Breaking News: Province Announces Increase in Property Transfer Tax Payable by Foreign Entities

Breaking News: Province Announces Increase in Property Transfer Tax Payable by Foreign Entities

Earlier today, the British Columbia government announced that the property transfer tax rate payable by foreign entities on purchases of residential property in the Greater Vancouver Regional District will increase to 15%. This increase in PTT payable will come into effect on Tuesday, August 2, 2016, and will be payable regardless of when the purchase agreement for the property was entered into. The additional tax applies on a foreign entity’s proportionate share of any applicable residential property transfer, even in certain circumstances when the transaction may normally be exempt from property transfer tax. For further details, please see:

Changes to Strata Property Act pave the way for strata redevelopment

Final Update: The changes were made effective on July 29, 2016.


Further Update: There were slight revisions made to Bill 40 at Third Reading.  It received Royal Assent on November 17, but for the most part is not yet in force. Commencement will be effected by regulation, which does not require the House to be in session and could occur in early 2016.

Update: The proposed provisions mentioned below appear in Bill 40, which is named (oddly) “Natural Gas Development Statutes Amendment Act, 2015” about half way down under “Strata Property Act

By Darren Donnelly

This is very big news. And very good news. Today the provincial government issued the following press release:

Proposed amendment to the Strata Property Act

A proposed change to the Strata Property Act will make it easier for owners to terminate a strata corporation by lowering the voting threshold from unanimous to 80%.

 Owners may wish to terminate their strata corporation for several reasons. As older strata corporations reach the end of their life cycle, major building and common property components start to fail, resulting in expensive repair bills. In some cases, strata owners want to sell the property to a developer who can put it to better or more profitable uses. For example, strata members living in a low-rise building on a large property may see the opportunity to have the land redeveloped into a larger building with more units.

 Currently, a unanimous vote is needed to terminate a strata corporation. The proposed changes would allow termination by an 80% vote of all the owners, making it easier for a majority of owners to terminate their strata corporation, if they decide it’s in their best interests.

In developing these proposed changes, the provincial government consulted extensively with the British Columbia Law Institute Strata Property Law Project Committee, which includes: expert strata lawyers; representation from the Urban Development Institute, and the two major strata associations: the Condominium Home Owners Association and the Vancouver Island Strata Owners Association.

 In 2014, the provincial government asked the BC Law Institute to review strata termination requirements. The proposed changes to the Strata Property Act are based on the BC Law Institute’s recommendation to government and are widely supported.

Coincidentally, just yesterday (!), I presented a paper at the Pacific Business & Law session on Hot Topics in Real Estate Development with my Clark Wilson partner, Pat Williams, entitled Strata Cancellation and Redevelopment. Having been involved in both successful and aborted wind ups of co-ops, common law strata corporations and actual strata corporations (two currently in the works) on behalf of owners, developers and real estate brokers, I have had a keen interest in this topic for years.

Pat is the chair of the BC Law Institute committee referred to in the press release above which proposed the changes to the Act which appear to be moving ahead. Assuming the amendments reflect substantially what was proposed by BCLI, cancellation of a strata plan will require approval by at least 80% of owners, plus court order. The committee’s rationale for the court approval requirement was stated as follows:

This procedure affords a dissenting owner a more realistic opportunity to make the case against termination. It also integrates any concerns that registered chargeholders may have with termination into the same process.

What are the implications of having to obtain court approval?

In practice, I expect that owners opposing a strata wind up would make the sort of arguments seen in the Cypress Gardens (Mowat v. Dudas, 2012 BCSC 454) and Seymour Estates (McRae v. Seymour Village Management Inc., 2014 BCSC 714) cases. Those involved cases applications under the Partition of Property Act wherein owners of units in each of the two “common law stratas” (not subject to the Strata Property Act) sought a court order effectively compelling all owners to sell the entire complex. In both of those cases, opponents stressed displacement and fairness factors, including not wanting to be uprooted from their neighborhood because of a lack of affordable replacement accommodation and the unfairness of being forced to sell against their will. Supporters, on the other hand, stressed the looming cost of capital repairs and replacements, the potential windfall prices available based on development values and the unfairness of being held back by a minority of owners.

Another important implication of the court approval requirement is that, as was the case in Seymour Estates and in foreclosure situations, it seems inevitable that the court will wish to see evidence that the owners are receiving fair market value, leading to a requirement that the property be widely marketed. This is great news for real estate brokers, and not so great for developers looking to gain an inside edge.

The details will unfold as the bill is introduced and works its way through all required readings in the legislature. In the meantime, although an 80% (plus court approval) threshold will make the previously-impossible possible, strata councils interested in leading their owners through a possible wind up would be well advised to first familiarize themselves on likely pitfalls and best practices. I know that our experience here at Clark Wilson would be helpful in that regard and would welcome questions. Please contact me, Patrick Williams or any member of our Commercial Real Estate or Strata Property groups.

The Security Deposit–Effective Security for the Landlord?

A recent Alberta case [Alignvest Private Debt Ltd. v. Surefire Industries Ltd., 2015 ABQB 148] reminds us of the limitations of the security deposit. The outcome will appear to many landlords to be counterintuitive.

Landlords not surprisingly think of the security deposit as a “pot of money” available to be applied towards performance of the tenant’s obligations “no matter what”. In contrast, a trustee in bankruptcy might look upon the security deposit as a credit to which the bankrupt tenant is entitled, and which is available to the trustee to apply for the benefit of unsecured creditors.

The Court in this case aligned with the trustee in bankruptcy.

Facts of the case and judgment of the Court

The facts of the case briefly stated are:

The Court held that:

“In summary, the deposit is security for obligations under the lease and not prepaid rent. It does not fall under an exclusion to the provisions of the PPSA, and as a security interest should have been perfected by registration. As it was not, it is subject to Alignvest’s perfected security interest.

Along the way, the Court commented that:

“The characterization of the deposit under this lease should not be taken as determinative of the characterization of deposits under other forms of lease, and is limited to this specific lease and the intervention of a secured creditor with a perfected security interest.”

Analysis and comment

This ruling does not bode well for landlords holding security deposits.

If a tenant stays solvent and keeps its creditors at bay, the security deposit can serve its purpose as intended. But landlords can be unpleasantly surprised to find that “when you most need it, it’s not there”. If the tenant is in bankruptcy, the security deposit may be characterized as a credit owed to the tenant. The security deposit may be interpreted to be a security interest that requires “perfection” by a filing by the landlord under personal property security legislation (or else the landlord’s claim could lose priority to other creditors).

What can a landlord do?

If a landlord holds a security deposit of the size in the Alignvest case, $3,187,500, then clearly the landlord will be well advised to register under applicable personal property security legislation. A single–tenant landlord might choose to do the same, rather than take any risk. Commercial landlords of multiple tenancies will want to consider an overall approach taking into account overall costs and administration. Unfortunately, the practical alternatives are not appealing. Among the possibilities for commercial landlords to consider are:

Conclusion and summary

The take-away points on this are:

(i)            appreciate that security deposits have limitations and vulnerabilities;

(ii)           on a case by case basis, consider whether to register under applicable personal property security legislation; and

(iii)          if the creditors are circling, consider applying the security deposit right away (if the tenant is in arrears) and / or taking steps to shore up your position (e.g. belatedly filing under the personal property security legislation might be helpful) before an insolvency filing occurs or the trustee in bankruptcy or creditors take enforcement action.

NAIOP and UDI Forecasts (in bite-sized pieces)

Our commercial real estate lawyers were all over Twitter today about the NAIOP and UDI Forecasts, both huge industry events that our lawyers attended.

Check out some of the important event content as tweeted by our stellar lawyers, and don’t forget to follow them on Twitter:





Follow us too:


 @JamesASpeakman, Managing Partner and Commercial Real Estate LawyerClark Wilson LLP






@TowrissYVR, Partner and Commercial Real Estate Lawyer, Clark Wilson LLP








@SarahWynJones, Partner and Commercial Real Estate Lawyer, Clark Wilson LLP





@DarrenDonnelly, Partner and Commercial Real Estate Lawyer, Clark Wilson LLP




Welcome to (formerly

Welcome to our new blog site, (formerly, where you’ll find the same great content, but with an improved look and feel. Don’t be afraid to look around and drop us a line if you see anything you’d like more information on.

The Commercial Real Estate Group of Clark Wilson LLP developed and maintains as a way to keep British Columbia’s commercial real estate professionals up-to-date and relevant with the latest industry topics, trends and news.

Our team of experienced lawyers share pertinent and timely blog posts, downloadable documents, articles, interest rates, a calendar of industry events and other useful material.

The “Build a Deal” portion of the site helps you gather information to analyze opportunities and ultimately produce a letter of intent to settle the business terms of a purchase.

Duty of Good Faith and Honest Performance Extended to All Contracts in Canada

On November 13, 2014, the Supreme Court of Canada updated Canadian common law by extending for the first time the principle of good faith to all contracts. Previously, the duty of good faith existed only in employment and insurance contacts in Canada. The ruling now aligns Canadian common law with Civil Law in Quebec and the law in most U.S. jurisdictions. The Court expects its decision to bring certainty and coherence to this area of law.

The Court, in its decision in Bhasin v. Hrynew, recognized good faith performance of contract as a general principle of the common law and further introduced a new common law duty to act honestly in the performance of contractual obligations. Justice Thomas Cromwell stated for the Court:

“In my view, it is time to take two incremental steps in order to make the common law less unsettled and piecemeal, more coherent and more just. The first step is to acknowledge that good faith contractual performance is a general organizing principle of the common law of contract which underpins and informs the various rules in which the common law, in various situations and types of relationships, recognizes obligations of good faith contractual performance. The second is to recognize, as a further manifestation of this organizing principle of good faith, that there is a common law duty which applies to all contracts to act honestly in the performance of contractual obligations.”

The case stems from a commercial dispute between two parties to a contract for services over the circumstances by which one party exercised a non-renewal clause in the contract. The Court found that the actively dishonest actions of one party breached the implied term of good faith in the contract. The defendant was ordered to pay damages based on the economic position the other party would have been in had the defendant breaching party fulfilled its duty under the contract.

The important aspects of this case with respect to commercial law are: (1) the implied principle of good faith and (2) the duty of honesty, in contractual performance.

The Court explained that the organizing principle of good faith in contractual performance means that:

What amounts to good faith will depend on the context of the commercial relationship, the type of contract and the circumstances involved. It may be easier to figure out what good faith is, by considering first what it is not. “Bad faith” as the Court pointed out, is a conduct that is contrary to community standards of honesty, reasonableness or fairness.

While the concepts of reasonableness and fairness have been well examined in the courts in the past, the Court took the time to examine the new duty of honesty in contractual performance. The Court explained that this means that:

The precise content of honest performance, like good faith, will also vary with context.

To conclude, parties currently performing obligations under a contract in Canada must be aware that they now owe each other a duty to act honestly in their contractual dealings. Exactly what this entails will depend on a number of factors and circumstances, so if you are concerned about whether you or someone you are contracting with may not meet the duty, please contact us and we can discuss the implications of the Bhasin v. Hrynewcase with you.

REDMA Regulations and Policy Statements Amended

As discussed in our previous article titled “Bill 17: New Amendments to REDMA”, the Real Estate Development Marketing Act (“REDMA“) was amended on May 29, 2014 by Bill 17. Following this amendment, both the regulations to REDMA and the policy statements promulgated under REDMA were amended.

Amended Regulations

Effective September 5, 2014, the regulations to REDMA were amended to: exempt several transactions from REDMA‘s marketing requirements; modify and add the definitions of municipality and related person, respectively, found in the regulations; and to require a trustee to pay all or a portion of a deposit held where certain requirements have been satisfied. The amendments can be briefly summarized as follows:

Return of Deposit

  1. a purchaser and a developer certify in writing to a trustee holding a deposit pursuant to REDMA that the purchase agreement to which the deposit relates has been terminated; and
  2. the purchaser and the developer have agreed on how to distribute the deposit between them the trustee must payout the deposit in accordance with the agreed upon distribution.
Exemptions From Marketing Requirements
A person is exempt from Part 2 of REDMA in respect of marketing of a development unit in a development property by a developer if:

  1. the person and the developer are not “related persons”;
  2. the person does not sell or lease, or offer to sell or lease, the development unit to a purchaser, other than the developer;
  3. one of the following is true:
    1. the person leases the development property to the developer;
    2. the developer has, by agreement, a right to purchase the development property from the person*; or
    3. the person has no interest in the development property other than a financing charge (defined in the regulations to include both a security interest or an encumbrance registered on title to the development property as a mortgage, assignment of rents, rent charge or equitable charge); and
  4. the person does not engage in activity that will or is likely to lead to a sale or lease of the development unit, other than the one activity, as the case may be, referred to above in bullet “3”.

*Where the condition outlined in bullet 3(b) is being relied on, no purchase agreement between the developer and a purchaser for a development unit can be completed unless the developer first purchases the development property or development unit from the person.

Definition of Municipality and Related Person
The Resort Municipality of Whistler is included within the definition of “municipality” found in s. 6 of the regulations and “related person” is defined to have the same meaning that it has in the Property Transfer Tax Act, being:

             “related person” means a person who is
             (a) a related individual, or
             (b) a related person within the meaning of section 251 of the Income Tax Act (Canada).
The Property Transfer Tax Act defines “related individual” to mean:
             (a) a person’s spouse, child, grandchild, greatgrandchild, parent, grandparent or greatgrandparent,
             (b) the spouse of a person’s child, grandchild or greatgrandchild, or
             (c) the child, parent, grandparent or greatgrandparent of a person’s spouse.

Amended Policy Statements

In August of 2014, the Superintendent of Real Estate introduced amendments to eight of the fifteen policy statements under REDMA. These recent amendments will become effective on October 1, 2014, and are intended to complement the amendments introduced by Bill 17.

The eight policy statements that have been amended cover the following topics:

The following table briefly outlines several of the notable changes to the eight policy statements affected by the amendments:

Policy Statement(s) Amended Details of Amendment
1, 2, 3, 8, 9, 10 and 11 permits a developer to provide a copy of a disclosure statement by electronic means but only with the written consent of the purchaser. As a result, developers will still want to ensure they obtain sufficient acknowledgement of receipt of the disclosure statement;
1, 2, 3, 8A, 8B, 9, 10 and 11 requires, where a developer is filing a consolidated disclosure statement, to note this fact in conspicuous type font on the cover page;
1, 2 and 8B requires, where a developer is filing a phase disclosure statement, to note this fact in conspicuous type font on the cover page;
1, 2, 3, 8B, 9, 10 and 11 requires a developer to describe the permissible uses of the development property intended by the developer and whether there may be other permissible uses of the development property beyond those intended by the developer;
1, 2, 3, 8B, 9, 10 and 11 requires a developer to provide purchasers with information about where to obtain further information and details about zoning requirements and permissible uses, such as the name and contact information of the responsible municipal department. Developers will want to confirm this information remains up to date before filing any amendments to their disclosure statement;
1, 2 and 8B permits a developer who markets development units in phases to market multiple phases of a development property concurrently under separate disclosure statements, provided the developer complies with REDMA, including s. 14(4), which requires developers, before marketing development units in a subsequent phase, to file an amendment to a disclosure statement submitted in respect of a previous phase unless, in accordance with s. 14(4.1) of REDMA, the developer files a phase disclosure statement under section 15.1 and the developer does not market, including the completion of a sale, any development units in any previous phase of the development property;
1, 2, 3, 9, 10 and 11
  • defines “commencement of construction” and “completion of construction” and requires developers to state the actual date of commencement and/or completion of construction if either or both have already occurred, or an estimated date range of commencement and/or completion of construction, not exceeding three months, where either or both events have not already occurred;
  • “commencement of construction” means the date of commencement of excavation in respect of construction of an improvement that will become part of a development unit within the development property, and where there is no excavation it means the date of commencement of construction of an improvement that will become part of a development unit within the development property;
  • “completion of construction” means the first date that a development unit within the development property may be lawfully occupied, even if such occupancy has been authorized on a provisional or conditional basis;
8A and 8B requires developers to state the various construction dates as required by the policy statement that applies to the interest in land that is subject to the time share plan, and requires developers to state either: that the offered time share interests are available for use; or, if they are not yet available for use, an estimated date range, not exceeding three months, for when the offered time share interests will become available for use; and
5 defines “building permit” to include one of multiple or staged building permits issued by an approving authority, where required, provided that each of the further required building permits to complete construction of the development property is promptly applied for, and promptly paid for. This provides developers with greater certainty as to when they have met the Policy Statement 5 requirements and can amend their disclosure statements.

Bill 17: New Amendments to REDMA

The real estate market in British Columbia has long been a driver of our province’s economy. Due in part to increases in real estate prices over the last several decades, investors and home–buyers alike have flocked to this market to purchase property. In an attempt to more heavily regulate the burgeoning market, in 2005 the province enacted the Real Estate Development Marketing Act (“REDMA”).

Following the enactment of REDMA was the 2008 financial crisis, which resulted in an increase in the number of homebuyers and investors seeking to rely on technicalities within REDMA as a means of escaping their contractual obligations. Early on, courts predominantly treated REDMA as “consumer protection legislation” and often required near perfect compliance with the Act from developers. This strict reading of REDMA resulted in uncertainty within purchase and sale agreements, as well as within the real estate development sector as a whole. However, over time the courts began to recognise the twin purposes of REDMA as both providing consumers protection while also enabling the efficient and profitable operation of the real estate development sector. Despite this shift from the courts, the need for statutory reform continued to exist. Enter Bill 17, titled the Miscellaneous Statutes Amendment Act, 2014, that came into force on May 29, 2014. This Bill, among other things, amends several sections of REDMA, including sections that govern rights to rescission and agreements that are void for non–compliance.

This article outlines the framework of REDMA, summarizes the jurisprudence under REDMA leading up to Bill 17, and lists the various amendments to REDMA under Bill 17.

1. Framework of REDMA

REDMA applies to developers who market, within British Columbia, development units, and governs purchasers’ rights to rescission. REDMA requires developers to make full disclosure relating to the development unit in writing before a purchaser signs a purchase agreement relating to the unit. REDMA also requires that a new disclosure statement be filed where the identity of the developer changes, a receiver or trustee in bankruptcy is appointed, or there is a substantial misrepresentation or failure to comply with the Act and the Superintendent requires a new disclosure statement. Finally, REDMA also requires a developer to amend the disclosure statement where there is non–compliance with the Act or regulations, or if the developer becomes aware of a “misrepresentation”. A misrepresentation is defined as a false or misleading statement or omission of a “material fact”. A material fact is defined in part as a fact “that affects, or could reasonably be expected to affect, the value, price, or use of the development unit or development property.”

Under REDMA a purchaser is given the absolute right to rescind a purchase agreement by serving notice of the rescission on a developer within seven days after the later of the date that the purchase agreement was made, or the date a disclosure statement was acknowledged in writing by the purchaser. A purchaser will also have the right to rescind the purchase agreement if the developer fails to immediately amend the disclosure statement where the developer becomes aware of a misrepresentation, or that the disclosure statement does not comply with REDMA or its corresponding regulations. Prior to Bill 17, this latter right of rescission afforded to purchasers under REDMA was extremely broad, as purchasers were entitled to rescind their purchase agreements at any time without any restrictions (except any applicable limitation period), and without regard to when they learned of the breach of REDMA, or whether the breach was even relevant to whether the purchaser would have entered into the purchase agreement in the first place. This right was further broadened by the fact that courts had historically interpreted “material fact” in a manner favourable to purchasers.

2. Jurisprudence under REDMA

Early on courts treated REDMA as “consumer protection legislation” and required near perfect compliance from developers with the Act, failing which, the contract would be found unenforceable. A few examples of this are the decisions of Dwane v. Bastion, Pinto v. Revelstoke Mountain Resort Limited Partnership, and Chameleon Talent Inc. v. Sandcastle Holdings Ltd. In Dwane the Supreme Court of British Columbia held that REDMA had been violated where the developer only delivered the original disclosure statement to the purchasers before they signed the agreement, in a situation where there had been three amendments in existence at the time. In coming to this conclusion, the Court noted that a purpose of REDMA was to maintain and enhance consumer protection, and that the Act provides purchasers with enhanced rescission rights. Similarly, in Pinto, where the developer failed to deliver four of the seven amendments to the purchaser, the British Columbia Supreme Court found that it was not sufficient that the missing amendments may have been incorporated into a “consolidated disclosure statement” that the plaintiffs received. Technical compliance was favored over a more purposive approach that could have looked to whether the purchaser actually received the necessary information.

In Chameleon the British Columbia Court of Appeal found the purchase agreement to be unenforceable because substantial delays in completion dates were not brought to the buyer’s attention via an amendment to the disclosure statement. The Court also held that, when determining if there has been a misrepresentation of a material fact, the individual characteristics of the purchaser are irrelevant because reference must be made to the nature of the disclosure statement and not to the state of mind of the purchaser. Therefore, the fact that one of the principals of the purchaser knew of the construction delays was irrelevant.

Following this period the tide appeared to be turning towards a more reasonable, common sense approach to REDMA when the Supreme Court of Canada released its judgment in Sharbern Holding Inc. v. Vancouver Airport Centre Ltd. In Sharbern the Court considered the pre–sale regime under the repealed Real Estate Act, the predecessor legislation to REDMA, and held that “an omitted fact is material if there is a substantial likelihood that its disclosure would have been viewed by the reasonable [buyer] as having significantly altered the total mix of information made available.” In keeping with the aforementioned trend the British Columbia Supreme Court held, in Mode Properties Ltd. v. Esposito, that REDMA did not require that purchasers acknowledge receipt of amendments to disclosure statements and that the developer obtaining financing for the project via a construction mortgage was not a material fact that had to be disclosed. In Esposito the Court also noted that while the developer should have described in the disclosure statement provisions from purchase agreement relating to extensions of time, it was not required to do so under REDMA.

The trend continued in the British Columbia Supreme Court decision found in 299 Burrard Residential Limited Partnership v. Essalat, where a developer failed to amend a disclosure statement with information concerning a four–month delay in the project’s completion date. The Court held that although REDMA expressly defined “material fact”, Sharbern was relevant to determining “whether a statement contained in a disclosure statement concerning a material fact [was] false or misleading.” Thus, based on the pertinent facts of the case, the Court framed the question as whether “there was a substantial likelihood that the undisclosed delay in completion would have had actual significance to a reasonable purchaser in making a decision whether to purchase a unit.” The Court also expressly rejected the buyer’s argument that “anything more than a trivial change in the completion date meant that the statement contained in the Disclosure Statement had become false and that the plaintiff was therefore required to file an amendment to the Disclosure Statement.” Ultimately, the Court held that there was no material misrepresentation because there was “no evidence that the delay that was experienced was in any way unusual or arose from anything other than the normal construction delays that a person would reasonably expect to be encountered in a construction project of this scale.” Furthermore, the Court also approved and applied the proposition in Sharbern that “surrounding circumstances” must be taken into consideration. In doing so the Court found relevant the fact that the purchaser’s real estate agent had been informed of the anticipated construction delays. Thus, in this case, the developer was entitled to keep the deposit – until the decision was appealed, as noted below.

In another pro–developer decision the British Columbia Supreme Court in Drake v. North Ellis Developments Ltd. held that the developer did not violate a Policy Statement related to REDMA that limited the deposit maximum to 10% because a “deposit” under REDMA does not include a bond that was not payable until completion, and was thus outside the marketing period. Importantly, Drake also accepted that REDMA has twin goals of protecting consumers as well as enabling efficient and profitable operation of the real estate development sector.

Also of note is the decision in Bosa Properties (Edgemont) Inc. v. Ban, where the Supreme Court of British Columbia held that although the purchaser signed the purchase agreement without fully reviewing the disclosure statement, the court refused to find that the purchaser was not given a reasonable opportunity to review it, and found that the purchaser did review key parts of the disclosure statement. In Ban the Court also held that the disclosure requirements will not be violated “[i]f from an objective person’s standpoint, the difference in what is represented as likely to occur from what actually occurs has little or no impact on” the value, price or use of the unit. The Court in Ban further opined that “acceleration is qualitatively different than delay and would not similarly influence the mind of a reasonable person.” In holding this the Court implicitly held that “material facts” that require amendments are those that negatively affect the price, value or use of the unit.

Two judgments that followed Ban, however, casted some doubt on whether REDMA would continue to be interpreted in the same aforementioned manner. The British Columbia Supreme Court in Woo v. Onni Ioco Road Five Development Limited Partnership held that the developer’s failure to disclose an amendment which stated that “everything [is] on track” was a “material fact” because this information would have reduced the risk of the developer failing to complete the project. What is also noteworthy in Woo is that the Court refused the developer’s plea for occupational rent or compensation for diminution in value of the units. In coming to this conclusion the Court considered other similar regimes to REDMA in Canada and relied on the notion that REDMA is consumer protection legislation. As noted below, this decision was reversed on appeal.

The second and potentially more far reaching decision is the Court of Appeal’s decision in 299 Burrard Residential Limited Partnership v. Essalat. In this decision, the Court of Appeal reversed the trial Court’s judgment referred to above and opined that, crucially, the trial “judge failed to recognize that in Sharbern the Supreme Court of Canada had to formulate a test for the key phrase in the absence of a statutory definition, whereas in REDMA the Legislature expressly covered both materiality and falsity in the definition section [and therefore] Sharbern was not a binding precedent.” Moreover, the Court held that Chameleon “negated the relevance of individual circumstances on the logic that a misrepresentation of a material fact refers not to the state of mind of the purchaser but to the nature of the Disclosure Statement” and that the trial judge was “bound to follow this decision.” The Court also found that, apart from true trifling matters, delays in the estimated date of completion will be considered a material fact, and that a roughly four month change in the estimated date of completion was a material fact that needed to be disclosed. The Court declined the invitation, however, to provide any guidance on the appropriate margin for error in estimating the completion date of a development. Finally, the Court noted that “the strictness of the filing regime must be maintained in order for the protection to be meaningful to the consumer.”

Most recently, however, came the Court of Appeal’s judgment in Onni, reversing the trial Court’s judgment referred to above. This decision appears to mark yet another change in the tide, towards a more reasonable and common–sense approach to interpreting REDMA. In this decision, the facts of which are briefly stated above, the Court of Appeal held that a developer is not required to disclose an amendment which states that “everything [is] on track”, because such a fact is not a material fact. The Court also expressly noted that “a proper interpretation of the definition of ‘material fact’ engages the notion that the effect on value, price and use must be adverse to the interests of the purchasers and not to their benefit.” In this decision, the Court also noted the twin goals of REDMA cited in Drake, and expressly chose not to require a developer to file an amendment to the disclosure statement where a change occurs that brings into being a fact or proposal which should have been disclosed if the fact or proposal had existed at the time of filing. Finally, while Court relied on its interpretation of “material fact” to dismiss the purchaser’s claim to rescission, implicit within the judgment, as a whole, is the Court’s concern regarding the potential open–ended nature of this right to rescission.

3. Amendments and Additions to REDMA

In keeping with the Supreme Court’s decision in Drake and the Court of Appeal’s judgment in Onni, where both Courts acknowledged the “twin purposes” of REDMA, the province briefly described the intended impact of the amendments, noting that they “will bring clarity to the scope of purchasers’ remedies and certainty to the enforceability of purchasers’ contracts” and are “designed to increase industry efficiency and provide purchasers with a more readable disclosure statement.” The following is a list with brief explanations of the various amendments to REDMA found in Bill 17. It is expected that the Policy Statements will also soon be amended to ensure consistency.



At this year’s Annual Industry Forecast Luncheon of the Urban Development Institute – Pacific Region moderator Diana McMeekin of Artemis Marketing introduced the presentation by referring to this year’s theme of Innovate or Stagnate. Ms. McMeekin challenged the 1,100 attendees by asking whether they should enter 2014 standing still and hoping for a positive outcome or looking to innovate their way into a more successful year. The same theme was carried through each of the three speakers’ presentations and the question and answer session which followed.

The proceedings started with Mark Betteridge‘s of Discovery Parks presentation on the Office and Technology sectors.


Mark Betteridge of Discovery Parks
Michael Penalosa of Thomas Consultants
Colin Bosa of Bosa Properties

As has been the case in years past, before moving onto more specific questions for individual panelists, the proceedings started with each being asked to answer the question “What’s in store in 2014?” for their respective areas:
Office & Technology Markets: Mark Betteridge, Executive Director, Discovery Parks

With technology being the fastest growing industry sector in the province, it is no surprise that Mark believes that technology will play an important role in the real estate industry in 2014. With the technology sector boasting virtually full employment, the result is that employees are calling the shots in terms of where their offices are located. For these employees, the technology environment is more about the neighborhood outside the building than the building itself. These employees are gravitating towards employers that are located in cheap, trendy locations, where net rent is in the teens. In particular, Main St. and the I-1 zone are attractive due to lower rents (for now), hip space and great food and drink options. In contrast, suburban business parks are less favoured by tech employees. In terms of growth areas within the province as a whole, Mark views Kelowna and, perhaps, the Comox Valley as having potential. Mark believes that there are financing opportunities, either to find or create capital pools to invest in both real estate and technology.

Retail Market:

Michael Penalosa, Managing Principal, Thomas Consultants
In a world of increasing e-commerce, Michael believes the key to retail space maintaining relevancy is to find a way to drive people into those spaces. Instead of single-purpose shopping malls anchored by department stores, or the suburban strip malls, retail spaces will need to change their role and function. Shopping malls will need to be multi-purpose in nature, combining office and residential space with the retail component, and providing people with experience-driven environments. Michael commented that examples of innovative retail spaces can be seen in the US, with shopping malls that integrate entertainment, restaurants, residential space, connections with LRT systems, retractable roofs and community gathering places. The UK and Dubai also have been ahead of the curve, incorporating “triple drama” storefronts, exclusive tenants, extensive fountains and an aquarium. These comprehensive retails places provide value for customers, demonstrate the necessity of community buy-in, and indicate that relevant retail spaces are all about the experience.


Colin started off by saying that 2013 turned out to be a good year for home building and noted that MLS sales were up 12% over 2012. Despite this, he said that there is no shortage of opinions or questions regarding the state of the real estate market. In particular, everyone wants to know if there is room for growth in the market and whether there is a housing bubble and if so, will it burst? Colin said that supply and demand are the key factors in answering these questions and in doing so we must go back in time and look at the causes of previous downturns in the market. He attributes the last downturn in the market to a poor economy, low in-migration and low employment levels resulting in less demand for housing.

He noted that the balance between supply and demand for 2014 looks promising. He pointed out that the BC Liberals have made job growth a priority, US housing starts are up 20% which is good for BC’s lumber industry and the LNG projects in northern BC will increase BC’s GDP – all of which will also create more employment opportunities. So, on the demand side, he predicts that greater employment opportunities, lower interest rates and increased migration (CMHC projects 30,000 people to move to the Lower Mainland) will create increased demand. On the supply side, he predicts that supply will be curtailed due to approval processes for developments and community plans taking longer and lenders acting more rationally.

He briefly discussed the concept of change in the real estate industry and noted that because sales have been robust since 2001, there has been little need for change. Meanwhile, he pointed out that there have been changes in the way that people shop, work, commute, travel and communicate and that developers need to take these factors into account when it comes to the designs of their homes. Although he predicts that 2014 will be a good year, as the market slows down, the companies that will be the most successful are the one that can adapt to change.


Since 2001 the real estate market has been doing well (other than a minor correction in the market in 2009). Looking into your crystal ball, how much longer will this last?

Colin said that although interest rates are on the rise, in the short run, the real estate market looks good. He noted that that supply and demand, which are the key factors in determining market stability, are in balance right now. He cautioned that there may be somewhat of an imbalance in the longer run, as supply increases due to greater activity on the development side as project and community plans are approved and demand decreases due to a slowing of international migration and an increase in interest rates.


It seems like online shopping has no bounds. What is the future of bricks and mortar?

Michael doesn’t think that bricks and mortar will disappear. He says that shopping in malls is very much a social activity and people will not replace it altogether with online shopping. He noted that some of the shortcomings to online shopping include the lack of instant gratification for the consumer and the inability of a computer to “up-sell”. In terms of shopping habits, he pointed out that people still like the “touchy, feely” aspect of shopping in person and generally are less likely to purchase items online that they need to see or touch. On a positive note for consumers, he does think that the popularity of e-commerce and, specifically, the ability of consumers to very easily compare prices online, will force retailers to be more competitive with pricing. Although bricks and mortar are here to stay, Michael thinks that online shopping will eventually have an impact on the size of retail shops as on-site inventory requirements lessen.


Will technology become a more important sector in the BC economy in 2014?

Mark said that technology will inevitably be a more important sector in the BC economy this year. He attributed this to the fact that technology, in any industry, is at the forefront of creating jobs and generating revenue.


What will be hot in the residential market in 2014?

Colin thinks that affordable homes offering value and located near public transit will be popular. He provided examples of how his company has maintained affordability by designing units with adaptable space and transferable components.


Will an anti-mall sentiment emerge in 2014?

Michael doesn’t think that an anti-mall sentiment will emerge in 2014. He noted that major renovations to existing shopping centres and the introduction of new products, such as outlet malls, are examples of how malls are invested in not only getting the best tenants but also responding to consumers.


Do pure technology companies behave differently as tenants compared to other firms?

In order to answer this question, Mark said that a distinction must be made between start-ups and more established, profitable technology companies. As tenants, start-ups are generally more of a risk than other companies as they are still at a pre-revenue stage and a landlord must really do its homework to determine where the company is going and what it may grow into (i.e. will it be sold to a bigger company or maintain its own operations). In the case of a profitable technology company, a landlord would do a conventional credit check (as it would for any other company) and, as it would for any other tenant, ensure that it is generally comfortable with the company’s products and operations, as opposed to mainly its financial background.


Who will be buying condos in 2014: Owners or investors, onshore or offshore?

Colin noted that 10 years ago, the split was 50% investors and 50% owners, peaking at 90/10, and now about 75/25. As to the offshore element, he does not see a large number of truly offshore buyers, observing that nearly all foreign buyers are actually immigrating or buying for someone who is here.


With the arrival of Target, Nordstrom and probably Saks, do you see more US department stores coming to Canada?

Michael first countered that not many retailers see themselves as traditional department stores anymore. Despite the well-publicized struggles of Target’s arrival here, there are opportunities that US retailers who see themselves as specialist will pursue.


How do landlords deal with the risk of renting to start-ups?

The key, according to Mark, is to recognize that they are start-ups and accept that there will be turnover – not so much because of business failures, but more often, tenants growing out of the space. This means a couple of things: all lease terms will be month-to-month and you need to have lots of tenants to mitigate the turnover risk.


Why is your company so bullish on Surrey Central?
Bosa takes a long term approach with everything they do. Colin says that any developer should want to be involved in any area with rapid population growth, massive infrastructure investment, Skytrain, SFU and reasonable land prices, but that the lingering stigma associated with Surrey has been a hurdle for others. Colin says that, for buyers, the combination of affordability (mid $400s per square foot) and an abundance of local amenities has resulted in faster than expected presales.


Are shopping area like the Village at Park Royal and Edgemont Village indicating a trend?

Michael says that in different ways both places have created a community feel that shoppers enjoy. Park Royal was and is a mall, but it has adapted successfully. Edgemont meanwhile was an actual community first and things have grown around it. Michael believes that whenever one can create authenticity, there will be a receptive audience.


Does mixed-use development really work? How do you do it?

All agreed that mixed-use is difficult and complicated, but very worthwhile. Mark says that combinations of rapid transit, density and multiple amenity and activity opportunities is “the only way to go forward.” Michael said “we preach it”, but recognizes that it is a lifestyle choice that is not for everybody – it may be noisier and more urban option, but also greener and more fun. Colin takes inspiration from the plazas of Europe, combining residential, commercial and outdoor spaces to create a sense of community. He also values the innovation that comes out of mixed-use projects and notes that retailers are increasingly open to new formats.


NAIOP’s breakfast Industrial Outlook for 2014 was attended by an attentive, quiet group of over 300. Mark Renzoni, introduced the session by reviewing the 2013 Industrial Outlook forecast. In 2013, the panel was generally bullish, predicting an improving industrial market, but with a lower level of sales (in terms of both number of sales and absolute dollar volume), primarily based on a lack of supply. In fact, Vancouver’s 2013 industrial market outpaced that of 2012, with over $1 billion in industrial transactions completed. As is typically the case in the Vancouver market, nearly 90% of the transactions were under $5 million in value.

Mark also noted that 2013 to 2015 will be a key period in the development cycle for industrial space in the Vancouver market, with several developments underway or in the planning stages, adding that market participants likely didn’t realize at the start of 2013 that the development cycle was about to commence.

Turning to the panel, Mark asked for a short summary of 2013 activity for each of the panelists and their view of overall market activity in 2014. Darren Cannon, discussed several large transactions which completed in the Vancouver market in 2013 and suggested that 2014 will be less active, as there are no large transactions on the horizon. Darren also predicted that capitalization rates for industrial properties in Vancouver would not change materially in 2014.Beth Barry, advised that the Beedie Development Group continues to be a buyer in the marketplace, but that she felt that a lack of available opportunities would limit their activity in 2014.

In terms of product availability nationally, Jeff Miller, advised that the lack of investment opportunities for industrial properties extends across the country and was expected to continue into 2014. He also noted that the average transaction size in Vancouver in 2013 was half of that in Calgary and Toronto. In addressing cap rates across the country, Kevan Gorrie, noted that cap rates for industrial properties are very “market specific”. Whereas the cap rates for institutional grade properties in Vancouver are very low (in the low 5% range), cap rates are in the low to mid 5% range in Edmonton and Calgary, in the high 5% to 6% range in Toronto and possibly as high as the high 7% to 8% range in Montreal. Markets across the country have moved apart in terms of cap rates, perhaps even more so than the divergence of cap rates between asset classes. Kevan noted as well that other than for institutional grade properties, cap rates have moved up slightly across the country, due to the increasing cost of capital for REIT purchasers.


Mark then spoke about the strata market. Darren was asked whether there is/will be a shortage in strata over the next 12 to 18 months. Darren responded by saying there is no oversupply. So long as interest rates stay low, mortgage and lease rates will be comparable. Mark asked Beth about pricing, specifically construction costs. Beth spoke about increases in strata construction costs. She referred to changes in municipal bylaws and the building code which have resulted in increased costs. She pegged the increase to $10-$15 per foot over the past 5 years. Jeff said that Oxford would not develop strata and also mentioned that corporate America did not want to see real estate on the balance sheet.

Mark then posed specific questions to the panel members.


Do you see land prices going up?

Beth said that land prices are definitely going up. She noted that from Beedie’s perspective, the “easy” sites are gone and land opportunities are now mostly available in more challenging sites (from a site preparation and location perspective) so there is also pressure on costs to develop.


Do you see the Norampac mill site development putting pressure on land value? What impact will the Norampac mill site have on land value?

Jeff doesn’t think that the Norampac development will have any impact on pricing. A lot of the remediation for this site was accounted for in the purchase price. He noted that there is a massive gap between the user market and what developers will pay. Input costs are increasing and he didn’t think land value will increase more until we see more absorption and rental growth.


What bets would you make if you were buying land?

Darren said that he didn’t know if land prices will go up. He noted that it is really tough to make pro formas work when a developer has to sit on land (while it’s being developed) without any return for 2-3 years, so there is a need to be more creative, suggesting joint venture arrangements or leasehold models.


Will REITs buy land?

Kevan said that Pure Industrial Real Estate Trust (PIRET) has avoided buying land because, up until now, they have been limited as to what they can do due to their size and investor expectations. He noted, however, that the timing is now right, (both from a size and investor perspective) for PIRET to get into buying land – but not in the Vancouver market. Most likely PIRET will focus on land purchase and development in the Toronto or Alberta market. He added his prediction that Vancouver land sales will be flat and vacancy rates will be soft.


What is your view of Alberta land values in comparison to BC land values?

Beth said that the average price per acre in Calgary is less than in Vancouver. Specifically, she noted that the price per acre of land in Calgary is in the high 6 figures whereas in Vancouver it is over $1,000,000.

Mark then noted that the forecast last year that vacancy rates would decrease turned out to be correct. He predicted that vacancy rates would continue to go down in 2014 but likely stabilize by the end of the year due to new development.


Are rents set to increase?

Darren said that the leasing market is tough because there is lots of new supply. He noted that the bright spots in the market are for well located, tier 1 buildings. He said that rental rates have been rolled back to the rates he saw in 2004 and 2005 but he expects to see rental rate growth in 2015.


Do you see an opportunity for rents to increase on lease renewals?

Beth said that she has seen renewal rates go up due to a lack of supply. She noted that their build-to- suit clients are looking for value so there is less ability to increase rates but pointed out that their rates are reflective of development costs and not of the general rental market.


Can you give us a national perspective on the movement of rental rates?

Jeff said that last year there was real pressure on rental rates. He noted that rental rates in the US have been strong and cited a 20-30% increase in rates which helps the business case for rates in Canada. He said that the Greater Toronto Area is primed for growth. He thinks that Edmonton is the strongest market and predicts continued growth in Edmonton due to the energy sector. He noted that the Calgary market is softer than Edmonton and predicted that rental rate growth would be flat. Jeff thinks that Calgary needs more demand and absorption in order to jump start growth.


Can you give us a national perspective on the leasing market?

Kevan said that the market in Toronto is very strong and that there is a great deal of demand across the board. He noted that the Calgary market is soft and that in Calgary location will be the most important factor in generating demand. He said that the Vancouver market is somewhere in between Toronto and Calgary and noted that they just completed that their last lease deal in Vancouver and don’t expect to do any more until 2015. He described Vancouver, Calgary and Edmonton as a “tenant’s market”.


Are you seeing any new users?

Beth said that the trend she has noticed in the last 8-10 months has been a growth in manufacturing. Many of their build-to-suit clients are in manufacturing as opposed to distribution. She noted that from November 2012 – 2013, manufacturing, particularly in the areas of transportation, food and machinery, has grown significantly in BC compared to the national average.


Are you seeing this trend (i.e. growth in manufacturing) in the East?

Jeff described manufacturing as “spotty” in Toronto and noted that there are manufacturing companies in their portfolio that are struggling. He added that big box retailers are active in the East and e-commerce is still emerging.


Who is experiencing positive growth on the user side?

Darren said that he hasn’t seen any significant expansion requirements for tenants but predicts that we will see that change in the next 18 months.


Noting that a low Canadian dollar is good for business in Canada, especially manufacturers and distributors, and that as of the start of the breakfast our dollar had dropped to US$0.89, he asked the panelists for their forecasts for this time next year. They all were in the 87 to 90 cents range, with Kevan venturing that the inevitable pipeline approvals, allowing Canadian oil to be sold to more lucrative markets than the US, will eventually drive the Canadian dollar upwards again.

2013 Vancouver Real Estate Forum

Keynote Address – Economic Overview – What is the outlook for Canada and the U.S?


Sonya Gulati, Senior Economist, TD Economics

Sonya Gulati’s presentation on the economic overview painted a modest outlook going forward. Ms. Gulati started by reviewing the Eurozone debt crisis and noted the environment of high unemployment, dropping revenues, growing expenditures and the mounting number of bailouts. Moving onto emerging markets, Ms. Gulati commented that emerging markets remain commodity hungry but that a slow-down will affect commodity sellers.

On the topic of the US economy, Ms. Gulati noted that fiscal drag is here to stay as we wait for the US to get back on secure footing; as long as the economy remains fragile, the Federal Reserve will continue to inject cash into the economy. Ms. Gulati noted that the unemployment rate of about 7.6% remains high (about 9 million people lost their jobs and only about half were able to get new jobs). She also noted that the unemployment rate does not capture underemployed workers or discouraged workers; if those factors are included, the unemployment rate is actually closer to 15%.

There are some positive signs: Ms. Gulati pointed out that US consumers are showing signs of wanting to spend again, and that home prices are starting to show gains. However, Ms. Gulati cautioned that due to the backlog of inventory, a rebound in the housing market will be slow and likely not materialize until 2014 or 2015.

Ms. Gulati noted that Canada, being a small and open economy, is sensitive to fluctuations abroad. Despite this, Ms. Gulati noted that Canada fared remarkably well in the recession, due to robust consumer spending and government policy. Going forward, Ms. Gulati predicted that businesses and exporters will propel the economy, and that non-residential construction and manufacturing would be the largest drivers of growth.

On the other hand, the same robust consumer spending that kept the Canadian economy afloat during the recession has led to high household debt, which Ms. Gulati identified as the number one risk going forward, given that high household debt was one of the predecessors to the US recession. As well, Canadian exporters will face challenges as the Canadian dollar is likely to remain high and strong.

At home in BC, Ms. Gulati described an environment of fiscal uncertainty, as the government has yet to approve a balanced budget. Ms. Gulati expects the housing market to improve as slightly lower home prices and slower sales indicate a stabilizing market. In line with overall economic improvement, the unemployment rate in Vancouver is slowly declining. As well, Ms. Gulati posited that low office vacancy rates in Vancouver may help the construction industry.

In summary, Ms. Gulati noted that Vancouver and other Canadian urban markets are doing well compared to other urban markets in North America, but that imbalances in recent years will limit growth going forward. She noted that commercial real estate remains a bright spot in the low rate environment.

Vancouver Investment Panel: Is the west still considered by many the best?


Avtar Bains, President, Premise Properties


Michael Emory, President & CEO, Allied Properties REIT
Scott Hutcheson, Chairman & CEO, Aspen Properties Ltd.
Michael Kitt, Executive Vice President, Oxford Properties Group Ltd.

The panelists began by commenting on their respective activities in Vancouver. Michael Kitt noted that Oxford, a wholly owned subsidiary of OMERS, has taken a cautious approach to real estate in Vancouver, given the higher costs compared to the rest of Canada. Michael Emory noted that Allied is a very focused Canadian REIT, which looks for three specific attributes in its properties: they must be located close to the core, have distinctive features, and have lower overall occupancy costs compared to towers. Scott Hutcheson commented that Aspen seeks downtown offices that present opportunities to add value. Mr. Hutcheson noted that the growth in Vancouver is compelling as a steady edging tool against volatile markets in Alberta where Aspen has invested.

Avtar Bains polled the audience and found that 40% thought that the province’s economic policy decision-making on jobs was the greatest challenge facing Vancouver, followed closely by 30% that thought that global economic pressures impacting trade and immigration was the next greatest challenge. Mr. Kitt agreed and pointed out that the effect of provincial policy at the municipal level is a significant concern for Oxford.

Moving onto the topic of REITs, Mr. Bains asked if the panelists thought that REITs would last. Mr. Emory jokingly answered that he hoped so, before noting that the REIT is a sustainable vehicle for three reasons: they have low debt ratios, pay out less than they earn and are specialized. He noted that Canadian REITs in particular are more sustainable compared to their American counterparts due to their more disciplined approach to debt.

In another poll of the audience, Mr. Bains asked which asset class is most likely to have the strongest returns in BC over the midterm, and found that 33% voted industrial, 27% voted retail, 19% voted office, 11% voted deployment and 10% voted residential. Mr. Hutcheson agreed that downtown office is unlikely to see much growth as it appears to have peaked, but that retail and industrial remain robust.

Mr. Bains ended the panel by asking the panelists to give advice to young men and women starting out in the industry. Mr. Emory advised that attitude, rather than aptitude, was the key factor. He noted that the industry is small and tough, and that you need a genuine enthusiasm and passion to succeed. Mr. Hutcheson recommended that young people obtain the highest education they can get and then work for a brokerage. He also advised young people to not compromise their integrity. Mr. Kitt reminded everyone that the industry is small and of the importance of one’s reputation.

B.C.’s Leading Employers – Why (604) is worth the investment!


Lorne Burns, Partner, Audit, National Industry Leader, Real Estate, KPMG LLP


Mauk Breukels, Vice President, Investor Relations & Corporate Affairs, Finning International Inc.
David Bowden, CEO, Colliers International
Andrea Goertz, Senior Vice President, Strategic Initiatives and Communications,TELUS Corporation

Lorne Burns noted that the four firms represented on stage shared a combined existence in BC of well over 400 years, then engaged the panelists in a wide ranging discussion centering on the current and future climate for Vancouver real estate. Their perspectives were provided from three diverse industries: technology, real estate services and industries using heavy equipment.

All agreed on Vancouver’s enduring attractiveness in terms of livability for individuals and, by extension, as a place to conduct business. But the city has other advantages too.

David Bowden spends much of his time traveling the world on business and increasingly hears that Vancouver enjoys a wonderful reputation. He sees the ever-increasing diversity of the population as remarkable, providing amazing opportunities for employers. He commented wryly that one disadvantage for an international company is that once employees move to Vancouver, they refuse to be transferred elsewhere. Mauk Breukels noted that with extensive national and worldwide operations, only 15% of Finning’s employees are located here and able to enjoy Vancouver’s lifestyle, surroundings and downtown livability, so the continuing excellence of YVR is very important.

In terms of local disadvantages, Mr. Breukels said that expensive housing was a hurdle to recruiting from elsewhere, but Mr. Bowden is more positive and believes that a growing acceptance of condominium living, in ever shrinking spaces, will help that issue sort itself out – public transit, however, must be improved. Andrea Goertz advised that compared to Alberta, higher BC taxes are a negative factor, and also noted that the multiplicity of local governments in Metro Vancouver creates more bureaucracy than, for example, in Calgary.

Asked about the impact of technology on real estate needs, Ms. Goertz had the most interesting answer. As a technology company with a strong culture of collaboration, as well as environmental and social responsibility, TELUS has a goal of having 70% of its “team members” working remotely. In financial terms, the estimated annual savings is $40 million, to be reinvested into product development and services, while providing exciting and different working space for the remaining 30%. TELUS has made a great effort to determine which functions require traditional space and which thrive in more of a “living room” environment. The results to date have included greater productivity and flexibility. While TELUS may be at the forefront, others may be expected to follow.

Mr. Bowden encouraged all attendees at the Forum to really focus on social media. He is seeing its relevance moving rapidly from the consumer area into business-to-business space with far-reaching implications for all businesses.

A Game of Musical Chairs or Well-Planned Growth?


Bill Tucker, CEO, Omicron


Sandy McNair, President, Altus InSite
Blair Quinn, Senior Vice President, CBRE Limited
Gavin Reynolds, Senior Vice President, Jones Lang LaSalle
Chuck We, Director of Leasing, Oxford Properties Group

Bill Tucker opened by acknowledging that office development is a sexy topic in Vancouver right now and told the group they were fortunate to be enjoying the insight of a panel with great depth of experience. He told the group that he would lead the panel through a discussion of office development starting with a look at the macro context and then drilling down to regional perspective and then ending with some discussion about trends.

Sandy McNair started by acknowledging there is much new supply coming onto the Vancouver market and examined three possibilities for the drive for such supply: (a) the desire of investors to acquire and develop new product, (b) incremental increasing demand, or (c) an obsolescence issue/desire by tenants to have the newest and best product. He presented a slide that showed the breakdown by age of office inventory across Canada in the major markets (i.e. Vancouver, Calgary, Toronto, and Montreal). In downtown Vancouver, only 8.2% of our inventory has been built since 2000, whereas 30.6% of Calgary’s inventory, 15.4% of Toronto’s inventory and 10.3% of Montreal’s inventory have been built in the same time period. Further, Vancouver tops the group with older product in the 1960–1989 age range with 68% of our product being built in that era.

Mr. Tucker asked Gavin Reynolds to discuss tenant mandates, both in terms of companies that reside full time in this market and those coming from outside the market. In response, Mr. Reynolds identified how high the average net effective rate was in 2009 when the market crashed, and noted that there was no real corollary reduction or fall back and tenants are still willing to pay those higher rates. He observed a resistance by many local companies to move to new product (i.e. many law and accounting firms are simply refreshing their existing office space) but he stated that global and US companies are trying to replicate what they offer their employees and clients in their other markets and so are willing to pay higher rates for new product and are not “looking for a deal”.

Blair Quinn also weighed in on this issue, saying that in his sector there’s been a massive change in the tenant mix since the meltdown. In the 2008, companies like Nokia, Microsoft started to shut down or severely downsize their operations in Vancouver but Mr. Quinn said he’s seen some bounce back as Facebook and Samsung have both taken up office space in Vancouver and local companies such as Hootsuite and Westport also continue to expand locally. He noted that there is absolutely no sublease market to speak of and that tenants have been paying the price as a result.

Mr. Tucker also asked the commentators to discuss the number of projects being built and whether the major driver is good solid demand, or capital being really ready to get to work.

Mr. We explained that for his company, building a new tower was a key piece of what they wanted to offer their own tenant base. He explained that “next gen” developments are offering unique things that older product cannot and does not offer to tenants. He also said that buildings like Telus Gardens (which he thinks would probably not have taken hold 5+ years ago) are experiencing a factor of being the right product at the right time. He also expressed confidence in Vancouver’s fundamentals and said his view is that Vancouver has the tenant base sufficient to absorb the new space.

Mr. McNair noted that one of the drivers of the new product has been an abundance of pension fund and private capital to place. His view is that if every single project in the pipeline right now got built, it would be problematic for absorption. However, he said that although there is an unprecedented number of projects coming onto the market, absorption statistics for Vancouver are good and we should end up with a bit of positive demand at the end of it all.

Mr. Tucker asked the panelists if they thought Vancouver would see any move by energy tenants and Mr. Reynolds noted that he had worked with Shell to set up a downtown office of 4,500 square feet in an Ivanhoe Cambridge building but that the move was as short term growth option and most commitments seem to be to field operations at this point. He predicts, however, that tax, political and other factors will drive some of the energy companies to set up offices in downtown Vancouver.

Before the obligatory election/politics question, Messrs. McNair and Quinn both weighed in on the future of Vancouver’s existing product in the face of the new product about to emerge on the market. Mr. McNair said that it will be interesting to watch what happens with the positioning of the A minus and B class product and where the back fill settles. C class product/owners know their game and will stick to it but the other classes may need to reposition. He predicted some big winners and some big losers and said that the pitch and position of the product will be key going forward.

Mr. Quinn agreed that branding will matter in a big way when the new product comes onto the market and thinks the industry will take a long hard look at some of the existing A class product in particular.

On the topic of what to expect after the election, they both agreed that an NDP government will cause an initial pause in the market. Mr. Quinn noted that economies go on and governments change and the pause will not last forever. Mr.McNair noted that business confidence will no doubt take a hit and that business confidence is absolutely critical to velocity so there may be some impact on rates. Mr. Reynolds’s view was a bit different – he feels that things will keep going full speed ahead in the short term and won’t slow down but 18–24 months out may be a different story as policies of the new government take hold. Mr. We’s short response was to remind the group that everyone will wake up on May 12 with deals to do and that no matter what the government, we’ll keep moving forward.

Bonus: What the Vancouver Sun took from this session

The Growth or REITs & Private Equity Funds and their Impact on the Real Estate Market


Pierre Bergevin, President & CEO, Canada, Cushman & Wakefield Ltd.


Trevor Blakely, CEO, Forgestone Capital
Kevan Gorrie, President, Pure Industrial Real Estate Trust
Shenoor Jadavji, President & CEO, Lotus Pacific Investments Inc.
Joe Mazzocco, Partner, Investments, KingSett Capital

This session featured a panel of principals from a diverse range of entities, from private equity firms, representing both institutional and high-net-worth investors seeking both value-add opportunities and long-term investments, to a publicly-listed REIT seeking to add to its growing investment portfolio. The panelists’ focus ranged from B class industrial in Canada and the Western United States, to working on the largest scale acquisition transactions in the Canadian marketplace. With such a wide range of knowledge and experience, the panel provided significant insight.

Trevor Blakely noted that with returns from the real estate sector continuing to outperform other investment sectors each year, REITs continue to attract well-priced capital, and pension funds are having their allocations to real estate increased. The investor demand for yield endures, seemingly unabated.

In addressing their sector and market focuses, panelists noted that their investment strategies include following population growth, which leads to increased demand for retail, office, industrial and residential. Trevor Blakely noted the lack of new transportation infrastructure in Canada to support the nation’s population growth, leading Kevan Gorrie to note Pure Industrial’s focus on targeting industrial property nodes that are well served by rail and road infrastructure. He also noted that significant activity in the industrial sector is taking place near to intermodal facilities, which support the distribution tenants that make up a large portion of the Canadian light-industrial market.

Panelists also discussed the importance of active asset management. Shenoor Jadavji noted the importance in the B class market of asset management to tenant retention and rental stability. At the same time, Joe Mazzocco noted the importance of actively managing a portfolio and determining when and where to add value through capital additions.

In addressing a question about what risks may arise in the Canadian market within the next 24 months, panelists mentioned a possible residential real estate bubble. However, none seemed too concerned that a bursting residential bubble will affect the investment market, as the demographic shift and turbulence in other sectors will continue to create a demand for yield producing investments. Mr. Mazzocco made the point that “you never overpay for the right real estate”, notwithstanding cycles in the real estate market.

In terms of the inevitable question regarding cap rates and inflation, panelists all expressed that there continues to be room for cap rates to compress for the higher quality assets, although they warned against overpaying for B class properties. When discussing possible increases in interest rates, Mr. Gorrie felt that interest rates could increase 50 basis points without affecting cap rates for higher quality assets, while Mr. Mazzocco felt that whether or not an increase in interest rates would affect cap rates depended on how quickly interest rates increased (a faster increase would have a greater effect on cap rates than a slow gradual increase) and on what the basis for the increase is (if interest rates increase due to inflation, cap rates may rise but so too should property incomes).

Lastly, in discussing the level of international investors’ interest in Canadian real estate, panelists noted that the high level of international interest a decade ago was driven by Canadian cap rates being very attractive in the global marketplace. With cap rates in Canada having compressed so significantly over the past decade, that is no longer the case. As well, panelists noted that international investors need a certain scale of investment to justify moving into a new jurisdiction, and that there is simply not enough real estate available in Canada to meet their requirements.

The Outlook for Capital and Debt Markets in 2013: Asset Values, Spreads, LTVs, and other issues


John O’Bryan, Chairman, CBRE Limited


Chris Dobrzanski, CEO, Citizens Bank
David Franklin, President, CMLS Financial Ltd.
Morley Greene, President, Trez Capital
Murray J. Williamson, Senior Vice President, Bank of America Merrill Lynch, British Columbia Region, Global Commercial Banking

When providing their views on the outlook for capital and debt markets in 2013, members of the panel were generally optimistic. Before directing his first question to Chris Dobrzanski, John O’Bryan opened the dialogue among the panelists with a series of slides showing continued growth in debt markets as a signal of confidence in the economy. When asked to comment on the general tone of the outlook for capital and debt markets in 2013, from a lending perspective Mr. Dobrzanski noted that he believes we are only half way through the debt de-leverage and low interest rate period. He warned that individuals and companies should be cognizant of their risk profile to ensure they are not vulnerable to rising interest rates.

When commenting on the job market, Mr. Dobrzanski noted that, although unemployment rates are not high in Canada, the jobs that have returned are not of the same quality as the jobs that were lost during the recession. People are increasingly working in consulting roles, retiring later and working two jobs to make ends meet. Particularly in Eastern Canada, the middle class is becoming a working poor class. In terms of the commercial mortgage market, Mr. Dobrzanski noted that there will be more risk in 2013 than in the last couple years, as unemployment rates remain high in the US and continue to act as a drag on the economy.

When asked to comment, Morley Greene noted that his company is more focused on the short-term side of things so he is particularly interested in the next 18 months and what governments may or may not do. Mr. Greene commented that if interest rates are kept low and things continue on as they have been, things will be fine; if interest rates rise, most projects will face significant challenges. Mr. Greene noted that his company is not having any problems with foreclosures and defaults at the moment and that he is cautiously optimistic, provided that interest rates remain low. Murray Williamson commented that he would put a slightly more positive spin on things, pointing to such things as private sector employment growth, low interest rates, high corporate profits, corporate recovery and the move towards energy independence in the United States. Mr. Williamson agreed with Mr. Dobrzanski that we are only halfway there, but noted that he is optimistic.

When asked to comment on the residential market, David Franklin noted that home value boosts spending. He commented that we are seeing an increasingly prudent approach to underwriting and reduced amortization periods. Mr. Franklin felt that the market has softened in the last year or so and he predicted that it will continue to do so. As long as employment rates remain steady, Mr. Franklin noted that this should not be a problem. Despite this softening in the market, Mr. Franklin noted that foreclosure rates in Canada are very low. Mr. Franklin predicted that the residential market will probably flatten out in 2013.

Compared to the United States, Mr. Williamson noted that Canada has very low commercial vacancy rates and is an “oasis of stability”. Canada went into the recession in better shape and similarly, came out of it in better shape. In Canada, there is a significant amount of capital and lower interest rates than in the United States. However, unlike Canada, there is less risk and more reward to invest in the United States. Lot prices are increasing in the United States and employment rates are rising as the economy generally improves. Despite the opportunities that exist in the United States, however, Mr. Greene feels that many investors are wary of investing in there.

For 2013, Mr. Williamson commented that their book in Canada is corporate and that they will continue to be very aggressive in their approach. In the United States, there is opportunity for good long-term returns in the fixed-income market. Vacancy rates for commercial real estate are decreasing in the United States and there is good long-term rate availability. Mr. Williamson noted that there is a lot of de-leveraging and mortgage restructuring opportunity in the United States, particularly in the Southwest. Mortgage delinquencies are decreasing in the residential market and there is increased confidence.

Mr. Dobrzanski noted that Citizens Bank was most active during 2009 to 2011 when there were many quality borrowers looking for loans; however, as there is now greater competition, they are less active. Better interest rates have driven this increase in competition.

With respect to commercial mortgage-backed securities (CMBSs), Mr. Franklin noted that CMBSs had increased steadily until 2007, when they dropped off drastically, and were effectively dormant in 2008. Since 2011, however, CMBSs have been returning in a very modest way. Mr. Franklin commented that the Canadian CMBS market is still in a growth phase and is very much a “niche play”, however, he noted that the experience of investors in Canada has been good. Banks in Canada are wary of securitization and feel that CMBS will not grow to the level they were at in 2007.

Mr. O’Bryan then turned the panel to a discussion of cap rates, which remain at a record low. The spread between Canadian cap rates and the 10-year bond rate has narrowed. In Canada, we are very close to where we were in 2007. Mr. Dobrzanski commented that this makes sense – if interest rates remain low, it is very logical for investors to enter the market. Mr. Williamson noted that appraisers have been under a great deal of pressure due to cap rates being so low. Increasingly, equity players have had to step up, which has been increasingly true in apartment and commercial real estate, as well as industrial real estate to some extent. Mr. Franklin noted that it’s a “frothy” market in which stability of cash flow is key. In such a market, amortization takes care of loan position. Mr. Franklin predicted that cap rates will likely increase during the next five years, however, this may not be the case. Mr. Greene provided a bit of a different perspective on this point, as short-term lenders, noting that they try to ensure that they are lending against an asset that can be refinanced.

To close, Mr. O’Bryan turned the panel to the subject of interest rates and presented a slide showing that we are currently in the fourth year of record low interest rates. He then asked each member of the panel to predict when interest rates would increase and why, and what they think will happen. Mr. Dobrzanski noted that as long as the annual increase in GDP is less than 2%, interest rates will remain low. He predicted that interest rates will increase in Canada in 2014 and in the United States in 2015. Mr. Franklin joked that he has been predicting interest rates will increase in the next 24 months for the last 48 months, so he would refrain from commenting. Mr. Williamson noted that an increase in interest rates is going to be corporate-led as employment rates increase in the United States and consumer confidence increases. Mr. Greene noted that so long as the United States wants to keep the value of their dollar low and their economy inflated, there will not be a drastic change in interest rates in Canada.

Drivers of the Industrial Market: What Do the Key Players See Over the Horizon?


Stu Morrison, Senior Vice President, Industrial, Colliers International


Tom Corsie, Vice President, Real Estate, Port Metro Vancouver
Ron Emerson, President, Emerson Real Estate Group Inc.
Alistair Pickering, Director, National Industrial, Oxford Properties Group
Paul Tilbury, COO, Dayhu Group of Companies

There was a consensus among the panel members that Vancouver is an incredibly challenging market in terms of supply. More than once the panelists repeated the refrain that there is “no new land” in Vancouver. This of course leads to pressure on pricing and the panelists all also agreed that the Vancouver market is an issue in Vancouver, and Alistair Pickering even said it’s one of the “biggest impediments” to entry into the Vancouver industrial market.

In terms of drivers of the market, Ron Emerson clearly sees the future and demand of the market being logistics-type space. Mr. Pickering agreed that logistics as opposed to manufacturing will be the growth area and focus going forward. Tenants now need large space, proximity to rail, highway and port. Mr. Emerson said that for industrial developers, the ALR is the elephant in the room and he does not think Vancouver can grow without changes to, and lands being removed from, the ALR.

Paul Tilbury agreed that the ALR is a beast that developers will continue to fight, but he doesn’t think it’s a battle that will ever be won. He sees a lot of potential and is focused south of the Fraser. He said that Dayhu is focused on building with vertical height in mind because over the next 15–20 year horizon they predict more automation and less physical human work. He noted that they’ve got demand from clients for 36 feet to 40 feet clear of vertical space. He also noted later in the discussion that internet fulfillment centres are becoming more and more prevalent in terms of tenant use of buildings, and although it represents a material shift in the way products are delivered to consumers, it does not change the fact that products do have to be delivered. He believes the Vancouver market can serve all of Western Canada if we have the right buildings.

Stu Morrison noted that Boundary Bay and Tsawwassen are ideal for importers and that distribution centres south of the Fraser will be in demand. Tom Corsie agreed and said that in terms of drivers, he sees Delta Port as having long term positive growth potential for being a major player in the container business for the domestic Western Canadian market. This will of course create further demand for distribution centres nearby.

With unanimous agreement of the panel, Mr. Morrison commented that the two most challenging items in the Vancouver industrial market are (a) the supply of land, which he characterized as basically nil in Vancouver, and (b) the fact that the cost of buying and developing any available land is more expensive than anywhere else. He noted that a recent study reported that there are 6,905 acres of available industrial land in Vancouver but he and all the panelists expressed skepticism at that figure.

On the issue of Vancouver’s lack of existing supply, Mr. Morrison reported that Target spent 28 months trying to procure their local facility and called Vancouver the most challenging market they’ve seen in North America.

On the issue of price, Mr. Pickering said that pricing is the biggest impediment to entry into the Vancouver industrial market. He said that in this market you need to understand the land, the motivation of the seller, and you cannot simply focus on potential cap rate compression. He quoted one of his colleagues’ famous line of “anything the cap rate fairy gives, the cap rate fairy can take away”.

Mr. Tibury commented that he has talked to many tenants who feel they have no choice but to locate in Calgary simply because there’s nothing available for them in the Vancouver market. In his view, there is at least 2 million square feet of potential demand in the market looking for a home. He said this is a good reason for developers to build “on spec” and potentially in phases – he said developers shouldn’t fear vacancy and said his own company analyzed the market and tested its own “testicular fortitude” before deciding to build on spec. He says “if you build it, they will come”. He also commented that a portfolio should have a blend/mix of classes of property and that developers should nurture tenants and treat them well and this will result in tenants that move with the landlord as it grows.

Mr. Morrison asked the panelists where distribution centre requirements are being accommodated (or will be accommodated) because he sees an impending bottleneck and real challenges in this area. Tom Corsie noted that tenants want their distribution centres to be 45 minutes away from container terminals and said that the South Fraser Perimeter Road is an exciting development in that regard. He said that mayor Lois Jackson thinks it will be a real catalyst of change in that area and he agreed that East Delta will be an exciting area to watch and be involved with going forward.

Mr. Emerson weighed in, noting that availability drives absorption and predicted that Delta Port developments will absorbed in less than 5 years. After that, he said, there really is no land left and a lot of existing product is becoming obsolete. He said that expansion at Delta Port is critical.

Everyone on the panel agreed that there is a real risk that if the Vancouver market cannot “solve” the “problem” of the supply of industrial land, importers and tenants may go elsewhere and the province will lose out on jobs and tax revenues.

Transit Oriented Development (T.O.D.): What Does the Future Hold?


Anne McMullin, President and Chief Executive Officer, Urban Development Institute


Gary Andrishak, Director, IBI Group
John Horton, President, Shape Properties Corp
Dan Turner, Executive Vice President, PCI Developments Corp.
Richard Weir, Vice President, Bosa Development Corp.

Gary Andrishak opened the discussion by providing a definition of Transit Oriented Development (TOD) and reviewing a number of examples. Simply put, TOD is a compact mixed-use development where residents live, work and play in close proximity to efficient rapid transit and the automobile is an option, not a necessity.

The panelists continued by describing the TODs being undertaken by their firms. John Horton described Brentwood Mall, where Shape Properties is effectively doubling the retail component of the mall and planning to build out a mixed-use, transit oriented city core with significant residential and other amenities. He also referred to Lougheed Mall, which Shape is taking through a similar redevelopment process. Dan Turner described PCI Development’s several TOD projects, including Crossroads in Vancouver, King George Station in Surrey and Marine Gateway in Vancouver, which will include 225,000 square feet of retail, 200,000 square feet of office and 460 residential units (which sold out in four hours). Lastly, Richard Weir described Bosa Development’s 20 year history with development TODs.

The panelists agreed that transit alone does not make a great development site. Development is about “placemaking”, and that requires amenities such as shopping, dining, entertainment, jobs, office and other. However, panelists also agreed that every constituency using those amenities benefits from transit.

Mr. Turner noted that PCI Development’s initial focus for each of its TODs is on the retail use. With a need for a significant anchor retail tenant, combined with the other types of amenities that lead to successful placemaking, their projects require a certain scale, which then leads to a large residential component. Mr. Andrishak concurred, while Richard Weir noted that amenities required for a successful TOD do not all have to be within the same development, and can be located in a central core (such as downtown).

Proximity to transit is also a key component to a successful TOD. In terms of proximity to transit, Mr. Andrishak noted the well-accepted principle that 800 metres is the limit beyond which the transit component is no longer a significant factor to a development.

Responding to the question of why they focus on TOD, Mr. Weir noted that density is typically encouraged around transit nodes. With community opposition to density becoming one of the biggest obstacles to development projects, choosing to develop near to or around transit nodes allows developers to avoid this risk.

With respect to the inclusion of office components in TODs, the panelists agreed that proximity to transit is a key requirement for office properties, and referred to a recent Jones Lang LaSalle study showing higher rents and lower vacancies in office properties near transit. Panelists also agreed that traditional office parks may suffer in the future from a lack of access to transit. Mr. Horton noted that Shape’s two Burnaby projects will set aside space for future office development.

Lastly, in terms of what makes TOD profitable, panelists noted that transit-oriented sites have a higher value, not because of the presence of transit, but because they typically allow higher density.

Is the North Shore the Next Big Real Estate Play?


Mark Hannah, Principal, Avison Young Canada


Rick Amantea, Vice President Community Partnerships and Development, Larco Investments
John Conicella, President, British Pacific Properties
Beau Jarvis, Vice President, Development, Onni Group
Rob Kavanagh, Vice President, Asset Management & Managing Broker, GWL Realty Advisors Inc.

Mark Hannah, as moderator, began this session by providing a general overview of the North Shore: there are approximately 175,000 people living on the North Shore, who tend to have more education and higher income per capita; there are three ski mountains and a [related] major trauma centre; the Trans-Canada highway, a BC ferry terminal, two major bridges and major ports are all within it; Seaspan made big news when it was awarded an $8 billion shipbuilding contract, which will create numerous jobs; and currently underway or planned are at least twenty mixed-use, pure residential and commercial projects. With that backdrop, Mr. Hannah then posed a question relating to development on the North Shore to each of the panelists.

As there is a strong demand on the North Shore for housing in all product classes, Mr. Hannah asked John Conicella what he thought was fueling this demand. Mr. Conicella’s belief is that this is not a result of growth but of change. He states that we are at the crux of a generational change. For Mr. Conincella there are three factors that will therefore fuel this demand: 1) an increase in the percentage of old housing stock, 2) changes in family size and household dynamics, and 3) the existence of housing types that won’t meet the new generation’s needs.

Rick Amantea was asked how Park Royal can meet the demand for retail space resulting from the demographic shift in the increase in population. Mr. Amentea feels that shoppers currently are, and going forward will be, looking for the social aspect of shopping. Park Royal, in addition to providing the underlying retail, is addressing these social needs. As an example, Park Royal has more cafes and full service restaurants than other retail areas and is planning to further grow those areas. It is a strength of Park Royal, according to Mr. Amentea, that it provides shoppers with a full social experience. In opposition to this, Mr. Amentea is concerned about grade level commercial spaces along the Marine Drive corridor, as an example that will not be able to provide this, which may lead to vacancy issues due to the desirability of the space.

Mr. Hannah noted that the North Shore does not suffer from the luxury of excess land, therefore there is going to be pressure for mixed-used projects that challenge the existing zoning on height and density. When asked how this demand or pressure can be accommodated Beau Jarvis’ response was that it can be dealt with by managing expectations and certainty for both developers and the community. According to Mr. Jarvis, communities on the North Shore are extremely polarized between those that have been there and know the old suburb and the younger generations that are new or returning to the area. Mr. Jarvis feels there are also communication problems in that the younger generations are time impoverished and, therefore, do not provide any input for policy planning that will affect them in the future, while the more established neighborhoods are suffering from fatigue as a result of being bombarded by consultation and planning, so they find it easier to refuse to participate. According to Mr. Jarvis, before there is a conversation about accommodating demand in relation to growth, the public needs to be meaningfully engaged and provide decent meaningful feedback. In order to elicit this engagement, municipalities, developers and planners need to be creative and provide simpler avenues for consultation, which can then lead to narrowing the divide between views in the community.

Finally, Mr. Hannah asked Rob Kavanagh what attracts businesses to operate from the North Shore. Mr. Kavanagh’s resounding answer was lifestyle. GWL Realty Advisors’ Northwood project is a lifestyle business park that tries to be best in class with respect to its buildings, amenities and community, which is attractive to businesses that focus on lifestyle. Having businesses on the North Shore allows you to live where you work and, for several businesses in the Northwood project at least, allows companies to test their products in the North Shore mountains. Mr. Kavanagh pointed out that the area is not for everyone, one big reason for which is the lack of transit, but he believes that a focus on lifestyle in an important aspect for employee retention and therefore a draw for businesses.

Luncheon Keynote: What’s Around the Corner? What Lies Ahead for 2014?


Michael Campbell

Michael Campbell began his presentation by noting that he was asked not to be too pessimistic. After listing all the global crises about which one could be very pessimistic, he commented that he didn’t think we were in that bad shape.

For future economic growth, Mr. Campbell predicts that Europe will at best have very low to no growth, the US will see 2–2.5% growth, but he noted that it looks like the initial rebound in the States is slowing, and Canada will struggle to find 2%, especially without focusing on China. Mr. Campbell also noted that commodities are in a down spiral, although he predicts that the market will come back in a couple of years, and central banks printing cash is not translating into economic growth. As was the case last year, Mr. Campbell is optimistic for the private sector as they will fill roles previously held by the public sector.

According the Mr. Campbell, the problems for government are financial – simply put, they need money – and it is businesses and the upper-middle class that they will go after to get that money. He notes that Canada plans to increase revenues by cracking down on tax loopholes and clamping down on tax havens, and several other governments are increasing taxes, and when that’s not enough, they are taking money directly from bank accounts. The problem with this approach, however, is that capital and people are mobile. These increased taxes create new incentives and do not work.

Mr. Campbell did see some positives. He noted that the stock market and real estate in many places are doing well. This is because people are looking for a good rate of return, which just isn’t possible with bonds currently. However, Mr. Campbell still sees Japan in trouble and predicts Italy and France are next to fall in Europe. He believes Canada has the opportunity to avoid these troubles but we need to recognize that the game has changed.

Normalizing the Residential Market… Finally?


Cameron McNeil, President, MAC Marketing Solutions


Ralph Archibald, Senior Vice President, Polygon Homes Ltd.
Cameron Muir, Chief Economist, BC Real Estate Association
Daryl Simpson, Senior Vice President, Bosa Properties Inc.

Cameron Muir started off the discussion by noting that, in contrast to some of its neighbours in the East, overall the British Columbia residential market is not doing too poorly. While Mr. Muir believes 2013 is a transition year for both the local economy and the housing market, he predicts that 2014 will prove to be stronger on both fronts. Daryl Simpson echoed Mr. Muir’s comments, noting that BC is currently in a balanced market and that, with some exceptions, the overall outlook in the province is “pretty good”. Ralph Archibald agreed with the other panelists and, generally speaking, finds it difficult to believe that there is a problem of oversupply in the province’s housing market.

Although the panelists believe the market is currently steady, Mr. Archibald does not think that BC will see the rapid sales demonstrated by the Marine Gateway and Station Square projects in 2012 repeated during the course of this year. Mr. Archibald pointed to the Richmond area as one in which a significant amount of activity is currently being seen – with roughly 885 units having entered the market within two weeks earlier this year, and roughly 175 – 200 of those units having already been absorbed. He also sees strength in North East Coquitlam for wood frame products, as there is not much current competition there for such product. Mr. Archibald views the upcoming launch of Wall Centre Central Park as one people should be watching carefully in order to gauge the existing interest of investors. In contrast to Mr. Archibald, Mr. Simpson is cautious about Richmond, as he believes the strong supply is confusing for consumers. Mr. Simpson believes the Metrotown area, which had success last fall, is one that is still strong.

Historically, Mr. Muir noted that current consumer demand in Vancouver can still be considered low. He believes that consumers have been influenced by tighter credit impacting housing affordability, and by media messaging that Canada is in deflationary aspect. However, Mr. Muir also commented that the longer BC sees low levels of sales activity, the greater the likelihood is that pent-up demand is being generated. In addition, he noted that while sales levels have decreased, prices have stabilized as home sellers, like buyers, are taking a “wait and see” approach and have no need to sell. Mr. Muir expects to see stronger sales activities toward the end of this year, and believes that sales have possibly even been increasing over the past several weeks. In terms of the impact of the foreign investor on the current housing market, Mr. Simpson does not see the Chinese speculative investor as playing a significant role. Mr. Simpson believes that the market is at present comprised of more income investors than speculative investors. Mr. Muir also does not believe foreign buyers are driving the current market – as they make up no more than 1–4% of the market. Mr. Muir stated that the idea that the Asian investor is needed to drive the BC residential market is a myth. Mr. Muir also observed that the Vancouver condo market has not been hot for three years, and that affordability has quietly improved in Vancouver as a result.

All of the panel members believe that most of the investors entering into presale agreements currently will complete their purchases in two years’ time, when construction of the project is complete. Both Mr. Simpson and Mr. Archibald noted that they are collecting strong deposits at present. Mr. Archibald also commented that one of the lessons learned from the downturn in 2008/2009 was that developers must ensure that they stay in contact with purchasers frequently, from the date of execution of the purchase agreement to completion.

When asked about the current low interest rates, Mr. Muir stated that he doesn’t anticipate that the Bank of Canada will increase rates until at least the fourth quarter of this year, and likely beyond then. Mr. Muir commented that the lower demand in the market seen at present is not due to interest rates, but instead due to tighter credit restrictions. Mr. Muir does not believe that home prices will change significantly in the coming years, as demand will also decrease once interest rates rise. Mr. Archibald commented that buyers have been hearing that interest rates are historically low for a long time – and that the low interest rates are not significantly impacting the market at present. He does believe that the new credit qualification rules were felt in the market, and is grateful that these credit rules were not combined with increases to interest rates. Mr. Archibald also stated that the changes to and from Harmonized Sales Tax were incredibly confusing for a lot of purchasers, but is optimistic that this issue will no longer have a significant impact on the market. Mr. Simpson agreed and believes that the relatively uninformed buyer may purchase in April because the purchaser believes he or she is getting a discount (despite the presence of the BC Transition Tax).

In commenting on the impact media has on the housing market, Mr. Archibald believes that it makes his sales staff sharper, as they need to “stay in prospects’ ears” both before they buy and during the rescission period. He thinks that the average homebuyer will not be moved by a single digit percentage decrease in pricing. Mr. Muir commented that the impact of media is all about perception, and that consumers are currently asking themselves if they’ll get a better deal if they wait – which is not aided by media hyperbole. In contrast, Mr. Simpson noted that BC has been in a negative news environment for so long now that it may actually be having a positive impact, by motivating people who now believe that the market has flattened.

With respect to statistics relating to the resale value of homes, Mr. Muir commented that all statistics need to be taken with a “grain of salt”. Mr. Muir noted that consumers should look at the benchmark home price in Vancouver, which has only declined in Vancouver by 3.5–4%.

In terms of the impact the upcoming provincial election will have on the residential market, Mr. Archibald believes that, in some ways, the current climate is easier to operate in than in comparison with the last two elections because if people believe the election is a foregone conclusion, there is no lull beforehand. Mr. Simpson noted that the upcoming election has already made a difference, and that the probability of a NDP government has likely impacted the malaise in the market currently. Mr. Simpson believes the NDP, if elected, will act as a dimmer switch in market. Mr. Muir noted that government likely does not impact market performance as much as people think.

In response to whether BC is currently in a more normalized market, Mr. Muir noted that while Vancouver has experienced unusually low demand, the Vancouver market is not as flooded as people would think. Mr. Muir doesn’t see a huge difference – plus or minus – in prices on the horizon. Mr. Simpson commented that the fact that vacancy rates are down and rental rates have increased in downtown Vancouver is positive news. In addition, Mr. Simpson noted that there is not much standing inventory. Mr. Archibald believes 2013 generally is shaping up to be similar to 2012 – but the difference is that everyone knows how to operate in these market conditions now.

Shopping 2.0: What Does Main Street Look Like in 5 Years?


Christina Flanigan, President, Praxis Projects


Michael Penalosa, Managing Principal, Thomas Consultants Inc.
Wynn Spencer, Vice President, Store Development, Lululemon Athletica
Geoff Stollery, Vice President, Real Estate, Best Buy Canada Ltd.
Chris Wood, Principal, Northwest Atlantic (Canada) Inc. Brokerage

Christina Flanigan asked the panel about the effects of e-commerce. Mr. Penalosa noted that retailers have an opportunity to incorporate e-retail and compete in terms of price and delivery with their e-commerce competitors. Geoff Stollery posited that the brick and mortar store will remain relevant – the question is “in what shape and size”? Best Buy is still trying to figure it out by opening smaller stores and implementing “reserve and pick-up” practices. Chris Wood suggested that apparel has a touch/see element that is difficult to replicate online and that the impact of e-commerce depends on the nature of the items sold.

Ms. Flanigan asked how online sales affect retailers in their revenues and percentage rent. Wynn Spencer noted that online shopping is a separate channel for Lululemon to reach customers. Mr. Stollery commented that this is an evolving issue that landlords need to understand. What happens when a customer comes into a store to look at a product but then orders it online? Is this a sale under the store lease? Mr. Stollery noted that the reality is that an online presence helps pay for the brick and mortar premises, regardless of the fact that the store may boost online purchases.

Ms. Flanigan moved the discussion to what developers can do to enhance the retail shopping experience. Mr. Spencer noted that it is critical for Lululemon to find a “cool shopping center” where it is possible to create the “kitchen party atmosphere” that makes their customers feel comfortable. Mr. Stollery noted that access, visibility and parking may appear to be obvious, but these are the sometimes overlooked pillars of success. Mr. Wood pointed out the importance of putting together a proper merchandise mix of convenience (food, drug, liquor), fashion and non-core uses (e.g. yoga). Although the merchandise mix will vary from market to market, it is an important aspect of attracting customers.

Mr. Penalosa commented that people want a sense of community in the retail environment, and the development of good useable public spaces is crucial to that sense of community. Mr. Wood noted that some developers have recognized that retail creates a sense of community and that retail is an amenity for office and residential space. Mr. Spencer noted that this sense of community is what differentiates brick and mortar stores from e-commerce and what attracts the customer to return. Developers can facilitate this, for example, by designing seating areas and wide sidewalks for strollers and groups. Mr. Spencer concluded that what retailers do inside the stores (i.e. create an attractive and inviting environment), developers can do outside the stores.

Transportation Improvements Provide Market Certainty in Uncertain Times


Don Campbell, Senior Analyst and Founding Partner, Cutting Edge Research Inc.

This session followed on the morning session on Transit Oriented Development and featured Don Campbell of Cutting Edge Research Inc. Mr. Campbell started by noting that the real estate cycle is changing again. For decades, real estate development has been focussed on the housing, shopping and work needs of baby boomers. Mr. Campbell noted that “echo boomers” now outnumber baby boomers in Canada, and that development needs to change to address the needs of this new generation.

Echo boomers have different needs and demands. They are less likely to require parking, more likely to require a work space in their home, more likely to accept smaller living spaces and, in particular, shared living spaces. Affordability is an issue for echo boomers, who are only now getting into the real estate market. Echo boomers are also changing demand for retail, restaurants and entertainment. Energy costs affect their disposable income and they are more likely to seek out “green” alternatives, with enhanced technology. Mr. Campbell suggested that these needs will be addressed by locating development near to transit, closer to amenities and with less parking. Unit sizes can be smaller and with live-work capability. Technology enhancements such as fibre optic are a must. He noted that rental units need not be studios and one bedroom units, as studies have shown that two and three bedroom units close to transit are very attractive to echo boomers, who are not adverse to sharing housing.

In terms of transit, Mr. Campbell noted that rapid transit ridership in Metro Vancouver increased by 10.2% from January 2012 to January 2013. With Vancouver named as the second most congested city in North America, people now measure their distance from home to work, or other distances, in time, rather than in kilometres. Rapid transit, which can include both rail and rapid buses, and include new bridges like the Port Mann and Golden Ears, have to put people closer to their destination in time, if not in distance.

Mr. Campbell noted the 800 metre rule for proximity to rapid transit and mentioned several studies that showed the significant increase in property values and rents for properties within this distance, as compared to similar properties outside the radius. He noted that development demand around transit hubs in Vancouver and Calgary has far outstripped initial projections. However, densification and development in Vancouver along the Canada Line will likely not match that to be experienced along the Skytrain Expo and Millenium lines, as studies show that the impact of new rapid transit on development is less in neighbourhoods with higher than the median income levels.

Lastly, Mr. Campbell noted that new highways and new bridges have similar impacts on values and development as does rapid transit, and suggested that investors and developers should use government funded transportation growth as a catalyst to portfolio growth.

Closing Roundtable Discussion: Final Comments on the Vancouver Market for the Next 12-24 Months


Mark Renzoni, Chief Operating Officer, CBRE Limited


Andrew Bibby, President & CEO, Grosvenor Americas
Remco Daal, President & COO, Canada, Bentall Kennedy
Ward McAllister, President & CEO, Ledingham McAllister Ltd.
Brian McCauley, President & Chief Operating Officer, Concert Properties Ltd.

The day concluded with an entertaining and interactive discussion of numerous current issues and trends, including the economic outlook for 2013, political stability and the upcoming provincial election, the residential market, office development, land values, and retail and industrial development in Vancouver. The group was cautiously optimistic about the outlook for 2013 and felt that slow, steady growth and the maintenance of the status quo would be positive for British Columbia.

Consistent with the feeling of cautious optimism, the group agreed that they will continue to make calculated decisions, focusing on a more disciplined approach, purchasing well-placed, good redevelopment land, developing in transit-oriented areas wherever possible and seeking out assets with income growth potential.

With respect to the residential market, Mark Renzoni observed that employment trends remain critical to the health of the residential market. While the residential market may have softened in the last year, Brian McCauley noted that there is often a huge disconnect between what the press is reporting and reality. Whereas it is not uncommon for the print media to focus on declining sales, speculating that a real estate bubble has burst, Mr. McCauley noted that the market is normalizing and that continued growth at past rates could not be expected. The fundamentals remain key – well placed, well marketed, transit-oriented developments will find a market. Ward McAllister noted that there continue to be huge successes in Vancouver and other areas that remain “hot pockets” for development; Vancouver and British Columbia will continue to grow in the coming year. In particular, the group agreed that the new MC2development of Intracorp is a prime example of a well-developed and well-marketed property that found a market.

With respect to office development, the group agreed that the market is stable in Vancouver, vacancy rates are low and there is lots of tenant activity. Remco Daal noted that Telus Garden and the Canada Post site both present exciting opportunities in Vancouver, with Telus Garden currently under construction and its office space already substantially leased, and the Canada Post site being in the very early stages of planning.

As land values continue to increase for prime sites, developers are spending a lot of time focusing on new opportunities. The group agreed that this is increasingly challenging as there are often many players chasing the same prime sites. As Mr. Daal observed, this sense of competition creates a greater need for developers to take a disciplined approach, anticipating the cost and risk of each new site.

Lastly, Mr. Renzoni asked the panelists to comment on critical issues of concern in the coming year. The answers provided included electing a business-friendly government and promoting political stability, maintaining a disciplined approach with respect to acquisitions and development, focusing on quality over quantity, growing the organization itself to provide increasing opportunities for the younger generation, and creating a pipeline for planning so that the flow of product can be controlled through phasing.

Didn’t they say the same thing last year? Links to Feature Articles from past Vancouver Real Estate Forums:

2012 Vancouver Real Estate Forum

2011 Vancouver Real Estate Forum

2010 Vancouver Real Estate Forum

2009 Vancouver Real Estate Forum

2008 Vancouver Real Estate Forum

2007 Vancouver Real Estate Forum

2006 Vancouver Real Estate Forum