Over the past two and a half years, many of us (especially those who live and work in urban areas) have become more cognizant of the need to be in communities where we can operate our day-to-day activities without straying too far from home. Perhaps, this has been born out of necessity for those who faced multiple lockdowns, or perhaps out of convenience for others who discovered that working from home meant more time to fit in those mundane daily tasks between the sixth and seventh Zoom calls of the day. We’ve all heard stories of the lunch break gym sessions, popping in a load of laundry while your computer runs its weekly update, and using the previously-typical evening commute time to visit the neighbourhood grocery store for that night’s dinner necessities. Saving time and checking off the to-do list is a win-win!

So, how can current real estate development make all of these habits even more accessible and convenient? Enter the Mixed-Use building. By common definition, a Mixed-Use development is “any building, or series of buildings in a complex or estate, which incorporates both residential and commercial units, often with common or shared facilities”. Take a drive down virtually any street in an urban centre (at least in the HRM!), and you’ll doubtless see a number of newly-constructed or recently-renovated multi-level buildings with one or two lower levels of commercial space (typically occupied by retail or service tenants), and several floors of residential units stretching into the sky above. Developers and tenants are becoming increasingly drawn to this type of building because of the convenience of amenities and numerous other benefits they tend to offer. Commercial units in Mixed-Use buildings help create a sense of community for building residents, but also serve those who make their daily commute into the business district. Mixed-Use buildings located in densely-populated areas often make more efficient use of their land footprint, help improve the walkability score of the neighbourhood, and provide residents with greater levels of convenience and variety which otherwise would be out of reach.

Mixed-Use developments are by no means a new concept—one of the earliest recorded examples is the Ancient Roman Trajan’s Market; a multi-level complex built in 110 AD and comprised of retail shops, offices, and apartments—however more and more iterations of the concept are cropping up in our markets. It is crucial to both landlord and tenant that space within these buildings is accurately measured and accounted for. Over the past several years, our Lasercad^® Division has been contracted to undertake the measurement of tenant spaces in these unique developments, with particular focus on the lower-level commercial portions. However, accurate measurements can only be achieved with proper tools, and most notably an established and an internationally recognised Measurement Standard.

The Building Owners and Managers Association (BOMA) is the most recognized name in the field of space Measurement Standards.  Though most commonly known for their Office Standard, BOMA has developed a series of Measurements Standards which are designed to address the need for accurate measurement within many classes of building.  In 2012, BOMA released its first Mixed-Use Measurement Standard.  In the simplest of terms, the Mixed-Use Standard worked as follows:

Step 1: Split the building up into its various single use components (ie office, retail, residential, etc.).

Step 2: Identify the various common areas which service multiple uses within the building.

Step 3: Allocate the Mixed Use Common Area amongst the various uses.

Step 4: Apply the single use Measurement Standard to each of the various building uses.

For example—let’s consider a Mixed-Use building which has office and retail levels, and apartments above.  The Standard works by breaking this building into three buildings—a retail building, an office building, and an apartment building, then allocates the common areas between those three “buildings”, and then applies a Retail Measurement Standard to the retail building, the Office Standard to the office building, and the Apartment Standard to the apartment building.

Of particular note with the Mixed-Use, is that it is designed to allocate each common area only to those who benefit from it. For example, if a building containing office, retail, and residential tenants has an elevator room on the roof, which only services the residential units, but not the lower-level office and retail tenants, the elevator mechanical room would only be allocated amongst the residential tenants. Similarly, if that same building has a loading bay which only services the retail units on the lower level, the area occupied by the loading bay will only be allocated to the retail tenants, an not to the office and residential tenants.

After years of exposure and use within the industry, the need for refinements to the Standard became evident.  And so in 2021, BOMA released an updated version of their Mixed-Use Measurement Standard. The updated Standard has simplified the methodology for determining the allocation of Mixed-Use Common Area and provided greater capability to ensure space is being fairly and accurately distributed amongst tenants. The simplification and clarity of the 2021 Standard also enhances the ability of our team to provide advice to building owners and managers faced with challenging building layouts and the division of space.

If you are a building owner or manager interested in ensuring your space is used efficiently and common areas allocated accurately, reach out to our Lasercad^® Division today. We would be happy to provide advice, or schedule an on-site visit to certify your property to the latest BOMA Standard Method of Measurement.

There’s an old episode of the Freakonomics podcast entitled Why Are Japanese Homes Disposable?, which originally aired in 2014.  The upshot of the pod is that while land in Japan retains its value over time (sort of…the pod is worth a listen!), the houses on it do not, so when “used” houses are sold, they are frequently demolished and replaced.  When I came across the episode, we were in the midst of record high lumber prices, not to mention a climate crisis, and I had a hard time wrapping my head around the idea of houses only lasting 40 years or so.  And then I thought I’d like to look a little more into construction costs and their impact on housing prices here.   

There are three common methods of valuing property: the income approach, the direct comparison approach, and the cost approach.  The income approach is only relevant for valuing income producing properties, so not applicable to housing prices per se (though would be relevant for rental properties, but that’s another story).  The direct comparison approach and the cost approach are both based on the general premise that similar things will have similar values.  In direct comparison, you’d pay for a house what everyone else is willing to pay for a comparable house in the same or a similar location.  In the cost approach, the premise is that you’d pay for a house the same amount it would cost to buy some comparable land and build the same house.  Thus, rising construction costs should push up housing prices and vice versa. 

One of the key components of most houses in Atlantic Canada is lumber.  The following graph shows the Nasdaq prices for Random Length Lumber futures contracts (i.e., lumber prices on the stock market) over the past five years.  The orange line shows the daily closing price (values on the left axis) and the blue line shows the aggregate demand for the stock (values on the right axis, measured in thousands of dollars), which I calculated by multiplying the closing price by the volume traded that day, so it’s a rough estimate because prices fluctuated throughout each day.  I find it interesting that as prices climbed in 2020, the gap between the lines for price and aggregate demand grew, and that while there are definitely some sharp spikes in it over the past two years, aggregate demand did not follow the same upward trajectory as did prices.  There is only so much money to be spent on lumber, and when prices go up, demand drops.  But, more to the point on housing prices: when lumber prices go up, so too does the cost to construct, and thus on a cost approach to valuation, house values rise.  

Source: https://www.nasdaq.com/market-activity/commodities/lbs/historical with slightly questionable calculations displayed by the author…maybe those demand spikes occurred when there was a price drop on a particular day, and volume traded shot up, then I’m calculating it on the end of day price…it’s an imperfect analysis!

Labour costs also feed into the cost to construct, and with a noticeable shortage of availability of skilled trades in recent times, it stands to reason that labour costs are up.  The following table shows average hourly wage rates for industrial, electrical, and construction trades; percentages at the end of the lines are the total change over the period 2017 – 2021.    Note the convergence in wages amongst the three Maritime provinces: could this be a marker of increased willingness to move around within the region? 

Source: Statistics Canada. Table 14-10-0340-01  Employee wages by occupation, annual

These are inputs into construction prices, which have tidy price indexes available, and it’s interesting to look at the difference in price changes between types of residential construction: single family houses and townhouses have had the sharpest increase, followed by low-rise apartments, with high-rise apartments bringing up the rear.  The intuitive difference maker is construction material: high-rises are not typically made of wood (yet – here’s one sample article of many on the topic).  The following graph shows the construction price index, quarterly, for a composite of eleven CMA cities, including from Atlantic Canada Halifax, St. John’s, and Moncton.  The patterns for each of these cities individually are similar. 

Source: Statistics Canada. Table 18-10-0135-01  Building construction price indexes, by type of building

Back in February, we published a blog that looked at interest rates and housing prices.  For a quick reference point, I’ll recycle one of the charts from that post:

Source: Turner Drake & Partners Ltd. Compuval™ Residential Database; Statistics Canada. Table 10-10-0145-01  Financial market statistics, as at Wednesday, Bank of Canada.

The next chart brings a few of the previous factors together.  It’s got lumber prices looking like the heart rate of someone doing sprints, the mortgage rate looking quite lifeless in comparison, and the year-over-year percentage change in house prices annually throughout the chart.  Benchmark MLS^® prices are shown with little diamonds and are July to July changes; these prices will include some new construction, but the majority of the inventory feeding into the data is existing housing stock (the sort that might be torn down and replaced in Japan).  New construction prices are shown with circles and are October to October changes.  Notice how the two housing price metrics track each other, and also follow the change in the price of lumber, especially towards the end of the period, when lumber prices were particularly volatile.      

Sources: www.nasdaq.com; Statistics Canada. Table 10-10-0145-01  Financial market statistics, as at Wednesday, Bank of Canada; The Canadian Real Estate Association; CMHC Starts and Completions Survey.

Our Planning team is currently working on a Housing Needs Assessment for the province of Nova Scotia.  Neil Lovitt wrote a blog post on that topic in April of this year, and in it, he noted that “housing affordability has rapidly eroded over the course of the pandemic, and was being degraded more slowly for years before that.”  Lumber prices appear to be coming back to relatively normal levels, though that can change in a heartbeat (take a look at late 2021 to early 2022 on the chart above); interest rates are certainly on the way up, and potentially holding there for a prolonged period.  Inflation has been at generational highs over the past few months, and labour costs will have to continue to increase if wages are to keep pace with the cost of living.  The latter three make construction less appealing, but we cannot afford to slow provision of new housing options if we want any semblance of affordability or attainability in the housing market.  In overly simplistic terms, a lot could be riding on lumber prices.    

Picture this: your business is booming, clients who have held off on visiting your office over the past two years are comfortable with meeting in-person again, and your business projections for the next few years look promising. Sounds great, right? But with all of this positivity comes a fairly significant challenge: your current lease is soon coming to an end, and you need to upsize your spatial footprint to keep up with rapidly-increasing business demands.

After setting aside some time in your busy schedule to scout out new locations, you find the building you think may be the perfect place for your company’s new home. It’s a brand-new building (the last sheet of Gyproc was just put up yesterday), close to all amenities and complementary services, and you’d be located in a great part of town. All you need to do is decide how you’d like to demise the space for offices and your showroom, find suppliers for your furniture and lighting needs, hire a contractor to put up a few demising walls and install a staff kitchenette and bathroom. You have the names of some reliable contacts for all the services you think you’ll need, so you’re confident that the finishing process will move quickly and everything will fall into place. A couple weeks later, however, after spending far too many hours of valuable time researching all your options, you reach the conclusion that you’re just a little bit outside of your comfort zone and need a professional to carry some of the load.

That’s where a broker can step in to help. First, they will review your space wish list. They’ll provide you with any other space options they believe will match your wish list, and can inquire as to the details of any vacancies you’ve had your eye on. Some of the options they suggest may currently be built-out with full offices, boardrooms, meeting rooms, kitchens, washrooms etc., but when you review your options, you may decide that none of them completely suit your needs, especially compared to your original choice: the brand-new space, fresh on the market, that’s ready to be built-out in such a way that you can achieve the exact layout desired to maximise efficiency in your space.

Brokers will tour through the space with you, taking stock of all the key components that will need attention: they notice the unfinished concrete floor, exposed ceiling, unpainted Gyproc walls, and anything else that catches their trained eyes. They’ll notice the HVAC, plumbing, and electrical that is only running to your unit, not yet throughout the whole building. They will discuss potential layouts based on your needs, and the landlord may provide a space planner to help bring to life your vision for the space. Once a solid plan is in place, you’re feeling confident that the price of the project will be pretty manageable. When the space plan comes back and the budget is calculated, you are shocked with the quote from the general contractor… “I could build a new house for that price!”.

According to recent research, the average cost to fully build out a typical office space ranges between $221 and $323 per square foot, depending on geographical location and the desired quality of finishes.  This figure has increased significantly over recent years, due in part to supply-chain shortages, rising costs of materials, general fluctuations within the market, and inflation; however, we can use it as a starting point.  Typically, a landlord will include a tenant improvement allowance within the asking net rent to help offset these costs.  The remainder is to be paid by the tenant.  There are a few options of handling these costs: a tenant can cut a cheque for the entire amount (this may have an accounting benefit), the tenant may amortise the amount over the lease term and pay back to the landlord as part of the rental payments (this helps spread the costs over the lease term, but the landlord typically charges interest on this amount) and/or a combination of both options. The landlord will make these concessions based on the strength of the covenant of the tenant and the length of the lease term.

Construction items to consider when building a space from a raw state:

Partition Walls (Metal Studs and Gyproc):  Even in an open concept space, washrooms, meeting rooms, etc. must be partitioned from the main space.

Flooring:  Flooring can range from carpet tiles to laminate flooring to ceramic tiles and anything in between. Carpet tiles can be among the more cost-effective flooring options, while ceramic and porcelain tile are among the more expensive flooring types.

Paint: Fortunately, paint is paint.

Ceiling Tiles: A suspended T-bar ceiling grid can help improve sound nuisances within an office.

Lighting: There are many lighting options available today, including more efficient LED lighting.

Electrical Distribution: In a new build, the landlord typically brings electrical into the unit, but in some cases, it is the tenant’s obligation to install a transformer and then distribute the electrical throughout the unit (outlets, drops, etc.).

HVAC Distribution: Again, the landlord will typically run HVAC to the unit, but it then becomes the tenant's responsibility to distribute the HVAC throughout the unit. This will depend on the unit layout; an open concept office will require less distribution and diffusers than a fully built-out space with all private offices.

Plumbing: The landlord will have a plumbing stack to the unit, but it then becomes the tenant’s responsibility to distribute throughout the unit. It is more cost effective to keep all plumbing in the same vicinity as this avoids the need to cut into concrete to run pipes (which significantly drives up construction costs).

Millwork: Millwork comprises of kitchen cabinets, storage cabinets, washroom counters, etc. These items will depend on the space design.

All of these items add up, and tackling them by yourself may be quite overwhelming. That is why a broker is committed to working tirelessly on your behalf to ensure your vision can come to life, while sticking to your budget as closely as possible!

Our Brokerage Team has extensive experience in handling complex leasing and sales transactions, which often include assisting clients in navigating the sometimes-complex build-out and fit-up process. If you need help with your commercial property acquisition or leasing requirements, a member of our Team will be happy to assist you through every step of the transaction. Contact Ashley, Emily, or James via email or at (902) 429-1811.

Recently, you may have come across some news coverage of a project we’ve started; from now until early 2023 we will be working on a Housing Needs Assessment for the entirety of Nova Scotia. It’s a bit unusual for us to be fielding media requests about the beginning of a project, usually the interest comes at the end when we actually have some results to talk about… if the interest comes at all. Yet, we shouldn’t be too surprised. Housing challenges continue to grow across Canada, and in many ways Nova Scotia has been particularly impacted. This is an issue we’ve been engaged in for some years now, building up our experience from Truro, NS to Terrace, BC. We are very excited at the opportunity this project creates for us to set a new standard for conducting these types of analyses, all right here in our home province.

I would be remiss to not prominently mention the collaborating firms we have on our team. While Turner Drake is getting the name recognition due to our role as project manager, the reality is this is very much a combined effort. In fact, the budget for this project is more directed to public engagement than data analysis – my excel file doesn’t care if I load in data for 1 municipality or 49, but talking to people can’t scale like that. We have an enormous geography to cover, and a diversity of stakeholders in each community to engage with. So, we are thrilled to have Upland Planning & Design Studio as well as Colab undertaking that process with us. Back closer to our focus, we are excited to be collaborating with MountainMath on the analytics and data dissemination.

Beyond the team itself, the scope of work we have gives us even more to look forward to. The RFP issued by the Province for this study was thorough enough to ensure the right questions will be answered, but was also flexible enough that we were able to put our own spin on things to ultimately propose a Needs Assessment as we think they should be done. We can’t get into everything, but here are a few highlights:

• We are excited to finally undertake this work with the benefit of data from the 2021 Census as it is released over the course of this year. While data sets related to the housing market and inventory are updated at least annually, this is not the case for many important socio-economic indicators that tell us about the people who are trying to access and maintain that housing. The 2021 Census will give us a contemporary view into these factors, something that has been an increasing challenge with this work over the last number of years. Until this point, we’ve had to rely on the 2016 Census, which predates virtually every important trend affecting our housing situation today.

• We are also eager to introduce a much more detailed understanding of Short Term Rental activity (i.e. AirBNB) across the province. This is a fraught topic; the use of our housing stock for short-term rental purposes has very clear negative and positive impacts, and these are highly variable between communities, and even across different neighbourhoods in the same community. Up to this point a lack of detailed data has prevented us from clearly understanding where the problems are, and how severe they may be. We’re looking forward to pulling back the curtain on this facet of the housing market!

• Finally, this project is an opportunity for us to up the ante in terms of making our work useful and accessible. While government is our client, housing issues are top of mind for many across the province and we want our efforts to benefit anyone working toward housing solutions. It is incredibly difficult to write a static report that presents such a breadth of information (both thematic and geographic) in a way that is useful to more than a few end users. That is why we are exploring how to better share our results so more people across the province can adapt it to their needs, interests, and locations. A more dynamic, web-based, and customizable approach to disseminating housing-related data and insights is one of the outcomes I am most excited for.

While this project will provide our client with key information they need to design and target public policy responses, the unfortunate reality is that our work will take time, and across the board we are playing a game of catchup where time is the most precious commodity. Housing affordability has rapidly eroded over the course of the pandemic, and was being degraded more slowly for years before that. Take a look at trends just in the owner-occupied market (which has lagged the rental market in terms of demand pressure):

In 2010, the Building Owners and Managers Association (BOMA) released their first Standard Method of Measurement specifically designed for Retail Space.  Prior to this, BOMA did not address the measurement of retail space, except where it existed within office buildings, and so measurement of retail space was done solely as a sub-set of the Office Standard.  With a Standard dedicated specifically to retail space, BOMA was able address a much wider variety of retail space as well as incorporate industry-specific scenarios.

In 2020, BOMA released an updated version of the Retail Standard.  The updated version was more comprehensive and provided greater clarity over its previous original version.  It also introduced the following advancements:

·        Two levels of measurement:

o   Partial Measurement

o   Overall Measurement

·        “Inter-Building Area”

·        The concept of the “Retail Experience”

Two Levels of Measurement

Partial Measurement

When a building contains multiple leased units, partial measurement may be employed in order to calculate the Gross Leasable Area (GLA) for a single unit.  This allows landlords to calculate a certified GLA for any individual unit, without the need to measure the entire building.  Leasable Exclusions benefitting the measured space can be measured in order to complete Inter-Building area calculations. This helps landlords determine the common area and maintenance fees for the occupant.

Although Partial Measurement allows a single space to be certified, any adjacent spaces may still need to be accessed in order to determine the thickness of demising walls, and confirm wall priority between spaces.

Overall Measurement

As the name suggests, this is a complete measurement of the retail property.  The Overall Measurement of a retail space is recommended by BOMA over the Partial Measurement since it provides a complete picture of the building (it is also less invasive to tenants since units only need to be visited once).  When landlords have access to more information (available through Overall Measurement) they are able to make better-informed decisions regarding the efficient use of space in their building.

Inter-Building Area

In the original BOMA Retail Standard, the GLA of a tenant space was effectively defined as the space physically occupied by a particular tenant—parking lots, major vertical penetrations, and the various common areas were not allocated to the occupants of a retail building.  The latest Standard changes this by providing landlords with the option to allocate this space (called “Inter-Building Area”) to the various occupants who benefit from it.

A simple example of Inter-Building Area can be found with a shopping mall with available on-site parking.  The standard allows us to take this parking area and proportionately allocate it amongst the occupants of the mall.

Example: Imagine a building with a total GLA of 30,0000 ft² and an associated parking lot of 10,000 ft².  We can calculate how much can be allocated to a tenant based on the percentage of total GLA that they occupy. If Occupant #1 has a GLA of 5,000 ft², their proportionate share of the building is 5,000 ft² / 30,000 ft² = 16.67%.  The tenant will then be allocated 16.67% of the parking lot, in this case 16.67% X 10,000 ft² = 1,667 ft².

The “Retail Experience”

When you walk into a nice restaurant, there are several factors which contribute to your overall experience—the nice carpet, fancy lighting, music, an outdoor patio or rooftop terrace, etc.  All these factors contribute to the “Retail Experience”, a concept that is introduced in the 2020 BOMA Retail Standard.

This concept allows landlords to define (and capture) unenclosed areas of a retail property which contribute to the overall shopping environment.  These factors are most notable in strip malls and restaurants since they often include permanent outdoor areas.  Covid-19 restrictions led to a surge in patio dining, however in the past, landlords had no way of capturing these areas within a tenant’s retail space. If these features are permanent, and under the exclusive use of a particular tenant, landlords now have the ability to capitalise on these features by including them in the certified GLA of the tenant space.

Are you unsure if you are efficiently utilising every square foot in you building? Our Lasercad® division would be happy to certify your space to the latest measurement standard, ensuring that you know exactly what you’re working with!

We’re all well aware of the trajectory of housing prices since the start of the pandemic: The Canadian Real Estate Association (CREA) reported a 17.7% increase in average housing prices nationally between December 2020 and 2021.  Reported increases in Atlantic Canada range from 9.3% in St. John’s NL, to 41.9% in Yarmouth NS.  We’ve arranged the following table of reported Atlantic Canadian areas in descending order by rate of increase, and included the dollar value that increase translates to.

Source: CREA.  * MLS® HPI benchmark prices; all other areas are average prices.  We don’t know why Charlottetown is not reported. 

Another thing we’re all aware of is current rock bottom interest rates, which were lowered from already low levels at the outset of the pandemic in an effort to keep the economy from coming to a crashing halt.  As someone who first bought a house when interest rates seemed low to those who held a mortgage in the 1980s, but high to those who weren’t yet born in the 1980s, I wanted to take a look at the cost of buying a home with a mortgage over the course of the past few decades, and how that relates to income. 

The following charts show average income for “economic families[i] and persons not in an economic family[ii]”.   The available data goes as far forward as 2019 and it was provided in constant 2019 dollars.  I wanted to look also at current dollar income, so I adjusted it using the relevant consumer price index (CPI).  Over the past four decades, average incomes have approximately quadrupled in Canada (+290%) and the Atlantic provinces (NL +318%; PE +291%; NS +284%; NB +295%; maybe a little more since 2019?)

Source: Statistics Canada.  Table 11-10-0191-01  Income statistics by economic family type and income source; and Table 18-10-0005-01  Consumer Price Index, annual average, not seasonally adjusted.

Source: Statistics Canada.  Table 11-10-0191-01  Income statistics by economic family type and income source.

Historic lending rates are provided on a weekly basis.  From the start of 1980 to the start of 2022, lending rates have declined substantially, by 8.46 percentage points (pp) for posted mortgage rates and 13.5 pp for the bank rate.  Mortgage rates peaked at 21.75% for a 10-week period in 1981 and reached their lowest between 2015 and 2017, at 4.64%.

Source: Statistics Canada. Table 10-10-0145-01  Financial market statistics, as at Wednesday, Bank of Canada.

And the final piece of the puzzle is housing prices.  Part of our Compuval™ suite of databases is our residential database, which captures details of housing sales transactions in Halifax Regional Municipality, dating back to the mid-1970s.  So, with apologies to all the other areas, for this portion, we are looking only at the housing prices for HRM.  The average price for a house in 1981 was $60,738; in 2021, it was $486,861, an increase of just over 700%, well above the quadrupling of incomes over the period.

Source: Turner Drake & Partners Ltd. Compuval™ Residential Database; Statistics Canada. Table 10-10-0145-01  Financial market statistics, as at Wednesday, Bank of Canada.

We also used the CPI to adjust average housing prices to 2021 levels: the increase over the forty years was 187%, even accounting for inflation. 

Source: Turner Drake & Partners Ltd. Compuval™ Residential Database; Statistics Canada. Table 10-10-0145-01  Financial market statistics, as at Wednesday, Bank of Canada.

No matter which way you look at, adjusted or otherwise, housing prices have increased over the past 40 years (what??!), and quite sharply over the past 2 years.  But interest rates have declined, so where does that put mortgage payments?  The following two tables show mortgage payments on the average priced home annually since 1981.  The mortgage rates are necessarily approximate because mortgage rates vary throughout the year – these are the annual averages of the reported weekly rates – and because there are other factors at play that might mean someone pays a different rate from that posted (negotiation, general discounts off the posted rate, etc.), but the purpose here is to show the trend over time.  I’ve also ignored down payments, so these payments are based on the full average price of houses, purely for simplicity.  The first table shows the five-year fixed rate, while the second shows the variable rate; payments are shown on average house prices in current dollars, and also adjusted to 2021 dollars using the CPI. 

Source: Turner Drake & Partners Ltd. Compuval™ Residential Database; Statistics Canada. Table 10-10-0145-01  Financial market statistics, as at Wednesday, Bank of Canada (for fixed mortgage rates); Super Brokers Mortgage Rate History https://www.superbrokers.ca/tools/mortgage-rate-history (for variable rates).

Source: Turner Drake & Partners Ltd. Compuval™ Residential Database; Statistics Canada. Table 10-10-0145-01  Financial market statistics, as at Wednesday, Bank of Canada (for fixed mortgage rates); Super Brokers Mortgage Rate History https://www.superbrokers.ca/tools/mortgage-rate-history (for variable rates).

The analysis shows that interest rates and mortgage payments followed a similar pattern until approximately the year 2000 for fixed rate mortgages, and 2009 for variable rate mortgages, at which points the two diverge, with interest rates continuing their downward trajectory while mortgage payments climbed with relative consistency to the present day (side note: over the study period, there were just three years where the annual average for variable rates was higher than that of fixed rates: 1981, 1989, and 1990). 

“Affordability” for housing is relatively refined in its definition (you can read a bit about it in our blog from June of last year), and this next table isn’t intended to comment on affordability in that regard, but rather to show the pattern of change in average incomes, annual mortgage payments, and consumer prices (CPI), all indexed to a common starting point (1980).  It is noteworthy how closely together the three moved between 1980 and 1990, at which point annual mortgage payments dropped relative to income and CPI; the latter two continued apace for about the next eight years, till incomes started to outpace consumer prices.  Even in 2020, the index for annual mortgage payments fell below that of income, but in 2021, these two came back together, suggesting that mortgage costs (index value in 2021 = 411.7) relative to income (index value in 2021 = 414.4) is now approximately equivalent to where it was in 1980 (both 100), or 1990 (index values 181.7 and 184.8, respectively).  

Source: Turner Drake & Partners Ltd. Compuval™ Residential Database; Statistics Canada. Table 10-10-0145-01  Financial market statistics, as at Wednesday, Bank of Canada (for fixed mortgage rates); Statistics Canada. Table 18-10-0005-01  Consumer Price Index, annual average, not seasonally adjusted; and Statistics Canada.  Table 11-10-0191-01  Income statistics by economic family type and income source.

One more exercise in modelling prices, payments, and interest rates: what would someone pay, including interest, if they bought an average house in 1981, versus in 2021?  In order to estimate this, I used a 25-year amortization period with 5-year terms.  For the first 5-year term, I used the average house price and fixed mortgage rate in the year of purchase, and then used an amortization schedule to determine the balance owing at the end of the term.  I repeated the process for each of the 5-year terms, using the end balance for the previous term as the mortgage amount, reducing the amortization period by five years, and using the prevailing interest rate of the first year of each term.  This is reasonable for the 1981 purchase, but the 2021 purchase is trickier because future interest rates are unknown.  Therefore, I simply modelled it looking backwards at interest rates in five-year increments, on the assumption that maybe rates will work their way back up.  Is it perfect?  No.  Is it reasonable?  Probably.  Is it interesting to speculate?  I think so.

The results: an average house purchased in 1981 cost $60,738; when fully paid off 25 years later, the total cost of principal and interest was $196,564 (note that the starting principal and total principal are off by $91, likely due to rounding).  The average house purchased in 2021 cost $486,681.  The full cost including principal and interest 25 years hence is modelled to be $858,865.  

Alex Baird Allen is the Manager of Turner Drake's Economic Intelligence Unit. In her role, Alex frequently undertakes market surveys, site selection studies, trade area analyses, supply & demand analyses, and demographic reports for a wide range of property types throughout Atlantic Canada. If you'd like more information on market research or our semi-annual Market Survey (recently updated and published with December 2021 results), you can reach Alex at 902-429-1811 Ext.323 (HRM), 1-800-567-3033 (toll free), or email ABairdAllen@turnerdrake.com

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[i] “An economic family refers to a group of two or more persons who live in the same dwelling and are related to each other by blood, marriage, common-law, adoption or a foster relationship.” – Statistics Canada.

[ii] “A person not in an economic family is a person living either alone or with others to whom he or she is unrelated, such as roommates or a lodger.” – also Statistics Canada.

 

Accurate Space Requirements:

Carefully study your real estate needs. When budgeting, it’s important to consider not just the purchase price (or if leasing—the base rent), but also any additional costs associated with the property. It is easy to overlook or underestimate extras such as: renovations, due diligence costs, legal fees, production downtime during the transition, recurring operational expenses for the property and (in the case of a lease) possible leasehold improvements. The lender wants to see evidence of solid planning. Determining whether you want to buy or lease and how you’ll accommodate projected growth is important in determining  your square footage needs.

The Subject Property:

If you don’t already have a property in mind, a lender may agree to a preliminary meeting to give you a ballpark idea of how much financing it could provide. However, such a meeting is generally advisable only if you already have a good relationship with the loans officer. You can leave a poor impression if it looks like you’re not a serious buyer and are wasting the lender’s time. Lenders decide how much to lend based not only on your finances, but also on the type of building, and its condition, age, resale potential, ability to generate a cash flow (which will support the debt service and marketability). Without a specific property, it’s hard for a lender to be precise on how much financing it can offer.

Business Plan:

Do you have a property in mind? You should. Prepare the documents you’ll need to show the lender. These will include a solid business plan, up-to-date financial statements, and details of the property you’re interested in. You should plan to make a good first impression and be well prepared.

How do your books look?

Start by making sure your company’s finances are in order and organised. One of the most important requirements for getting financing is having a profitable and growing company. A business with no profitability hurts your chances at obtaining a loan. Lenders like to see a proven record of profits year over year.

Meet the lender to clarify the terms and conditions:

It’s best to meet the lender before bidding on the property you have in mind, especially if it’s your first venture into commercial real estate. The lender will also advise you on its conditions for granting financing. Those may include obtaining environmental and building condition assessments, an appraisal, and a title search. It helps to use approved experts for this kind of due diligence, and each lender has its own list of such experts. If you use someone else, the lender may require a second opinion and the transaction could be delayed.

Don't rush the conditional period:

Your purchase offer should give the lender enough time to review the terms of the deal. It’s common for offers to provide 4 weeks of “conditional acceptance” while lenders often need six to eight weeks and possibly more (especially if due diligence issues arise). The last thing you will want to do is ask for an extension, especially on a “hot” property or “remove conditions” without having the full approval from the lender. 

During the first week of November, the reminders were everywhere: “Change your clocks, check your batteries”. The end of Daylight Savings is a great time to check your smoke and carbon monoxide detectors to ensure they are in good working order. Although the majority of properties are equipped with this equipment, many are overlooked. Functioning smoke and carbon monoxide detectors are critical to fire safety and reduce the risk of fire related death by nearly 50%. Another key aspect of fire safety is having up-to-date Fire Emergency and Fire Exit plans. When was the last time you reviewed yours? 

According to the National Fire Code of Canada, the fire safety plan of a building must be reviewed at least every 12 months, but in reality, your fire plan should be reviewed whenever there are changes to the floor plan. As noted in our April blog post, changing trends in remote work have created opportunities to alter workspaces, renovate offices, or even convert buildings to adapt to today’s commercial real estate environment. It is important to review your Fire Emergency and Fire Exit plans whenever these changes take place to ensure they are an accurate representation of your space’s current configuration and use. An outdated fire safety plan may be of little help in the event of a fire. 

Having a fresh look at your Fire Safety Plan can also identify opportunities to make changes to your fire safety equipment—especially if your property is undergoing renovations. Regular reviews of your fire safety plans also helps to ensure adherence to evolving building codes and fire safety regulations.

Don’t have a Fire Emergency or Fire Exit plan? Our Lasercad® division can assist in creating or updating these by measuring the space and laying out a clear exit path, as well as identifying the locations of safety equipment for your tenants.

HST Self-Supply on new apartment buildings has been around for a long time. We were first introduced to the world of HST (or GST as it was then known) back in 1990 at a seminar put on by one of the leading accounting companies to help the appraisal profession adjust to the new rules.  GST was officially launched in January 1991 and the world of Self-Supply was unleashed. For the first 35 years or so it lay relatively dormant with scarcely a call to our offices from new apartment builders, who are the most affected by the new rules. Rarely were we consulted on Self-Supply valuations.  Everyone was seemingly happy in apartment land. But the last 5 years has erupted with calls coming in on a regular basis from clients old and new, anxious to escape the inevitable battle with CRA’s auditors and appraisers. (For those looking for a tutorial, see our blog post of August 24^th, 2016, “HST Self-Supply Rules: Is CRA on the Warpath”.  And feel the pain).

Undoubtedly the biggest practical problem for apartment builders is the uncertainty it leaves after the building has been completed. HST on new buildings is based on “Fair Market Value”, not on the cost of construction.  The latter is easily calculated because ITC’s (Input Tax Credits) will have been filed with CRA throughout the construction process. The former – “Fair Market Value” - cannot be calculated until the building is completed and it is, like any market value figure, just an opinion.  But CRA’s opinion increasingly is at odds with the builder’s opinion. To make matters worse, CRA’s review will come along well after the building has been finished, and therefore well after the mortgage financing has been committed, and occasionally even after the building has been sold.  In jurisdictions with regulatory rent controls, rents too will have been committed. In short, the final HST tax bill comes in well after all the dust has (literally) settled. Too bad that it can’t be agreed in advance, or based on something more predictable than “Fair Market Value”.

 "Just levelling the playing field..."

The reasoning behind the Self-Supply rules is succinctly laid out in an official CRA publication (GST/HST Memoranda series 19.2.3, paragraph 5) which begins “Purpose of self-supply rules: level playing field”. In essence, it is an attempt to put the builder who wants to keep the building on the same footing as an investor who wants to buy it. The selling price will (fingers crossed) include a profit component for the builder and that’s what CRA wants a piece of.  It’s difficult to argue with the principle, but what it overlooks is that HST is just another construction cost to be recovered through the eventual selling price. If HST is charged on the elusive profit component, it simply adds to the cost of the building and hence adds to the selling price. The builder pays tax on the profit and recovers it from the purchaser as part of the selling price. The playing field is level. But if no tax is charged on the elusive profit component, the cost of the building is marginally lower and, assuming a balanced market, the selling price will be marginally lower.  The playing field remains level, just slightly smaller. CRA’s concern is that the tax on the builder’s profit will simply end up in the builder’s pocket, but a competitive market will address that. Viewed from that angle, the pain, anguish and sleepless nights endured by the builder waiting to settle the tax bill with CRA is more to do with the size of the playing field than its degree of tilt. All of that pain and anguish could be removed if the tax on profit were a predictable formula, agreed in advance, rather than an elusive opinion coming after the show is over.

HST on Apartment Rents

So, what if the profit – or rather the tax thereon – is occasionally underestimated? Eventually it is the end user who pays the HST on goods and services anyway. That’s how value-added taxes work. For apartment buildings that means the tenant ultimately bears the cost of the builder’s HST, even though residential rental property is, for the most part, officially exempt from HST. Rents must be sufficient to recover all of the costs or else buildings don’t get built. So that troublesome tax on the builder’s profit ultimately shuffles through to the tenants.  Is it a bad thing to give tenants a break these days?  And for more on THAT debate, check out our recent June 21^st blog, “Affordable, Attainable, Available”. 

Boy howdy, let me tell you how tempting it is today to write another blog post about housing, what with a new majority provincial government, and the shameful campaign of homelessness evictions launched by HRM. It's a topic we will be sure to revisit soon, but the honest truth is a while ago I started writing this piece about a different issue in pressing need of attention, and there just is not the time to pivot. 

That other issue, of course, is the long emergency of climate change. A long emergency that is rapidly becoming shorter according to the recently released 6^th Assessment Report of the Intergovernmental Panel on Climate Change. The outlook is grim, with some irreversible effects of climate change now baked into our future, and an ever-diminishing window of opportunity to take action and head off the worst. This is ‘code red for humanity’ as put by UN Secretary General, Antonio Guterres.

A few months ago, I turned 35. Old man, I know. But even from here, just past the threshold of maturity, let me tell you that aging is a hell of a trip. With a few decades and milestones under my belt, I can now regularly perceive the arc of time, but still hold clearly in my mind the memories of early childhood when nothing existed beyond the “now”. I can vividly remember, for example, sitting in the school library in Grade 4 and learning about the Montreal Protocol and how it reversed the depletion of the ozone layer (something very topical to a pasty redhead with British genes). I remember learning how something called the Kyoto Protocol was going to help prevent a different environmental crisis called Global Warming. It felt like an imperceptible eon away at the time, what a different world we would be facing if that had panned out.

My daughter turned 5 this spring and at the moment her “now” is a lot more focused on Covid than climate, but that will probably change soon. That long arc of time leading to climate-driven environmental and social crises has converged with the now. As the IPCC report lays out, our window of opportunity to shape future impacts and head off the worst is running out. Not in imperceptible eons, not in generations, but in a decade (singular), in near-term political cycles. In all likeliness, I will know whether or not my daughter is inheriting a disastrous +2°C world before I know whether or not she’s passed her driver’s test.

But even that sentiment downplays the issue. In fact, we are already living with the impacts of climate change and it’s easy to find the real estate angle. Earlier this week our social media accounts shared this article from the CBC examining the lack of climate risk information in the typical real estate transaction process. The topic is presented against the background of raging wildfires in the BC interior, which have destroyed numerous homes and disrupted even more communities. This is already leading to some early musings that the housing markets of Vancouver Island could see a groundswell of demand pressure over the long term as people are increasingly motivated to move upwind of areas where “50-year fires” are now happening multiple times in a decade, threatening life and shelter, and choking out the rest.

So far, the smoke is dissipating before it reaches this side of the continent, so our concerns are not so focused on forest fires (though, not to be ignored). Sea level rise and flooding are the risks du jour. We’ve visited this topic a number of times already, in research articles from 2006, 2007, 2013, 2016, and most recently 2019. It’s a subject that we care about and have integrated into our valuation practice, adding a climate risk section to our standard reports just a few years ago. But as one small firm in this big industry it is difficult for us to push that envelope.

Well, reality is on its way to force the issue. Back in the fall of last year the National Bureau of Economic Research published a working paper from a couple good eggs at the Wharton School examining the capitalization of climate risk in real estate prices. More specifically, their analysis of home sales in coastal areas of Florida noted that properties more exposed to the risks of Sea Level Rise started to see lagging sales volumes in the early 2010s, with price appreciation starting its underperformance a few years later. Their conclusion is this is a demand-side trend, buyers are now thinking about climate change in the timespan of their own mortgage term! Here’s the money chart:

This trend is just starting, and with the IPCC telling us that a +1.5°C world is now unavoidable, it will only grow in impact in the years to come. Not eons, not generations, years. We’ll continue to look for ways to integrate climate risk assessment into our work, and we recommend that anyone considering a real estate acquisition these days do the same. Even if you don’t expect to own the property long enough for sea level rise and other climate impacts to physically threaten your asset, the next buyer sure could be, and property values look to be a leading indicator now, not a trailing one. In other words, without due care, your mortgage could be underwater long before the property itself is.

June 28, 2021 marked the twenty-eight year anniversary of my employment at Turner Drake.  Time really does fly when you’re having fun.

Originally hired, trained and educated as a commercial appraiser, I’ve spent the majority of my career in our Property Tax Division. True to our in-house training program of the time, I was hired freshly graduated from University; started as a trainee valuer; moved into a Manager’s role six years later, and then, commencing in 2006, became divisional Vice-President, where I lead a team of six. That team assists hundreds of owners every year in mitigating their tax burdens. 

Twenty-eight years in property tax translates into tens of thousands of appeals filed and, over the course of addressing those appeals, some recurring themes have emerged. I’ll discuss them below…and in the process, try to do a little bit of property tax myth-busting.

Thou Shalt Not Covet Thy Neighbour’s Assessment

If you own property in Nova Scotia, it’s tempting (and, with the information available online free-of-charge, relatively easy) to compare your assessment to competing properties. For some owners I’ve encountered, logging on to assessment sites and feverishly clicking on surrounding properties has become sport…in some cases, bordering on an obsession.

While comparable assessments are undeniably a useful benchmark, as well as a helpful tool to identify an over-assessment (we do it too!); and while some assessors will even consider assessments on similar properties as grounds for reducing an assessment at the (relatively informal) initial appeal review stage, the fact that your assessment compares unfavourably to others will carry no weight before Nova Scotia’s administrative Tribunals, Boards, and Courts.

Nova Scotia’s Assessment Act requires uniformity of assessment…but legislated uniformity is achieved across entire classes of property in a Municipality (and there are only two such classes of property: residential and commercial). Sadly, ensuring that your property’s assessment is consistent with similar properties does not ensure uniformity.  This is one of the most common misconceptions that we encounter in dealing with property appellants.

And don’t even get me started on New Brunswick, where there is no uniformity or equity provisions in the assessment legislation- none! Comparable assessments have zero evidentiary value. Sad, but true. There are reform moves afoot to address the issue, but given the current glacial pace, I may be another twenty-eight years in before they come to fruition.

The Best Opportunity to Reduce Your Assessment (and Taxes) is NOT on Appeal

In every Province in which we operate, assessing authorities are willing to discuss assessments prior to those values being inserted onto the official assessment rolls. In our experience, such preliminary consultations often produce better results- at lower cost- that waiting to file formal appeals. A number of provinces- Nova Scotia among them- fully embrace the opportunity to discuss proposed values and to make changes, where required, at the “pre-roll” (referred to also as the “advance notification”) stage.

Of course, it’s not always possible to do so, as values may not be available with sufficient lead time in advance of the filing of the roll. But where the opportunity presents itself, my advice is always to be proactive, and to address a problem before it becomes one.  A stitch in time really does save nine.  

(Nova Scotia owners, take note: the opportunity to pre-negotiate your 2022 assessment- the first assessment year when the COVID-19 pandemic will be technically relevant for assessment purposes- will open in mid-to-late September.  Carpe diem).

Not Every Property is Overassessed

There. I’ve said it. 

It’s the truth- not every property offers the opportunity for tax relief. My colleagues and I take many, many calls where we have to break that unwelcome news to owners…sometimes in spite of a double- digit increase, or an assessment that exceeds its neighbours by a considerable margin, or a revenue stream that has tanked due to the COVID-19 pandemic. In fact, for every appeal we file, there is probably a second property that was reviewed and its value accepted. 

Assessors- They’re Just Like Us.

They worry about mixing vaccines. They wonder about going gluten-free. They drive their kids to countless sport practices and extracurricular activities. They think about work while they’re walking the dog.  They fret about how they look on Zoom calls. And, for the most part, they’re well educated and professional, and open to reasoned argument. That’s not to say that we don’t take the gloves off from time to time. But professional relationships built on mutual respect with assessors from across the country have allowed for the settlement of hundreds of appeals every year without the need for Board and Court appearances.   

Giselle Kakamousias is the Vice-President of Turner Drake’s Property Tax Division. Her experience negotiating and appealing property assessments is extensive: it is a wise property owner who follows her advice. If you’d like more of it, she can be reached at (902) 429-1811 ext. 333 or gkakamousias@turnerdrake.com.  

Affordable housing has been a hot topic in recent years, and is even more so now as rental vacancy rates are extremely tight and housing prices have experienced record rates of increase in Atlantic Canada.  A recent news article caught my attention, with its reference to a price point – “attainable” – I haven’t heard as much about, and it inspired me to take a look at what the difference is, and how each lines up with Atlantic Canadian markets.  Then, because alliterations sound better in threes, I needed a third A: the obvious choice in this context is to look at availability.

First, the definitions, a slipperier thing to pin down than one might imagine.  Canada Mortgage and Housing Corporation (CMHC) defines affordable housing as housing that costs less than 30% of a household’s before-tax (gross) income, absent any requirement for the housing to be provided or made possible through a government program, and without restriction on tenure or type. 

With that definition, affordability is very much relative: in theory, a $4.3-million home would be “affordable”, provided your household income is $300,000 – about 1.7% of Atlantic Canadian households.  

…housing which is deemed affordable to those with a median household income or below as rated by the national government or a local government by a recognized housing affordability index.

After listing a property for sale, you receive an offer from a prospective buyer. Then, before you’re able to present the offer to your seller-client, a second and third offer arrive with all of the buyers and their agents impatiently waiting for answers.

While handling multiple offers requires more diplomacy than handling a single offer, from a business standpoint there is really little room for complaint here. You have an attractive listing, which has a good chance of selling quickly, and your marketing efforts are paying off, which should please the seller.

However, there is plenty of room for problems if you don’t handle the intense demand for your listing with diligence and fairness to all – your seller-client and the prospective purchasers.

Verbal Offers Are Not Competing Offers

All offers must be presented in writing. If a seller’s agent is presented with a verbal offer, the seller must be told what was offered and the buyer’s agent must be instructed to put the offer in writing in order to be considered.

Disclosure to the Buyer

In Nova Scotia, the decision to disclose the existence of competing offers to buyers is entirely up to the seller.

Should the seller receive competing offers, the seller’s agent should:

• inform the seller immediately;
• recommend the seller review each offer prior to making a decision;
• disclose the presence of competing offers to the buyers’ agents if the seller agreed to do so, however the content of the offers must remain confidential;
• attempt to have all offers presented to the seller in the same time frame. The seller can delay the presentation by providing written consent; and
• advise the seller of their options, such as:
• accept one offer, reject all others;
• counter one offer and set others aside pending the result;
• reject all offers;
• accept more than one offer with any offers after the first as back-up offers. Any back-up offers must remove the seller’s obligation from the first contract when moving on to the next through a condition included in the counter offer, such as “seller’s acceptance of this back-up offer is subject to the seller ceasing to be obligated in any way by [date] under the previously accepted purchase contract. This condition is for the sole benefit of the seller.”

Representing Buyers

The buyer’s agent has a duty to disclose competing offers and any terms that are known to them, but ultimately buyers might not be made aware of competing offer situations; that decision rests with the seller. If the seller does disclose that the buyer is in a competing offer situation, the buyer’s agent should:

• immediately inform the buyer;
• advise the buyer of the seller’s options;
• ask to personally attend the offer presentations; and
• advise the buyer of their options, such as:
• increase the offer prior to presentation;
• leave the offer as it is;
• withdraw the offer; or
• reconsider the fixtures, chattels, terms and conditions of the offer prior to presentation and have these changes reflected in writing.

Tips for Buyers

Once the buyer is made aware that they are in a competing offer situation, they may want to increase the offer price and/or reconsider a term or condition in effort to compel the seller. Financing and inspections are both examples of conditions that buyers could remove in effort to improve their offer. Doing so however, increases the level of risk for the buyer.

Price:

What can the buyer realistically offer on the property? Is the property appropriately valued? Buyers should understand the long-term risks of increasing their offer price and what impact it could have on their financials. Further, buyers should understand that increasing their purchase price above the asking price does not guarantee that their offer will be successful.

Property Inspection:

Buyers may be tempted to remove the inspection condition in an effort to present a more appealing offer to the seller, but there could be major risks involved in doing so. Property defects and major repairs are an expensive reality in many older buildings and foregoing the inspection will prevent the buyer from having a clear understanding of the current state of the property. Buyers are recommended to use extreme caution when deciding to remove an inspection clause for this purpose.

Financing Pre-approval:

If you don’t know exactly what you can afford, you may be looking out of your price range and wasting your time. You may also be looking below what you would have qualified for and not getting the right investment property for you.

If you start off by getting a pre-approval on the other hand, you can sort by price, identify the right neighbourhoods, and find your desired property much faster.

Offer & Acceptance:

There is no contract until all parties agree to its written terms, sign their names to express that agreement and communicate acceptance to the offering party. Until then, you have nothing more than a stack of offers – not a stack of contracts – any one of which could appeal to your seller-client. Do not advise a buyer or a buyer’s agent that the seller has accepted the buyer’s offer until the seller has signed the offer. A seller who orally expressed a willingness to accept an offer has not yet accepted the offer and has no legal obligation to do so. Thus, no contract has been formed.

The Back-up Offer:

When one offer is accepted, your client may be willing to negotiate another as a “back-up”. Of course, this would require agreement by the second buyer and would require special language indicating that the back-up contract has no legal standing unless and until the primary contract is terminated.

Only One Winner:

Unfortunately, in the case of multiple offers for one property, there will be those that lose. Someone will walk away disappointed for not having been able to buy their ideal property, but if everything is handled in an equitable manner, the seller should NOT be the losing party, but should walk away with a deal that is in their best interest.

The Covid-19 pandemic has had a tremendous impact on the commercial real estate industry.  Central Business Districts throughout Atlantic Canada (and beyond) have experienced the greatest impact as the market shifts away from traditional brick-and-mortar office space.  Many large employers anchoring multi-story office buildings have transitioned to a remote workforce to satisfy public health guidelines, while also providing their staff with more flexible working arrangements.  Vibrant, bustling downtowns are now a shell of what they once were – your morning pitstop is now closing its doors and is shadowed by dark buildings and empty parking garages, while office towers are being considered for possible sale, renovation, or conversion to multi-residential purposes. 

With a reduction in office occupancy, downtown districts have experienced a significant decrease in traffic.  During December 2020 our in-house regional market survey found that the majority of urban centers throughout the Maritime provinces have experienced increasing vacancy rates.  Halifax was the only market to see a slight decrease in the rate (of 1.39 percentage points). Downtown St. John’s on the other hand recorded the largest vacancy rate at a whopping 37.46%, substantially higher than that of the greater St. John’s area as a whole, and up 10.93 percentage points (PP) from the prior year. Moncton office vacancy rates increased 8.56(PP) from the prior year while Saint John and Fredericton followed with growth rates of 4.07(PP) and 3.83(PP) respectively.   

On a macro level, Statistics Canada report that the number of firms with 10% or more of their workforce working remotely doubled between February and May 2020. This trend may not be over any time soon, as one in five companies reportedly expect 10% or more of their staff to continue working from home post-pandemic. Canada did experience a decrease in remote working after the first wave of COVID-19, however since October 2020 remote working has increased and in December was sitting at 28.6% according to Statistics Canada.

Although the pandemic has brought a lot of doom and gloom, it has also created new opportunities and broadened perspectives. Our Lasercad^® team have had the pleasure of helping our clients pivot and re-focus; assisting them in mapping out socially distanced office layouts in order to “future-proof” spaces, while also promoting continued in-person workflow amongst staff. We have provided landlords and building owners with accurate measurements and floor layouts to aid in managing and renovating their properties.

The long-term effects of the pandemic on local commercial real estate remain to be seen, however preparing yourself and your property for various outcomes is a great start. Having an electronic CAD inventory of your space allows the flexibility to run a variety of scenarios and can be a helpful tool while working with tenants, contractors and buyers. If you would like to hear more about our recent projects please don’t hesitate to reach out. Our Lasercad^® team would be happy to discuss your concerns and requirements as you try to navigate these uncertain times. 

Mark Smith is a consultant in our Valuation Division and is heavily involved in many of our Lasercad® projects. For more information about our range of Lasercad® services, feel free to contact Mark at (902) 429-1811 or msmith2@turnerdrake.com.

Expropriation is the forceable taking of property by an acquiring authority for a public project, such as a road, transmission line, pipeline etc. In the vast majority of cases, only a small portion of a property is taken, and sometimes only a partial interest is required.  Pipelines, for example, only require a sub-surface easement interest, allowing the owner to continue using the surface for anything that doesn’t interfere with the operation and maintenance of the pipeline itself.  Transmission lines are happy to share, requiring only an easement interest for the towers and the overhead lines.  Regardless of whether the interest is full (fee simple) or partial (easement), the acquiring authority pays compensation for the value of the interest taken, the boundaries of which are defined by a survey plan and a legal description, properly recorded at the Land Registry.

In some instances, however, an acquiring authority may exert control beyond the boundaries of what it has legally acquired.  In Nova Scotia, new highways are usually designated as controlled access highways under the Public Highways Act, imposing potential new restrictions on building setbacks.  A permit from the Minister is required for the construction of buildings and structures within 60 metres (197 ft.) of the limit of a designated controlled access highway or within 100 metres (328 ft.) of its centre line.  That is probably far more restrictive than the local By-Laws require, potentially sterilizing a fair chunk of land alongside the new highway unless Ministerial approval is granted.  In rural areas it probably doesn’t matter, but in urban areas it might, especially if there is a potential for development.  The Public Highways Act does allow compensation for so-called injurious affection resulting from a controlled access highway designation … but not for new highways.  So, any compensation in respect of new setbacks alongside new highways must presumably be claimed via the Expropriation Act, even though the restrictions are authorised under a different act.

Pipeline easements come with similar strings attached.  Oil and gas pipelines are regulated under the National Energy Board Act (which strictly speaking grants orders for rights of entry rather than expropriations).  The Act imposes an automatic 30 metre (98 ft.) Prescribed Area – or safety zone – on either side of the pipeline, within which so-called ground disturbances and construction activities are restricted. Some activities are totally prohibited and others require the pipeline company’s permission.  So, whilst the pipeline company only acquires the easement within which its pipeline sits, it casts a 30 metre shadow on either side.  Compensation for restrictions within the 30 metre safety zone is often challenged but has been awarded and upheld by the Federal Court in valid circumstances.  Again, in rural areas it might have little impact, but in urban areas it most likely will, especially if it interferes with development plans.

Well, last year certainly was one for the history books. Of all the issues amplified by the pandemic in 2020, housing and its affordability has been among the most universal, and the most important. Tight vacancy and escalating rents, construction cost and process challenges, plummeting interest rates and a dearth of listings, CERB and eviction bans, renovictions and rent control, escalating homelessness and guerilla shelters. The jury is still far out on 2021, of course, but the challenges and conversations around housing show no signs of a speedy resolution.

I’ve been trying and failing for some time to write about housing; what’s been happening in our region, and how those trends have been affected by the ongoing pandemic. Part of my challenge has been simply keeping up to date – these days you can’t go more than a week or so without getting hit with some new and relevant information. Another part of my challenge has been the complexity of the issue. Housing is the bottom line that many personal, economic, and policy issues fall down to; it is difficult to understand one major facet of the issue without an appreciation for the others.

Originally my goal for this piece was to do a punchy listicle with a couple interesting data points. In my naivete, I established a working title of “3 Charts to Explain Housing”. However, I’ve found it impossible to weave together anything worth saying using so few threads. So, with apologies to our ever-patient marketing staff and any of you who were wishing for a light read, I give you: Seven Facets of Our Housing Situation Explained (with eight charts).  

POPULATION GROWTH

While the COVID-exodus to Atlantic Canada from elsewhere in the country has received much media attention over the past few months, it is really a sideshow. Despite the interesting anecdotes about sight-unseen sales in (formerly) sleepy markets, or Realtors® conducting showings via Zoom, overall interprovincial migration is not significantly different in 2020. We have longer term and more fundamental growth drivers affecting our region. Many of these have been a significant source of housing demand over recent years, but in some cases, have waned under pandemic conditions:

Oil Patch Kaput

During the tar sands heyday from late 2004 to late 2015 out-migration from Nova Scotia to Alberta averaged about 1,250 people every quarter. That’s one Antigonish per year. For eleven years straight. These days, with oil trading at half its price, the exodus has collapsed by a similar proportion while in-migration from Alberta has remained comparatively steady. The result: in the 62 quarters from Q1 2000 to Q2 2015, net migration from Alberta to Nova Scotia was positive only 3 times. In the 21 quarters since (no data yet for Q4 2020), it’s only been negative once. A penny saved is a penny earned.

Real Estate Refugees

Yes, there is certainly a notable inflow of population and home-buying capital from other Canadian regions that have experienced stronger price appreciation, and worse pandemic performance. The work-from-home narrative dominates the conversation on this, but it is not the whole story. This is a combined house price arbitrage play with the beginnings of a structural trend, principally from Ontario and British Columbia, driven by population aging as households execute longer-standing plans to retire Down East. It has been going on for several years, with 2017 being a breakout after Toronto and Vancouver posted eyewatering year-over-year house price increases. The after-spring bump in 2020 from ON and BC is only about 10% higher than the same period last year.

Increasing Immigration

The immigration story was really kicked off in 2016 with the much-publicized landings of Syrian Refugees however other streams for entry really took things from there. Nova Scotia went from welcoming about 610 international immigrants per year (2005-2015 average), to more than 1,390 per year since. Numbers have waned in 2020, obviously, but the Federal Government was early to state that immigration, and increased immigration at that, is a core element of its post-pandemic economic recovery plans. We therefore expect this trend to pick right back up as vaccination is rolled out globally.

Student Bodies

Efforts to recruit international students (and their sizable tuition fees) have been front and centre for post-secondary institutions for some time. However, the Trump presidency apparently supercharged things as a significant number of prospective students have diverted to other western countries who didn’t follow the same nationalistic and isolationist path. This is such an interesting twist of fate that it deserved its own chart:

(Note: Household growth is derived by applying occupancy rates to population growth estimates from Statscan. Occupancy rates are interpolated/extrapolated from census figures, and are approximately 2.3 people/household for recent years. This approach likely underestimates the number of households added as the demographics of new arrivers lean towards smaller households than the general population.)

Among the fun things to look forward to at this time of year is PNC’s annual (37 years now!) Christmas Price Index, in which they calculate the prices of the twelve gifts from the classic song, “The Twelve Days of Christmas”.  The highest increase year-over-year was for the two turtledoves, up 50% to $450, which contrast to a few of the other avian gifts: swans, calling birds, and a partridge will cost you the same this year as last…as will minimum wage milk maids.  This year’s index accounts for cancellations of many live performances: the unavailability of dancing ladies, leaping lords, pipers, and drummers means that the total cost of these gifts is down over last year.  How far down, though, is a matter of measurement.  If you were to buy just one of each of the gifts – one goose, one ring, one French hen, etc. – you’d pay 58.5% less than last year, for a grand total of $16,168.14 (USD).  But you can also measure by the full cost of all the gifts –   both the turtle doves, all the geese, none of the performers – to arrive at grand total for 2020 of $105,561.80, down just 38% since 2019.  Or, and I’m assuming this is based on the one-of-each option, PNC also provides a “core” index, which excludes the Swans-a-Swimming, the price of which is apparently the most volatile.  The core index for 2020 costs $3,043.14, down 88.2% from 2019. 

So, the same index has three different year-over-year price changes.  That provides a perfect segue into a discussion of the critical thought, and careful consideration required before relying on Price Indices for decision making, planning, and policy purposes…there are many available from which to choose, including the overall, oft quoted, Consumer Price Index (CPI).  This is not to say that price indices are not a valuable tool – just that care needs to be exercised in choosing and using them.

Twice a year, we undertake a comprehensive market survey of rental office and warehouse space; the summary results include average net rental rates, realty taxes and operating expenses, and gross rental rates.  As part of our analysis, we look at the relationship between the All-Items CPI and the total for realty taxes and operating costs (RTCAM), over a five-year period.  The CPI is a measure of the cost of a certain “basket of goods”, and as such generally measures the rate of inflation – which is expected to be reflected in the costs to operate a building.  The fact that the cost to operate a building includes a different basket of goods than that required to run a household – more cleaning and heating, fewer sneakers, school supplies, and food items – makes it unsurprising that, while these two measures usually move generally in concert, there can be significant variation.  This year, where costs have shifted up and down across various sectors, particularly highlights the challenge of relying on the CPI as a surrogate for other baskets of good: the five-year ratio between CPI and RTCAM, describing how the RTCAM moved for each 1 percentage point change in the CPI, varied from a 1.14 percentage point decrease in office RTCAM in Saint John NB, to a 1.01 percentage point increase in Fredericton, with Moncton, St. John’s NL, and Halifax falling at varying points along that range.  December’s survey includes both office and warehouse space in Halifax, and there is a differential between the ratio of CPI to RTCAM for the two sectors, with office RTCAM coming in at 0.59 to 1 percentage point change in CPI, and warehouses coming in at a ratio of 1.2 to 1. 

PNC says about their index:

The PNC Christmas Price Index® is an annual tradition which shows the current cost for one set of each of the gifts given in the song "The Twelve Days of Christmas."

It is similar to the U.S. Consumer Price Index, which measures the changing prices of goods and services like housing, food, clothing, transportation and more that reflect the spending habits of the average American.

The goods and services in the PNC Christmas Price Index® are far more whimsical, of course. And most years, the price changes closely mirror those in the U.S. Consumer Price Index. This year, the approach to PNC’s CPI takes into account the sociopolitical environment brought on by the pandemic by using the Index to provide an analysis of current market conditions, while including the impacts of COVID-19 as highlighted by the data. 

It’s a fun way to measure consumer spending and trends in the economy. So, even if Pipers Piping or Geese-a-Laying didn’t make your gift list this year, you can still learn a lot by checking out why their prices have increased or decreased over the years.

It’s definitely worth checking out.  And if you’re interested, we publish the summary results of our market surveys on our website and through email distribution.  Watch for them in the New Year – or contact us to subscribe.  Wishing you and yours all the best for the holidays, from all of us at Turner Drake & Partners Ltd.  

Alex Baird Allen is the Manager of Turner Drake's Economic Intelligence Unit. If you'd like more information on market research or our semi-annual Market Survey, you can reach Alex at 902-429-1811 Ext.323 (HRM), 1-800-567-3033 (toll free), or email ABairdAllen@turnerdrake.com 

Residential fires are soaring, causing millions of dollars in damages, and claiming the lives of many. While this headline may sound shocking, this has become a catastrophic reality for many apartment owners across Canada and worldwide. It’s quite clear how the ongoing pandemic has changed our daily lives in a socio-physical sense - most notably the way in which we interact with others, and how we navigate the shopping malls and hallways in our apartment or condo buildings. What many have not considered however, is the increased risk of fire-related emergencies resulting from higher daytime occupancy levels in multi-unit residential buildings.

National Fire Prevention Week runs from October 4th to 10th. This might not be something you typically note in your calendar, however, if you are an apartment owner or manager, you should! If you have yet to equip your building and tenants with clear evacuation plans, or reviewed your latest fire-insurance policy, these items should be top of mind.

It goes without saying that the COVID-19 pandemic has directly and abruptly affected both short-term cash flow and long-term economic prospects for real estate owners in the Atlantic region. Commercial and investment property has been particularly hard-hit, with hospitality and retail property profoundly (and in many cases, irreversibly) impacted. 

Not surprisingly, my colleagues and I field multiple inquires a week respecting the potential for property tax relief.  Unfortunately, we find ourselves delivering the unwelcome news that there’s very little immediate aid available; in some cases, not for years to come. A little background will help to explain why this is so.

Property taxes are the product of a property’s assessed value (a point in time estimate of market value which is calculated as of a legislated date: in assessment parlance, the “base date”), and the applicable tax rate.  In most Atlantic Canadian jurisdictions, assessment and taxation are separate functions.  Assessed values are calculated by assessing authorities (the Property Valuation Services Corporation in NS; Service New Brunswick in NB; the Department of Finance in PEI; the Municipal Assessment Agency and the City of St. John’s in NL); mil rates are set (and taxes collected) by the municipalities.

In providing relief, Atlantic Canada’s assessing authorities and its municipalities are stymied by legislative authority that varies from jurisdiction to jurisdiction.  The ability for the pandemic to be reflected in assessed values (which, in all four provinces, are to market value) depends to large degree on the base date:

On the taxation side, we have prepared a reference guide detailing the myriad of programs available in various Atlantic Canadian cities, towns and municipalities[1].  It is available on our websites at https://www.turnerdrake.net and https://www.turnerdrake.com/products/propertytax.asp. The vast majority have been limited to extension of tax deadlines and reductions in interest rates applied to arrears.

There is little that can be done with respect to the tax rate applied to your property[1]; your tax management strategy should therefore focus on your assessed value.  What will be the impact of the pandemic on values?  In my opinion, few property types will escape unscathed, and for many, recovery will be protracted. While I don’t have a crystal ball, we do have a rear view: experience in the aftermath of historic cataclysmic events- e.g. the recessions of the early 1990s and 2007-2009; 911; and SARS, for example- will all provide guidance in establishing the penalties on the value of ICI real estate.

Property taxes can be an enigma under conventional circumstances. COVID-19 has created a property tax quagmire. My colleagues and I would be happy to provide advice on a property-specific basis.

Have you ever gazed over a decrepit old building, or vacant parcel of land, thinking to yourself “This would be the perfect place for…”

Taking this vision and transforming it into reality is the premise behind an as-if-complete valuation. This form of valuation provides a current or prospective (future) value opinion of a development prior to it being constructed. In addition to undeveloped properties, real estate owners and developers can also utilise this form of valuation to determine the contributory value of renovations to an existing property.  

Owners and developers typically require this form of valuation as an input for mortgage financing and proceed in one of two ways: The property can be valued as though it were complete as of the effective date of the report or alternatively; it can be valued as at an assumed date of completion. Regardless the path, the values presented rely heavily on the standard described in the report, and the proposed timeframe of the development.

Working together with architects, engineers, lenders, designers and planners is an integral part of orchestrating the materials required for this form of valuation. Building plans and renderings paint the backdrop while finish schedules, cost estimates and operating projections provide focus to the finer economic details required for these projects. 

Financing details are based on the lender’s relationship with the developer together with their experience completing similar developments, financial position, cost of the project and overall loan-to-value ratio. Once the as-if-complete value of the property is determined the bank will typically schedule formal draws for the various milestones of the development. For example; the first milestone may cover the cost of excavation and site work, foundations, framing and roofing. This is where experience, organisation and timing are key to the financial and fiscal success of the project.

Often developers run into issues during initial milestones, where projected budgets are exceeded and the initial draw does not cover the costs allocated to such milestones. This can occur as a result of unforeseen circumstances, an unexperienced contractor or builder, fluctuating material costs etc.  If the developer does not have access to an outside source of funds to complete this work and proceed to the next milestone, lenders will sometimes issue a “swing-line” or short-term, interest-only line of credit to see them through to the completion of the milestone at hand. Progressing through the first and second milestones of a project are often the most difficult as they can be the most capital intensive. Paying close attention to cash flows and budget are paramount to ensuring the financing terms are met and the project is completed as scheduled.

While construction pushes forward and developers achieve various milestones, it is typically the responsibility of the valuation consultant to confirm the work completed falls in-line with the details described in the report. Various meetings and site visits are completed throughout the project, and progress reports filed to the lender as per the scheduled incremental milestones leading up to, and including, the completion of the project.

New developments and renovations are susceptible to a number of different variables that could easily alter a project cost or timeline. Such variables can heighten the risk of a project; therefore, including proper contingencies and mapping out the development in fine detail will aid in minimising risk and provide additional comfort to lenders considering your project. 

The ongoing pandemic has had a tremendous effect on the world and although primarily negative in nature, many clients have taken this additional time to dream big and “put the wheels in motion.” Formerly neglected ideas are re-surfacing and with the help of this form of valuation we are playing a key role in bringing these ideas to fruition. 

Patrick Mitchell is a consultant in our Valuation Division and has extensive experience in the valuation of projects that are in early stages of development, or have yet to break ground. Patrick’s passion for design and architecture has strengthened his relationships with local architects, builders and developers. For more information about our range of Valuation® services, or more details concerning as-if-complete valuations, feel free to contact Patrick at (902) 429-1811 or pmitchell@turnerdrake.com

In truth, very few people get the chance to suffer the trauma of an expropriation.  You have to be in the wrong place at the right time. But if and when your opportunity does come, your best hope is to emerge financially “whole”, albeit a little battle scarred, confident that the lawmakers have your back through their expropriation legislation.

Expropriation legislation has its roots in the Dickensian days of the English railway boom of the 19^th century, a time of rapid industrialization that needed legislative “devices” to hurry things along. Reforms followed until eventually the individual was adequately protected against the state. In Canada, legislative reform came along in much more modern times, but by the 1970’s most provinces had a pretty decent code of expropriation compensation in place.  And Nova Scotia was among the best of the best.  Its 1973 Expropriation Act fully embraced the commendable philosophy that because expropriated owners were being deprived of their property against their will, they should not be treated as typical litigants. Instead they were entitled to be satisfied – at the authority’s expense – that they were indeed being treated fairly. The playing field was level: all was good.

Alas, things have changed since then. Numerous subtle and not-so-subtle changes have been introduced over the past 25 years that have tilted the playing field.  And always in the same direction. Perhaps the biggest changes, in the Nova Scotia Expropriation Act at least, have been with regard to the expropriating authority’s legal obligation to reimburse a claimant’s fees. The original safety net was contained, in plain and simple language, in section 35 of the original Nova Scotia Expropriation Act.  It entitled an expropriated land owner to be reimbursed for “the cost of one appraisal and the legal and other costs reasonably incurred…in asserting a claim for compensation”. Checks and balances protected the public purse from frivolous abuse, but the basic intent was that, win, lose or draw, an owner – rich or poor - was entitled to be heard at the authority’s expense. 

The first change came in 1996. Section 35 was abruptly repealed and in its place stood a re-enacted section 52. Things became considerably more dicey for the property owner with respect to the reimbursement of costs, which were now only assured if the owner proceeded to a hearing and won outright.  The owner was now in much the same position, for cost purposes, as a typical litigant who chooses to engage in combat.  Of course, there is nothing preventing an amicable settlement without resorting to a hearing – and the vast majority of expropriations are settled that way – but the safety net of section 35 was removed.

2019 saw more changes when the Nova Scotia government introduced a Tariff of Costs to control the amount of appraisal, legal and other experts’ costs that an expropriating authority must legally reimburse. Henceforth the amounts that combative property owners can recover are prescribed by law.  With respect to appraisal fees, the allowable amounts depend on the complexity of the case (measured against a rather loosely defined benchmark called “ordinary difficulty”).  In some cases the Tariff will be sufficient. In other cases it will fall short.  The same with the reimbursement of legal fees.  Claimants may very well have to reach into their own pockets to pursue their case from now on, as would a typical litigant. If you think that sounds a tad unfair, you are right.  After all, no one chooses to be expropriated. And from my experience it is always more time consuming, and therefore more costly, to represent a claimant than it is to represent an expropriating authority. For property owners, this is a once-in-a-lifetime event.  The rules have to be explained; facts sorted from fiction; expectations managed. Expropriating authorities, on the other hand, can draw on their in-house resources and often have a wealth of experience.  The conversations are different.

And it’s not just the issue of cost reimbursement that has been tilted. Another amendment in 1996 denied compensation for loss of access along provincial highways when alternative access is being provided by new service or access roads. An odd, and as far as we know unique, twist to the Nova Scotia compensation code. More recently, a 2019 amendment introduced a new definition of Disturbance to the Nova Scotia Expropriation Act, a particular head of claim that arises when a claimant has to relocate.  The old words had withstood the test of time, undefined but “undisturbed” for a generation. In Nova Scotia it is now very narrowly – and again, as far as we know, uniquely - defined and will inevitably defeat claims that have previously been upheld.  Indeed that’s the whole point.

Changes to the Expropriation Act in Nova Scotia have usually been introduced as knee jerk reactions following adverse decisions by the courts, introduced as helpful “clarifications” to help them get it right next time. Challenging an expropriation and pursuing a claim through the courts has never been for the faint-hearted.  But these days you might need a war chest with no guarantee that you will emerge financially “whole”. 

Lee Weatherby is the Vice President of our Counselling Division. If you'd like more information about our counselling services, feel free to contact Lee at (902) 429-1811 or lweatherby@turnerdrake.com

COVID-19, despite months of rumblings that it might be on its way, arrived rather abruptly on our doorstep.  Collectively, we shifted from theoretical preparations “in case” and “if” the virus impacted us directly, to many people working from home, a transition that happened within days in some cases.  Ready or not, here it came. 

Now, just (“just”!) a couple of months later, the next transition is upon us, as the economy reopens and we figure out, industry by industry and company by company, what the new normal will look like.  It’s a question on the minds of many, and one my department has spent a fair bit of energy contemplating from our makeshift at-home workstations (check out this CBC article for a peek at mine…kids and various home schooling accoutrements banished for the deception of professional appearances).  The short answer is that it is too soon to tell, though there are rumours and rumblings that work-from-home will continue for some people and/or companies (demand for that may come from either end of the equation).

The longer answer is that major recessions usually result in a sea change in how office space is utilised.  After the 1990 recession, which coincided to a certain degree with the advent of cell phones and the internet, there was a rise in “telecommuting”, some people working from home, and “hot desking” where different people used the same desk at different times of the day.  Cubicles rose in prominence over individual offices (as evidenced by every 90s movie that takes place in an office).  Post-2008 recession, the movement was to open concept offices, with bullpen style areas where everyone has a laptop and a cell phone and shares common space and/or works from home part of the time.  Each of these shifts, from individual offices to cubicles to bullpens, equates to fewer square feet of office space per employee…which in turn equates to lower costs for companies, for whom office space is often the single largest expense after HR. 

The logical next step in the continuum is an increase in employees working from home, with an overall reduction in the amount of office space leased.  This could be driven by employees who find they like shedding their commute and are productive at home (and expect to be more so when schools and daycares reopen).  It could also be mandated by employers who find that cutting workplace expenses - from rents to coffee supplies - can come without significant detriment to their business model. 

There are some companies for whom this is a viable option, but for others, it is not practical.  Will confidential meetings between lawyers and clients take place in lawyers’ basement playrooms, or out in public at coffee shops?  Unlikely.  Further, many industries rely on the sharing of ideas to innovate and problem solve.  The benefit of casual conversations and impromptu collaborative meetings is worth the expense of working together in one location.  So there will remain demand for professional office space from certain sectors for a variety of sound reasons.   

Worth noting, too, is the consideration that the pre-COVID bullpen office set up has significant drawbacks until (unless) a vaccine becomes available: shared space is not practical from a public health perspective, and may redirect those who can’t realistically work from home long term, to shift back to individual offices that ameliorate physical distancing.  That is: more square feet of space per employee.    

And then the final elephant in the room is the total elimination of demand for office space from companies which do not survive the economic fallout of the pandemic.  It is too soon to measure how extensive this will be, but there certainly will be casualties of a recession that may well be deep and prolonged. 

So, coming full circle to the short answer: even with lots of companies opting to return to offices, a decline in overall demand for office space is certainly expected, probably over the next couple of years.  Because leases are typically signed on 3-5 year terms (or longer), a “shadow” vacancy of leased-but-vacant space could surface first (i.e. space for sublease), though if the original lessees can’t pay, the space is effectively just vacant regardless of any contractual debt on it (distinguished from, for example, a healthy company who chooses to move to a new office building when they still have a year left on their lease).  With increasing vacancy, landlords will opt first for rental incentives to entice tenants to their space, and there will be downward pressure on net rental rates.  Our June Market Survey is underway now…stay tuned in the coming months for the early indicators of impacts on the market.  

No one wants to own a “dirty” property; it is important to both Buyer and Seller that they understand how a sale can be impacted by the discovery of contamination. From the Seller’s standpoint, they may need to remediate the property prior to selling. Remediation is costly and time consuming – it can take a year or longer to test the soil and groundwater, adequately address the contamination, and ensure that the site is fully remediated. The Seller will incur carrying costs, such as property taxes, during the remediation.

There will be other problems too, in addition to the time delay. The Buyer’s lender will rarely finance a dirty property and will almost always require a Phase 1 environmental assessment to confirm that it is not contaminated. In most cases it will be the Buyer who commissions the Phase 1 report. This consists of historical research of site… do past uses point to possible contamination from chemicals or hydrocarbons?...  was the property previously used to house a gas station?... were manufacturing or service uses such as dry cleaning, sand blasting (lead paint), etc. conducted on the property?... The term “mad as a hatter” originates in the fact that hat manufacturing utilised mercury as part of the process, with unfortunate consequences for the participants. The Phase 1 audit will also investigate existing and surrounding property uses that may have contaminated the site; for example a bus depot whose leaking underground storage tanks have resulted in contamination of the ground water and its concomitant migration into surrounding “downstream” properties. It will also consider the building materials used on site…. are the plaster, or ceiling tiles, likely to contain asbestos; the fluorescent lights, PCBs; the paint, lead; what other horrors lurk in the building structure? If anything suspicious comes out of this research, the Phase 1 report will recommend a more invasive Phase 2 investigation requiring drilling or removal of building material for laboratory investigation.

A Phase 1 report can cost anywhere between $1,200 and $3,000 for most small to medium sized properties. Since a Phase 2 environmental assessment comprises soil and ground water testing, more intrusive testing and the use of heavy equipment, this study can easily cost over $20,000. Should the Phase 2 study identify contaminants, the level of contamination and the intended use of the property by the Buyer, will determine the degree of remediation required. If contaminants exceed the maximum allowable level, the Department of Environment has to be notified and they will issue an order to remediate the property within a specified timeline.

Remediation can be time consuming. Once the contaminated soil has been removed from the property, an environmental consultant will set up “test events” whereby the soil will be re-tested to confirm that the remediated property falls within the specified guidelines. These test events usually occur once every three months over a year long time period. However, if the groundwater below the property is not static, the test events may register that it is “clean” during one test and then show contamination at the next test event, as the groundwater migrates back and forth.  

The intended use of property also determines the overall impact of the contamination and the level of required remediation. For example, a former gas station site  to be sold for apartment development requires a higher level of remediation than a site to be utilised for industrial purposes…. properties intended for residential use are held to a higher environmental standard than properties to be occupied for commercial uses. 

Since the Seller is in the chain of title they may be held liable for contamination after the property has been sold… even though they may not be the source of the contamination! This is why mortgagees, such as banks, will rarely foreclose contaminated property… and why governments would be wise to avoid expropriating pulp mills (Government of Newfoundland take note!). It is therefore to the Seller’s advantage to establish the present extent of contamination (if any) to safeguard themselves for the future. If a property is sold and is subsequently discovered to be contaminated, the Seller will need to establish that it was “clean” when they sold it, otherwise they could be held liable for the contamination even if they did not cause it.

A Buyer is similarly advised: If they purchase a property without undertaking the proper environmental assessment to confirm that the property is “clean”, they are at risk; they could be held liable for the contamination, even though they did not cause it, and be ordered to remediate the site at significant cost. Unless the Buyer is a risk seeker they should invest in hiring an environmental consultant as part of their overall property purchase due diligence.

The moral of this story? Don’t be penny wise and pound foolish! It matters not whether you are a Buyer or Seller: a few thousand dollars spent on an environmental audit can save you hundreds of thousands in potential remediation costs. 

Ashley Urquhart is the Senior Manager of our Brokerage Division.  She has a vast network of contacts and would be happy to assist you with all your leasing needs. If you would like more information, please feel free to contact Ashley at (902) 429-1811 or aurquhart@turnerdrake.com.

As summer edges near, warm days pull our minds and hearts outdoors - reminding us of the natural areas that make Nova Scotia a beautiful place to live.  From the maple-dappled shores of the St. Marys River to the sweeping rocky coastlines of Yarmouth’s Tusket Islands Nova Scotia has an abundance of natural beauty spanning countless ecosystems.  These natural spaces from a web of protected and semi-protected landscapes across the province ranging from provincial nature reserves to prime agricultural lands protected in perpetuity from development beyond a plough’s furrow.

Canada’s legal concept of ‘owning’ land, though heavily based in a euro-centric view culturally, does provide tools to assist in the protection of our natural environment.  Most of the time when someone purchases a property what they are actually paying for is a registered legal interest in the property which allows them to use it unencumbered by others (the “Fee Simple” Interest). However, there are many ways to split up this interest and each comes with a value reflecting what the interest holder can and cannot do on the property.  For example, by placing a restrictive covenant on lands, or placing ownership with a land trust, it is possible to prevent the spoilage of natural places.

Valuing a partial interest in land is a critical step in protecting wild areas through the use of Land Trusts, which are not-for-profit organisations dedicated to the protection and stewardship of special places including rare species habitat, areas of historic cultural significance, and precious agricultural land.  Sometimes these Land Trusts acquire property outright through donation or purchase, and other times an interest is granted to the Land Trust as a Conservation Easement which details what is – and is not – permissible activity on the land.  In this way, these Land Trusts have steadily grown a network of protected places over the course of many decades.

For many landowners, the decision to donate land is driven by a love of nature or a desire for a lasting legacy.  As an added incentive there can be tax breaks associated with these ecological gifts – the value of which must be determined by a professional appraiser.  In this way Turner Drake has played a quiet (but important) role in the protection of an abundance of properties which ultimately contribute to Nova Scotia’s roster of important wild places.  We are fortunate that through this process, we have walked across places few Nova Scotians have seen or heard of, but which nonetheless provide safe haven for many plants and animals.

The season for outdoor exploration is here and given current restrictions in urban-based gatherings Nova Scotians have a unique opportunity to explore their surroundings and connect with their natural environment in a meaningful way.

Just how important is proper fire safety planning?  In addition to potential loss of life and property damage, lack of proper Fire Safety Plans can land you with a hefty fine…or even potential jail time!

Section 2.8 of the National Fire Code of Canada states that any building required by the National Building Code to have a fire alarm must also have an approved Fire Safety Plan. Halifax Regional Municipality By-law F100 also states that, “Every person who contravenes or fails to comply with these regulations or fails to carry out an order made under these regulations, is guilty of an offence and is liable on summary conviction, to a fine of not more than $5000, or in default of payment of the fine, to imprisonment for a term not exceeding six months”.

Concerned? Turner Drake’s Lasercad® Division can prepare two types of Fire Plans to help manage your properties’ fire safety concerns: Fire Emergency Plans and Fire Exit Plans.

Pictured below are examples of both types of plans prepared for a local client. Fire Emergency Plans provide a detailed layout of each floor in a building, showing the location of all demising walls, doors, windows, plumbing fixtures, etc. In addition to providing a detailed layout of the space, Fire Emergency Plans indicate the precise location of all implements relevant to fire safety. The lower ground floor of a Halifax Heritage Building pictured below illustrates the exact location of all fire safety devices on the floor, such as Fire Extinguishers, Smoke Detectors, Exit Signs, Pull Stations, etc.

Fire Exit Plans are prepared to show the general layout of a floor’s common area accessible to the general public, and indicate key features necessary to ensure a safe evacuation in the event of a fire. Pictured below is a Fire Exit plan prepared for the ground floor of the same building.  The plan clearly indicates the location of the Fire Exit Plan, marked “You Are Here”.  Additionally, it shows readers the location of all Pull Stations in the event these must be activated to trigger the building’s fire alarm. Most importantly, Fire Exit Plans guide readers to safety via proper evacuation routes while also highlighting all emergency exits, and applicable Muster Points for the assembly of building occupants at a safe distance from the building.

If your building exceeds 3 storeys and does not currently have Fire Emergency or Fire Exit Plans please give us a call. Our Lasercad® team would be happy to discuss how we can help improve your building’s Fire Safety while also answering any questions you may have regarding local safety requirements.

As a child I imagined what it would be like to score a goal for the home team in a sold out stadium.  The deafening sound of tens of thousands of fans celebrating my efforts was amazing.  I still have a passion for sport, but by day, my passion is property tax so I read with interest some recent reports on how a handful of pro sports franchises significantly reduced their property tax bills.  The Montreal Canadians, San Francisco 49ers and Carolina Panthers had their property tax bills slashed by 40%, 50% and 56% respectively.  Chances are your business doesn’t occupy a stadium, but there are tax lessons to be learned for any businesses that owns or occupies a Special Purpose Property.      

Special Purpose Properties are properties that are designed in a way that makes them good for a single use.  Some uses (like hotels) appeal to a broad array of investors, but others appeal to a very limited market making them difficult to value.  Stadiums obviously fall in this category but so do churches, schools, power plants, hospitals, and most purpose built manufacturing facilities.

The most common method for estimating the tax assessment of a limited market, special purpose property is the cost approach.  You start by estimating how much it would cost to construct the improvements, deduct allowances for all forms of depreciation and then you add the land value.  Simple enough.  So how is it possible that Bank of America Stadium (the home of the Carolina Panthers) can have estimates of its value ranging from $87m to $472m? 

It’s because valuation experts will differ in how they account for “all forms of depreciation”.  Physical depreciation is readily understood, however properties can also suffer from functional and/or external depreciation. Although a stadium, pulp mill, food processing plant, church or hospital may have been meticulously maintained, it may be subject to significant amounts of functional and external depreciation if its configuration is sub-optimal, if it is poorly located, or if the economic prospects for which it was built have deteriorated in some way- all of which are grounds for a reduction in its assessed value.

The Bell Centre in Montreal opened in 1996.  It cost roughly $240m to construct (roughly $485m today).  The land is currently assessed at just over $50m and the total assessment now stands at $167m.  This implies a total depreciation from all causes of approximately 75%. Only a small amount (+/-1/3^rd) of this relates to physical depreciation as stadiums can have very long physical lives.  Anfield, Old Trafford, Fenway Park, and Wrigley Field are all more than 100 years old so the key to accurately estimating the total depreciation in a stadium (or any other special purpose property) is in identifying and quantifying functional and external depreciation. Unfortunately there aren’t any tables an assessor can use to estimate these forms of depreciation.  It requires an understanding of why the property was configured the way it is, how it would be configured were it to be re-built from scratch, and an understanding of the location and economic factors that apply to the use it was designed for.

During my career, consulting on behalf of taxpayers I’ve often heard the argument from assessing authorities “the owner is using it for the purpose in which it was built” and/or “the business is very successful” which leads to the question “how can there be significant functional and/or external depreciation.” In the Panthers case it’s true the stadium was being used for the purpose in which it was built.  It’s true that the business is viable (David Tepper acquired the Panthers including the stadium for $2.2b in 2018) but those are the wrong questions.  The right question is “would the business be worth more if it had the right stadium in the right location?”

The right stadium might have more seats, more private boxes, more places to sell advertising and might cost less to operate.  It might also be built in a location to make commuting easier so more fans buy tickets and spend more on concessions while they are at the game.  The same concepts hold true for any special purpose property.  A church located distant from its parishioners, a school with declining enrolment, a power plant compelled to use high priced coal, and a poorly configured manufacturing plant located too distant from its markets or its raw materials can all suffer from functional and/or economic depreciation.    

2020 property assessment notices are rolling out across Canada (New Brunswick is up next!).  If you own or occupy a special purpose property, make sure you ask the right questions when you decide if it’s time to request a review this year.  

Andre Pouliot is Vice President of our New Brunswick operations and Senior Manager of our Property Tax Division. For more information about our property tax services, feel free to contact Andre at (902) 429-1811 or apouliot@turnerdrake.com

CMHC has just released its annual rental market survey data, and the results are concerning for the Halifax Regional Municipality. After 2018’s record low vacancy, we’ve been eagerly waiting to see whether supply or demand would win the race this past year as both construction and population growth continue their fevered pace. Unfortunately for renters, it looks like demand has again won. With new supply undershooting by 280 units over the year, the overall vacancy rate has now plummeted from 1.6% to a new record low of 1.0% in 2019.

While the challenge of finding an apartment is stressful enough, unfortunately for renters the bad news doesn’t stop there. Vacancy rates are a leading indicator for rental rates, and this year’s results show the first hard evidence that tight market conditions are translating into price increases within the existing rental stock. Once the competition for limited available units heats up, price increases kick in as the market begins rationing too little supply among too much demand. While the statistics of overall average or median rents have been on the rise for a number of years, this has largely been driven by the addition of new, more expensive buildings to the rental pool. Yearly increases in existing buildings were muted, proceeding at around 2% per year even in record-setting 2018. However, thanks to the knock-on effects of that year’s diminutive vacancy rate, same-building rents in 2019 show an increase of 3.8%. This is nearly double the historical average, and the largest single-year increase on record. The 2019 vacancy rate of 1.0% therefore does not bode well for renters in this year to come. Things are going to get worse before they have a chance to get better!

On that note, what is it going to take for things to get better? Despite record-levels of construction in the purpose-built rental sector, the market supply is not growing fast enough to meet demand (hence the reduction in vacancy). Based on average figures for the last 3 years, the period where population growth has driven vacancy below its typical range, the calculations are humbling. HRM would need to increase the supply growth rate by about 13%, delivering an extra 230 units per year, just to stabilise the vacancy rate and keep up with the growth in demand. Of course, holding vacancy at 1% won’t help with prices. In order to return the market to a reasonable 3% vacancy rate, there would have to be a further increase of 23%, another 410 units per year, and this would have to be sustained for the next 3 years in order to get back to balanced market territory.

Multiunit starts were up in 2019, but only by 15%. This is an industry already at record activity levels and it strains to push the pace further. Additionally, provincial level data is suggesting HRM’s population growth may still be accelerating. As a result, odds are that a sufficient increase in the growth of rental supply is not about to materialise in the short term to provide relief.

So what solace can we offer? Well, it’s not much to take to the bank, but we may be seeing the start of demand-side trends that could help blow off some pressure. Much of the population growth pressure is driven by new people arriving in the city from elsewhere in the province, county, and world. Having a few years under their belt now, not-quite-so-recent migrants and non-permanent residents could start to flow out of the rental sector. Having found their feet, these groups may look to transition into the homeownership market as they seek to become more established (or, in the case of international students, simply move away as their studies conclude). Of course, there are also domestic trends to consider as well, and while rental demand growth from downsizing boomers is unlikely to relent, an increasing number of millennials are aging into their prime home buying years.

Often lost in the rental housing conversation is the fact that despite the frenzy of apartment construction, HRM has actually not built very much housing in the last few years overall. Unlike other Canadian cities where a surge of rental construction has come only after owner-occupied markets launched out of financial reach, HRM’s rental supply is the first preference for many. This means rental housing has been voraciously consumed at the same time that homebuilders have struggled to find demand for their available lots. As a result, the explosion of apartment construction has been largely offset by a drop in subdivision development.

Perhaps things are turning around, however. This past year may have heralded disappointment for renters, but it provided encouragement for owners; price action in the resale market showed strength that we haven’t seen since the early 2010s, and with it came an uptick in new construction activity as well. Is this evidence that some of HRM’s recent population growth is starting to flow from the rental sector into ownership?

This would certainly be good news for the homebuilding industry, which has been a shadow of itself for several years. It would also be good news for those still in the rental market, as a revived owner-occupied market would ease pressure on rentals by siphoning off some of the housing demand. Further, reactivating the idle resources in the homebuilding sector is an easier means of increasing the growth rate in total housing supply than hoping for the multiunit sector to conjure up a significant escalation in their maxed out production levels. 

Turner Drake is engaged in Housing Needs Analyses from coast to coast. To see how your community can benefit from the unique expertise of our Planning and Economic Intelligence team, call Vice President Neil Lovitt at (902) 429-1811 or nlovitt@turnerdrake.com.

I recently read an article by the CBC entitled “From sacred to secular: Canada set to lose 9,000 churches, warns national heritage group.”  The article discusses shrinking congregations as member’s age, move away or switch to new spiritual practices.  The article notes that in Eastern New Brunswick alone the Roman Catholic Archdiocese for example predicts that 20 of its 53 parishes will likely close if the congregations can’t find a way to generate more money.  With less money coming in and higher maintenance and operating costs churches face a challenging future.  

This article resonated with me on a professional level and personally as a member of a local church.  In the past few years our firm has been contacted by a number of churches, in particular church committees made up of congregation members.  These committees are assigned the unenvious task of exploring what to do with their beloved church as it faces the challenges of a shrinking congregation.

The common questions asked by committee members to aid in their decision making include:

• Scenario #1: What is the value of the church as it currently operates?
• Scenario #2: What is the value of the underlying land as a redevelopment?
• Scenario #3: What if the church were sold for an adaptive re-use, what would it be worth?

Essentially the committees want to determine the Highest and Best Use of their property, with values determined for each scenario so they can be make an informed decision, and ultimately present it to their congregation. 

Churches serve a number of roles for their community.  Outside of Sunday church services and funerals they are used as polling stations, a place of refuge after disasters, a place for private and not-for-profit groups to meet, a venue for concerts, fundraiser dinners and suppers and a place for performing arts to operate out of.  While church layout and design elements vary between denominations the fundamental church layout is fairly consistent.  Typically it includes a large entrance lobby, a sanctuary, parlour, large multi-use hall together with a kitchen and a number of smaller rooms used for meetings and general storage.  They tend to have several large, wide-open areas with high ceilings together with a large number of smaller classrooms.  As a result of their special purpose design they are challenging to value.

Scenario #1 - determining the Market Value of a church as it currently operates may not be as hard as it sounds.  There are numerous examples of church properties that have sold to other congregations for continued use as a church. 

Scenario #2 – determining the value of the underlying land for redevelopment is more challenging.  Often times the property has an institutional zone assigned to it, reflecting its current use.  However, this doesn’t necessarily limit the property to its current use.  It can often be re-zoned and redeveloped for a more intensive use.  Exploring this scenario involves discussions with the local planning authority, and in the end professional judgement is needed.  In addition to re-zoning, heritage designation issues, service and utility easements on the parcel and demolition costs for the existing building must be explored and considered under this scenario.     

Scenario #3 considers the value of the church for an adaptive re-use.  This can certainly be the most challenging scenario to consider when determining value.  The question here is “does the existing building actually provide additional, measurable value?”  Older buildings often have a lot of character and heritage value.  However, the cost for repairs and maintenance for these older buildings can be substantial.  They typically have masonry exterior walls with decorative features that require a lot of maintenance.  Their walls are often load bearing, meaning they cannot be easily reconfigured for another type of use without substantial structural work.  In addition they typically sit on expensive land, located in more central downtown locations with increasing pressure on land values.  All of these things can point to demolition of the existing church to make way for a new development.  However, that’s not always the case.

Recently I completed an assignment for a registered heritage property in Halifax.  The Centre Plan envisioned a low-density residential use for the property.  However, Package A contained significant implications for the property as it contains policy applicable to registered heritage properties.  This general policy allows for consideration of new development via discretionary approval processes (a “Development Agreement”) rather than zoning.  The overarching goal of the municipality is to encourage the rehabilitation and retention of heritage buildings. In order to do this, they will support a significant amount of new development intensity on sites containing a heritage building, using this as a tool to create sufficient value that the required conservation measures can be accommodated within an economically feasible project. This opens the possibility for significant building height and floor area ratios, as well as consideration of other cost-savings, such as lower parking requirements.

In that instance, the cost involved with demolishing the existing building coupled with only low-density anticipated for the site meant that demolition of the building was not the best option.  Alternatively, retaining the existing structure, or a substantial portion of it under policy contained within Package A of the Centre Plan opened up the possibility for significant building height and floor area ratios, as well as consideration of other cost-savings, such as lower parking requirements.  This second option meant a higher value for the property.  In that instance the best option was retaining the existing building for an adaptive re-use as part of a larger development.

The take-away here is that valuing churches or special purpose properties is not a straightforward exercise.  With shrinking congregations and higher operating costs these types of assignments are becoming increasingly more common.  They can be complicated and require a team approach to valuing the property with assistance from planners with a solid understanding of the Centre Plan.

For more information on the valuation services we provide visit our Valuation and Advisory Services site https://www.turnerdrake.org.

On Wednesday September 4^th, I had the pleasure of presenting before the Standing Committee on Law Amendments regarding the assessment and taxation of heavy industry in New Brunswick.  I was pleased to see such a high level of interest from Committee members in understanding how property tax assessments (which are based on market value) are calculated. 

Fair assessments start with accurate estimates of a property’s value.  In a market value assessment system, there are no “breaks” or “deals” for property owners.   Assessment professionals take their cues from the market and adjust their models so all assessments approximate market value.

Understanding the assessment system means understanding market value and the factors that influence it.  Most of us have a reasonable understanding of the factors that influence the value of our homes.  We understand that a strong housing market drives higher values for all houses.  We understand that a property with features that purchasers desire (e.g. great kitchen; open concept design; a finished basement) will have a higher value than one that lacks these features or is in a state of disrepair.   We understand “location, location, location”, and the benefit of being close to amenities like parks and schools, and the disadvantage of being located next to negative influences like landfills or flood zones.  

Although the market for heavy industrial properties is global as opposed to local, the factors that influence their value are not dissimilar.  When markets are strong (i.e. there is a balance between the number of buyers and sellers), values can be stable.  When markets are weak (there are more sellers than buyers), values will fall.  Individual facilities can become less appealing to buyers as they get older, or if the building design and layout will not accommodate the most efficient technology or process.  Location also applies.  Instead of proximity to parks and schools, ask if the facility is located close to its raw material, or close to where it sells its final product?  Does the location offer a competitive advantage or disadvantage in terms of the cost of inputs to production?

The 2013/2014 re-assessment of pulp and paper mills in New Brunswick generated questions from the Committee and provides an excellent case study for the factors that impact the market value of heavy industrial properties generally.  If you understand the factors that impact housing values, consider the following scenario. Imagine an older neighborhood with houses built up over a period of 100 years.  The market is poor, and there are significantly more sellers than buyers.  When you look up and down the streets, approximately 1/3^rd of the houses are vacant and boarded up while they wait to be demolished.  Demand is weak generally, but the houses in this neighborhood are especially less appealing than newer houses because they are older and are lacking in amenities that purchasers require.  The purchasers themselves have concluded that it would be much less expensive to build a new house than to modernize the older structures. In fact, the houses are so functionally obsolete, there are builders constructing houses across town with all of the amenities purchasers demand for less than half the cost of reconstructing replicas of the homes in the older neighborhood.  

This was the state of the market for pulp and paper mills at the time of the reassessment.  Maritimers will recall closure of mills in Bathurst, Dalhousie, Miramichi, Brooklyn, and Port Hawkesbury; all but one were subsequently demolished.  Assessors and Appeal Boards in assessment jurisdictions across the country were tasked with coming up with an estimate of the market value of these assets. Many experts provided testimony, and Appeal Boards in contested hearings in Ontario ordered assessment reductions ranging from 60% to 75%.  It shouldn’t be surprising that experts tasked with determining the values of mills in our region came to similar conclusions. 

To be clear, the assessment process is about ensuring that assessments reflect market value, not about providing a “break” or a “deal” on property taxes.   

André Pouliot is a Senior Manager in the Property Tax Division at Turner Drake & Partners Ltd.  André holds professional designations in Valuation with the Appraisal Institute of Canada, Royal Institution of Chartered Surveyors and has more than 20 years of experience in the assessment and valuation of heavy industrial, commercial, and investment properties. 

What is building efficiency? and why is it becoming increasingly important for landlords, purchasers and tenants alike?

Building efficiency stems from a variety of factors, some of which are tied to the building envelope or overall operating systems (HVAC, lighting, etc.), while others are tied to design and layout.  Our Lasercad® team focuses on the latter and partners with building owners and managers to help analyse and optimise their building efficiency using the BOMA Standard Methods of Measurement.

Using a typical office building as an example, the ratio of a building’s Occupant Area to its Rentable Area will yield a gross-up or efficiency factor, where higher factors equal lower efficiency.  In other words—the larger the percentage of common area to tenant occupied area, the larger the gross-up, and thus less efficient the building.

Since common areas are proportionately allocated (“grossed up”) back to each tenant, they are a primary contributor to determining building efficiency.  Large common areas in a multi-tenant office or industrial building increase a tenant’s overall rent as a result of higher gross-up factors.  It’s a double whammy because tenants are also subjected to higher Common Area Maintenance (CAM) charges which are needed to service those common areas.  The results manifest themselves in a variety of ways—higher vacancy rates, lower net rents, reduced marketability.  The list goes on.  An inefficient building is less attractive to potential tenants as well as to buyers.

Optimising building efficiency is becoming more crucial as development restrictions evolve and building owners, managers and shareholders look to maximise their returns.  Whether it’s new construction, or the renovation of an existing building, the BOMA Standard Methods of Measurement have become an increasingly important input of the initial design phase, and more and more developers are seeking guidance and expertise from our knowledgeable staff.    

Below is an overview of two buildings we recently measured with common areas highlighted in blue.  123 Jones Drive has an excessive amount of common area, including a large lobby, washrooms and extensive hallways.  By contrast, 125 Jones Drive has approximately twice the footprint, yet has far less space taken up by common areas.  Our BOMA analysis revealed the impact of the vastly different layouts: 123 Jones Drive has a gross-up of approximately 30%, meaning their rent is based on 30% more space than they physically occupy (i.e. Floor Allocation Ratio: 1.30).  By contrast, 125 Jones Drive has a gross-up of only 9% (i.e. Floor Allocation Ratio: 1.09) therefore staking claim as the more efficient building.

If you’re interested in optimising your building’s efficiency using BOMA standards, please don’t hesitate to contact one of our analysts to discuss a few of our key strategies. Whether you’re in the preliminary design stages of new construction, or renovating an older building, optimising your space to yield the most efficient solution is our primary focus.

Patrick Mitchell is the Senior Manager of our Lasercad® Division and also highly involved in our Valuation Division.  For further information on how to maximise your property’s value through space certification please don’t hesitate to reach out. Patrick can be reached at pmitchell@turnerdrake.comor by phone at 902-429-1811. 

Who’s Going to Live In All Those Houses? – A common refrain when there’s a lot of residential development, whether houses, apartments, or condos.  Demographic trends can help to answer the question after the fact, but more importantly, attention to demographic patterns ahead of developing can ensure that housing supply meets demand.  After all, once it’s built, housing supply is here for the long haul.  At the recent NSPDA and LPPANS conference, Turner Drake led a workshop examining how individual decisions feed into patterns in housing supply and demand.  Here’s a brief recap (granted, a Nova Scotia‑oriented recap, but many of the principles apply across Atlantic Canada).
 
The Life Cycle of Housing
A typical person will move around a bit in their lives, starting out in their parents’ house (or houses: if we can infer Canadian behaviours from American stats, the average person owns 4.5 to 5.5 houses in their lifetime), moving to a rental apartment before buying their own home(s).  Later in life, they may downsize back to an apartment (possibly a more luxurious one this time) or condo, and finally make their way to a seniors’ residence. 
 
In-demand housing stock is heavily dependent on the dominant age groups in any given area.  The primary drivers of rental apartment demand are 20-29 year-olds, and the 65-and-older cohort, though the latter is increasingly shifting to a 75-year-plus bracket, and the former arguably extends to above age 35.      

Source: Statistics Canada 2016 Census

The inverse is demand for owned housing, and the primary buyers are ages 25 through 45.  The 25-29/34 year-old age bracket falls into each of the renter and buyer categories: this is the first-time homebuyer age range, where we see the steepest increase in home-ownership rates.  The inference is that by age 45, buyers have bought their first home, possibly sold it and upsized to a larger family home, and here they stay for a prolonged period of time.

The graph above shows shrinkage in the brackets that include ages 20 through 45, but growth in the 65+ brackets.  Growth in the 55-64 year old bracket means that the latter will continue to expand as Baby Boomers age.  A 2018 Royal LePage survey of home buying intentions found that 42% of Atlantic Canadian Baby Boomers plan to downsize in retirement, with 23% intending to sell their homes and move to their secondary properties, i.e. to the cottage.  Thirty-two percent would consider buying a cottage in which to live in retirement.  The answer is probably no, but all this moving to the cottage raises the question of whether the province will see population ruralisation over the next few censuses, or whether the urbanisation of younger generations will continue in numbers sufficient to offset it?  The map below shows population change at the Dissemination Area level in Nova Scotia between the last two censuses: the concentration of purple (growth) in urban areas, in contrast with the pink and red (shrinkage) of the rural areas, indicates urbanisation.

Turner Drake started in 1976 with the mission to “provide solutions to real estate problems”. Initially we focused on valuation practice, but as real estate and its challenges have become more diverse, so too have we. Over the decades we’ve added complementary practice areas, expanding our perspective and deepening the expertise we could bring to the aid of our clients. Not long ago we once again ventured into new territory, adding a Planning Division. Rooted in the economic perspective that all our divisions share, our planning practice is unlike any other in Atlantic Canada.

Often we are called in to lend a hand on other Turner Drake assignments; bolstering property tax appeals, identifying implications for property valuation, or accurately reviewing development potential for brokerage clients. But we work most closely with our Economic Intelligence Unit, where our combination of GIS resources and expertise in the analysis of demographic, economic, and real estate market data have led us to some truly interesting planning assignments.  Working with a variety of both private and public sector clients, we’ve been involved in some of the largest planning and development projects in the Region. And some of the smallest. We’ve even picked up a few awards along the way. The challenges and outcomes are varied, but one thing is always common; an approach grounded in real estate economics.

Now, having just crossed the five-year milestone, we celebrate another; our first staff expansion. We put out the call shortly before the New Year: thanks to the many that applied, we are humbled by your interest in what we are trying to bring to the planning profession. So who is the new recruit ready to help us continue our success?    

Say Hello to the Newbie – Andrew Scanlan Dickie

Hello world, I’m Andrew – Turner Drake’s self-declared Newbie – here to share the story that is me; a story of adventure, intrigue, and spreadsheets. Yes, I’m that guy – the one who likes numbers just a little too much. I’m no mathematician, just a fanboy hoping to put my interests to use. I suppose that’s how I ended up here, but that will come.

My last names may throw you off, but I’m a born and bred Montrealer (I can feel the maritime Bruins and Leafs fans cringing). I decided to stay local for my first university degree, receiving a Bachelor of Commerce from McGill. I was young, inspired, and ready to take on the world. What does the mean? You got it – I went back to school, but this time away from home (sorry mom).

In Spring 2017, I graduated from Dalhousie University with a Masters of Planning degree. My short two years in Nova Scotia were nothing short of amazing; I met my soon to be wife, made amazing friends, and embraced the culture and lifestyle. But like many before me, I left to seek opportunities elsewhere.

Over the last two years I worked for a small-town municipal government in Ontario, wearing the many hats allotted to me and expanding my knowledge of planning policy. Don’t get me wrong, I loved it – but two things kept nagging at me: (1) Ontario’s got nothing on the Maritimes (there’s just something about the air here) and (2) my professional life was number deficient (ahem, nerd).

At the time, my partner and I were nestled in the suburbs. We had adopted a dog and enlisted the help of a real estate agent – we were getting pretty darn serious about putting down roots. So, one might say it was an 11th hour moment when the Planning Division opportunity for Turner Drake came up. I would say it was more an aligning of the stars; a chance to return to the place my partner and I hoped to call home and the lifestyle that comes with it, and an opportunity for me to develop both my business and planning expertise.

So here I am, ready to take on the world yet again and use my skills to contribute to the well-oiled machine that is Turner Drake. I’m chomping at the bit, so if you or your organisation are wondering how our expertise in development economics and real estate market analysis can enhance your planning process, just give us a call! Hint, hint, nudge, nudge – mandatory municipal planning strategies as part of the Nova Scotia Municipal Government Act are becoming a thing, so feel free to reach out about how that may affect you or how to explore that process. Alternatively, if you’re in Ontario and require some help navigating Ontario’s Planning Act, let me know!

To see how your project can benefit from our unique planning expertise, call Senior Manager Neil Lovitt at (902) 429-1811 or nlovitt@turnerdrake.com. We’ve got more horsepower than ever.

You are a tenant looking for commercial space to lease. You start your search by checking the local Kijiji ads and maybe check with a few colleagues when you realise that perhaps you are in over your head. One ad is asking for $14/ft.² net plus operating and taxes, while another is asking $3,500 per month gross. How do you compare these two rents?  

Or perhaps you are a new landlord, eager to fill up your new investment property and start making a return. You are not sure what to charge for rent, but you want to ensure that all of your operating expenses are recovered at the end of each operating year and you are not out of pocket for any expenses.

First, let’s summarise the rental terminology:

Net Rent: Often called “Base Rent”.  This is what you pay for the right to occupy a given space

Additional Rent: Often called “Common Area Maintenance (CAM) and Realty Taxes” or “Service Rent”:  This is the cost of operating a given space or property.  It includes such things as electricity, heat, garbage removal, snow clearing, etc.  It is typically paid for by the landlord and then recharged to the tenant on a per square foot basis.

Gross Rent: This is the sum of all rent paid (Net and Additional Rent).

In order to compare a net and gross lease, the rents must be converted to the same basis (ie: both must be compared on a per square foot basis, or both on a monthly rental basis).  For example: let’s say that a particular unit is 1,500 ft.² and it is being offered at a Net Rent of $14/ft.² and CAM and Taxes of $11/ft.².  Converting this to a monthly rent is as follows:

($14/ft.² + $11/ft.²) X 1,500 ft.² = $37,500 annual or $3,125 per month.

Alternatively, if you are provided with a rental rate of $3,500 per month gross for a 1,500 ft.² space, converting this to a per square foot rent is as follows:

$3,500 per month X 12 = $42,000 per annum / 1,500 ft.² = $28.00/ft.²

Now that you know how to calculate and compare net and gross rental rates…which one is better?  A net lease or a gross lease?...well it depends which side of the lease you are standing on.  The main difference between a net and gross lease, comes down to who shoulders the risk of increasing operating costs.  Under a gross lease, a tenant has committed to a set amount of rent for the lease term.  If the operating costs increase during the term of that lease term, the landlord “eats” those costs, thereby cutting into his/her effective rent.  Under a net lease however, the Additional Rent charged for operating costs fluctuates throughout the term of the lease.  Since landlords are recharging the tenants for common area costs, any increases are simply passed on to the tenant.  Tenants may prefer a gross lease since it represents a steady and guaranteed rent, and no risk of increasing common area costs during the length of the lease.  Landlords on the other hand tend to prefer a net lease where there is a steady and guaranteed base rent, and any risk of increased expenses is simply passed along to the tenant.

Ashley Urquhart is the Senior Manager of our Brokerage Division.  She has a vast network of contacts and would be happy to assist you with all your leasing needs.  Feel free to contact Ashley at (902) 429-1811 or aurquhart@turnerdrake.com.

Happy GIS Week! 

We were working recently on an assignment in the Annapolis Valley, the land of orchards and sloping vineyards…and that got us thinking about the impact of elevation on land area.  Ultimately, the question is one of land value: inherent in the value of agricultural land is potential crop yield.  More land area equals more growing potential equals more value.  Where slopes are acceptable or even advantageous, they may serve double duty in that sloped land is larger than it seems.

Our Valuation Division’s MO is to maximise your property value…this is an Economic Intelligence Unit blog post, and this is GIS Week, so we’re going to geek out on how to ensure you’re counting all your land, using a GIS, a little high school math, and a fair bit of Pythagoras[i]. 

Pythagoras’ Theorem defines the relationship between the sides of a right triangle with the equation a² + b² = c².  Side “c” is the hypotenuse, and is always the longest of the three sides. 

For illustrative purposes, we created a convenient, perfectly rectangular, parcel.  It measures 500 x 1,150 m, for a total area of 575,000 m² (57.5 hectares).

That is: 

But the land comprising this parcel is sloped.  The contour lines added to the image below demonstrate the degree of the slope; on average, there is an elevation differential between the highest and lowest elevations of 140 m.  

Thus, the 500 m parcel dimension is effectively 519.2 m:

and the effective land area is 597,080 m² (59.7 ha.), a difference of 22,080 m² – over 2 hectares of extra space for crops! 

 

This is a highly simplified example of the impact of slope on land area.  There are many other factors to take into account, such as the tipping point between beneficial slopes and unusable inclines.  But in a world where “land: they’re not making any more of it,” holds true, the most informed decisions are the best ones.  Where a precise figure is required, you’ll need to call in a professional land surveyor.  But when an area scaled from a map is fit for purpose, using a GIS and a little high school math can yield a more useful number than you’d get from a regular map. 

 

P.S. a related fun fact was shared at Wednesday night’s Geomatics on the Town event (part of the 2018 Geomatics Atlantic Conference): tree planters space their seedlings at a certain distance from each other.  For one tree planter, this was the equivalent of 3 steps on flat ground, but on sloped terrain, it was 12 steps in order to leave sufficient room between trees! 

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[i] Mainly for defining the relationship between the sides of a right triangle, but a little bit for first floating the idea that the Earth is a sphere...it comes into play in measuring distance.  There are two methods of measurement in a GIS, Cartesian and Spherical.  The Cartesian method calculates distance and areas based on data as projected onto a flat surface (like scaling from a paper map), while the Spherical method accounts for the curved surface of the Earth (like scaling on a globe).  The distances in this example were measured in MapInfo using the Spherical method.   

Several blog posts (and a few years) ago, drawing on the experience amassed over my twenty-five year career at Turner Drake, I did some property tax myth-busting.  One bears repeating- particularly at this time of the year:

The Best Opportunity to Reduce Your Assessment (and Taxes) is NOT on Appeal

In every Province in which we operate, assessing authorities are willing to discuss assessments prior to their values being inserted onto the official assessment roll.  In our experience, such preliminary consultations often produce better results- at lower cost- than waiting to file formal appeals.

Nova Scotia’s assessing authority, the Property Valuation Services Corporation- the “PVSC”- and its predecessor, Service Nova Scotia and Municipal Relations, is a pioneer in this regard, and has been pre-publishing its assessments for over twenty years.

This year, 2019 pre-roll assessments for commercial property and apartments containing six or more units were pre-published on September 25^th.  Proposed values can be accessed on the PVSC’s website at www.pvsc.ca, and the underlying valuations can be obtained by using the AAN and PIN from the top right- hand corner of 2018 assessment notices at:

 https://www.pvsc.ca/en/home/findanassessment/multiple-report-tool/default.aspx

Owners with concerns with their proposed assessments have about eight weeks to contact the PVSC: assessors have the ability to amend values until the last week in November. The 2019 roll officially closes on December 1^st.

PVSC’s management embraces the opportunity to discuss assessments (and to make changes, where warranted) at the “pre-roll” stage.  Property owners are encouraged to avail themselves of this opportunity, and PVSC should be commended for publishing its proposed 2019 values.

Of course, it’s not always possible to engage in preliminary consultation, as not all values will be available with sufficient “lead time” in advance of the filing of the roll.  But where the opportunity presents itself, my advice is always to be proactive, and to address a problem before it becomes one.  A stitch in time saves nine.

It is a common misconception that a piece of real estate has a single value.  This is simply not true.  Determining which value is appropriate likely has the biggest impact on property value.

The Royal Institution of Chartered Surveyors’ Global Valuation Standards, specify six types of real estate value (Market, Rental, Equitable, Investment, Synergistic, and Liquidation). The Appraisal Institute (of America) has identified ten distinct, and valid, property valuation bases in common use in North America. Legislation, case law, and the purpose of the real estate assignment, result in many variations of these property valuation bases. Any conversation about valuing your property has to start therefore with an understanding of the purpose of the valuation assignment or you can end up with a conclusion which is worthless at best, or seriously misleading at worst.

Let’s discuss the two most common types of value.

Market Value (Highest and Best Use) is typically quoted and understood by many (including appraisers) to be the only type of value.  It is the highest price you would get for your property on a specific date, if it was offered for sale, properly marketed, and exposed for a sufficient period of time to alert and allow all potential purchasers to submit offers.  It assumes that both seller and buyer are knowledgeable of property values, that neither are under pressure to sell or buy, are typically motivated, and are each acting in their best interest. It assumes a cash purchase, or typical mortgage financing, in Canadian dollars. It also anticipates that the purchaser will be able to put the property to its “Highest and Best” use, which may for example, include redevelopment, if this will create a higher value than the existing use of the property.

But beware, Market Value is not the price you could expect to get if the purchaser (1) was an adjoining owner, (2) was undertaking a land assembly, (3) was a relative or business associate, (4) knew something that the vendor should have known but did not, (5) did not know something known to the vendor of which the purchaser should have been aware, (6) wanted a “vendor take back” mortgage, (7) intended to lease back the property to the vendor, (8) enjoyed a negotiating advantage because, for example, the vendor was in dire financial straits, … and so on.

I was recently contacted by an existing client looking to secure financing for their property located on the Halifax Peninsula.  Their property was improved with an older, single storey commercial building.  The underlying land was worth considerably more than the building and property under its current use.  After discussing the purpose of the assignment with the client and their bank, it became clear that the bank was interested in more than just the Market Value (Highest and Best Use) of the property in this instance.  The bank’s goal was to determine if the income generated by the property, under its current use, was sufficient to keep the lights on and pay the existing mortgage.  However, the bank also wanted to know what they could expect to sell the property for if they ended up taking possession of it and selling it on the open market. Effectively, the bank had two different goals which gave rise to two different values.

We completed a thorough analysis of the property and provided the owner, and their bank with two values (1) Market Value (Highest and Best Use), which in this case was for redevelopment of the property, and (2) Market Value (Value in Use) as it currently exists without regard to redevelopment potential.  Market Value (Value in Use) is similar to Market Value (Highest and Best Use) but is based on the assumption that your property could only be utilised for its existing purpose.   

Difference in Value

In this instance the difference in value was significant: $1.5 million (Market Value - Value in Use) versus $2.3 million (Market Value – Highest and Best Use).  Both values were included and supported in the report, allowing the bank to make an informed decision on lending.

 

Nigel Turner, Vice President of our Valuation Division, can be reached at nigelturner@turnerdrake.com

The Building Owners and Managers Association (BOMA) publishes measurement standards for office, industrial, retail, and mixed use spaces.  These measurement standards provide guidelines for measuring the area occupied by each tenant within a building and, when appropriate, allocating common spaces.

BOMA states that if a building contains a single occupancy type comprising 51% or more of the total building area, the corresponding standard should be used.  In other words, the building owner does not have the right to simply choose the standard that best serves their interests. Given the ubiquity of commercial buildings that can be used for both office and retail uses, particularly in suburban and rural areas, it is critical to understand the differences between these standards.

Boundary Condition

Where does my measure line extend to? One of the most important differences between the Retail and Office Standards is how the measure line differs for exterior enclosures.  The Gross Leasable Area of a retail building is measured to the outside face of the exterior walls.  Under the Office Standard the measure line for the exterior enclosure is the dominant portion of the inside finished surface. The dominant portion is the finished surface that comprises over 50% of the vertical height, measured from floor to ceiling (not exceeding 8 ft.).  This difference can be significant.  The illustration below shows how a unit measured to the Retail Standard (right) captures more area than a unit measured to the Office Standard (left) based on this condition:

    

On February 5^th, Scott Armour McCrea, CEO of The Armour Group, took to the airwaves to ridicule Alexandra Baird Allen, the Manager of our Economic Intelligence Unit … the cause of his angst, an earlier CBC radio interview with Alex on the results of a Halifax Central Business District (CBD) survey which revealed an office vacancy rate of 17.3%. Labelling her conclusions “manufactured hysteria” Mr. McCrea disparaged the survey results, questioned the competence of Alex, her survey team and Turner Drake … and ignited a gender war: “Mansplainer” was perhaps the most polite invective hurled in Mr. McCrea’s direction (we are keeping a list… it’s not pretty but quite informative… we might publish it). So what was it all about?

Scott Armour McCrea is a developer and a very important man, as he so informed the CBC, the largest private office landlord in the city. In sonorous tone and displaying gravitas befitting a man with gaze firmly fixed on his own navel, Mr. McCrea revealed that “no other real estate professional uses the Turner Drake data”.  In fact, he confided, no actual practitioner agrees with them!  He then proceeded to reveal why … the full Monty so to speak.

Turner Drake, Mr. McCrea intoned, is a minor player in the leasing field completing only 2% of leasing transactions while actual practitioners such as brokers CBRE, do 30% to 40% and publish their own survey. CBRE pegged market absorption at “about 300,000 ft.² a year” stated Mr. McCrea, “not the 25,000 ft.²” calculated by Ms. Baird Allen. The Armour Group, Mr. McCrea’s company, did their own survey as well and estimated the vacancy rate at 13% to 14%. … and most vacancies were in buildings most people would “never, ever want to work in”. And the problem was exacerbated by the Province who were so concerned about saving taxpayers’ money, they insisted on consigning their employees to space that only the private sector would tolerate. But that, he confided, was about to change. The real reason though for the problem: “if there is a problem in Halifax and I am not suggesting there is”, was that the City was “under-demolished”.

So what are the (non-hysterical) facts?

Alex has been a valued colleague for twelve years, is a Chartered Surveyor and has a degree from the University of New Brunswick, a Diploma in Urban Land Economics from the University of British Columbia and an Advanced Diploma in Geographic Information Systems from the Centre of Geographic Sciences at Lawrencetown, one of the top three GIS institutes in Canada. She combines her work as Manager of our research group with her role as a mother of twins. We have never known her to engage in hysteria, manufactured or otherwise. The office surveys are, we believe, the most comprehensive conducted in Halifax and cover all rental buildings 5,000 ft.² or larger. They are a structured survey using purpose designed survey instruments and software, deployed by a team of trained researchers. The survey to which Alex alluded in her CBC interview had a response rate of 89% (previously we have achieved 98% but this time a large landlord, The Armour Group, refused to participate). We do have human and programmatic error traps in place for quality control purposes but recognise that they are not yet infallible so seek to have as many eyes on the results as possible and offer the full survey to any participant who would like a copy. 40% take advantage. One such recipient, was kind enough to point out not one, but two errors, in our December 2016 Halifax office survey. We are not perfect, but we are transparent. We corrected the errors, reissued the survey, changed our software to catch similar human errors and published a correction, apology and thanks in our Spring 2017 Newsletter to the gentleman who had so diligently scrutinised the survey, Mr. McCrea.

Our Market Surveys are undertaken by a research team independent of our Brokerage Division. The volume of their lease transactions is therefore unrelated to the amount of research undertaken for the Market Survey.  In any event we cannot utilise data gathered by our Brokerage Division for the Market Surveys because that would be a breach of confidentiality.

The CBC interviews were focused on the Halifax CBD. Ms. Baird Allen’s data referred to the Halifax CBD. Mr. McCrea’s interview focused on the Halifax CBD… unfortunately the CBRE data he referred to did not. It pertained to the wider HRM metropolitan market. CBRE’s estimate of the vacancy rate for the Halifax CBD is very similar to our own (18.5% versus our 17.3%). A world away from the 13% to 14% cited by Mr. McCrea. CBRE’s vacancy rate for the entire HRM office market was 15.5% (we place it at 14.97%)… probably the source of Mr. McCrea’s confusion.  There will always be some differences between the Turner Drake and CBRE survey results, an important factor being that our survey does not just focus on larger buildings but covers some as small as 5,000 ft.². Mr. McCrea’s comment that the “annual market demand was 300,000 ft.²  not the 25,000 ft.² quoted by Turner Drake” was similarly erroneous. Alex’s figure of 25,000 ft.² referred to the CBD, which, after all, was the subject of the CBC interview to which Mr. McCrea was responding. It was based on the average market absorption over the past five years. CBRE’s estimate of annual market absorption of 308,944 ft.², referenced by Mr. McCrea, referred to the entire HRM market.

Mr. McCrea’s comment that most of the vacancies were in buildings that most people would “never, ever want to work in” does not accord with the facts. Class A buildings have an average vacancy of 21.8%.

We concur with Mr. McCrea that many office buildings will have to be demolished or repurposed, Alex pointed this out in her CBC interview. However 625,750 ft.² of the 879,665 ft.² of currently vacant space would have to be taken out of service to restore equilibrium to the downtown office market… the aggregate of the former Bank of Montreal tower, the former Royal Bank tower, Founders Square and … volunteers anyone? Oh but Mr. McCrea is adding another 125,000 ft.² at Queen’s Marque… let’s see, what else for the wrecking ball…?

We politely pointed out to Mr. McCrea his confusion with the CBRE survey statistics and gave him the opportunity to rectify the error. He did not respond. As for the mansplainer moniker… nothing we can do about that... we trust he is not consigned to the couch. Probably have to make his own coffee from now on though.

For more information on mansplainer consult Wikipedia. For information on the office market in the Halifax CBD and lots of other areas in Atlantic Canada, contact Alex Baird Allen the (very calm) Manager of our Economic Intelligence Unit at 902-429-1811 Ext.323 (HRM), 1-800-567-3033 (toll free), or ABairdAllen@turnerdrake.com

Nova Scotia’s 2018 Preliminary Property Assessments are available on the Property Valuation Service Corporation (PVSC)’s website, and there is a brief window to discuss assessments with PVSC assessors prior to the assessment roll being finalized on December 1^st.

Between now and then, the PVSC is encouraging property owners to discuss any errors or provide additional information which may have an impact on the value of their property. The benefits in taking advantage of this opportunity are:

1)     It provides a higher level of certainty in preparing tax budgets for the 2018 fiscal year (for both the owner, and the municipality).

2)     It provides property owners with an opportunity to address concerns with 2018 assessments outside of the formal appeal process, and before the values are finalized and inserted on the official assessment roll.

3)     Owners who are not satisfied with the results of pre-roll consultations can still file a formal appeal when official assessment notices are received in January.

Preliminary consultations are typically less formal and more timely (and thus cost effective) than an appeal.  This is especially so because at the “pre-roll” stage, assessors aren’t in the position of defending an assessment that has already been published.  The best time to address an assessment issue is before the problem becomes one.

The link to proposed 2018 assessment data is as follows: https://www.pvsc.ca/en/home/findanassessment/searchbyaan.aspx.  Preliminary 2018 assessments are publicly available; owners will need their Assessment Account Number and PIN Access Code (which can be found at the top-right hand corner of their 2017 Assessment Notice) to access the underlying valuation records.

Of Heaven and Sea and Earth