities for developers and investors looking to enter, or maximize their positions in, the Vancouver real estate market. For those following real estate trends carefully, there are several opportunities that provide an excellent entry point into the promising commercial real estate market in Vancouver:
_ “ Build-to-own” This strategy works
particularly well for residential rental apartments, long-considered the safest asset class. Here, developers and investors should consider purchasing buildings with the sole purpose of retaining the asset and generating profit through a rental framework (e.g. converting warehouse square footage to office space, or buying a hotel and transforming it into rental units);
_ “ Build-to-sell” While the residential
ma rket is somewhat t umult uous at present , i nvestor dem a nd rem a i ns strong and Vancouver’s overall risk is considered low. Developers a nd investors should consider focusing on targeted condominium developments in Vancouver and across North America, which still present many opportunities for strong returns;
_ Small bay industrial and condominiums
Demand for this industrial strata/condo product is strong, especially from small business owners who want to own their real estate to house their business;
_ Pivot to “reposition” Certain commercial assets can benefit from short-term holding income while a re-purposing strategy is executive. Developers and investors should prioritize securing near-shovel ready sites with minimal entitlement approval processes if exploring “ground up” development opportunities with no holding income.
Although the housing market has softened in Vancouver, one part does not make a whole. There are still a great many reasons
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Toronto & Vancouver: A Tale of Two Cities The result of this growing disconnect between income and home pricing is that home ownership has become a challenge for many Canadians living in major cities. This is especially true in Toronto and Vancouver where home prices have risen to be the highest in the nation. Based on recent home resale prices in the City of Toronto, it would require a household income of $115,400 per year to afford mortgage payments for an average condo. For a semi-detached home, this figure rises to $156,600 and for a single detached home, to $195,700. Environics Analytics estimates 2019 median household income for the region to be only $84,900 before income taxes. In the City of Vancouver, this gap is even more pronounced. The income requirements for single detached or attached homes are $315,700 and $145,800, respectively, yet the median before-tax household income for the region is only $82,100.
City of Toronto housing affordability requirements Single detached
$195,700 /yr
Semidetached
$156,600 /yr
condo
$115,400 /yr
GTA median household income, before income tax
Calculated assuming a 33% allocation of 20% down payment, 25 year amortization period, 3.19% fixed mortgage, 2019 City of Toronto property tax rates, & typical condo fees. Average price for 416 area for detached, semi-detached and condo apartment. Source: CBRE Research, Toronto Real Estate Board (July 2019), Bank of Canada, City of Toronto, Environics Analytics, 2019
$84,900 /yr 0
50,000
100,000
150,000
200,000
250,000
300,000
Af ter ta x salary requirements
City of Vancouver housing affordability requirements Single detached
$315,700 /yr
At tached
$145,800 /yr
condo
$112,100 /yr
GVA median household income, before income tax
Calculated assuming a 33% allocation of 20% down payment, 25 year amortization period, 3.19% fixed mortgage, 2019 City of Vancouver property tax rates, & typical condo fees. Average of benchmark price for Vancouver East and Vancouver West areas. Consistant with REBGV methodology, townhouse benchmark used in place of attached benchmark.
$82,100 /yr 0
50,000
100,000
150,000
200,000
250,000
Af ter ta x salary requirements
to maintain an optimistic outlook on the city’s broader real estate market, particularly across the commercial, industrial and office sectors. Ample opportunity exists, but developers and investors need to be prepared to employ the right strategies when the right opportunities come along.
300,000
Source: CBRE R esearch, Real Estate Board of Greater Vancouver (July 2019), Bank of Canada, City of Vancouver, Environics Analytics, 2019
It is vital that developers and investors pay close attention to real estate trends, seek value in commercial, industrial and office real estate, have the fortitude to implement “out of the box” strategies and remain patient for the housing market to bounce back. Vancouver’s real estate market has, and will always be, resilient.
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Customer-driven Demand Shaping Canadian Real Estate Companies are adapting their developments and spaces to offer the top-quality amenities and services that users demand. By Hugh F. Kelly, Anita Kramer, Andrew Warren Building.ca
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The challenges facing Canada’s real estate industry continue to grow. Despite Canada’s low unemployment rate and signs of strength in areas spanning multifamily, industrial, and office real estate, we are finding a heightened feeling of unease among many in the industry. With high asset prices and rising costs for land and labour, our 2020 Emerging Trends in Real Estate report reveals declining business prospects overall. As increases in foreign direct investment and the large amount of domestic capital crowd out smaller players, it is no surprise that our 2020 emerging trends barometer shows many in the industry are in a holding pattern. The survey, published by PwC Canada and the Urban Land Institute (ULI), takes an in-depth look at the causes of the unease and some of the solutions available, including: changing customer expectations, preferences, and behaviours; technological pressures; policy challenges and uncertainty; and rising business threats such as labour shortages, skills gaps, and cybersecurity vulnerabilities. Many of these business challenges are not new, but we are seeing the pace of change and adoption pick up. And while the industry is clearly responding to these disruptions, the scale of the changes puts many organizations’ survival at stake. It is time for a new approach that puts customer needs at the heart of everything that companies do.
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Companies are responding — particularly when it comes to developing deeper connections with customers, integrating technology across their businesses, addressing skills gaps, and rebalancing their portfolios to find new opportunities and optimize their assets — but there is a clear role for governments as well when it comes to broader challenges like housing affordability. Governments and the real estate industry have an opportunity to do more to embrace mutually beneficial approaches to housing supply issues through transit-oriented development policies and collaborating on solutions to address affordability gaps in major cities. As with many of the challenges facing the industry, solving these issues requires all players to think differently.
Putting Customers at the Heart of Reimagined Spaces A major part of the industry’s success in building for the future lies in its ability to reshape real estate in response to changes in customer habits and expectations and evolving uses of space. Changes are playing out in large and small ways across property types. As online shopping continues to grow in Canada, the need for dedicated space for deliveries, including cold storage for food deliveries, is an emerging
trend in the multifamily residential sector. Some developers are looking to cut the amount of space otherwise dedicated to kitchens or even eliminate standard appliances like ovens. Co-living is another rising trend in Canada. Blending features of apartments, dorm rooms, and hotels, co-living accommodations offer residents the opportunity to have their own space within common living areas at a more affordable price. Some developers are developing multigenerational co-living projects, in which separate buildings accommodate the needs of a particular generation, but there also is common community space shared by all residents. While some customers may be willing to give up space or certain features in the name of affordability or a preference for a more communal lifestyle, demand remains high for high-quality features and amenities that enrich residents’ experiences, including services like housekeeping, curated events, and easy access to basic household supplies. The trend toward shared spaces in the office sector, which has been ongoing for several years, offers yet more evidence of rising tenant and customer expectations. Beyond good gyms, more tenants (and their employees) are looking for features like proximity to restaurants and less tangible elements, such as a communal vibe.
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“The work environment is becoming more playful, more livable,” said one interviewee. “If you like going there, you’re going to enjoy working there and you’ll stay.” In response to those trends, many building designers are also designing offices in ways that make people feel more at home. For example, they are introducing wood finishes and kitchen designs more typical of a residential setting. As living and working spaces continue to decrease in size, expect the demands for more communal offerings to continue. The Rise of REaaS These rising expectations are driving major shifts in an industry that has long been seen as reluctant to change. Much like the introduction of cloud computing revolutionized the software sector, the rise of real estate as a service (REaaS) is transforming all areas of real estate. Although co-working is the most common example of REaaS, the concept cuts across property types. As the gig economy becomes more prevalent in Canada, all space—whether residential, office, or retail—will increasingly be viewed as a service that is rentable. Consider the decreasing desire to own property on the residential side, particularly among millennials and baby boomers. According to Statistics Canada’s latest census figures, homeownership rates in Canada remain very high, but the numbers have come down from their 2011 peak of 69 per cent to 67.8 per cent in 2016. And despite the continued desire of many people to own, much less stigma is attached to renting than in the past. Reflecting on the growing movement toward temporary spaces, one interviewee spoke of the potential of subscription-based models for housing in which people would occupy different products at a particular stage of life. As another interviewee noted, many consumers are already focusing more on monthly costs than the total purchase price. While affordability is a factor, the REaaS trend also goes back to changing consumer behaviours as people look for more flexibility as their lifestyles and preferences evolve. Blurring the Lines Another important aspect of all these trends is the blurring of lines between property types and uses. In the past, for example, office space was designed and built to address traditional notions of office-based work. But the new
30
environment, shaped by technology and customer preferences, is changing that approach significantly. With access to a good Wi-Fi connection, a traditional office is no longer necessary. Once again, flexibility is key as form follows function. Some of the ways that traditional lines are blurring include: •T he evolution of retail spaces to become more of a distribution hub with smaller store footprints; • The “surban” trend, in which suburbs are transitioning to include more urban elements with a live/work/play dynamic; • Partnerships among co-working companies, hotels, and retail centres to provide access to underused space as well as services and amenities. The real estate industry is clearly paying attention to these trends as companies make major investments in more flexible business models. But these shifts also represent a significant challenge for many industry players. When it comes to embracing co-working arrangements in offices, for example, short-term leases can affect property valuations and add to costs when tenants change more frequently. This makes it even more crucial for established industry players to embrace the technologies, services, and modernized spaces that can help them compete with newer entrants. What Actions Can You Take to Position Yourself to Thrive? Tap into a variety of information sources, including data-driven insights, to truly understand what your customers want. Embrace customer personalization to take your growth to new levels. Also, think about your supply chain. Which parts do you want to own and serve directly, and which can you assign to someone else to undertake on your behalf? Try to minimize the number of layers between your company and the end consumer so that you do not lose control of an important asset. In addition, explore the ways that joint ventures and partnerships can help you explore new market opportunities. As larger projects with more diverse uses become more common, partnerships can go a long way in accessing the necessary capital and skill sets while sharing risks.
Expected Best Bets in 2020 Multifamily housing and logistics facilities continue to be very strong asset classes. As phrased by some of our interviewees, the best bets for 2020 are mainly about “beds and sheds,” particularly in the top markets of Toronto, Vancouver, and Montréal. In the sheds category, it’s all about warehousing and fulfillment, which tied as the top development opportunities in our survey. Customers’ rising expectations for same-day e-commerce deliveries continue to spark demand for large-scale facilities close to population centres and transportation routes. Turning to beds, senior housing ranks next on the list of top development prospects. The industry is responding with a variety of options, especially those tailored to seniors looking for a blend of convenience, security, high-end amenities, and flexibility to suit their active lifestyles. Despite the strong prospects, developers and operators face considerable costs, complexities, and regulations in creating and running facilities and services that cater to Canada’s aging population. Also in the beds category are mid-priced apartments, which ranked third on our survey for development prospects. From co-living arrangements to traditional rental housing to moderately priced condos, the multifamily category still offers the affordable options that many Canadians are looking for. Demand remains strong, even as condo and rental housing construction has risen consistently and significantly across Canada over the years. Rental housing under construction was just 13,947 units in 2008, a number that rose to 56,394 in 2018. For condos, units under construction hit 120,923 in 2018, up from 94,658 in 2008. Rounding out the expected best bets for 2020 is transit-oriented development. In Montréal, projections suggest that the region’s Réseau express métropolitain project will spur about CAD$5 billion in real estate development along the route. And in Ontario, Metrolinx is moving to a market-driven approach to financing transit projects in which it will link new stations to development as it looks to capture land value in its rail network and real estate portfolio.
October/November 2019
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What It's Worth
In this episode of the podcast series Single Serves, Arnaud Marthouret chats with Toon Dreessen, president of Ottawa-based Architects DCA, about current professional service procurement methods, its problems and potential solutions.
Arnaud Marthouret: Why is the current procurement of professional services model a problem? Toon Dreessen: I think it is a problem [because] we have this illusion that what we buy we have to equate with getting best value and there's this belief that best value means lowest price. That might be true if you're buying a particular product, say, exactly the same sheet of plywood: if you get it for $5 in one place and $6 in another, if all things are equal the $5 one is a better value. But when it comes to professional services, it's significantly different and what it really comes down to is how do we get things for best value if what we're doing is forcing people to submit the lowest price. Price is related to effort and when you're buying professional services, you're buying services that create something that has lasting long-term value. If you want a building that is climate responsive, innovative, or has to do a certain thing, then you need to have enough services behind that to come up with those ideas. If you limit the amount of service you limit the amount
of innovation and you limit the amount of service by cutting the fee. We architects are in a large part our own worst enemy because I might look at a job and say “the fee is worth $200,” but someone else might come along and say “I’ll do it for a $190.” Then next time I say “Okay, jeez, I lost the last one by 10 bucks. I'm going to lower my fee to $170,” and you keep going and before you know it you're doing things below cost and it makes the process of getting something interesting unfair to the public because the public doesn't get the best opportunity to see what I can do. AM: With professional services intimately tied to creativity and innovation in the field of design and engineering, the less you pay for something the less innovation or creativity you’re going to get. Is that a fair interpretation? TD: That's a very fair interpretation. I think that what you're getting as a result of a low bid fee is low services. But it's really it's an illusion because if I bid really low to get the job because the RFP has something
People who are doing procurement don't know what architecture is.
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unattainable in it or out of my control, like say planning approval, well, I bid low to get the job and then the minute there's a delay or there's an out-of-scope change I hit them up for extras and then pretty soon the total of my extras is what the fee would be to do the job fairly. And who loses out on this? The public, because someone has bid low and nailed them with extras to provide something that we should have just had a fair fee to begin with. AM: Where do you think this commodity mind-set in the provision of professional services comes from? It's got to come from somewhere. It's been historically that way for a long time. TD: Philosophically, I think that this stems from a cultural devaluation of design and the role of design in the built environment. We used to believe that architecture was something that we invested in and cherished and you can see that in the way we used to make buildings. It's not that architects were on a pedestal but architects were seen as adding value to a project and what's devolved over the last half century is that we now think of architecture as a commodity, that every architect is the same and every architect can do the same thing. We were having a meeting with a client group and a whole bunch of architects [were] in the room. And [the client] said “Look, if the top three architects can all meet the same qualifications and are just as good, I'll take the cheapest.” Well, yeah, you're going to get the guy who's going to be the cheapest, you're going to get the guy who's going to do the least amount of
service up front and is going to find a way to make an extra and is that really the mindset you want to go into? It's because people who are doing procurement don't know what architecture is, what it does and they don't even understand the legal framework that requires architects to be involved. They just think that architects are just service providers and one is just like another. AM: How does one convey the inherently uncertain nature of the design process with procurement people who are looking to deal only with certainty? TD: There’s an illusion today if we think that there's certainty in the way we're pricing professional services now because as soon as something changes – as soon as there is a scope change, a schedule change or any kind of change in the process – then architects today are having to go back and say “I need an extra for this thing because that wasn't in the scope.” There is no certainty today. I think to bring more certainty is to go through a QBS [quality based selection] process. If you wanted to hire me as your architect and you said [you] want an office building, I could go through a QBS process and say to you “Look, I'm going to give you the following services all in, there's no extras.” And then you would know up front what I've allowed for in the project and how I've arrived at my fee and know that one hundred percent there's no uncertainty in it. You could expect exactly the best result because you have my dedication. If you are forcing me to compete with other people, I try to figure out how I could get hired for
tell them the truth. They want to hear that. You might not get the job, but they need to hear the truth. 34
the best price possible knowing that I've got a few things in my back pocket if something doesn't work out. I'm gonna have to hit you with an extra. AM: What can architects and designers do to better demonstrate their value, and maybe integrate that in the procurement process and make sure that this doesn't get put aside? TD: I’ve been thinking about this and it's not easy. Some of the simple ways are things like develop a good reputation for your standards, your quality, your ability to bring something in on time and on budget, and keep your promises. Like if I went out and I hired somebody and said “I expect you to work Monday to Friday from 9:00 to 5:00,” and the first week they were 9:00 to 5:00, in the second week they were 10:00 to 4:30, and in the third week they were 11 to 3. I'd kind of go “Hey, we said 9:00 to 5:00. What's the deal?” and you go “Well, I don't feel like it anymore,” they would have let you down and you would be disappointed. [To] architects, when a client says to us “I've got a budget of half a million dollars to do this tenant fit up.” Then you work hard to bring it in at half a million dollars and when they say [they] want it to be occupied by June 1st you say to them right up front “Okay. You want to occupy June 1st. You need six weeks for construction. That's May 15th. You need two weeks for permits. That's May 1st. So here we are: May 1st. I've got one day to do all the design. Do you think that's fair?” You could have that conversation, negotiate and be honest with them and say “I don't think that your budget is achievable. I don't think your schedule is achievable,” and you’re honest with your client. You tell them the truth. They want to hear that. You might not get the job, but they need to hear the truth and they don't want to be lied to. I think that's a really important part of it. AM: Why do you think the architecture, design and construction industry is so accepting of procurement as it currently is instead of rebelling and saying “To hell with your stupid requirements. This doesn't make any sense and we're going to help you procure our services in a way that is fair for everyone.”?
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TD: That's a really tough one. I mean a big part of it is that it's the only game in town [and] everybody is playing the same game. All the procurement departments are using the same models. No one's willing to stick their neck out and choose to do things differently. It's the only game in town. So whether it's school boards or community centers or cities or municipalities or colleges or universities or provincial government or federal government, everybody's doing it the same way. Edmonton and QuĂŠbec are the only places where things have changed. What they're doing there is something that's much more in a QBS
kind of a model and what they're basically saying in Edmonton is “We're going to qualify a shortlist of people, we're going to ask that those people do a design or compete for the work but whatever the competition process is, this is the fee we're going to pay and we're going to pay this fee plus or minus a couple of per cent and you have to justify why but that's what we're going to pay.� And that puts everybody in a level playing field because now you know what the rates are going to be. So you can calculate from that going in and you know what you're going to have to do and how you're going to do it. You don't have to think about
what the right way is to get the job. All you have to do is think about how to do the best design you can within a very fair and transparent fee. AM: Is there a legal mandate to have the procurement process as it is? Or is it just done that way because it's always been that way and nobody is willing to try new things? TD: There's no legal mandate to do that and it's actually kind of interesting that the model is what it is. A number of years ago the federal government partnered with the
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Federation of Canadian Municipalities on an infrastructure purchasing guide and there was research done and everybody kind of bought into this process that said that quality based selection is the best way to do procurement, and then the federal government said “Oh, that's great,” and put it on a shelf and don’t use it. There's different ways of doing procurement: the way it is right now the federal government usually does a two-envelope system where your second envelope is price and price is only worth 10 per cent of the score. But no one else is really doing QBS the way it should be done with the exception of a few isolated school boards here and there. A lot of people say, “Oh we use quality based selection because fee is only 30 per cent of our score.” Well, 30 per cent is still a hell of a lot. Even if it's one per cent of your score, it can really affect the decision of who gets the job. If you were to line up the three best lawyers in Canada and you put them in a row and said “I want one of the three of you to do this job and defend me in court,” who's going to do the job? Do you think you're really going to get one of the three best lawyers in Canada who's going to undercut the other two for a lower price? You're going to pay the service for what it's worth. Are you going to really haggle about it? That's the flip side to this people don't really understand: my services represent less than one per cent of the total life cycle cost and value of a project, and my effort can affect 80 per cent of the lifecycle value of a project in terms of its operating cost, its maintenance, the quality of life for
people in the building, the productivity of the people in it. What I do has a massive impact on the end result and lasts for generations. If I turn to you and said “I can give you a building that never has a utility bill because it's net zero, or my building can cut the number of sick days of your staff down to 10 per cent because it's a better building environment with better natural light and more productivity,” that's worth something. So, why would you cut my fee that cuts your ability to have a better business? AM: Can you speak to what your ideal vision of procurement would be and how that would work? TD: My ideal vision of procurement would be a fair and transparent quality based process that has room within it for outliers, for people who have never done that type of project before or who are new to the profession but have great ideas, as a way of broadening the profession so that everybody can succeed. I'm not saying that there needs to be like some kind of a socialist network where work is handed out to every person in equal measure, but if you're going to create a building that has lasting value for a community, instead of just looking at people who have done the same thing before and those are the only people you are going to consider, open the market to new ideas and create a model in which everybody can compete fairly and transparently to get the best value. I think that we really do a disservice to ourselves in Canada by undermining our
We really do a disservice to future generations because we have a flawed procurement model. 36
procurement model by assessing quality in such a poor way. We reward firms who bid low, who do the same ol’ same ol’, who don't bring innovations or ideas that we need to create really important architecture and engineering and [infrastructure]: we really do a disservice to future generations because we have a flawed procurement model. AM: This leads to subpar buildings which cost more to maintain because of all sorts of problems down the road. While it's a bit beyond our respective reach — I mean we can advocate for it and we can keep spreading the word and I think that's a great way to start — but what do you think would need to happen at a societal level for that mentality to change in procurement to significantly move in the right direction? TD: I think that if the public had a better understanding of the role of architecture within their lives, if they understood a little bit better that what an architect could do is make their bike route home a little safer or a little bit more beautiful and that if an architect made their grocery store more interesting or more innovative or use less energy, or if their home was a little bit nicer designed and could save them money, that all of these things has something to do with architecture, because architecture affects every one of us every day. I think that if the public understood the role of architecture and engineering in a better way, they'd have a stronger appreciation for it and might turn around and start agitating for a better built environment, and if they agitate to politicians who make these decisions we might see change.
An architect by training, Arnaud Marthouret is a culture, communications and media maven for the architecture and design industry.
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Spray Foam Insulation, Evolved An HFO awakening sees the phase out of HFCs. By Doug Kramer
Synonymous with an efficient building envelope, spray foam insulation has continually evolved over the decades and experienced numerous blowing agent and formulation technology changes. The evolution of spray foam spans 30 years with the formation of the Montréal Protocol in 1987. This was at a time when 197 countries joined forces in a green building narrative that articulated the profound connections between buildings, people, and the long-term health of our planet. These collaborative discussions led to an agreement and the progression of technology to exclude chlorofluorocarbons (CFCs) in order to preserve the ozone layer. The Montréal Protocol is considered by many leaders to be the most successful earth-friendly, global unification action to date. It’s been hailed as a testament of exceptional international co-operation. The Montréal Protocol on Substances that Deplete the Ozone Layer will allow us to eliminate HFCs, which will then lead to an avoidance of 0.5C of global climate warming by the end of the century. It’s believed that with continued full implementation of the Protocol’s provisions, the ozone layer should return to pre-1980 levels by 2050.
The Road to HFO Technology As science and the spray foam industry learned more about the impacts of certain blown agents, the Montréal Protocol was expanded to include a long list of controlled chemicals including HCFCs, HFCs and other
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ozone-depleting substances (ODS). The evolution of blowing agents saw a discontinuation of CFCs with the replacement of hydrochlorofluorocarbons (HCFCs) which in turn were replaced by hydrofluorocarbons (HFCs). As standards changed over time, so too did the chemicals; they improved over their predecessors from an environmental and health consideration perspective. Among today’s green building standards and certification systems, we are seeing another spray foam insulation (SPF) metamorphosis. Canada and other developed nations have set a target of 2020 to replace HFCs with the most advanced in blowing agent technology. Reducing greenhouse gases and climate pollutants is essential to our future. That said, the insulation industry is teaming up with the many industries leading the growing call for HFC reduction, including the air conditioning and refrigeration industries. For stakeholders in the SPF business, these regulatory changes mean embracing the bigger picture and developing new blowing agent formulations. Honeywell changed the game a nd created a new product based on HydrofluoroOlefins (HFOs). This blowing agent has an ultra low global warming potential (GWP) and are non-ozone depleting. Concurrently, Lapolla, with a new, progressive vision, pioneered the development of an SPF technology that incorporated the new HFO blowing agent. Lapolla’s new SPF technology was the first to market the near-zero GWP product with equal effectiveness as a superior
insulating product to other HFC-blown SPFs. Acceptance and collaboration globally around the Montréal and Kyoto Protocols demonstrates that we are now committed to innovations that are better for the environment. The new and improved SPFs on the market must have a broad range of advantages over its brothers and sisters, which includes better RSI or R-Values, airtight building envelopes, added structural support, moisture control and a 40 per cent savings in energy costs or more over other forms of insulation. According to MarketWatch.com, the demand for SPF is estimated to be approximately 18 to 20 per cent of the insulation market today. The growth has been steady and reliable, with estimates of continued aggressive growth for the foreseeable future. In fact, with the desire to have an airtight home or building and to save on energy, the demand for quality SPF is increasing. Builders, architects, interior designers, home and building owners see the value and are educating themselves on the products’ efficiencies and overall health benefits. The future of the spray foam insulation market looks promising with plenty of opportunities in the residential, commercial, and other end use industries. MarketWatch.com indicates that the global spray foam insulation market is expected to reach an estimated $2.1 billion by 2023 with a CAGR of 5.4 per cent from 2018 to 2023. The major growth drivers for this market are the stringent government regulations for greenhouse gas emissions and the increased demand for energy efficiency in homes and buildings.
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Image courtesy of Icynene-Lapolla
According to Lucintel, a global management consulting and market research firm, wall insulation is expected to remain the largest application and to witness the highest growth over the forecast period of 2018 to 2023 supported by increasing demand of energy efficient insulation for home and building structures. Even though the SPF industry is adopting climate-friendly technologies, everyone should be aware that some cheaper alternatives still use HFCs. The right questions must be asked to avoid it from being installed. While the contractor’s or installer’s experience, certification and skill sets are critical, not all foam is the same. Cheaper SPF solutions that are not installed by certified professionals could mean no warranty, no fire resistance classification protocols, poor protection against mold growth and air permeability, low quality spraying equipment, unknown blowing agents and diminished properties in the actual finished foam (water absorption, fire class, dimension and stability).
According to the Climate and Clean Air Coalition, (CCAC), the phase-out of HFCs coupled with energy efficiency gains of this new class of products will avoid as much as 1°C of global warming. With HFOs comes a sweeping sustainable and impactful change. HFOs are non-toxic, they do not deplete the ozone, they are not a volatile organic compound (VOC) and they are non-flammable. HFO-based SPFs are also efficient and allow contractors and installers to save on installation time. They exceed in overall performance and contribute to the health and well-being of the planet, homes, buildings and people. With the future in full sight and the evolution and adoption of HFO blowing agents in more SPF products, green builders, architects and contractors alike see great potential for their building projects, knowing that air pollution issues and environmental considerations have been heard. HFOs are a progressive step forward.
Above Canada and other developed nations have set a target of 2020 to replace HFCs with the most advanced in blowing agent technology.
Doug Kramer has been a leading figure in the spray foam insulation and roofing products industry for almost 30 years with manufacturing, operations, sales and marketing experience in a broad variety of elastomeric coatings and polyurethane foam for construction. He is currently the president and CEO of IcyneneLapolla, a leading SPF company in the insulation industry with two long-standing SPF brands.
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site visit Tetris Effect
Moriyama & Teshima Architects navigate a tight site and existing forms to create a modern research facility at Ryerson University. By Shannon Moore
THIS PAGE Ryerson University’s Centre for Urban Innovation is a new facility where science research labs, fabrication, incubation, assembly spaces and commercial spaces come together to support researchers and innovators with strong industry links to alternative energy, water management, food production, body metrics and human health, data analytics and urban infrastructure. Photography by Riley Snelling
For Phil Silverstein, the process of designing Ryerson University’s new Centre for Urban Innovation was very much like playing “the ultimate game of Tetris.” Located on the site of a century-old heritage building in downtown Toronto, the 64,260-sq.-ft. research facility needed to cleverly maneuver existing architecture and sensitively bridge the gap between old and new. To navigate the project’s strict parameters — which also included a tight timeline and even tighter property lines — the design team flanked the original building (built in 1886 as Canada’s first school of pharmacy) with a pair of three- and five-storey additions connected below grade. Outside, the new building is deliberately set back to showcase the heritage façade, whereas inside, wet and dry laboratories take centre stage.
“To keep the heritage building as a standalone structure, we created a large atrium where the two buildings abutt,” says Silverstein, an associate with Toronto-based Moriyama & Teshima Architects. “We also created the ability to see into the research labs from different lookout points in the atrium. We wanted anyone from the public who enters the building to have a view into these exciting spaces.” Whereas the university’s research teams were previously spread out across the campus, they can now study urban infrastructure issues together under one roof. In addition to informal collaboration zones and lounge spaces that encourage interaction between departments, the facility also contains stepped seating in the atrium for official public gatherings and industry events.
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THIS SPREAD A central four-storey sky-lit atrium encloses and bridges the original heritage building to the new addition. Each tier of the new volume features floor-toceiling glazing, allowing dynamic views into its lab spaces from every angle. Stepped seating on the north side of the atrium not only connects users to the second level, but also serves as an active space for gathering, studying and industry presentations.
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From a materials perspective, the design team opted for surfaces that would both complement the existing building and support the innovative nature of the space. The exterior is clad in aluminum expanded metal mesh, while polished concrete, metal archways and heritage brick find a home inside. “The material expression is very honest,” says Silverstein, who draws attention to the raw mechanical elements that have been left exposed and used as ceilings to accommodate height constraints. “Every single nut and bolt had to be thought out in
order to coordinate the intense level of infrastructure. It may look like the pipes have been haphazardly thrown up on the ceiling, but every square inch was determined and placed.” Like any heritage project, it was not without its surprises. Contamination caused by old buried diesel tanks required soil remediation, while the discovery of original architectural elements added a level of interest and character to the design. “We found giant stone medallions, sliding doors, beadboards and windows that had all been covered since the
1940s,” says Silverstein of the various excavated and repurposed objects. In the end, the facility — made possible through a $19.8 million investment from the federal government’s Strategic Investment Fund — preserves the rich history of the site and offers new opportunities for urban innovation. “When Ryerson took the building over, they had a lot of ideas of how this could come together, but it was really a pipe dream,” says Silverstein. Now, that dream is a reality, and the university’s research can thrive in a skillfully executed and thoughtful design.
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spec sheet Product Round-up New & noteworthy for building specification.
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ASV | RT-50 PosiTrack Loader The RT-50 includes best-in-class ground pressure, ground clearance, serviceability and features a greater performance-to-weight ratio than any machine in its class, giving operators more clout in tight areas larger machines can’t access. The track loader boasts a 1,400-pound rated operating capacity. The lightweight unit’s low trailer weight makes it easily towable by a 1/2ton pick-up truck or SUV. www.asvi.com
Schlage | Encode Smart WiFi Deadbolt Unlike other smart locks on the market, the Encode Smart Deadbolt features built-in WiFi connectivity, eliminating the need for an additional smart home hub. The lock operates across popular smart home ecosystems, integrating with smart home technology using the Schlage Home App, Amazon Alexa and Google Assistant. The property owner can program up to 100 unique codes and monitor access via customizable notifications or via the Schlage Home App activity log. www. schlagecanada.com
Bradley Corp. | WashBar Duo The sleek WashBar Duo is comprised of a single piece of chrome-plated metal that combines soap and water elements, when only both are needed. LED lighting on the fixture helps to visually orient the user through hand washing with easyto-identify icons on top of the bar. The Duo includes an efficient one-gallon soap container that uses either liquid or foam soap and requires fewer refills. www.bradleycorp. com
LG Hausys | HI-MACS STRATO COLLECTION Three new colour patterns have been brought to this solid surface collection: Strato Terra, Strato Slate and Strato Crème, all characterized by a patent-pending wavy pattern effect running horizontally across the slab. Inspired by nature, Strato Terra emphazises warmth; Strato Slate provides shades of grey, reminiscent of concrete; and Strato Crème is inspired by summer. www.lghimacsusa. com
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Drone Volt | Heliplane V.2 The latest generation long range VTOL (Vertical Take-Off and Landing) drone combines the advantages of multirotor UAV with those of fixedwing UAV. Designed for construction site surveillance, inspection and photogrammetry sectors, the new Heliplane v.2 can reach speeds of 72 km/h, has autonomy of 60 minutes and can resist 50 km/h winds, thanks to a carbon fiber and Kevlar frame. www.dronevolt.com
Landscape Forms |LINE Designed by Shane Coen and Coen + Partners, recipients of the Smithsonian Cooper Hewitt National Design Award for Landscape Architecture in 2015, L I N E has a broad colour palette, finishes, and offers vertical and horizontal rod and slatted, louvered, perforated, and solid steel panels. Functional and beautiful, the aluminum panels create boundary and incorporate art into the role of space division. www. landscapeforms.com
Jardin de Ville | Close-up The QuÊbec-based maker of high-end garden furniture added several new models to its Summer 2019 collection of garden pavilions. The Close-up’s special feature is a roof with adjustable louvers, which can be positioned at various angles to let in more or less sun, and when closed a gutter system channels rainwater through the posts and into the ground. The structure can be either freestanding or attached to a building. www.jardindeville.com
MAPEI | Mapefloor I 900 This new two-component, low-viscosity epoxy resin is used as a primer before the application of resinous flooring systems, and is very effective at priming absorbant concrete substrates. By enhancing the bond of multilayer resinous flooring systems, it is excellent for interior use in industrial settings including institutional buildings, storage and logistical areas, and wet and dry processing areas. www.mapei.com
A. O. Smith | ProLine Electric Tankless Series This water heater family is equipped with built-in Dry Fire Protection and Scale Reduction Technology that helps reduce failures and service requirements. The single-chamber design is compact enough to be mounted under a sink, in a remote bathroom or other hard-to-plumb area. Available in three sizes and 45 different models ranging from 2.4kW to 32kW and Uniform Energy Factor up to 0.93, the units are available in a variety of voltage options. www.hotwater.com
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from the bullpen Canada’s New Home Data Problem Complex statistical models are only as good as the data in them, and the industry must demand better transparency. By Ben Myers
Ben Myers is president of Bullpen Research & Consulting, a boutique real estate advisory firm that works with land owners, developers, and lenders to better inform them of the current and future macroeconomic and site-specific housing market conditions that can impact their active or proposed development projects. Follow Bullpen on Twitter at @BullpenConsult or find Ben at www.BullpenConsulting.ca.
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When starting any new company these days, an entrepreneur must consider whether technology will put them out of business in the future. That was certainly a consideration for me when starting a consulting firm that produces residential market studies and values new home projects. Will a computer be able to take available new home data and produce a reliable absorption and pricing valuation and forecast over the next five to 10 years? The answer was no. Scott Page, an author and professor at the University of Michigan has talked about the need for data analysts to be bilingual. What he means is, they not only need to understand how data works and its limitations, they must fully understand the industry in which data is being derived: two very different skills. First off, understanding the residential real estate market and the multitude of factors that impact value is extremely difficult; I’m personally updating my mental models daily. Complex statistical models are only as good as the data in them, and Canada has a new home data problem. The CMHC tracks things like starts, completions, standing inventory and single-family house prices for every major market in Canada. However, the house prices are recorded at closing, not at the time of the sale, and starts and completions are also lagging indicators, reflecting market conditions a year to four years earlier. CMHC doesn’t track new condo prices at all. This leaves most of the heavy lifting to for-profit private data collections firms. During my career I’ve worked for three such firms (one in Dallas and two in the GTA), with the biggest issue being collection. The accuracy of the data was occasionally called into question, and I vigorously defended the developers and brokers that provided it. Why wouldn’t they tell me the truth, the market was booming? Perhaps I was a little too trusting. In 2009, market conditions changed, and sales were extremely slow. Many developers, including some of the GTA’s most wellknown, refused to give us their sales num-
bers. Luckily the market roared back to life, and those firms gave us their figures again. A couple years later I ran into a developer and congratulated him on selling 325 units during the opening month, having just received the figures from their brokerage. He told me that wasn’t accurate; they’d only sold about 250. When I asked the brokerage, they admitted fibbing because the other big launch at the time had sold well, and they wanted to make themselves look better. I like to believe that these are isolated instances, and that our industry understands that good data can help everyone, including the lenders that are essential to getting their land, construction and inventory financed. Statistics Canada has recently began tracking new condo prices, but the indexes are really limited in what they provide. If we add on that the local real estate boards across Canada are very protective of their data, going as far as actively pursuing legal action against realtors that publish detailed pricing on their websites or newsletters. There are other resale property and land portals that exist in various provinces as well, most of which make it nearly impossible to download large data sets for analysis. Perhaps I shouldn’t be complaining, this lack of available data and piecemeal new home sales and pricing information in Canada makes someone with my skillset more valuable. You need someone to fill in the missing puzzle pieces. However, the housing analysis would be better, the development risk would be lower, the consumer would be more informed and more likely to buy, and the entire industry would benefit if there was much better new home data available. Several of my clients will probably not be happy with me, but measures need to be put in place to improve new home data tracking and reporting in Canada. To the industry, please provide accurate information to your local data firm and Statistics Canadas, and to consumers, support transparent developers.
October/November 2019
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WITHOUT COMPROMISE
Designing to be environmentally-friendly doesn’t mean you have to compromise your vision. In the past, the design choice was limited, but no longer. As the leader in modular paving solutions, Unilock offers the widest selection of permeable products in the market today. Begin by choosing your size and then optimize your color, finish and texture. We will work closely with you to make your vision a reality.
PROJECT: Parvis du parc Frédéric-Back. Montreal, QC DESIGN: Groupe BC2 / CIMA+ PRODUCT: Town Hall® and Eco-Priora™ with Smooth Premier finish
Permeable means rain water naturally flows between the specially-designed pavers and into the designed sub-base.
Eco-Line®
Eco-Optiloc™
Eco-Priora™
Eco-Promenade®
City Park Paver™
Thornbury™
Town Hall®
Contact your Unilock Representative for samples, product information and to arrange a Lunch & Learn for your team.
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UNILOCK.COM 1-800-UNILOCK
2019-10-02 3:45 PM