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November 2007

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Sustainability Report Issued for Commercial Structures - November 23, 2007

A new report released today provides the blueprint for greener Commercial Buildings in Canada. The report, released by Sustainable Development Technology Canada (SDTC), highlights the technical and non-technical changes in the design, construction and maintenance of Canada’s commercial buildings that need to be made to reduce their energy utilization, water consumption and waste production.

“The commercial building sector accounts for about 14% of secondary energy use in Canada and has seen energy-related GHG emissions increase 42% between 1990 and 2004,” said Vicky J Sharpe, President and CEO of SDTC. “For this sector to change direction, we need a whole new approach to both the way we design, build and use commercial buildings as well as the regulations and policies that guide these activities.”

The report covers all types of commercial buildings; including offices, institutional and public service such as health care and education, hospitality, entertainment, and retail and wholesale trade. Together, they are simply referred to as “commercial”. Multi-unit residential buildings (MURBs) are not included in much of the analysis because they are classified as residential buildings by Natural Resources Canada (NRCan). However, many of the technologies and issues do apply to MURBs.

The focus of the analysis is on building operations. Although embodied energy, material selection, construction, and demolition are important in a life cycle approach to buildings, the largest environmental impacts are a result of the operation of buildings. Operations are the most important aspect of commercial building eco-efficiency analysis. SDTC understands the critical importance of a full lifecycle approach, and incorporates the entire building lifecycle considerations into individual project investment assessments on a case-by-case basis.

Among the technical changes recommended, the report stresses the importance of improved system and equipment efficiencies as well as the development of integrated design processes.

“Right now, too many of the key players in the development and operation of your typical commercial building work in isolation, focusing on their niche of expertise,” said Dr. Sharpe. “We need real-world demonstrations that break the silos in the design process to align the concepts of liability and economic viability to comfort and usability.”

Among the non-technical changes recommended, the report stresses the importance of accurate data, improved eco-labeling and life-cycle-based performance standards that will enable certification of buildings on a life-cycle rather than on an as-built basis.

“Switching to a life-cycle approach is crucial if we are to truly achieve on-going sustainability in our commercial buildings,” said Rick Whittaker, Vice President, Investments at SDTC. “Progress has been made over the last few years with the rise of LEED designation and other tools, but more work needs to be done to establish at-a-glance, meaningful measurements that give owners and tenants sustainability indicators to help in their decision-making.”

The Sustainable Development Business Case Report on Commercial Buildings – Eco-efficiency is the fifth in a series of reports produced by SDTC. These reports are the result of extensive consultations with industry, policy makers and academia. This input is analyzed along with market data and current reports and studies to arrive at an investment report that creates a common vision of market potential. These reports are used to guide the investment decisions of SDTC. Previous SD Business Case reports addressed the subjects of Renewable Electricity, Clean Conventional Fuels, Biofuels, and Hydrogen. They are all available in the Knowledge Centre at www.sdtc.ca.

BC Housing Market Predicted to Remain Strong - November 15, 2007

Demand for homeownership will keep housing starts and existing home sales at above-average levels in BC and Victoria, and push new and existing home prices higher in 2008.

“In Victoria, housing demand will be supported through 2008 by ongoing job growth and a steady flow of people moving to the region” said Peggy Prill, CMHC’s Victoria Senior Market Analyst. Home prices will continue to rise, spurring demand from move-up and move-down buyers, as well as investors. In 2008, both new home starts and existing home sales will stay above the average of the last ten years, but edge down slightly from 2007’s strong levels. Look for new and resale home prices in Metro Victoria communities to increase, but at a slower pace than in recent years.

“Housing starts in BC will top 33,250 next year down slightly from this year’s level but still above average levels”, noted Carol Frketich, BC Regional Economist. Factors behind this demand include: unemployment near record lows, strong employment growth, rising wages, relatively low mortgage rates and growing migration. Recent financial market turmoil in the United States and a strong Canadian dollar will keep interest rates relatively flat in Canada despite upward inflationary pressures.

Is the White Picket Fence Becoming History - November 14, 2007

After more than three decades of slow but steady growth, the condominium concept has finally clicked with Canadian homeowners. The lifestyle has proven to be a solid investment in housing markets across the country, chalking up some of the most impressive gains in residential real estate in 2007, according to the RE/MAX Condominium Report released today.

Their universal appeal is substantiated, with every market reporting increased momentum in condominium sales volume over 2006 levels. In fact, 80 per cent of markets surveyed reported double-digit gains in sales year-over-year, with 53 per cent reporting increases over 20 per cent. The greatest growth was experienced in Canada's small to mid-sized markets.

Leading the country, in terms of percentage increase in sales so far this year, are Kitchener-Waterloo (+59%), Regina (+57%), St. John's (+54%), and Saskatoon (+33%).

"The white picket fence, sprawling green lawn and tidy urban bungalow has become an unattainable ideal for many first-time buyers - especially in the West," says Elton Ash, Regional Executive Vice President, RE/MAX of Western Canada. "By necessity, condominiums have become the only practical means to homeownership for a growing segment of the population. Today's entry-level purchasers aspire to manageable mortgage payments, sunset city views, and the
non-stop action and amenities of central core living, all packed into 600 to 800 sq. ft. The momentum of the market in recent decades has redefined the home buying process."

While price appreciation on freehold properties, in particular, was the primary factor in the upswing, the strong desire among baby boomers to lead an active, carefree lifestyle has also driven the concept to unprecedented popularity. The RE/MAX Condominium Report identified Greater Vancouver as the strongest market in the country - where close to 60 per cent of all residential sales now involve a condominium. Condominium presence is also on the rise in centres such as Toronto, Edmonton, Calgary, Regina, Ottawa, and Hamilton-Burlington, where condos now represent 20 to 30 per cent of all MLS sales.

"Deteriorating affordability levels in major Canadian centres have led to the resurrection of the condominium lifestyle in recent years," says Michael Polzler, Executive Vice President, Regional Director, RE/MAX Ontario-Atlantic Canada. "Condominiums are clearly the answer to the skyrocketing cost of land and shelter that has all but eradicated the dream of homeownership for many first-time buyers."

Condominium values were also up from coast-to-coast in 2007, with all major markets reporting an increase in average price. Thirty-three per cent of cities surveyed reported double-digit price appreciation. The most dramatic hikes were seen in Western Canada's red-hot housing markets, led by Saskatoon (+24%), Calgary (+22%), Edmonton (+19%), Kelowna (+16% for town homes, +12% for apartments), Vancouver (+14% for town homes, +11% for apartments), and Victoria (+9% for town homes, +12% for apartments).

At the top end of the market, condominium ownership has been equated with lifestyle. Throughout 2007, aging baby boomers fuelled demand for luxury condominium units. Upper-end activity was reported to be on the rise in all markets examined, with the greatest appreciation occurring in Edmonton (+154%), Greater Toronto (+98%), Victoria (+85%), Winnipeg (+58%), Vancouver (+49%) and Kitchener-Waterloo (+39%). The maintenance-free factor, the ability to travel and to enjoy the best the city has to offer - from restaurants to recreation - were cited in overall condominium appeal.

"In years past, there seemed to be a ceiling in terms of what buyers were willing to pay for this type of product," says Polzler. "Widespread acceptance has seen that philosophy tossed out the window. In the upper-end especially, buyers have demonstrated a willingness to set new benchmarks, and in some cases, are spending more than what a detached home might cost. Multiple offers, once unheard of, have become a reality in some centres."

New benchmarks for the most expensive apartment-style condominium units ever sold through MLS have been reported in several cities in 2007, including Vancouver ($18 million), Calgary ($3.7 million), Edmonton ($2.3 million), Winnipeg ($1.25 million), and Kitchener-Waterloo ($670,000).

Given solid demand through all price ranges, it comes as no surprise that investors have been very active in the majority of markets surveyed, hoping to snap up a piece of the pie while demand remains at peak levels. Yet, with a growing number looking for a quick return on investment, swelling inventory levels have become a serious concern in several markets, most notably in Calgary and Edmonton, and to a much lesser extent, Kelowna.

"The impact of speculation, especially in Canada's largest condominium markets, has yet to be determined, but concerns for the future are relevant," says Ash. "In downtown Vancouver, an estimated 50 per cent of sales activity is attributed to investors, whereas as much as 60-85 per cent of new condominiums sales in Toronto's downtown core reportedly involved investors in 2007. This is a major factor that could influence prices in years to come."

For now, a number of market fundamentals point to increased growth in sales, prices and demand well into 2008. These include vibrant economies, Canada's aging population, rising prices, and higher levels of immigration, to name a few.

Housing Starts Drop Off in October - November 8, 2007

The seasonally adjusted annual rate of housing starts was 219,500 units in October, down 22.0 per cent from 281,300 units in September, according to Canada Mortgage and Housing Corporation (CMHC).

“The decline in housing starts in October reflects the exceptional strength in new construction in September rather than weakness in October,” said Bob Dugan, Chief Economist at CMHC’s Market Analysis Centre. “Much of the decline in October can be attributed to the fall in multiple starts. We continue to expect that residential construction activity will remain strong throughout next year, with the trend decreasing gradually between now and the end of 2008.”

The seasonally adjusted annual rate of urban starts decreased 24.9 per cent to 183,600 in October, compared to September. Urban singles were down 6.0 per cent to 84,900 units in October, while multiple starts decreased 36.0 per cent to 98,700 units.

In October, the seasonally adjusted annual rate of urban starts decreased in all five regions. Urban starts registered a decrease of 14.7 per cent in the Atlantic region, 36.0 per cent in Quebec, 30.6 per cent in Ontario, 20.0 per cent in the Prairies, and 5.6 per cent in British Columbia. Urban single starts were down in all regions except British Columbia, where they were unchanged. All regions saw declines in urban multiple starts. The largest decrease was in Ontario where urban multiple starts dropped by 50.1 per cent.

Rural starts were estimated at a seasonally adjusted annual rate of 35,900 units in October.

Actual starts, in rural and urban areas combined, were up an estimated 1.5 per cent in the first 10 months of 2007 compared to the same period in 2006. In urban areas, actual total starts grew by an estimated 0.1 per cent year-to-date. Actual urban single starts from January to October 2007 were down 5.3 per cent compared to the same period in 2006, while multiple starts grew by approximately 5.4 per cent over the same period.

Construction Intentions Easing Off - November 6, 2007

The value of building permits slipped slightly in September—although they were still well above $6 billion—as gains in the residential sector were more than offset by declines in non-residential intentions. A Statistics Canada report released this morning shows that municipalities issued building permits worth $6.2 billion in September, down 1.7% from $6.3 billion in August. Intentions peaked at $6.9 billion in May and June. This strength during recent months indicates that construction sites should remain busy in the coming months.

Non-residential permits declined 8.6% to $2.2 billion, the lowest level over the last five months. The non-residential level was almost $1.0 billion below its peak in May 2007. The industrial and institutional components experienced double-digit decreases, while the commercial component remained virtually unchanged.

In contrast, intentions in the residential sector climbed 2.6% to $4.0 billion. This ranked as the second highest monthly value since December 2005, thanks to a fourth gain in five months for the single-family component.

The total value of building permits reached $18.7 billion between July and September, down 4.1% from the second quarter of 2007. This was the second highest quarterly level on record for the total value. The quarterly growth in residential value of 2.1% was not enough to offset a 13.0% loss in non-residential intentions.

Housing sector: Single-family reaches a record high

Strength in employment, growth in disposable income, tight apartment vacancy rates in certain centres, and attractive financing options continued to stimulate the demand for housing. However, the deterioration of housing affordability due to the rapid growth in prices for new housing—particularly in Western Canada—and the recent increases in mortgage rates could erode demand.

Municipalities approved single-family permits valued at a record high of $2.7 billion, a 9.4% increase over August. The number of single-family units approved rose 4.4% to 10,454, the highest level since January 2006. The value of multi-family permits fell 9.0% to $1.3 billion. The number of multi-family units authorized declined 12.7% to 9,041.

Provincially, the value of housing permits increased significantly in Ontario (+27.2% to $1.6 billion). This gain originated from both single and multiple residential units, and was sufficient to compensate for the declines in other provinces. The largest declines (in dollars) occurred in Quebec (-9.6%) and British Columbia (-9.8%), due to drops in multi-family permits. Residential permits incurred double-digit declines in each of the four Atlantic Provinces because of severe drops in multi-family permits.

In the third quarter of 2007, single-family intentions were up 6.3% from the second quarter to $7.5 billion, more than offsetting a 4.6% decline in multi-family intentions to $4.3 billion. Third-quarter residential permit values rose in seven provinces. Increases in Quebec and Ontario were only partly offset by drops in Alberta and British Columbia, and generated a 2.1% increase at the Canada level.

Non-residential sector: Western Canada pulls down the numbers

Significant declines in the three westernmost provinces were behind the 8.6% drop in non-residential permits in September. In the commercial component, municipalities issued $1.3 billion worth of permits in September, down a slight 0.4% from August. Commercial intentions peaked in May and June 2007, reaching $2.1 billion and $1.7 billion respectively. In September, a gain in office buildings permits was largely offset by decreases in projects in the warehouse and retail trade categories.

In the industrial component, the value of permits plunged 22.5% in September to its lowest level since April 2007. Lower construction intentions for manufacturing buildings were behind the retreat. The decline in industrial permits was spread across the country, as Quebec and Manitoba were the only provinces to show a gain. The value of institutional permits also hit its lowest level in five months, with a 15.9% drop to $517 million. This was fuelled by a lower value of permits for medical buildings. The decline in institutional permits in September came largely from Ontario and British Columbia.

Provincially, the largest decline (in dollars) occurred in British Columbia, where non-residential construction intentions retreated 38.7% to their lowest level since November 2005. All three components experienced reductions in the province.

In Alberta, non-residential permits were at their lowest level in the last five months in the wake of a 10.1% decrease in September. In Saskatchewan, a 48.0% drop in September followed a strong month of August. In both provinces, the overall decline was fuelled by retreats in the industrial and commercial components. Quebec, New Brunswick and Nova Scotia also reported declines.

In contrast, gains were recorded in Ontario, Manitoba, and Newfoundland and Labrador. In Ontario, intentions for non-residential buildings surpassed the $1.0 billion mark in September for only the third time since 1989, thanks to projects for office buildings.

Despite the September decline, several factors are still having a positive impact on the non-residential sector. Low office vacancy rates, high corporate profits, increasing demand for health and nursing facilities, and the vigorous retail sector are all factors helping to stimulate the demand for non-residential space.

The total value of commercial permits declined 23.8% in the third quarter to $3.9 billion, following a record level in the previous quarter. The value of institutional permits rose 2.5% to their highest value ($1.7 billion) since the third quarter of 2005. Industrial permits increased 11.4%.

Metropolitan areas: Toronto leads the pack

Since the beginning of 2007, 26 out of the 34 census metropolitan areas posted increases in the total value of building permits between January and September compared with the same period in 2006.

The largest gain (in dollars) came from Toronto, with its very high construction intentions for non-residential buildings, and a strong gain in the single-family component. With still a full quarter to be accounted for, the value of non-residential permits was already above the annual totals for 2005 and 2006 in Toronto.

Toronto was followed by Calgary and Vancouver. In Calgary, the strong gain came in large part from the booming commercial sector, especially the office buildings category. In Vancouver, the strong demand in the housing sector was mainly behind the gain.

 

 

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