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Now is the time of year where many companies are cleaning
house. Auditing departments are analysing and assessing inventory, and looking for
ways to minimise losses – kicking off the New Year in stride! Unfortunately, during this process many building
owners and managers overlook the main driver of their revenue – the very square
footage upon which leases are based.
It has become increasingly common for building owners and
managers to rely on historical figures when selling or purchasing a property. Many put their trust in building and unit
sizes that have been carried forward for years, or even decades. Considering building revenues and overall property
values are directly correlated to building size, wouldn’t you want all of your
ducks in a row before purchasing or selling a property? In other words, when making an investment
decision, why rely on areas that have not been certified?
Space certification is more than just an independent, third
party confirmation of the size of an existing space. It can also be a crucial vehicle for
unlocking additional property value.
Recently one of our clients was in the process of negotiating
the purchase of a large multi-tenant industrial building. The owner provided our client with the
overall building area together with segregated unit areas. The owner had openly stated the areas had not
been measured in at least ten years and so prior to making his final investment
decision, he engaged our Lasercad® team to verify the areas with a space
certification of the building. Once the
tenant spaces were measured and the rentable areas calculated in accordance with
the appropriate standard method of measurement, we came to an astounding
conclusion. Our space certification
rendered a total rentable area which was more than 10% higher than the owner-provided
areas! The building area had been
understated for the past 10 years (or more). From an investment standpoint our client was
floored. Based on the current market
rates for the area, the owner had been losing out on approximately $35,000 per
year of additional revenue. The
potential revenues which could be realised from the previously understated
building size played a major role in determining the overall value of this multi-tenant
industrial building.
Although some building owners and managers may overlook the
source of their building and unit sizes, many others have been pro-active in
implementing space certification as a standard procedure - especially when
making investment decisions. Regardless
of whether you are buying, selling, or leasing, it is essential to know where
the underlying areas originate from. The
square footage of your building is typically the core revenue driver and often
times, these areas are understated. Now
is the time to get a grip on your inventory and ensure you’re maximising its
value. [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.
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
Why Hire a Commercial Broker? How a Commercial Broker Adds Value in Real
Estate Transactions
There are ample online and
offline resources available at your fingertips to help you purchase or sell a
commercial property on your own – so why hire a broker? If you have the time,
negotiating skills, real estate market information, and understand your target
market and how to reach them, you don’t!
However, unless you can say
yes to all of the above, here is how a commercial Broker adds value to your
transaction:
1. Your time is valuable. Letting a Broker do the heavy lifting and
deal with “tire kickers” allows you to focus on your business.
2. Brokers have the contacts
and resources to market your listing or find you a suitable property, ensuring
all opportunities are uncovered.
3. Brokers understand your
target market and how to reach them.
4. Brokers do not have an
emotional attachment to the property or transaction.
5. Brokers are often members
of local real estate associations, which can provide you with access/exposure
to the MLS system in addition to their own websites, social media platforms,
and databases.
6. Brokers have the inside
track on market data, sales transactions, planning considerations and players
in the market who are looking to purchase or sell commercial properties. They can
help you determine a reasonable price and can help maximise market exposure.
7. Brokers know how to
properly measure a building and collect the property information required, such
as any material latent defects that must be disclosed in a transaction, which
can avoid future lawsuits.
8. Brokers prepare Purchase
& Sale Agreements, Counter Offers, etc. on your behalf, saving you from hiring
a lawyer to assist with these items.
So, once you’ve decided to
hire a commercial broker, how do you choose which broker/brokerage to represent
you? The short answer is to simply hire the broker with whom you feel most
comfortable. There are many excellent commercial brokers locally, so meet with
a few, ask them questions, and choose the broker you feel will best represent
you, and who understands your wants and needs. Each commercial broker has their
own strengths; it is up to you to determine which one is the best fit for your
organisation.
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 1 (800) 567-3033.
October 7th
through 13th is Fire Prevention Week in Canada. With firefighters in Nova Scotia responding
to over 1,400 fire related incidents in 2016/2017, it is important to ensure
that you have the resources in place to help tenants safely clear a property in
the event of a fire.
The theme of this year’s Fire Prevention Week is “Look. Listen. Learn. Be aware. Fire can happen anywhere.” The “learn” component of this year’s them refers to the need for everyone to learn two ways out of every room. We can help. 
Our LaserCAD® team is able to assist with “learning” by creating fire escape diagrams for your building. We can add additional crucial details to your fire escape diagrams by including the locations of fire extinguishers, pull stations, hose cabinets, and emergency lighting, as well as clearly indicating escape routes. These maps allow tenants to quickly identify an escape route and the location of fire safety equipment in the event of an emergency. We can also customise the diagrams as needed, showing separate escape routes for each individual tenant space and noting any other relevant details, such as muster locations. You may not be able to predict when a fire will occur, but you CAN plan for it. For further information feel free to reach out to any one of our Lasercad® space measurement experts at (902)-429-1811 or toll free at 1-800-567-3033.
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 Halifax Regional Municipality is in the throes of moving its
long awaited Centre Plan from draft to reality. With the first package of
draft policy and regulation released in late February, it’s come a long way
from the high-level guiding document that Turner Drake assisted with in 2016.
However, there is still a ways to go. As one might imagine, when replacing
multiple planning policy and development regulation documents for the most
dynamic and complex urban environment in Atlantic Canada, the devil is truly in
the details.
One of the biggest details being grappled with is the deployment
of density bonusing, which is principally designed as an affordable housing
tool. Depending on what you read, the current framework may actually backfire by
delivering no affordable housing and even drive up market-rate housing prices
by suppressing supply, or it may be perfectly fine and a good replacement for
present ad hoc negotiations which are falling
short of the Centre Plan’s achievable outcomes. Either way it provides
an opportunity to highlight the perks and pitfalls of this increasingly common
strategy.
What is Density Bonusing?
Density bonusing is a planning policy tool whereby new development
projects can access higher regulatory limits on built area in return for
provision of some public benefit. In other words, trade height for amenities.
It is sound in concept. The value of urban land (but not the buildings on it)
is primarily driven by where it is located, and what can be done on it. Thus,
it is value created by our collective society through the infrastructure and
services provided to it, the legal framework that governs it, and the
surrounding public and private activities which would make one desire a
particular location over another. When local governments “add density” by
increasing regulatory limits over what is currently anticipated by the market
(i.e. already reflected in its price), they literally create additional land
value out of thin air. In requiring a developer to provide public benefits for
this added density, local governments are recapturing the value they created in
the first place.
There is an obvious tension here in terms of why this ‘bonus’
density was not permitted in the first place, but in the messy world of
city-building, ideological purity will always lose to practicality. Density
bonusing thus becomes something akin to racketeering: nice development
application you’ve got there… what say you give us some art and affordable
housing, and maybe that shadow ain’t so bad anymore.
How Does it Work?
While it’s a clear win-win in concept, it can be complex in
practice. There are four important factors that determine whether or not
density bonusing works on a given site:
·
the value of the property as it exists today
·
the value of the land if purchased for redevelopment
·
the value created by adding bonus density
·
the value captured through required public benefits
It is important to note that all but the last factor on this list
are determined by the real estate market. The value captured is set by the
municipality, and is typically based on an estimation of the value of the bonus
density. In HRM, the tradeoff of density for benefits is structured under a
predefined framework. Other municipalities negotiate these arrangements on a
case-specific basis, but this approach it generally used in far larger centres
due to the complexity and sophistication involved.
Roughly speaking, development projects are feasible in areas where
the market price for land exceeds the value of properties as currently
developed. Adding a density bonusing program to the mix will increase the
redevelopment value, but also add a new cost in the form of requisite public
benefits. On net, this is usually a positive value; these programs are designed
to recapture only a portion of the value they create.
It should be apparent that density bonusing is not, in principle,
a drag on development. In fact, a properly designed program should improve the
feasibility of existing projects and even increase the total pool of viable
projects where the net positive addition of value (bonus density minus benefit
cost) actually tips the balance of feasibility. For all intents and purposes,
this is indistinguishable from a basic upzoning.
Where Can It Go Wrong?
There are plenty of opportunities for density bonusing programs to
go awry, but most are the usual pitfalls of any public policy. There needs to
be a logical and efficient administration process. The program needs to be
supported by accurate data so that its function lives up to its intent.
Appropriate buffers needs to be left to account for secondary costs and added
overhead created by the program itself. There needs to be additional mechanisms
in place to deal with the outputs (this is an important topic of conversation
in the Centre Plan context, in which the majority of benefit is supposed to be
in the form of affordable housing while the municipality has no formal
jurisdiction or established programming).
However, the fundamental issue of whether a density bonusing
program works is the value relationship between what is proposed, and what
exists today. Most of the debate and discussion in HRM has been focussed on
aspects of the former: what is the best value capture rate to use, what is the
right threshold for triggering the bonus requirements, what are the correct
value assumptions? Important questions, but their answers are all derived from
the latter issue, not determined in a vacuum.
At the scale of a city, form follows finance. Whether density
bonusing is implemented or ignored by the private sector will ultimately depend
on whether the total value of entitled and bonus density, less the cost of
delivering it (development costs plus public benefit), is a sweeter deal than
exists today. If a profit incentive exists, a badly designed program will still
deliver. If a perfectly designed program equates to a downzoning, don’t count on
anything happening until prices rise, or losses are written off.
How to Get it Right?
As municipal planning increasingly makes use of economic and
market-based tools (and it should) it also needs to expand its understanding of
the principles and systems that underpin them. Weight does need to be placed on
the market conditions of the present given their influence on the future (to
say nothing of the municipality’s complicity in forming them).
The traditional approach would state planning policies cannot be
captive to past practices and existing conditions, otherwise change would never
be possible. While this is true, it is not justification for being willfully
ignorant either. Understanding the basic value relationship between today's
conditions and those proposed under new policy is the key to understanding
whether density bonusing, or any planning policy for that matter, will deliver
on its promise. [1].jpg)
Neil Lovitt, our Senior Manager of Planning
& Economic Intelligence can be reached at 429-1811 ext. 349 (HRM), 1 (800)
567-3033 (toll free), or nlovitt@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. .jpg) 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
to the Halifax CBD. Mr. McCrea’s interview focused on the Halifax CBD… unfortunately the CBRE data he referred to did
not. It pertained to the wider HRM
metropolitan market. CBRE’s estimate of the vacancy rate for the Halifax
CBD is very similar to our own (18.5% versus our 17.3%). A world away from the
13% to 14% cited by Mr. McCrea. CBRE’s vacancy rate for the entire HRM office market was 15.5% (we
place it at 14.97%)… probably the source of Mr. McCrea’s confusion. There will always be some differences between
the Turner Drake and CBRE survey results, an important factor being that our
survey does not just focus on larger buildings but covers some as small as
5,000 ft.2. Mr. McCrea’s comment that the “annual market demand was
300,000 ft.2 not the 25,000 ft.2
quoted by Turner Drake” was similarly erroneous. Alex’s figure of 25,000 ft.2
referred to the CBD, which, after all, was the subject of the CBC
interview to which Mr. McCrea was responding. It was based on the average
market absorption over the past five years. CBRE’s estimate of annual market
absorption of 308,944 ft.2, referenced by Mr. McCrea, referred to
the entire HRM market.
Mr.
McCrea’s comment that most of the vacancies were in buildings that most people
would “never, ever want to work in” does not accord with the facts. Class A
buildings have an average vacancy of 21.8%.
We
concur with Mr. McCrea that many office buildings will have to be demolished or
repurposed, Alex pointed this out in her CBC interview. However 625,750 ft.2
of the 879,665 ft.2 of currently vacant space would have to be
taken out of service to restore equilibrium to the downtown office market… the
aggregate of the former Bank of Montreal tower, the former Royal Bank tower,
Founders Square and … volunteers anyone? Oh but Mr. McCrea is adding another 125,000
ft.2 at Queen’s Marque… let’s see, what else for the wrecking ball…?
We
politely pointed out to Mr. McCrea his confusion with the CBRE survey
statistics and gave him the opportunity to rectify the error. He did not
respond. As for the mansplainer moniker… nothing we can do about that... we
trust he is not consigned to the couch. Probably have to make his own coffee
from now on though.
For more information on mansplainer consult
Wikipedia. For information on the office market in the Halifax CBD and lots of
other areas in Atlantic Canada, contact Alex Baird Allen the (very calm)
Manager of our Economic Intelligence Unit at 902-429-1811 Ext.323 (HRM),
1-800-567-3033 (toll free), or ABairdAllen@turnerdrake.com
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