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Turner Drake & Partners Ltd.
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Tel.: (902) 429-1811
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# Monday, March 30, 2020


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.

Monday, March 30, 2020 12:14:06 PM (Atlantic Standard Time, UTC-04:00)  #    -
Atlantic Canada | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Turner Drake
# Thursday, March 12, 2020

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
Thursday, March 12, 2020 10:33:01 AM (Atlantic Standard Time, UTC-04:00)  #    -
Atlantic Canada | Lasercad | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Property Tax | Turner Drake
# Monday, March 2, 2020

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.  

  

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

Monday, March 2, 2020 10:38:48 AM (Atlantic Standard Time, UTC-04:00)  #    -
Atlantic Canada | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Property Tax | Turner Drake
# Friday, January 17, 2020

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

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

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

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

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

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

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

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



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

Friday, January 17, 2020 3:16:50 PM (Atlantic Standard Time, UTC-04:00)  #    -
Atlantic Canada | New Brunswick | Newfoundland & Labrador | Nova Scotia | Planning | Prince Edward Island | Turner Drake
# Wednesday, October 23, 2019

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

Wednesday, October 23, 2019 11:57:24 AM (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Turner Drake  | Valuation
# Friday, October 4, 2019

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.   

 

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. 

 

Friday, October 4, 2019 9:18:44 AM (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Property Tax | Turner Drake
# Wednesday, September 18, 2019

Photo Credit: iStock Photo AntonioGuillem

It comes like a bolt out of the blue; the municipality wants to purchase your property so that they can widen the highway. Often times they intend to seize just part of your property: that front yard you so carefully nurtured to provide a fragile barrier between your home and the busy street is destined to become another traffic lane. Many owners have received this type of letter, more will receive similar letters in the future (if not from the municipality then the province, federal government or any organisation with expropriation powers such as a water authority, power utility, Crown Corporation). Sometimes the purpose of the exercise may not be clear, other than the fact that your property, or part of it, is required for the public good. During our early days in business in the 1970s some provinces, such as Nova Scotia, did not always inform owners that they had taken title to their property… the unfortunate owner only discovered such was the case when they enquired why they were no longer getting a property tax bill! Often times, municipalities such as the City of Halifax, did not advise the owner that they required the property, or part of it, content to leave it to the appraisal firm to break the news when they arrived on site to conduct their inspection. (We fired the City of Halifax as a client after arriving on site to find the property owner had not been informed about the expropriation; his wife was dying of cancer in the bedroom). Legally this is still the case in many provinces in Atlantic Canada; the acquiring authority does not have to inform you that you no longer own your property for several months after they have filed the expropriation document (Nova Scotia 90 days, Prince Edward Island 60 days). Thankfully in practice, that at least has changed, but the unfortunate reality is that property owners rarely have legal grounds to prevent the authority from purchasing their property. In other countries, property owners have to be notified that their property is to be expropriated and have the right to object that the acquisition is not really required for the road widening, or other scheme that is its raison d’etre, or that the scheme itself is not required to serve the public good. But this avenue is rarely available in Canada, or indeed in North America. (In this Region, proposed expropriations under the Federal and New Brunswick Expropriation Acts are the exception that prove the rule. Each require the acquiring authority to notify the property owner before they expropriate and provide a public enquiry to hear objections. However the Federal Act is really window dressing, the public hearing a mechanism to “vent”; the New Brunswick Act however does require the Expropriation Advisory Officer to issue a decision as to the necessity for the expropriation and whether the scheme is consistent with the public interest. If your property is located in Nova Scotia, Newfoundland or Prince Edward Island you have no say in the matter at all!. Even if subsequent events disprove the “valid public use” test, owners have no right to recover their property (the ill-fated Mirabel Airport in Quebec is an example… the original owners, or their descendants, were eventually offered 300 hectares of the 38,800 hectares originally expropriated, but only after a long, bitter and very public fight). So what do you do when you receive “the letter”, particularly if it does not mention “expropriation” and is instead a civilised attempt to negotiate compensation before the municipality seizes your property by force?

 

We live in an age when most of us have lost faith in our institutions, the civil service, politicians and the private sector. That trust has been eroded over the past two decades by greed, politicians who no longer adhere to acceptable forms of behaviour, the shrill cacophony of social media seamlessly blending fact with fiction, and an emancipated Fourth Estate no longer able to defend the “little guy”. The adage “you can’t fight city hall” too often engenders a feeling of helplessness, particularly if the acquisition involves your family home, the sanctuary you hold inviolate; or your business, a livelihood born of blood, sweat and tears. Cheer up, not all is bad, the press and electronic media may no longer have the heft they once did, but you do have the protection of an excellent and independent judicial system. Why is that important? The letter you received from the acquiring authority may not have mentioned “expropriation”, and the words “judicial system” may raise the spectre of long and expensive litigation in which you, the little guy, are pitted against an acquiring authority with much deeper pockets. But bear with us. Even if your property has not yet been expropriated the negotiations will be framed by the Expropriation Act because the acquiring authority has to rely on it if they cannot reach a settlement with you by negotiation. Now, it has to be said, the Expropriation Acts do not represent the legal community’s finest hour. The Nova Scotia and New Brunswick Expropriation Acts, each appear to have been written in a hurry by somebody suffering from a hangover. The Newfoundland and Prince Edward Island Expropriation Acts have a distinct feudal flavour, drafted in the days when peasants lived in huts of mud and wattle, addressed their betters with a touch of forelock, eyes downcast and a mumbled “zur” (or that, at least, appears to have been the assumption of the persons drafting them). In fact the PEI Act doesn’t even attempt to lay out the framework for compensation, happily delegating it to the court system, undoubtedly in the pious hope that the judge would have a clue what it was all about, because the person drafting the legislation sure as hell didn’t! Only the Federal Expropriation Act can claim lucidity, and even it overlooks the fact that businesses occasionally occupy real estate and are adversely impacted if it is whipped away from under their feet. But, and this is the good news, none of this really matters very much because there are some good Expropriation Acts elsewhere and a body of case law and appraisal practice that have established well proven methodologies for identifying and calculating compensation. The courts have embraced the principle that, since expropriation is the exercise of police power by the state (or its surrogate), the benefit of the doubt lies with the unfortunate property owner and they have not been shy in ensuring that the latter does not suffer financial loss as a result.

 

Expropriation

 

So what is “Expropriation” and why should you care? Expropriation is the seizure of your property, or a part of it, by the government, or a body authorised by them, for public use or benefit. The bad news, as we have already mentioned, is that you cannot object to it unless you live in New Brunswick or the property is being acquired under the Federal Expropriation Act… the good news is that you are entitled to be fairly compensated for your loss. The initial approach from the acquiring authority advising you that they want to purchase part or all of your property will rarely mention the word “expropriation”. Whilst this may be an attempt to spare your feelings by appearing to be non-threatening you should be cautious. We no longer have a strong media but, as mentioned, we do have an excellent court system… and they are on your side. While you will probably never need to go to court you should avail yourself of the protection afforded by our judicial system. Your rights to fair and proper compensation are codified in the relevant Expropriation Act (sort of) but you will not be so protected unless (1) your property has been officially expropriated or (2) the acquiring authority has agreed in writing to proceed as though you had been expropriated i.e. that they will afford you all of the compensation you would have been entitled to under the Expropriation Act had your property been expropriated. So this is Step One, make sure that the acquiring authority is prepared to offer you all of the rights and privileges afforded by the Expropriation Act and get that commitment in writing. If they will not provide it, refuse to negotiate until they expropriate your property.

 

Compensation

 

It is a fundamental principle of Expropriation that the acquiring authority is required, as far as monetarily possible, to put you in the same position after the acquisition as you were before it. Most court decisions have interpreted that principle as giving you the benefit of the doubt, short of plundering the public purse. The federal and some provincial Expropriation Acts acknowledge that the negotiations are unevenly balanced in that the property owner faces an acquiring authority with much deeper pockets and resources. Some Expropriation Acts attempt to level that playing field by requiring that the acquiring authority be transparent in their calculations of compensation, and some give the property owner access to their own professional advice if they desire it, at the acquiring authority’s cost. The Federal Act unambiguously provides that the property owner is entitled to professional advice at the Fed’s cost, the Atlantic provinces are more parsimonious, sometimes offering it if the property owner wins in court (Nova Scotia, New Brunswick, Newfoundland), or not considering it worthy of mention (Prince Edward Island). Nova Scotia limits the amount they will pay in legal costs and appraisal fees, something they are now allowed to do in their Act, so the unfortunate property owner has to pick up the rest of the cost, or find a cheap lawyer or appraiser. A word of caution: the devil is in the details and some acquiring authorities do not play by the rules established by the relevant Expropriation Act, case law or appraisal practice. It is essential to have an understanding of your rights under the Act, the type of compensation and how it is calculated. Each province in Atlantic Canada has its own Expropriation Act and each municipality, or other body with expropriation powers, is governed by that Act. The federal government also has its own Expropriation Act. Broadly speaking the Acts are similar, in practice if not content, and the methodology for calculating compensation is identical even when it is not specified in the legislation.

 

Negotiations

 

The acquiring authority may employ their own staff to negotiate, or will contract it out to a firm such as ourselves (we also negotiate on behalf of property owners). Our article “Land Agency… a respectable profession” elsewhere in this Blog details our approach when we are representing the acquiring authority: you should expect nothing less. The act of expropriation, or its anticipation, obligates the acquiring authority to fairly compensate you for your loss and that means they must engage in “principled negotiation” rather than attempt to settle the compensation claim for the lowest amount. If you find that you are not comfortable negotiating, insist that the acquiring authority pay for your professional representation. Whether the Act specifically allows for it or not, it has been our experience that acquiring authorities want to reach agreement without the adverse publicity of a formal expropriation, much less the agony and expense of a court action. They recognise that some property owners need professional assistance and that this may facilitate an agreement. If the acquiring authority is attempting to negotiate compensation before they formally expropriate, particularly if your property comprises woodland or agricultural land, the acquiring authority may attempt to negotiate without commissioning an appraisal, using instead their knowledge of property values. There is nothing wrong with them so doing provided they are open and transparent about their compensation calculations and are able to validate them by reference to other property sales. However you can require that the acquiring authority provide you with a formal appraisal (they have to anyway if they formally expropriate) and you should insist on this if your property has buildings on it, is in an urban area, or if only part of your property is being acquired and the remainder is likely to be adversely impacted. Many Expropriation Acts (Federal, Nova Scotia, New Brunswick) require that the formal offer after expropriation has to be accompanied by an appraisal. The formal appraisal should meet, at a minimum, the Canadian Uniform Standards of Professional Appraisal Practice (CUSPAP) www.aicanada.ca/about-aic/cuspap/ . Frankly CUSPAP is not the most rigorous standard in the world, it is not specifically directed at expropriation, and most appraisers (like most lawyers) are not sufficiently familiar or skilled in recognising and computing the various Heads of Claim. Do not accept any appraisal tendered by the acquiring authority at face value. Research the author of the appraisal report on the internet and check his/her reputation with a trusted professional advisor to verify that they are experienced in expropriation work. At a minimum they should be an Accredited Appraiser of the Appraisal Institute of Canada or a Member of the Royal Institution of Chartered Surveyors (Valuation) but neither qualification guarantees that they are experienced and knowledgeable in expropriation. Do not assume that the acquiring authority has already done the research and has chosen their appraiser on the basis of merit; the Federal Government and some provinces do so, but other provinces and many municipalities, Halifax Regional Municipality for example, simply select an accredited appraiser on the basis of cheapest cost. Some acquiring authorities will instruct the appraiser to limit the types of compensation (Heads of Claim) they consider in the appraisal and although the omissions may be listed in the appraisal report their significance can easily be overlooked. The Province of New Brunswick Department of Transportation and Infrastructure, for example, instruct their appraisers to ignore Injurious Affection and Special Economic Advantage, items which often constitute the bulk of the loss suffered by the property owner.

 

Heads of Claim – A Hitch Hiker’s Guide

 

A governing spirit of expropriation, or the negotiations which preclude it, should be that the property owner (and tenant if the property is rented) will not suffer financial loss as the result of losing all, or part, of their property. You will not be compensated for emotional loss arising, for example, from the upheaval in your life. If you are a property owner the types of loss and accompanying compensation will fall under some, or all, of the following Heads of Claim:

 

(1) Market Value of the interest acquired in the property.

(a) “Market Value” is defined differently in the various Expropriation Acts but essentially is the amount of money you would get for your interest in the property if it was sold on the open market. For example, if you occupy and own the freehold (fee simple) interest in a residence which is acquired in its entirety by the municipality, your compensation will equal the sale price you would have achieved had you sold the property of your own free will through a real estate agent. This can cause a problem if the Market Value of your property is lower than that of other properties in the neighbourhood since the cash you receive will not be adequate to purchase a similar home. In that instance you are entitled to additional compensation under the “Home for a Home” head of claim (see below). Unfortunately you will not be compensated for any “special” value your property may have to the acquiring authority over and above its Market Value.

(b) If the municipality only takes part of your property (typically part of your front yard in the case of a road widening), you are entitled to the Market Value of that portion of your property. Obviously calculating Market Value is somewhat problematic since bits of front yards are not typically sold on the open market. Its value will therefore be based on the sale prices of comparable vacant lots expressed on a square foot or other unit basis. You are also entitled to the value of any improvements such as lawns, flower beds, bushes, etc. … but not the emotional value you may have invested in nurturing them. If fences and steps have to be demolished the acquiring authority has to replace them. Sometimes the loss of a front yard is so extreme it renders the home unsuitable for continued owner occupation; it may be uninhabitable or suitable only as transient accommodation such as short term rental. In that event the owner should be able to substantiate the acquiring authority purchasing the entire property. The “Home for a Home” provision may then be relevant.

 

(2) Home for a Home

(a) If the property is occupied by the owner, as opposed to being rented, as a family home, you will be entitled to additional compensation if the Market Value of the property is inadequate to purchase a similar home in the neighbourhood. In this event your compensation will be based on the Market Value of similar homes for sale in the neighbourhood. What happens if there are none for sale? Whilst the compensation does not require that you remain in the neighbourhood it does get a little tricky if you do not have that choice. In the unhappy event that substitutes are not available you would be entitled to be compensated for the Market Value of the next best alternative.

(b) If the property is rented, a cottage, or anything other than an owner occupied family home, your compensation is restricted to Market Value even if you cannot purchase a similar property with it. The acquisition will also trigger tax liabilities which you did not contemplate until you intended to sell the property. It is our view that the impact of paying those taxes now, rather than deferring them for the future, is a valid compensable item.

 

(3) Disturbance

(a) When a property owner is forced to move out of their home there will be moving expenses, as well as items such as drapes for the new home. The acquiring authority is required to compensate the owner for these items. If it is not practical to estimate these costs some Expropriation Acts (Federal and Nova Scotia) provide an allowance instead of up to 15% of the Market Value. The New Brunswick Expropriation Act allows, in addition to moving expenses, 5% of the market value of the residential portion expropriated, to compensate for the cost and inconvenience of finding another residence. The other Acts do not place any value on the unfortunate property owner’s time.

(b) If the property contains a business the occupant will suffer a variety of losses. If the business has to relocate it will incur a number of costs: new stationery, informing customers, staff overtime packing and unpacking, new signage, etc. as well as the cost of the move itself. Whether the business moves or not, profits will usually be adversely impacted by the road widening scheme and/or the relocation. Trade once lost to competitors may takes years to recapture, may even be lost forever. Whilst all of the foregoing is compensable some Acts provide that compensation for loss of goodwill, where the business has relocated, can be deferred for the earlier of a year (Nova Scotia) or nine months (New Brunswick) after the relocation, or for three years (Nova Scotia) or two years (New Brunswick) after the expropriation. It is not clear when the business can expect to be paid if it does not relocate, but given that it has to prove its loss one imagines that this would be twelve months (Nova Scotia), or nine months (New Brunswick) after the road widening scheme is complete. Thus a business can struggle to survive during and after the road widening but cannot claim for its loss until later. Whilst the acquiring authority can agree with the business owner to waive the deferment it is our experience that such is not normally the practice. Business loss (goodwill) is not specifically mentioned in the Federal, Newfoundland or Prince Edward Island Acts but is a compensable item.

 

(4) Injurious Affection

(a) Where only a portion of the property is acquired, a common situation with road widening schemes, the balance of the land may be reduced in value because (1) the remaining property is less useful since it is smaller, a more awkward shape, or is severed from the main parcel and/or (2) the construction or use of the road on the land acquired adversely impacts the value of the remaining property. For example, it may no longer be possible to park a vehicle on the land remaining because it is now too small or of the wrong configuration. A residential property without parking is less valuable than a house with a driveway. The construction of the widened highway may render access to the property more difficult if traffic increases. The increased noise and loss of privacy in the home which results from it being closer to the highway will reduce its value. Or take a farm cut in two by a new highway. The farmland on the other side of the new road, particularly if it is limited access highway, will be considerably less valuable because it is no longer as accessible from the farm buildings. Farm fields impacted by the new highway may no longer be of optimum size and shape; drainage may be adversely affected too. In our experience Injurious Affection usually represents the vast majority of the loss sustained by the property owner, especially in residential properties impacted by road widening. The accepted method of calculating Injurious Affection is the “Before and After” method. This methodology is codified in the Federal and Nova Scotia Expropriation Acts. The property is valued as it existed prior to the acquisition and commencement of the road widening (Before Value); and then valued again on the assumption that the road scheme is complete (After Value). The difference between the Before and After values, minus the Market Value of the land acquired, is the Injurious Affection. The New Brunswick Expropriation Act provides that a claim for Injurious Affection has to be made within one year after the damage was sustained, otherwise it is barred.

(b) For housekeeping purposes some Expropriation Acts include Disturbance under Injurious Affection. This has no impact, other than to confuse matters, unless the acquiring authority has directed their appraiser to ignore Injurious Affection (a common practice with the New Brunswick Department of Transportation and Infrastructure).

 

(5) Special Economic Advantage

(a) If the property is owner occupied i.e. not rented, the owner may be able to claim for any special economic advantage arising out of, or incidental to, their occupation of the property to the extent that they have not been compensated under the other Heads of Claim. For example, if you or a member of your family is disabled, and the home has been adapted to meet their requirements with ramps, grab bars, wider doorways and hallways, stair lifts etc. you will be able to claim for the cost of these improvements.

(b) The same conditions apply with commercial property that has been adapted to suite the unique requirements of the business. It applies as well to property that has additional value because of its location, such as a woodlot proximate to the owner’s mill.

(c) Special Economic Advantage is specifically mentioned in the Federal, Nova Scotia and New Brunswick Act.

 

(6) Special Purpose Properties

(a) Some properties do not normally sell on the open market; churches, schools, hospitals, religious and charitable institutions are examples. If the property being acquired falls into this category and the owner has to relocate, they can base their compensation claim on the reasonable cost of creating a similar property (technically known as “the cost of equivalent reinstatement”). Even though the buildings on the property they are vacating may be old, the claim for compensation can be based on the cost of building a new, otherwise identical structure, plus the cost of acquiring a replacement site…. though some Acts (Federal, New Brunswick) attempt to claw back some of the compensation if the owner has improved their position.

(b) The Federal Act, cognisant no doubt that we are meant to be a secular society and less fearful for their immortal soul than the Provinces, do not restrict the qualifying properties to religious institutions and instead embrace all properties that do not normally sell on the open market.

 

(7) Professional Fees

(a) The Federal Act provides that the acquiring authority pay the legal, appraisal and other costs reasonably incurred in ascertaining a claim for compensation. The onus is on the property owner to ensure that the costs are reasonably incurred, not that they are reasonable.

(b) The Nova Scotia Act provides that the owner is entitled to be paid the reasonable costs necessarily incurred in ascertaining a claim for compensation but this is only triggered by an application to the Nova Scotia Utility and Review Board after negotiations have failed. However in practice they are compensable up to the date the acquiring authority makes their Offer to Settle (just before the start of the Board hearing) and are not conditional on the property owner winning their case. Reimbursement of costs incurred after the Offer to Settle are conditional on the outcome of the hearing. The province has recently placed a limit on the fees it will reimburse for legal and appraisal advice. The property owner will now have to fund the difference, or find a cheap lawyer and appraiser.

(c) The New Brunswick Act makes no provision for the reimbursement of professional fees unless the matter proceeds to Court. Reimbursement may be dependent on the compensation award.

(d) The Newfoundland Act provides that professional fees are only paid for proceedings before the Board and they are conditional on the outcome of the hearing.

(e) The Prince Edward Island Act has yet to acknowledge the necessity for professional advice or its role in protecting property owners.

 

(8) Betterment

(a) Where only part of the property is being acquired, the remaining property may increase in value as a result of the scheme for which the property was purchased. For example, land may be purchased for a highway intersection, with the result that the land remaining after the acquisition increases in value because it has development potential for a service station, hotel, shopping centre or other commercial use. This increase in value, known as “Betterment”, has to be offset against the compensation. Depending on the Expropriation Act, Betterment may be offset against the (1) total compensation [Newfoundland and Prince Edward Island] or (2) the land remaining after the expropriation [Federal, Nova Scotia, New Brunswick].

 

(9) Factors Not To Be Taken Into Account

(a) Anticipated use by the scheme for which the property was expropriated.

(b) A value established by reference to a transaction which occurred after publication of the intention to expropriate, or the actual expropriation if there was no published intention to expropriate.

(c) Any increase or decrease in value resulting from anticipation of the expropriation.

(d) Any increase in value resulting from the property being utilised for an illegal use.

 

(10) Heads of Claim Have To Be Consistent

(a) The Market Value of the land acquired has to be based on its existing use value if the costs of relocating are to be allowed. For example, a property owner cannot claim for removal costs if he/she is basing the value of their property on the assumption that it could be redeveloped.

 

(11)  Payment of Compensation

(a)  Federal, Nova Scotia, New Brunswick, Acts - A “without prejudice” offer has to be made by the acquiring authority within 90 days of registration of the Notice of Expropriation. If the parties do not agree the compensation the Federal Act provides for payment of 100% of the offer of compensation; the Nova Scotia Act for 75% of the compensation (excluding business disturbance) and the New Brunswick Act 100% of the “Market Value” (other Heads of Claim such as Injurious Affection are excluded). This payment is “without prejudice” and the property owner is free to pursue his/her claim for additional compensation.

(b) Newfoundland – the property owner has to file a claim for compensation within the time limit specified in the Notice of Expropriation and where the parties do not agree on the amount the matter is sent to the Board to be “fixed”. Compensation is paid out within six months of the Board’s decision.

(c) Prince Edward Island – the property owner has to file a claim for compensation within six months of registration of the Notice of Expropriation “or in the case of land injuriously affected within six months of the injury”. Payment is only made after the parties agree on the amount.


Mike Turner is Chairman of Turner Drake & Partners Ltd. A fifty year veteran of expropriation on two continents he is still shocked at the cavalier attitude some acquiring authorities adopt when dealing with property owners. If you'd like more information about our expropriation services, feel free to contact Mike at (902) 429-1811 Ext. 312 or mturner@turnerdrake.com


Wednesday, September 18, 2019 1:47:53 PM (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | Counselling | Expropriation | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island
# Wednesday, July 24, 2019

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

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

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

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

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

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

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

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

Wednesday, July 24, 2019 1:52:36 PM (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | Lasercad | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Turner Drake
# Monday, July 8, 2019


“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.


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
Monday, July 8, 2019 3:45:55 PM (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | Counselling | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Turner Drake
# Tuesday, June 11, 2019

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:


…at least in Halifax:



…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.


Tuesday, June 11, 2019 12:25:44 PM (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | Economic Intelligence Unit | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Turner Drake