Real eState

Real estate investors push for improved ESG measures in commercial property

Published

2 years ago

November 29, 2022

The Canadian construction industry is making strides in adhering to ESG principles.CARLOS OSORIO/Reuters

Canada’s commercial real estate sector is striving to meet increasingly demanding environmental, social and governance standards, but the ESG is still greener on the other side of the world.

For example, experts say Canada is playing catch-up in the use of “green leases” – commercial tenancy agreements in which the landlord and the renter incorporate sustainability, socially responsible management and good governance into their property deals.

According to Tonya Lagrasta, vice-president and head of ESG for Colliers Canada in Toronto, “Canada is behind places such as the European Union. Many Canadian developers are moving ahead anyway – we’re seeing a shift – but the rules and regulations aren’t necessarily in place.”

“In North America we’re seeing more of a push toward stronger ESG standards coming from investors, while in Europe it comes more from regulation,” says Avis Devine, associate professor of real estate finance and sustainability at York University’s Schulich School of Business, in Toronto.

A study last year by Deloitte, Green Leases – in the ESG Context, found that the European Union Commission gave green leases and other ESG measures in the property sector a boost in December, 2019, when it adopted rules specifying what makes these measures green.

“In North America we’re seeing more of a push toward stronger ESG standards coming from investors, while in Europe it comes more from regulation.

— Avis Devine, associate professor, Schulich School of Business, York University

Lenders, developers and tenants can consider deals to be green if they include goals for climate change, protecting and conserving water and biodiversity (on the property), controlling and minimizing pollution and moving toward a circular economy that recycles and reuses materials.

According to the Deloitte report, research by Savills Investment Management found that 73 per cent of the world’s institutional investors expect green lease clauses to be incorporated universally between tenants and real estate investment managers by 2029.

In Canada, the experts say that major commercial developers, such as Oxford Properties, BentallGreenOak and Brookfield Asset Management, are typically ESG leaders. “These tend to be companies that have global assets, including those in places where the ESG rules are more developed than in Canada,” Ms. Lagrasta says.

Developers and institutional lenders in Canada were getting more serious about higher ESG standards before 2019, “but the pandemic set things back,” says Ryan Riordan, finance professor at Queen’s University’s Institute for Sustainable Finance, Smith School of Business, in Kingston.

On the other hand, COVID-19 gave real estate developers the opportunity to look more closely at environmental issues such as indoor air quality, Dr. Devine says.

There’s more interest than ever in commercial property ESG measures, but the challenge now is to make physical changes to buildings, Dr. Riordan says.

“We’re making strides on the construction side of ESG, but it takes a lot of time to retrofit and replace buildings with ones of higher standards,” he says.

Retrofitting is a daunting challenge but one that experts consider necessary because buildings contribute nearly 40 per cent of the world’s carbon emissions that are linked to the global climate emergency.

Canada and other countries are struggling to achieve net-zero emissions by mid-century amid concern that if we don’t succeed, damage to the Earth will be beyond repair.

“We need to retrofit nearly all the standing dwellings in Canada, but we’re doing this at 1 per cent of them per year. If we don’t go faster, it will take about 70 years – we should be going three times as fast every year,” Dr. Devine says.

There’s also a strong business case for retrofitting old office buildings to make them more eco-friendly, Dr. Devine adds. It’s partly good marketing – white-collar employees are still only trickling back to offices in major Canadian cities, and when they do, they want to go back to good quality workplaces, she says.

“There’s a premium earned by environmentally certified buildings,” she explains. It shows up in better occupancy rates, more likely lease renewal and lower costs to finish off rehab work for tenants once the basic environmental work is done, she says.

“And after we account for higher rents or lower water costs, is there a market premium for being a leader in sustainability? Evidence says yes,” Dr. Devine adds.

A study by Smith’s Institute for Sustainable Financing, released in April, shows investing in carbon reduction “more than pays for itself in terms of avoided physical damage alone.”

The Physical Costs of Climate Change: A Canadian Perspective suggests the savings come even before “taking into account the potential economic benefits of transitioning to a low-carbon economy” for Canada’s entire GDP.

But green leases are only a small part of how commercial real estate developers are boosting their ESG credentials, Ms. Lagrasta says. “There’s more attention being paid now to the S [social benefit] and the G [governance],” she says.

Institutional investors are looking more holistically these days at potential risks, for example, the cost of urban sprawl and the potential financial benefits of diversity on corporate boards.

“There is deep corporate finance literature showing that we end up with better risk-balanced outcomes in our real estate [investments] if the management isn’t all male,” Dr. Devine explains.

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Real eState

Greater Toronto home sales jump in October after Bank of Canada rate cuts: board

Published

4 days ago

November 6, 2024

Anne Joseph

TORONTO – The Toronto Regional Real Estate Board says home sales in October surged as buyers continued moving off the sidelines amid lower interest rates.

The board said 6,658 homes changed hands last month in the Greater Toronto Area, up 44.4 per cent compared with 4,611 in the same month last year. Sales were up 14 per cent from September on a seasonally adjusted basis.

The average selling price was up 1.1 per cent compared with a year earlier at $1,135,215. The composite benchmark price, meant to represent the typical home, was down 3.3 per cent year-over-year.

“While we are still early in the Bank of Canada’s rate cutting cycle, it definitely does appear that an increasing number of buyers moved off the sidelines and back into the marketplace in October,” said TRREB president Jennifer Pearce in a news release.

“The positive affordability picture brought about by lower borrowing costs and relatively flat home prices prompted this improvement in market activity.”

The Bank of Canada has slashed its key interest rate four times since June, including a half-percentage point cut on Oct. 23. The rate now stands at 3.75 per cent, down from the high of five per cent that deterred many would-be buyers from the housing market.

New listings last month totalled 15,328, up 4.3 per cent from a year earlier.

In the City of Toronto, there were 2,509 sales last month, a 37.6 per cent jump from October 2023. Throughout the rest of the GTA, home sales rose 48.9 per cent to 4,149.

The sales uptick is encouraging, said Cameron Forbes, general manager and broker for Re/Max Realtron Realty Inc., who added the figures for October were stronger than he anticipated.

“I thought they’d be up for sure, but not necessarily that much,” said Forbes.

“Obviously, the 50 basis points was certainly a great move in the right direction. I just thought it would take more to get things going.”

He said it shows confidence in the market is returning faster than expected, especially among existing homeowners looking for a new property.

“The average consumer who’s employed and may have been able to get some increases in their wages over the last little bit to make up some ground with inflation, I think they’re confident, so they’re looking in the market.

“The conditions are nice because you’ve got a little more time, you’ve got more choice, you’ve got fewer other buyers to compete against.”

All property types saw more sales in October compared with a year ago throughout the GTA.

Townhouses led the surge with 56.8 per cent more sales, followed by detached homes at 46.6 per cent and semi-detached homes at 44 per cent. There were 33.4 per cent more condos that changed hands year-over-year.

“Market conditions did tighten in October, but there is still a lot of inventory and therefore choice for homebuyers,” said TRREB chief market analyst Jason Mercer.

“This choice will keep home price growth moderate over the next few months. However, as inventory is absorbed and home construction continues to lag population growth, selling price growth will accelerate, likely as we move through the spring of 2025.”

This report by The Canadian Press was first published Nov. 6, 2024.

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Real eState

Homelessness: Tiny home village to open next week in Halifax suburb

Published

2 weeks ago

October 24, 2024

Anne Joseph

HALIFAX – A village of tiny homes is set to open next month in a Halifax suburb, the latest project by the provincial government to address homelessness.

Located in Lower Sackville, N.S., the tiny home community will house up to 34 people when the first 26 units open Nov. 4.

Another 35 people are scheduled to move in when construction on another 29 units should be complete in December, under a partnership between the province, the Halifax Regional Municipality, United Way Halifax, The Shaw Group and Dexter Construction.

The province invested $9.4 million to build the village and will contribute $935,000 annually for operating costs.

Residents have been chosen from a list of people experiencing homelessness maintained by the Affordable Housing Association of Nova Scotia.

They will pay rent that is tied to their income for a unit that is fully furnished with a private bathroom, shower and a kitchen equipped with a cooktop, small fridge and microwave.

The Atlantic Community Shelters Society will also provide support to residents, ranging from counselling and mental health supports to employment and educational services.

This report by The Canadian Press was first published Oct. 24, 2024.

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Here are some facts about British Columbia’s housing market

Published

3 weeks ago

October 17, 2024

Anne Joseph

Housing affordability is a key issue in the provincial election campaign in British Columbia, particularly in major centres.

Here are some statistics about housing in B.C. from the Canada Mortgage and Housing Corporation’s 2024 Rental Market Report, issued in January, and the B.C. Real Estate Association’s August 2024 report.

Average residential home price in B.C.: $938,500

Average price in greater Vancouver (2024 year to date): $1,304,438

Average price in greater Victoria (2024 year to date): $979,103

Average price in the Okanagan (2024 year to date): $748,015

Average two-bedroom purpose-built rental in Vancouver: $2,181

Average two-bedroom purpose-built rental in Victoria: $1,839

Average two-bedroom purpose-built rental in Canada: $1,359

Rental vacancy rate in Vancouver: 0.9 per cent

How much more do new renters in Vancouver pay compared with renters who have occupied their home for at least a year: 27 per cent

This report by The Canadian Press was first published Oct. 17, 2024.

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