|
|
|

My University Co-op Experience Over the past 17 weeks, my focus has
been on expanding my knowledge in the realms of real estate and business in a
broader context. The journey has been
immensely rewarding, equipping me not only with valuable insights that will
help me in future years of schooling but also with skills that will undoubtedly
shape my lifelong journey. Prior to
starting my work term at Turner Drake, I was unsure of what to expect. I was welcomed in with a very friendly staff
and even had my own designated workspace. As some people may have put together
by my last name (Turner), I am the grandson of Mike and Verna Turner and the
nephew of my uncles Mark and Nigel Turner. This lineage nurtured within me a curiosity
about the real estate industry from an early age. This curiosity was manifest during my middle
school's seventh grade "Take Your Kid to Work" day, when I chose to
spend the day at Turner Drake rather than the customary classroom setting with
my parents (both of whom are teachers). That experience left a memorable
impression on me, and I returned home to share my enthusiasm for the very
friendly staff and the interesting jobs they had me do. From that moment, I knew that Turner Drake
could be a potential future job for me. Flash forward many years and I was applying
for a summer co-op position at Turner Drake. My work term at Turner Drake looked very
different than that of other co-op students in the past. In year’s past, co-op students were predominantly
engaged in data processing tasks at Turner Drake however in 2023 the co-op format
at Turner Drake was revamped to include access to multiple divisions of the
firm. As the guinea pig for the new
program, I was rotated through Lasercad, Economic Intelligence, Valuation,
Property Tax, and Data Processing. This unique structure provided me with a
comprehensive understanding of the breadth of expertise within Turner Drake. The progression of my summer was as
follows: - I began my summer working with Sarah
in the Data Processing Division. My
responsibilities there included updating lease and sales information, as well
as familiarizing myself with the various databases integral to Turner Drake's
operations. This phase proved to be the
bedrock of my summer, as concepts acquired under Sarah's guidance were
applicable across many different divisions. - I then transitioned to the Economic
Intelligence Unit where, under Colin's guidance, I engaged in data extraction
for market surveys and contributed to database updates. This exposure not only deepened my
understanding of report construction but also shed light on some of the sources
of these critical data points. - I then moved into the Valuation Division,
where I worked with both Nigel and Austin. In this division, I engaged in the assembly of
documents showcasing comparable property sales and contributed to data
collection for valuation reports. This
phase unveiled the determinants underlying property valuation, providing
insights into the fundamental principles of property valuation. This was a very interesting division to work
in, as it allowed me to see what makes one property more valuable than another,
as well as understanding some of the basic fundamentals of how to properly
evaluate a property. - My final stint was in the Property Tax
Division, working with Mark. My main
focus there was on reviewing property assessments to determine if there were
adequate grounds upon which to pursue an appeal, and then helping to formulate
those arguments. This experience not
only allowed me to explore the realm of property taxation but also provided me
with a unique perspective to recognize the disparities that frequently arise
between a business's tax responsibilities and the potential avenues for reducing
costs.
My time at Turner Drake has been very
beneficial for me, as it allowed me to not only gain work experience in a field
I am interested in, but also provided me the opportunity to pick up a variety
of new skills too. I extend my sincere
gratitude to the exceptional staff at Turner Drake for their inclusive
environment, where my involvement went beyond that of a typical summer student,
making me feel like an integral part of the team. This sentiment was consistently evident,
whether in staff meetings or casual lunches with team members. With all that being said, this is definitely a
place I would love to work at after I have finished my time at university.
.png)
The Significance of
SPACE
Space measurements
should always be considered during lease negotiations because there are significant
impacts on both the landlord and tenant side of the equation. Accurate and clear space measurement ensures
transparency and fairness, which in turn can prevent conflicts that may arise
from misunderstandings or discrepancies between landlords and tenants.
For tenants, understanding
the precise dimensions of the leased space allows them to plan effectively,
ensuring that their operations, equipment, and staff can be accommodated
comfortably. It also enables tenants to
accurately assess and compare different lease options, thereby making informed
decisions about the most suitable space to accommodate their needs.
Landlords, on the
other hand, benefit from providing precise measurements as it establishes trust
with potential tenants, enhances their reputation, and facilitates smooth lease
transactions. The space measurement
process provides an accurate inventory of your square footage, and can sometimes
identify/uncover space you didn’t know existed.
How can you benefit
from what we do?
The Building Owners
and Managers Association (BOMA) have meticulously crafted a suite of
measurement standards to address a wide variety or property types (office,
industrial, retail, mixed use, etc.). Here
in the Lasercad® division of Turner Drake & Partners Ltd. we identify and employ the
appropriate BOMA standard for your building, ensuring space is accurately
measured in accordance with the proper/accepted standard method of measurement.
BOMA certifications set
properties apart from other non-certified ones. Landlords can leverage the certifications in
marketing and promotional efforts, highlighting the building's functionality
and the benefits it offers to tenants. This
can attract a broader pool of potential tenants and increase the property's
visibility in the market, potentially leading to higher rental rates and long-term
tenants.
BOMA certifications
indicate that a property is well-managed and adheres to industry-recognised
standards. This can make the property
more appealing to potential tenants, leading to an increased tenant demand,
reduced vacancy periods, higher occupancy rates, and the ability to attract
high-quality tenants.
What tools and
processes do we use?
In order to ensure
we’re getting the most precise measurements; we use high-quality lasers measuring
systems which are capable of measuring over 300 feet with an accuracy of 3
millimeters. There are systems on the
market that scan and draw the unit in a single step—fully automatic with little
human input but alas….computers are not perfect and algorithms and assumptions
are built into the software! We prefer
the precision of a laser system which is backed up by the human element. We employ lasers for the on-site measurement,
then double check closing errors by hand before leaving the job site. Back in the office, we download the data into
a CAD program and draft the floor plans, once again checking to ensure minimal
closing errors. These extra layers of
quality control greatly reduce the risk of any potential human and
technological error.
Why is this level of
precision so important?
Since 1976, we have
measured and certified over 10,000 buildings and tenant spaces in Atlantic
Canada and Ontario and have discovered it is not unusual to find that 50% of
the leases in a building show incorrect Rentable and Occupant areas. This can occur because of one (or multiple!)
of the following factors: inaccurate measurement (e.g. “counting the ceiling
tiles”), space modifications on lease renewal which were not corrected in the
new lease, or use of a non-standard or inappropriate Method of Measurement. The
latter can result in the same space having a rental rate of $16.82/ft.²,
$15.00/ft.², $14.89/ft.², $13.33/ft.², $12.74/ft.²…simultaneously…because it is
measured using any one of the non-standard methods in use.
At a rental rate of
$15.00/ft.² net absolute, every 1,000 ft.² “lost” could reduce the value of the
property by $250,000. Over a typical
5-year lease term, this could also mean a “lost” rental revenue of over
$65,000!
Over the years, technology
has changed significantly. The lasers we
use have become smaller, faster, and more accurate. There is an astounding amount of space
measurement technology currently being produced, and we’re keeping our eyes on
options which may further improve our processes. Overall, however, we will always place a high
value on the “human element” of our resources. Our goal is to ensure we are creating a
service and product which will increase the accuracy and efficiency of space in
the Canadian commercial real estate market, and will benefit our clients and
their tenants, now and in the future.
Palmer Lumb
is a consultant in our Lasercad® division, as well as our Economic Intelligence Division and is
also involved in our Planning Division. For more information about how you can benefit from the expertise of our Lasercad® division, contact Palmer at (902) 429-1811 or plumb@turnerdrake.com

Turner Drake & Partners Ltd. 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—Counselling, Property Tax, Brokerage, Lasercad®—expanding our
perspective and deepening the expertise we bring to our clients. Our Economic
Intelligence Unit was added in 2006, then in 2014 we added Planning. Rooted in
the economic perspective that all our divisions share, our market analysis and
planning practices are unlike any other in Atlantic Canada.
Planning and Economic Intelligence work closely
together. In many ways we are one division – we share a collection of GIS
resources and expertise in the analysis of demographic, economic, and real
estate market data. Working with a variety of private and public
sector clients, we have 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.
Alas, there is much work to be done, and so we
decided to expand our team! At Turner Drake, we hold our own feet to the
fire—we strive to maintain/surpass the quality of work upon which we have built
our reputation. Our new recruit should help us do just that.
Say Hello to the Newbie – Palmer
Lumb
Hello readers, my name is Palmer –
Turner Drake’s newest Planning and Economic Intelligence team member!
I grew up in the big city of
Toronto, but – unlike most Torontonians – I’ve always had a passion for the outdoors.
I was never the kind of kid who played video games in the basement or stayed
inside with my nose stuck in a book. I always wanted to be outside exploring.
When I was ten, my mum signed me up
for a canoe kayak summer camp that was close enough to ride to with the
neighbourhood kids. I immediately fell in love with the lifestyle—being on the
water with friends, playing games around the club, looking up to the older
paddlers. Little did I know at the time, our club had a five-time Olympic Games
coach for spring canoe kayaking.
I pursued the sport and stuck to
the club’s development program. I started competing provincially, then
nationally, and over time I started winning races. This only further fueled my
passion to train. I began racing for Ontario and eventually for Team Canada at
Junior Worlds and Junior Pan Ams. Although, I did not reach my goal of racing
at the Olympic Games, I left with something that I did not anticipate when my mum
signed me up: a sense of community. I was surrounded by coaches, teammates, and
competitors who were all driven just like me. Although I wanted a change in my
life, I continue to carry those soft skills – responsibility, self discipline, and
time management – with me today.
Eventually I decided to put
paddling on hold, go to university, and finally live a “normal” life. I was
accepted into the Community Design program at Dalhousie University. Coming from
a high-performance sport, I continued to be competitive and exceled in my
program. I am most proud of my honour’s thesis that investigated suitable
locations in the HRM for electric vehicle charging stations.
I couldn’t stay away from the water
for long and so to replace paddling, I took up surfing so I could enjoy the
ocean and Nova Scotia’s beautiful scenery. When there aren’t any waves, you will
still find me outside, either hiking, camping, or riding my bike. Nova Scotia
is truly Canada’s Ocean Playground and I am happy to call Halifax my new home!
At Turner Drake, I plan to continue
my competitive work ethic. I love playing with data and finding the incredible
results it can produce, which is why the Planning and Economic Intelligence
divisions were so appealing to me. 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!
Palmer Lumb is a
consultant in our Economic Intelligence Division and is also involved in our
Planning and Lasercad® divisions. For more information about how you can benefit from the unique expertise of our Planning
& Economic Intelligence team, contact Palmer at (902) 429-1811
or plumb@turnerdrake.com
 Trajan's Market, Rome
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.
Emily McClelland is the Manager of our Lasercad® Division and also highly
involved in our Brokerage Division. For further information on how
to maximise your property’s value through space certification please don’t
hesitate to contact her. Emily can be reached at emcclelland@turnerdrake.com or by phone at 902-429-1811.

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. 
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

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):

This is only a narrow view of a larger and more
complex picture, but it helps to illustrate just how severe the problem is for
lower income households. Not long ago, a household earning $40,000 had a shot
at about half of the ownership opportunities across HRM, these days they’re
fighting it out for the cheapest 10% of the market. While across Canada we are
starting to see more serious engagement in the issue and more on-the-ground
interventions, my perspective is that no jurisdiction is yet grappling with the
elephant in the room; that a sizable proportion of the population is now firmly
outside the boundaries of what market-rate housing can serve. None of the low
hanging fruit or amount of “innovative” policy and partnership that is
comfortably within the boundaries of government intervention is going to get
around this basic fact, and it’s going to take time for government to tool up
and get back to engaging with this issue at a scale that approaches historic
precedents.
[1][2].jpg)
Neil Lovitt is the Vice President of Turner Drake's Planning and
Economic Intelligence divisions. He engages in numerous consulting
assignments, including non-market housing feasibility studies, Housing Needs
Assessments from coast to coast, land inventory analyses, and infrastructure
studies. To see how you can benefit from the unique expertise of our Planning
and Economic Intelligence team, call Neil at (902) 429-1811 or nlovitt@turnerdrake.com.

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!
Tyler Manning 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 Tyler at (902)
429-1811 or tmanning@turnerdrake.com.

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

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.
James Dunnett is a Consultant in our Brokerage Division and has extensive experience in handling complex leasing and sales transactions. If you need help with your commercial property acquisition or leasing requirements, James will be happy to assist you through every step of the transaction. Contact him at (902) 429-1811 or jdunnett@turnerdrake.com.

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

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 24th, 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 21st blog, “Affordable,
Attainable, Available”.
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.

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 6th 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.
[1][2].jpg)
Neil
Lovitt is the Vice President of Turner Drake's Planning and Economic
Intelligence divisions. He engages in numerous consulting
assignments, including non-market housing feasibility studies, Housing Needs
Assessments from coast to coast, land inventory analyses, and infrastructure
studies. To see how you can benefit from the unique expertise of our Planning and
Economic Intelligence team, call Neil at (902) 429-1811 or nlovitt@turnerdrake.com.

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.
[1][2][3].jpg)
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. Relatively affordable: on the market for approximately
$4.4-million. Source: ViewPoint Realty
Seems likely that this is not the
intention of the definition, or any measures put in place to encourage the
supply of affordable housing. And in
fact, CMHC’s Housing Continuum graphic implies that affordable housing is
separate from market housing. Wikipedia
offers a slightly more specific definition:
…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.
 If we combine the two, that would
indicate that affordable housing is housing which costs no more than 30% of the
median household income – and for practical purposes, let’s assume that is in
reference to local median incomes, and not, for example the national figure…more
on that later.
We conducted a very high-level
analysis of the median incomes for the four Atlantic provinces and a selection
of cities. We used average rental rates
for 2-bedroom units because this is by far the dominant unit type for rental
accommodation. The calculation is simple
(very!): divide 30% of the median household income by 12 to get the monthly
income, subtract off the average rental rate and an allocation for utilities of
$150 per month (property tax and water are included in the rental rate;
electricity/heating may or may not be included, so to play it safe, we assumed
that it’s not for most units) and see what’s left over. Great news: positive balances all-round,
averaging $620 per month surplus – hoorah, there’s no affordability issue!
Data Sources: Environics Analytics via Sitewiseweb;
CMHC; Dalhousie University
Here’s the “but”…and it’s not
inconsequential by any stretch. Median
household income is, by definition, the middle of the income spectrum. So, a household earning the median income
being able to afford average costs for rental housing tells only half the
story. Our next analysis worked the
figures backwards: we took the average rent plus the same allocation for utilities,
on an annual basis and figured out how much a household would need to earn in
order for housing costs to equal 30% of their gross income – then figured out
approximately how many households fell below that income threshold, based on
the number of households in various income brackets. Reports of an issue don’t look overblown at
all.

Data Sources: Environics Analytics via Sitewiseweb;
CMHC; Dalhousie University
Prices for owner-occupied housing
have increased substantially over the course of the pandemic. We ran the same sort of analysis as above,
for average/median sale prices in 2020 and 2021. The geographic availability of data is a bit
inconsistent, but our aim is a general idea, so overall, the data is fit for
purpose. Mortgage rates impact the cost
of housing; we used discounted rates (rather than the posted rates) relevant at
the relative times. To keep things
simple, we assumed a 5% down payment, then based on a very unscientific poll
around the office cross referenced against an online monthly expenses
calculator, we allocated 40% of the mortgage cost to cover property tax,
utilities, and insurance costs: rough idea, fit for purpose.
Data Sources: Environics Analytics via Sitewiseweb;
CREA; ratehub.ca
We also looked at the year-over-year
change in house prices: in 2020, the median income was sufficient to afford a
house in all Atlantic provinces, and the selected cities (2020 house price data
for Moncton is conspicuous by its absence), but in 2021, the income needed to
afford a typical house climbed over the median level for Nova Scotia and PEI,
and their capital cities.
Data Sources: Environics Analytics via Sitewiseweb;
CREA; ratehub.ca
Obviously, averages and medians are
the central figures: there will be houses priced
lower as well as houses priced higher, so the above analysis is not to say that
in HRM, for example, you couldn’t find a house priced within your means if your
household income is less than $100,000 (though it’s getting trickier,
especially with our recent embrace of the “offers over” system of home
buying). But this does provide an
indication of affordability, and leads us to the next A on the list:
attainability.
Again, the definition is slippery,
and in some senses, attainability is defined the same way as affordability,
i.e., at no more than 30% of gross household income. It seems that the key difference is the
removal of reference to median income: each income bracket will have its own
price range of attainable housing – and associated appropriate housing types,
categorized by type, size, and tenure.
Implicit in the idea of attainability is that suitable housing exists in
the local market in a variety of forms and price points, sufficient to meet the
needs of the population.
We used data on household income
brackets to model the proportion of households in each province/city by maximum
monthly housing budget. We then used the
same $150 allocation for utilities for rental units to determine affordable
rental ranges, and the same ratios for expenses-to-mortgage (i.e., 60% of
budget is available to service the mortgage, with 40% allocated to property
tax, utilities, and insurance) to determine affordable house prices, as were
used in the earlier analyses. All
figures are approximate at best and should not be relied upon for life
decisions, but they give a sense of what is attainable to each income bracket
from a price perspective.
 Data Sources: Environics Analytics via Sitewiseweb
Data Sources: Environics Analytics via Sitewiseweb. Note that the annual income from a minimum
wage job, at 40 hours per week and 52 weeks per year varies by province but all
four Atlantic Canadian provinces would fall towards the low end of the
$20,000-$39,999 income bracket, averaging $26,000 overall.
And so we come to the final A: availability. It's an important one, because it's effectively the supply side of the supply and demand equation, which is the driving force behind prices. For this portion of the discussion, we're abandoning price points in the interest of balancing level of effort that can be allocated to a blog post.
One of the components of the attainable definition was that a variety of housing formats would be available locally to serve the various budgets - the CMHC housing continuum graphic gives a rough sense of what this might look like, as does this Housing Life Cycle graphic borrowed from the City of Belleville, Ontario.
From an availability perspective, we
start with rental tenure. With the
exception of Cape Breton and St. John’s, vacancy rates are low across the
selected cities.
Source: CMHC (annually in October)
At a provincial level, in October
2020, there were just over 3,000 vacant rental units in Atlantic Canada, of a
total rental universe just shy of 114,000 units. Once those 3,000 units are sliced and diced
by price, style, and location, availability is probably problematic.
Source: CMHC (October 2020)
For residential sales listings, we
have to rely on data for Nova Scotia only, due to availability, but we suspect
that a similar pattern will be in evidence in the Maritime provinces at least. Prices continue to climb in 2021, but it
appears that the supply-side driving force behind that trajectory may no longer
be in play: the number of listings for the period 1st January to 16th
June in 2021 was greater than any other year in the past five years,
versus 2020, which had the fewest listings of the five years.
 But what about affordability of
these available houses? That’s a
question that could have many answers – in that it can be answered in a myriad
of ways. We’ve opted for a very simple
one, using price points of affordability for the median household income under
two interest rate scenarios: the current posted rate and a current available
discounted rate, and ignoring down payments because we’re more concerned with
monthly costs in this analysis. We’ve also ignored time – and changes to
mortgage rates and income levels over its course, for illustrative purposes
(horseshoes, hand grenades, and this blog post).
Median Household
Income
|
$67,115
|
30%
|
$20,135
|
Monthly
|
$1,678
|
Mortgage amount @ 1.68% (discount rate)
|
$410,793
|
Mortgage amount @ 4.79% (posted rate)
|
$293,120
|
Mortgage rates from ratehub.ca
Let’s just pause on the one-hundred-and-seventeen-thousand-dollar
difference in what is “affordable” under those two rates. In some areas, you could buy a house for
that. Maybe not for much longer, if
interest rates stay low, but there are rumblings from economists that as
interest rates rise, the “affordability” of houses will contract and what some
fear is a housing bubble, may burst.
The second half of 2021 is yet to
be, so here are the Nova Scotia listing counts annually to 16th
June. A few things jump out: (1) there were more listings in the first
half of 2021 than in the same period of any other year in the past five (we
already knew that from earlier); (2) other than at the outset of the pandemic,
when home was so distinctively the safest place to be and few wanted to let
strangers walk through theirs, 2021 had the fewest listings below the posted
interest rate affordability threshold; and (3) 2021 had the fewest listings
below the discounted interest rate affordability threshold, full stop.
 Source: NSAR MLS®, with affordability
thresholds calculated using data from Environics Analytics via Sitewiseweb;
and ratehub.ca.
Back to that mention of localized
median household incomes. In the absence
of sufficient NOAH (Naturally Occurring Affordable Housing: see TDP VP Neil
Lovitt’s excellent blog from earlier this year) in the region,
programs that encourage affordable units in new developments are an important
part of the solution moving forward.
There’s a knife edge on which
balances the costs of development with what is affordable to those who need
non-market housing. It is highlighted by
reaction to a recent announcement of a sizable federal loan on a new apartment
building that will be approximately one-quarter designated affordable units. They’ll be priced in relation to the median
income for the area, which has generated a fair bit of blow back (to be fair: the
perception of how widespread negative reviews of policy are is almost certain
to be skewed, since those who really disagree are far more likely to speak out
against it, while those who agree or are neutral have less incentive to chime
in on the discussion). The issue they
raise is that the local (Halifax) median income referenced is close to $90,000
(as in, one large Costco order close to), so the affordable units could be
priced as high as $2,238, though most are actually going to be less than that
since the agreement includes provision for a further discount to the 30%‑of‑median‑income
standard. The underlying questions in
the flak are really: is median income a reasonable metric on which to base
affordability measures? And what median
should be used? And is there any
relationship between the maximum “affordable unit” price tag and unit size? One-bedroom versus four at $2,200 is a
pretty substantial difference.
There’s a geographic driver of
housing prices, and it costs more to commute less, generally. Maclean’s magazine published an analysis in 2014 that showed a minute of driving time
could save you thousands in housing costs.
Inspired, we devoted a TDP Trends to the topic; with some variation, in general,
the farther you get from the downtown core, the less expensive houses are.

Source: Turner Drake & Partners Ltd. (2015)
This is relevant to a discussion of
housing that is affordable, attainable, and available because cars are
expensive to own and operate. Pushing
affordable housing to the far reaches of the city, where transit options are
limited/nil (and don’t forget that commute times via bus are going to be
longer), is short-sighted at best, and counter-productive at worst. But median incomes are likely higher where
housing prices are higher, whether that’s localized within a city, or the city
median is used in lieu of the provincial one.
Is there a conclusion? Not in terms of a solution. But an acknowledgement of the complexity of
the issue, and the fact that a broad stroke approach to the metrics may provide
little in the way of assisting those who need support to find and keep suitable
housing that fits both the budget and the family structure. That, and the fact that “affordable housing” as defined, is only of
use if it is also attainable and available.

Turner Drake refines high-level,
surface-scratching analyses like the foregoing, into fine-grained, location
specific consulting assignments, including market and non-market housing supply
and demand analyses throughout Atlantic Canada, and Housing Needs Assessments
from coast to coast. To see how we can
provide solutions to your real estate problems, you can reach Alexandra Baird
Allen at (902) 429-1811 or abairdallen@turnerdrake.com.

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.
James Dunnett is
a Consultant in our Brokerage Division and has extensive experience in handling
complex leasing and sales transactions. If you need help managing your leasing
requirements, or are interested in purchasing or selling a commercial property,
James will be happy to assist you through every step of the transaction.
Contact him at (902) 429-1811 or jdunnett@turnerdrake.com.

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

From the tip of the Tuskets to the briny Bras d’Or, Nova Scotia hosts a buffet of islands along the coast and in our many inland lakes. They provide visitors with a glimpse of wild beauty and an air of mystery; offering fantasies of self-isolation in a rustic cabin, or (in rarer cases) a self-sustaining luxury compound in the sea. There is no denying the unique appeal of an island property: every trip is a journey and the setting is ripe for peaceful contemplation and an escape (geographically) from it all. But not all islands are created equal, and one person’s paradise is another’s bare rock suited more to the gloomy vibes of a horror film à la The Lighthouse (filmed, incidentally, in the almost-an-island Cape Forchu near Yarmouth, NS). On occasion we are tasked with placing a monetary value on islands in Atlantic Canada, and though it feels crude to reduce these special places to dollar signs, our valuation crew is beholden to the oath of Market Values and Highest and Best Use. So, what factors into such an assignment? Before I jump into my canoe or take to the sky for the inspection, here are some considerations rolling around my head: Location The classic axiom of real estate applies most strikingly to island properties. An island located many kilometres out to sea will attract a much smaller pool of potential purchasers than an island within a leisurely boat ride of the mainland. For every additional hour spent travelling to an island, the cost of fuel, and risk of weather increases the difficulty in visitation and greatly increases the cost to move construction materials. For this reason, inland islands (on mainland lakes, or the Bras d’Or Lake) are generally more accessible and desirable than their oceanic counterparts. Amenities What better accessory for your yacht than a private island? Islands located near marina facilities, yacht clubs, and other services are immediately attractive to folks who enjoy Nova Scotia’s sailing culture. This trend is best revealed in the market for islands between Lunenburg and Chester on Nova Scotia’s South Shore. Here you will find the most expensive islands in the province, adorned with multi-million-dollar estates including the recently purchased “Kaulbach Island”. With a price tag of $4,000,000 this property includes multiple high-end buildings, deep anchorage, and a farm to keep you stockpiled in the event of any cataclysm (yacht not included). Waterfrontage Sandy beach or granite cliff? Both offer beauty but it is the former which is sought most by island purchasers. Valuing an island property often involves two key unitised elements: the “Basic Land Value” captures the uplands which tend to vary in quality based on vegetative cover, topography, etc. and are expressed as a value per acre; and the “Waterfront Benefit” which varies based on coastline material (sand, stone, boulders, etc.), accessibility, topography, and aesthetic appeal; and is expressed as a dollar amount per linear foot of water frontage. Breaking down value into both the Basic Land Value and the Waterfront Benefit is one of the ways we can leverage past sales of islands (which are inherently unique) to provide an estimate for islands yet to be sold. Ecological Interest As with many assignments involving wild places, the cold calculus of valuation has a redeeming quality when it can be leveraged to protect the land for future generations. In Nova Scotia, organisations such as the Nova Scotia Nature Trust, Nature Conservancy of Canada, Ducks Unlimited, and the Provincial government have created a market for islands which explicitly recognises their ecological significance. Islands which might otherwise be used to dry fishing gear can be justified with a Highest and Best Use “for conservation use” when there is demonstrable demand for islands hosting birds, mammals, and plant life unique to these coastal oases. It’s a small step, but by establishing conservation as a legitimate Highest and Best Use (backed by market data) we are opening a door to recognising the intangible values and relationships we have with land. It is this humble appraiser’s hope that one day the valuation process will broaden even further, allowing for the legitimate weighing of non-market values and against the rigid confines of what is merely “financially feasible” or “legally permissible”. Perhaps we can one day pit the spiritual value of land against its extractive value. .png)
James Stephens is a consultant in our Valuation Division and is heavily involved in the valuation of lands for the provincial governments, private land owners, and land trusts including the Nova Scotia Nature Trust, Nature Conservancy of Canada, Annapolis Valley Farmland Trust, and the Island Nature Trust. For more information about our range of Valuation® services, valuations for land donations, feel free to contact James at (902) 429-1811 or jstephens@turnerdrake.com.
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:  Again, the pandemic has had an understandable dampening effect as travel
has become restricted and classes moved online, but this is a temporary blip. With
sanity restored to the White House, however, it will be interesting to see how
quickly, and to what extent, this trend recovers in Canada.
Added together, we get a picture of population
growth which has been driving strong housing demand for a period well before a
coronavirus turned the world upside down.

In fact, the pandemic
has decelerated the net impact of these demand drivers, evidenced in CMHC’s
2020 Rental Market Survey which found apartment vacancy in Halifax rising
significantly from its previous record low… though it remains too low.
SUPPLY RESPONSE
All of this new
population needs shelter, demand requires supply. Adequate housing supply, in
and of itself, does not solve all housing challenges. However, making sure we
are expanding our housing inventory in pace with our population growth is a
fundamental piece of the puzzle solving some issues, and making many others a
lot easier to deal with. Supply and demand interact like tectonic forces in
housing markets, any of the other actions we might take are done in their
context. Let’s take a look at the Halifax area, which is generally where most
of the province’s population growth is landing. How have we been doing? (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.)
Not good.
Typically, it would be
excessive to examine this data over a 30-year period, but here it is necessary
to show just how unprecedented the current growth disparity between people and
shelter is in Halifax. For the entire time series Halifax only rarely approached
– and never exceeded – an even level of housing construction for each household
added to the city. Each time that it did, the industry responded with stronger
building rates. This is important as demand is also increasing from shrinking
household sizes within the existing population in addition to this incremental
demand from growth. In 2016 Halifax blew past that previous ceiling, adding
more households than houses for the first time in at least three decades, and
more importantly, sustained these historic levels of under-building for 5 years
and counting! The first rule of getting out of a hole is to stop digging.
CREDIT
As debt becomes cheaper
to carry and more easily accessed, it inflates the value of assets. Falling
yields on risk-free vehicles like government bonds drive investors to seek
higher returns, and the same low rates that motivate this behavior mean the
system is flushed with credit on which to acquire these assets. For decades,
interest rates have been in secular decline, and this was accelerated
significantly in 2009 when the Great Financial Crisis ushered in the era of
emergency near-zero rates which have seemingly evolved into permanently low
rates. Or perhaps the emergency is now permanent, it is sometimes hard to say.
Real estate is an
illiquid asset, which means transactions in the market are heavily influenced
by the marginal buyer; those who are willing and able to outbid all others for
the property, and thereby set the bar for valuation. We observe the impacts of
this monetary policy context clearly in the commercial real estate sector as cap
rates have compressed, amplifying the market value of properties
independent of changes in the income they generate. A similar effect is felt in
the residential sector, where increasing mortgage credit acts as an accelerant
in any market with a whiff of demand, launching prices higher, even as the
incomes that support them lag.
The chart below shows
the results of a simple model that applies typical mortgage parameters to
annual house price, income, and interest rate data to plot the changing
relationships between income, purchase price, and mortgage carrying cost. In
the data since 2000, incomes have increased by about 70%, new house prices by
200%, and average interest rates have dropped by 50%. 
The resulting price to
income ratio skyrockets by nearly 190 percentage points as a result. However,
the countervailing force of loosening credit means the actual carrying cost of
that price, which is what households actually pay (because we don’t buy homes,
we buy mortgages), is only up 5 percentage points over the same period and
generally fluctuates up and down within a tight 15 point range.
This is the critical
mistake made by those who talk about housing prices as being “detached” from
incomes. House prices are attached to incomes, firmly, by the sinews of credit.
As it has eased, that connection has lengthened, but the relationship is just
as firm. In fact, it is more accurate to describe this relationship in the
inverse; it is largely because interest rates have fallen that prices
have gone up! If interest rates were to reverse their long-standing trend, we
would see how quickly this detachment narrative disappears.
DISAPPEARING NOAH
Naturally Occurring
Affordable Housing, in housing policy parlance, is a somewhat new and
misleading term that basically refers to unsubsidized housing that exists
within the private market at a relatively affordable price. Think classic
shoebox 3-story walkup apartment buildings (though it can come in any form). Without
non-market interventions such as capital grants or operating subsidies, this
housing is affordable mostly because it is less desirable relative to other
options in the market, and this is principally a function of when it was built.
Buildings go down in relative value over
time, or depreciate in valuation parlance, because they go out of style, they
get rundown and tired, they lack design features and amenities that more recent
buildings have, they are more likely to suffer pest nuisances… if competition
is the mechanism by which markets work, these buildings are losing the
competition.
This part of the
housing inventory is critical for those employed in entry-level positions or
lower-income industries. However, as NOAH is still firmly within the housing
market, it is subject to market forces. In times of growing demand, the lower
end of the market is generally where renovations and recapitalizations become
feasible first. In and of itself, this is a good thing. We want our building
stock to receive reinvestment and cycle back up through the market instead of
declining into uninhabitability. However, that idyllic impression of market
function is running into some cold realities.
The first is a quirk of our development history.
The chart below shows the distribution of apartment inventory in Nova Scotia by
building age (we have removed the comparatively minor contribution of buildings
built pre-1950 for the sake of our x-axis). With regular maintenance and the
occasional replacement of major building systems like roofs and HVAC, that
typical midcentury shoebox building may be expected to last 50 or so years
before a complete revamp is required to extend its lifespan.

At any given time there
is a continuous stream of building stock aging down and being recycled back up
through the market, but a disproportionately large section of the apartment
inventory is now coming due. Units constructed during the boom of the 70s are
turning over, and there are far fewer units next in queue replace them at the
bottom. Particularly cruel examples notwithstanding, this dynamic is largely
responsible for the increasing prevalence of “renoviction” stories that we’ve
seen in the media over the past couple years. Our total supply of NOAH is
dwindling.
INCOME INEQUALITY
The second reality affecting
the ability of NOAH to adequately serve lower income households is the fact
that those households are falling further behind. The majority of households in
rental housing are in the bottom 40% of the income distribution. The chart
below shows how incomes (adjusted for inflation) have changed over time. 
This of course does not
reflect the added issue of declining income mobility, highlighted in recent
research from Statistics Canada. Still, even this
incomplete picture is concerning: over four decades real family incomes in this
lower 40% have, at best, increased by less than $4,000 or about 0.26% per year.
Unfortunately, the operating expenses of the buildings they occupy (property
taxes, utilities, construction materials, insurance premiums, contractor and
trade labour, etc.) are growing at a much higher rate. Compounded over decades
this means rent in stable, older buildings – even if run on a break-even
financial model – will increasingly outpace the ability of many renter
households to afford them.
This is mostly a
renter’s issue, but it affects those in owner-occupied housing as well. Though
interest rates have maintained affordability in the carrying costs of mortgages,
other costs associated with home ownership, such as down payments, have become
increasing barriers to entry. Ultimately, the spectrum of the population that
the housing market serves is getting narrower, and a big part of that issue (especially
the “crisis” part) is due to stagnant household finances and stagnant social
supports as inequality in our society grows.
SUPPLY OF NON-MARKET
HOUSING
The third reality is
the availability of housing options for those who are finding themselves
outside of the limits of the market. Canada as a whole has not engaged much in
the production of social housing, especially since the late 80s and early 90s
as the federal government unwound their previous decades of involvement. Yet,
even by these low standards Nova Scotia has the dubious distinction of being
the second worst province in terms of adding to its stock of non-market housing
since 1990: 
A brief pause here to look
over the rim of my glasses at New Brunswick which has apparently built all of
thirteen (!) units in the last three decades. This data is from CMHC’s
inaugural Social and Affordable Housing Survey, so hopefully in future updates
more units will be identified.
Barely more than 7% of Nova
Scotia’s non-market inventory has been built since the 90s, and I would wager the
proportion for more recent decades is closer 0%. Over this same timeframe, all
housing completions tracked by CMHC totaled nearly 98,000 units, meaning only
0.93% (910 units) of what we’ve built has gone towards increasing our
non-market inventory.
Now, this is at least
somewhat understandable. Up until recently Nova Scotia has been able to coast
along without too much trouble thanks to stagnant population growth and the
ability of NOAH to take considerable pressure off the waitlists for non-market
options. Well, those days are over. If there was one thing the Province could
do without having to wait for their Affordable Housing Commission to tell them,
actually increasing the inventory of social housing would be it!
IMPORTED DEMAND
Finally, we get to the
Boogeymen. For those who subscribe to the “detachment” perspective described
earlier, the thought process is straight forward enough; if local fundamentals
are not viewed as an explanation for housing costs, logic dictates that
something else must be afoot. There is a fairly large goodie bag of these
something-elses, but they are always fundamentally about pathways for external
demand to enter and distort local market conditions: money laundering crime
lords, capital from unstable regions flying to the local real estate of safer
countries, foreign and local speculators turning houses into tax-advantaged
capital gains, Wall St. and Bay St. financializing local housing in order to
transfer wealth from residents to shareholders, wealthy tourists displacing
locals via AirBNB conversions.
Like any good story,
there is always an element of truth at the core. And like any good Boogeyman, a
lack of information prevents us from ruling them out entirely. The issue with these
explanations is not whether they are completely fabricated; most are true to
some degree and documented to have occurred somewhere at some time. The issue
really is whether they are happening locally, and if so, are they to a degree
that would have a material effect. In our view, there are enough conventional
and locally-based explanations for our housing conditions in this region.
Occam’s Razor and all that…
Having said that, we
fully agree with at least one of the proposed mechanisms by which outside
demand has been imported into our local markets: the proliferation of
short-term rentals. The number of housing units in our communities now
dedicated exclusively to providing short-term accommodations on a commercial
basis has exploded since the global advent of AirBNB and its imitators just a few
years ago. While there are some interesting and ultimately beneficial facets to
this trend, what demands the most attention currently is the resulting reduction
in housing supply available for traditional forms of tenancy. In response, we
have invested in access to world-leading data services covering this new sector
of the real estate market. Currently we have market data coverage for all of
Nova Scotia at the individual listing level, updated monthly. We have a few interesting
extra-curriculars in the works for this resource, but alas, these are busy days
and client needs come first (seems like a certain provincial government should
be beating down our door on this one, but I digress). In the meantime, here is
why Short-Term Rentals have our attention: 
This chart shows the growth of
housing units (CMHC tracked housing completions) against growth in what we
estimate to be commercially operated STR units (i.e. entire-home AirBNB
listings that spend the majority of the year available on the platform rather
than housing a long term resident). Starting with only a couple hundred in
2016, commercial STRs have grown rapidly, peaking at nearly 1,700 units in
2019. This negates about 18% of the 9,300 housing units completed in the
municipality over the same timeframe. In a time when we need all the supply we
can get, this is an unnecessary headwind. At the same time, these overall
numbers are not earth-shattering; it’s hard to imagine that conditions would be
that much different if the industry had been able to pump out 11,000
units instead of 9,300 over those three years.
However, those are the overall
numbers. The short-term rental market is not dispersed evenly throughout the
housing market, it is having vastly different impacts within Halifax. Some
locations have no loss of housing availability, others are under significant
pressure. To illustrate, though STR units peaked at 18% of completions for HRM
overall, if we narrow our analysis to just the Peninsula, that figure jumps to
about 30%. You can imagine how that may escalate further looking at some of the
high-demand neighbourhoods.
More on that in the future. [1][2].jpg)
Whew, you made
it to the end, but when it comes to housing issues there are no shortcuts! This
is an immensely important challenge and we’re trying to do our part. We are
proud to support the work of Nova Scotia’s Affordable Housing Commission
through our involvement in their Data and Financial Modelling Working Group. Of
course, Turner Drake is also engaged in numerous consulting assignments,
including non-market housing feasibility studies, and Housing Needs Assessments
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.

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
Photo
Credit: istockphoto
The Asking Price is a critical element when
listing a commercial property. If it is too low you may under sell your
property. If it is too high it will scare away prospective purchasers and the
listing will go stale: it may then be necessary to withdraw the property from
the market and re-introduce it at a later date, or alternatively reduce the
price substantially to reignite interest. But while property sells at Market Value, owners often measure its
worth in terms of Intrinsic Value. This
can give rise to a difficult conversation between real estate broker and
property owner.
Market
Value
is generally defined as "the most probable price which a property should
bring in a competitive and open market as of the specified date under all
conditions requisite to a fair sale, the buyer and seller each acting prudently
and knowledgeably, and assuming the price is not affected by undue stimulus”.
More specifically, market value is based upon a property’s Highest and Best
Use. The Highest and Best Use of a property is the probable and legal use of
land, or an improved property, that is physically possible (what can be
physically built on the site?), legally permissible (what uses are permitted
under the current zoning?), financially feasible (will the purchaser achieve an
acceptable return within a reasonable investment horizon?) and maximally
productive (what use generates the highest return?). Simply put Market Value is
the highest price attainable assuming the property is expertly marketed to the
widest pool of prospective, knowledgeable purchasers.
Intrinsic
value
is the owner’s perception of the inherent value of their property to them. This
value can be based on the actual amount of money they have invested in the
asset, any sweat equity by the owner, emotional attachment, or just their
perception of current market conditions. Sometimes the property owner may be
constrained by the debt burdening the property, or the net cash they need to
realise on sale after paying capital gains tax and transaction costs.
How do you bridge the divide between Market
and Intrinsic Values? It starts with the acceptance by both parties, broker and
property owner, that they have a common goal… to sell the property on the most
advantageous terms to the owner. Before we undertake to market a property for
sale, we sit down with the owner (vendor) to go over the marketing plan for their
property, the pricing strategy, and the listing agreement, to ensure the vendor
understands the selling process and each party’s obligations under the contractual
arrangement. Since an appropriate asking price is critical, we research the
property, its zoning and planning considerations, and sale prices of comparable
properties, to develop an asking price based on the Market Value. Because Intrinsic
Value frequently differs from Market
Value the vendor may have price expectations that cannot be realised on
sale and it may be better to withhold the property from the market until prices
increase…. realising of course that there is always the risk that prices may
fall too, as is the case currently in some market sectors. However if the owner
is serious about selling, it is imperative that the asking price be reflective
of Market Value plus a negotiating
buffer (every purchaser likes to feel like they have negotiated a good deal for
themselves). Otherwise, the overpriced property will sit on the market and become
stigmatised: potential purchasers will wonder why it has been on the market for
longer than is typical, if there is something wrong with the property, or will want
to try to use the long marketing exposure as negotiating leverage. On the other
hand if a property is reasonably priced and is properly exposed to the market,
a vendor will have much better chance of consummating a sale at a price, and
within a time frame, that optimises their sales transaction.
Reduce
Stress: Live Longer
Selling your property, even commercial real
estate, is rarely anybody’s idea of fun… so we have compiled a list of the
difficult questions you meant to ask your real estate broker but were too
embarrassed, simply forgot… or did not know you should ask. Questions such as “I don’t want my staff to know I am selling:
what can I do to keep it quiet?” or “I
am already talking to a prospective purchaser: do I still have to pay you a
commission if I sell to them?” and even “Why do I need a real estate broker anyway?”. Better still we have
provided our answers in the way we do best… frank, forthright and brutally
honest! Call or email me, I will happily send them to you. 
As Senior Manager of our Brokerage Division, Ashley Urquhart assists both landlords and tenants meet their space requirements, and vendors and purchasers optimise their property portfolios. For more real estate brokerage advice, you can reach her at aurquhart@turnerdrake.com or (902) 429-1811.
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.

Given the ongoing COVID-19 pandemic, and the attempt to abide by physical distancing protocols, employers worldwide have been forced to encourage remote, work-from-home policies. According to StatsCan, 32.6% of companies reported 10% or more of their workforce were teleworking in the month of May, compared with just 16.6% in February. Furthermore, 22.5% of companies expect 10% or more of their staff to continue working from home post-pandemic. It’s a typical noon hour on the fourth floor of your apartment building, and you’re finishing up a conference call while lunch simmers on the stove. The kids are racing around the apartment while the laundry machine chugs through the spin cycle. There’s a knock on the door - another amazon delivery… Sound familiar?! Working from home has allowed significant flexibility in a world of fast-paced multitaskers however; it also raises concerns surrounding at-home fire emergencies. Building owners, managers and insurance companies are quickly growing concerned as the slightest distraction can have severe (and sometimes fatal) consequences. A recent article by Greg Meckbach of the Canadian Underwriter noted that the number of fatal at-home fires in Ontario has risen by 65% compared to this time last year. Local sources including the Halifax Fire Investigation Summary also highlight this issue, shedding light on the growing frequency of fires in predominately multi-residential apartment buildings across the Halifax Regional Municipality. It is crucial that building owners ensure the safety of their residents by establishing a formal fire emergency and evacuation plan. To the surprise of many, this is also a requirement set forth by most municipalities and within the National Fire Code of Canada (see our March blog post for specific details/requirements).

Sadly, the majority of buildings do not have adequate fire plans or procedures in-place. These protocols are an added level of insurance that are typically overlooked until it’s too late. Now more than ever, apartment owners and managers should be establishing or reviewing existing fire protocols for their buildings. We also suggest reviewing your current fire insurance policy to ensure you are equipped with adequate coverage. On the face of it, these suggestions may seem like an added expense however; they could be invaluable in the event a fire arrives at your doorstep. In my dual roles of Manager of Turner Drake’s Lasercad® Division and consultant in our Valuation division, I have experience in both the preparation of Fire Escape floorplans, and the completion of Fire Insurance reports. I have worked with a number of building owners and managers to implement Fire Safety Plans in apartment buildings throughout Atlantic Canada. If you have any questions regarding our Fire Safety Plans or how to go about reviewing your current Fire Insurance coverage for your property, feel free to contact me at 902-429-1811 or mjones@turnerdrake.com
.jpg)

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. 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; 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.
[1].jpg)
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 19th 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”. .jpg)
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. 
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

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. .png)
James Stephens is a consultant in our
Valuation Division and is heavily involved in the valuation of lands for the provincial
governments, private land owners, and land trusts including the Nova Scotia
Nature Trust, Nature Conservancy of Canada, Annapolis Valley Farmland Trust,
and the Island Nature Trust. For more information about our range of Valuation®
services, valuations for land donations, feel free to contact James at (902)
429-1811 or jstephens@turnerdrake.com
In light of ongoing coronavirus pandemic, we are writing to update you on how these recent events are affecting our work. Overall, you should know that Turner Drake & Partners Ltd. is adapting to the situation and we remain open and available to assist you with your real estate needs. The effort to slow the progression of COVID-19 is of critical importance, and we are proud to do our part. Turner Drake is following the most current recommendations and direction from the appropriate government authorities, and has taken steps to ensure the safety of our personnel and clients. This means we are conducting our operations in new ways, including implementing flexible and remote working options for staff, enacting stricter office cleaning and hygiene protocols, and practicing social distancing when staff are present in the office. It also means we are modifying our procedures for how we serve our clients, including minimizing in-person meetings, making greater use of teleconference and screen sharing systems for interactions, and working with you to implement proper sanitation and distancing practices when our work takes us to your site. The Client Area of our website allows you order new jobs, monitor the progress of existing assignments, and transfer large files through the Drop Box option (don’t worry—our Client Area has a password recovery tool if you have misplaced yours). If you do not yet have access to our Client Area, you can also order new jobs through the “Contact Us” portion of our website www.turnerdrake.com. If you would like to meet in person, please contact us in advance so we can make arrangements. Turner Drake’s mission is to help solve your real estate problems, and we will continue to live up to that while also rising to this public health challenge which demands action from us all. Our consultants are proactively contacting clients where these new practices will impact ongoing assignments, and we welcome any questions you may have currently, or in the future as this situation evolves. Thank you for your understanding and cooperation, and we promise to extend the same as all of us adjust to this unprecedented and rapidly changing situation. Best wishes and good health. |

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.
Andrew Savoy 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, including Fire Safety Plans, feel free to contact Andrew at (902) 429-1811 or asavoy@turnerdrake.com

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 (+/-1/3rd) 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. .jpg) 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.
[1][2].jpg)
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.
Nigel Turner, Vice President of our Valuation Division, can be reached
at nigelturner@turnerdrake.com

On Wednesday September 4th, 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 1/3rd 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. .jpg)
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. [1].jpg)
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.

“How much? Get out!” (followed by the noise of a slamming door). Another day in the life of the hapless land agent, doing his level best to get the most for the least. At least that’s the common perception, but here at Turner Drake we approach things a little differently. Our team of Land Agents follow the concept of “principled negotiation”, not positional bargaining. And it works. We are routinely retained to provide Land Agency services under contract to governments and corporations, who are increasingly out-sourcing this type of work to the private sector. The projects we work on are large and small, involving anywhere from half a dozen to several hundred different property owners, and our mandate is simple: negotiate fair deals for the purchase of land interests to support infrastructure projects. Without upsetting anyone. Roads and transmission lines are especially popular these days. Seems we just can’t live without them. These are corridor acquisitions: mile after mile of trees and fields with the occasional home or business. All neighbours. All savvy negotiators. And all deeply suspicious of strangers who turn up on the doorstep bearing gifts. So our approach must respect that and we have developed a simple formula built around three principles: Consistency We can’t divulge offers and settlements to neighbours. It’s a privacy thing. But we expect that neighbours will talk as soon as we leave. In fact we encourage it. They can compare figures if they like, essentially testing our integrity to see if anyone got a better or worse deal than the others. And therein lies the challenge with corridor acquisitions. Those at the end of the line must be treated the same as those at the beginning; those who settle quickly must be treated the same as those who hold out for more; those who shout must be treated the same as those who whisper. Sure, there are perfectly valid reasons for paying different amounts, but it can’t be arbitrary. It must be explainable. It must be credible. And it must be fair. Transparency We go to great lengths to make sure landowners understand what is happening and what is going to happen. Large infrastructure projects will already have gone through a very public process by the time we get involved and many landowners will have attended open houses …. and perhaps already made their views known. But the regulatory framework for compensation and landowner’s rights under the law are usually a mystery. We explain them. Fully. Our team of Land Agents are trained negotiators with the support of an entire team of in-house professionals to draw on. So we don’t present take-it-or-leave-it offers. We explain how they are calculated, usually by reference to a base-line appraisal or a third party site-specific appraisal. All of which is revealed to the landowners so they too can see how the calculations are made. Respect It goes without saying but we’ll say it anyway. Every landowner has a story to tell and it is our job to listen. Respectfully and with an open mind. Of course we don’t believe everything we hear, but invariably we will learn something from everyone just sitting around their kitchen table. Eating the free cookies. Most people just want their voice to be heard, and anyone who is being asked to give up their land against their wishes deserves to be heard. We call it respect. It builds trust and it leads to mutually agreeable results. And that’s all we’re looking to achieve. Without drama. Without the slamming of doors. .jpg)
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
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.
 Age distribution in Nova Scotia
(Source: Statistics Canada Population Estimates)
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. 
Population change 2011-2016, Statistics
Canada 2016 Census
Just 29% of Atlantic Canadian Baby Boomers would consider purchasing a
condo, the lowest rate in the county.
Recall that the stat comes from a survey of home buying intentions…and recent trends have been for downsizers to opt
for rental apartments over condominium apartments. There is certainly incoming supply of
apartment units: CMHC statistics on housing starts over the past few decades
show a distinct shift from single-family construction to apartments: 

…though the rest of Nova Scotia is a different story:

The breakdown of the same housing start data shows a distinct rental
intention:

…which again is driven almost entirely by the Halifax pattern:

...while the rest of the province still shows a clear preference for
offering options for home ownership, with very little constructed for either
the rental or the condominium market:

On the demand side, the province appears largely influenced by the
statistics for Halifax, with vacancy mirroring the same ups and downs over the
past three decades, though vacancy is a bit tighter in the city (overall 2% in
NS and 1.6% in Halifax in October 2018).
Demand is strong: vacancy rates have been falling since 2014, even as
the inventory of rental units has been steadily increasing.

In the years ahead, expect continued growth in demand for higher
density residential forms, especially of the rental variety. This trend is driven by the Halifax market,
and offers an appealing lifestyle (low maintenance, low commitment), combined
with the option to live off the equity unlocked from the sale of the family
home. It is not far-fetched to
extrapolate that demand for multi-unit rental apartments may also exist in
smaller municipalities in the province, but that rural housing economics (lower
housing prices but similar construction costs) have thus far constrained the
supply side of the equation.
Turner Drake & Partners’
Economic Intelligence Unit follows closely trends in real estate and the
factors that can impact its value, from demographic patterns and preferences,
to climate change. Custom reports
translate data into conclusions. For
more information on how we can assist you, please call or email Alexandra Baird
Allen: 902-429-1811 x323 or abairdallen@turnerdrake.com.
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 [1][2].jpg)
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.

Specific Claims are launched by a First Nation band against the
Government of Canada for historic grievances, typically over issues like
unfulfilled treaty obligations, loss of reserve lands and mishandled First
Nation funds. The most common cases that cross our desk involve the sale of
reserve lands by the government of the day without the Band’s consent, either
because it was never surrendered by them or because it was invalidly surrendered.
The events are always historic and quite often pre-date Confederation
– a time when settlers were actively seeking to establish themselves in the new
world and the government of the day was eagerly trying to accommodate them
through grants and leases of land. And
sometimes that happened to be unsurrendered reserve land.
Those readers with a penchant for all things historical will find
interesting reading on the origins of these claims by researching King George III’s
“Proclamation of 1763”, issued in those turbulent times of squabbling between
the French and the British. It imposed a fiduciary duty of care on the Crown
which endures to this day, and is enshrined in the Constitution Act of
1982. Heady stuff.
Our involvement in these files begins when the historical research has
been done and the claim has been accepted by the government for negotiation.
The stage is then set for negotiations to begin over the amount of compensation
that the FN should receive from the Government of Canada.
The structure within which these negotiations take place is laid out
in federal government guidelines. The first, released in 1982, set out the
policy on specific claims and established guidelines for the assessment of
claims and negotiations. These were tweaked under successive governments but
the fundamentals remain the same. They
can currently be found in the document entitled “Specific Claims Policy and
Process Guide”, available online and currently (still) under review.
We have been actively engaged on claim files in the Maritime provinces
since the company began over 40 years ago – impressive, but a mere blink of the
eye within the context of the time periods actually covered by these types of
claims. Our involvement occurs in one of two ways. 1.
As an independent Consultant, hired under a
joint terms of reference to calculate the ingredients of the claim, which then
forms the platform for negotiations between the parties. 2.
As a Technical Expert on behalf of the First
Nation, advising their negotiation and legal team on the technical aspects of
the claim, ensuring that the process follows the guidelines and that the FN
receives the compensation it is due.
We have represented (or continue to represent in currently active
claims) over half a dozen First Nations throughout NS and NB, usually in the role
of Technical Expert.
The structure of a claim is set out in the guideline and usually there
are two components, calculated separately but intrinsically linked through the
historical record. (1) Current Unimproved Market Value - Where a
claimant band can establish that certain of its reserve lands were never
lawfully surrendered, or otherwise taken under legal authority, the band shall
be compensated either by the return of the lands or by the current unimproved
value of the lands. A relatively straight forward process….. (2) Historical Loss of Use -
Compensation will include an amount based on the loss of use of the lands in
question, where it can be established that the claimants did in fact suffer
such a loss. This can include losses from timber, agriculture, minerals and
aggregates, fishing rights, land rental losses and a myriad of other
components. A far from simple process,
often involving experts from different fields … and forests. The claim clock
begins when the lands where first taken – usually 100 years or more in the
past.
The process is not a quick one.
Reconstructing historical events – and placing a value on them - takes time and
diligence. This is no splash-and-dash
appraisal job. And rightly so because
there is much at stake here. Claims typically run into the millions of dollars
and the calculations behind them must withstand robust scrutiny by both
sides. The cost of righting past wrongs
does not come cheaply – or quickly. .jpg)
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

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!
[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.

Alex Baird Allen is the Manager of Turner Drake's Economic Intelligence Unit, and has a high level of expertise and interest in GIS. If you'd like to reach Alex, call 902-429-1811 Ext.323 (HRM), 1-800-567-3033 (toll free), or email ABairdAllen@turnerdrake.com

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 25th. 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 1st.
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.
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.
.jpg)
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.
Looking for explanations on the different types of values listed
above? Visit our Valuation and Advisory
Services site https://www.turnerdrake.org/WhichValue for more information on the various types of values.
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:
 Allocation of
Common Area
Under the Office Standard, building
owners can allocate to each tenant their proportionate share of common area. This
process of “grossing-up” the tenant’s space means each unit has two areas: a Tenant Area (the space physically occupied
by the tenant), as well as a Rentable
Area (the Tenant Area plus a proportionate share of common space). In a retail building this is not the case, as
this Standard does not allow for the grossing up of common areas. Under the
Retail Standard, Gross Leasable Area is simply the area designed for the exclusive use of an occupant with no share of
common area.
Consider a hypothetical office
unit with a Tenant Area of 1,250 ft.2 located within a building that
contains three additional units of the same size and 200 ft.2 of common
area. Each unit comprises ¼ of the total
Tenant Area, and is allocated 25% of the common area (25% x 200 ft.2
= 50 ft.2) making the Rentable Area of the unit 1,300 ft.2
(blue overlay on left side graphic below). If this were a retail building the
Gross Leasable Area would be 1,322 ft.2 as this unit would simply be
measured to the exterior face of all exterior walls, while excluding any allocation
of building common areas (green overlay on right side graphic below).

These are just two of the many
differences between the Retail and Office Standards. With a total of six BOMA Measurement
Standards it is critical to verify that the correct standard has been applied
to your building, and that your space has been certified to verify its accuracy. Mitchell Jones splits his time between Turner Drake's Lasercad® and Valuation Divisions. For further information feel free to reach out to him, or any one of our space measurement experts at (902)-429-1811 or toll free at 1-800-567-3033.
On
February 5th, 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
t | |