S U M M E R

F O C U S I N G

O N

M E M B E R S

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I N D U S T R Y

A Look at BC’s Real Estate Industry

What Makes a Great Neighbourhood?

Market Implications of Foreign Buyers on BC Real Estate

Digital Disruption in Commercial Real Estate

THE COURAGE TO TRANSFORM It’s in you to lead. To not only embrace change,

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Where We Live and Work – The Real Estate and Development Industry in British Columbia S U M M E R

A key driver of the BC economy, the real estate and development industry has fuelled growth in our province for many years. The price of residential real estate, the rise in popularity of mixed-use developments, and the evershrinking size of condominiums are hot topics with British Columbians.

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BC is one of the hottest real estate markets in Canada, with $48 billion invested in residential real estate in the province in 2014. Over 153,500 British Columbians work in the finance, insurance, real estate, and leasing industry, representing 25% of BC’s total GDP. According to the BC Real Estate Association, housing demand for 2015 is expected to produce the highest level of unit sales since 2007. The non-residential construction sector is also strong, as 3.2 million square feet of office space in Metro Vancouver is expected to become available in 2015-2016. The Chartered Professional Accountants of British Columbia was formed through the amalgamation of ICABC, CGA-BC, and CMABC. CPABC was officially established when the CPA Act came into effect on June 24, 2015.

In this issue, CPABC Industry Update profiles the real estate industry’s contributions to the BC economy, how the commercial real estate industry is undergoing a digital disruption, the impact of foreign buyers on the 3 HOUSING DEMAND residential real estate market, and a Q&A with members working in the About real estate industry. CPABC Industry Update is the organization’s Nine of BC’s 11 real estate Housing demand for 2015

onlineismagazine members working in industry. expectedfor to produce Published quarterly, Industry Update is distributed the highest level of tounit over 36,000 candidates, and sales sincemembers, 2007. students in British Columbia. Opinions expressed are necessarily BC not Multiple Listingendorsed Service by CPABC. Copyright CPABC Industry Update 2015. (MLS) residential sales are forecast Contact to rise 12% us toVisit 94,300 units in us online at 2015. bccpa.ca, or email [email protected]. Editorial inquiries can be sent to Tiana Mah at [email protected].

board areas are forecast to

Also included experience in this issue is a list housing of professional development courses increased in 2015. being offereddemand this fall. Those members working in real estate and development •won’t want to miss our ASPE accounting seminars for the Vancouver & Fraser Valley are forecasted to lead the real estate and construction industry. province with a 16% to 17%

increase in residential sales. Update, and we look forward We hope you enjoy this edition of Industry Drivers of housing demand: to your feedback.

In this Issue

economic growth consumer confidence low mortgage interest rates

Real 7 Urban Commercial Development in Vancouver: The Rise of Vancouverism

Look for this icon throughout Industry Update Click to return to In this Issue (page 3) Estate Outlook

in every issue

8 Designing New Neighbourhoods The non-residential construction sector 10 Digital Disruption in Commercial

4 Industry Snapshot: Real Estate

Real Estateis strong in BC, as work continues on 3.2 million sq. ft. of office space in Metro Vancouver. This space is Building BC: Member Q&A on expected to become available BC’s Real Estate Industry throughout 2015-2016.

16 

14 PD Opportunities

18 CPABC Career Connect Profile:

23 Connect with

Investment in Non-Residential Building Ledcor

CPABC Online

Construction in BC (Q2 2015):

20 Market Implications of Foreign

0.3% Spending is up: +4.5% +1.0%

Investment is up Buyers

institutional buildings industrial sector

Source: BC Stats, non-residential building investments, July 28, 2015

20 Office Market Outlook by Canada’s Major Markets (Q1 2015) Indicator

Vancouver

Calgary

Toronto

Vacancy downtown

7.2%

10.7%

2.7%

Vacancy suburbs

11.5%

10.4%

9.1%

Net rent downtown

$27.31

$28.00

$28.55

Net rent suburbs

$19.21

$23.00

$14.88

Source: Colliers Q1 2015 Office Market Outlook report

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WorkBC industry profile: finance, insurance, real estate and leasing, workbc.ca BCREA Housing Market Update (July 2015) BCREA Housing Forecast, second quarter – June 2015

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20 SUMMER 2015

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Real Estate Industry in BC $48 billion investment

Finance, Insurance, Real Estate & Leasing Industry:

25% of BC’s total GDP.

1

in residential real estate in BC by consumers in 2014.

Industry employed

Source: BCREA

153,500

Economic Spin-Off Average BC residential housing transaction generated $64,500 in related expenditures in 2011.

British Columbians in 2013.1

Source: BCREA

$884 Average weekly earnings of British Columbians

in the real estate and rental and leasing industry. Source: Statistics Canada, CANSIM Table 281-0083, May 2015

BUILDING PERMITS BY THE NUMBERS

Permits Issued by Sector

Value of building permits issued in British Columbia rose 22% in the first five months of 2015 compared to 2014. (unadjusted, Jan-May 2015 versus same period in 2014)

+30.4% Industrial +3.7% Commercial +8.8% Institutional & Government -1.6%

Residential Construction

-5 0 5 10 15 20 25 30 35 Source: BC Stats, residential & non-residential building permits, July 8, 2015

Residential Real Estate Outlook HOUSING MARKET UPDATE2 Average Home Prices

Greater Vancouver $922,326 Fraser Valley $572,888 Victoria $536,553 Okanagan Mainline $409,162 Kamloops $318,020 Kootenay $296,011 BC Northern $262,384

Source: BCREA Housing Market Udpate, July 2015

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I N D U S T R Y U P D AT E

HOUSING DEMAND3 Nine of BC’s 11 real estate board areas are forecast to experience increased housing demand in 2015.

Housing demand for 2015 is expected to produce the highest level of unit sales since 2007. BC Multiple Listing Service (MLS) residential sales are forecast to rise 12% to 94,300 units in 2015.

Drivers of housing demand:

• Vancouver & Fraser Valley are forecasted to lead the province with a 16% to 17% increase in residential sales.

economic growth consumer confidence low mortgage interest rates

Commercial Real Estate Outlook The non-residential construction sector is strong in BC, as work continues on 3.2 million sq. ft. of office space in Metro Vancouver. This space is expected to become available throughout 2015-2016.

Investment in Non-Residential Building Construction in BC (Q2 2015):

0.3% Spending is up: +4.5% +1.0% Investment is up

institutional buildings industrial sector

Source: BC Stats, non-residential building investments, July 28, 2015

Office Market Outlook by Canada’s Major Markets (Q1 2015) Indicator

Vancouver

Calgary

Toronto

Vacancy downtown

7.2%

10.7%

2.7%

Vacancy suburbs

11.5%

10.4%

9.1%

Net rent downtown

$27.31

$28.00

$28.55

Net rent suburbs

$19.21

$23.00

$14.88

Source: Colliers Q1 2015 Office Market Outlook report

1 2 3

WorkBC industry profile: finance, insurance, real estate and leasing, workbc.ca BCREA Housing Market Update (July 2015) BCREA Housing Forecast, second quarter – June 2015

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The new normal

EMERGING TRENDS IN REAL ESTATE

2015

URBANIZATION

Driven by work and lifestyle choices, people are flooding into city centres and adapting to less space.

Beyond the cubicle In a bid to attract and retain the best talent, employers

OFFICE SPACE

are seeking workspaces outfitted with the newest technology and the most attractive amenities.

Mixing it up

As people return to the city, mixed-use properties are becoming increasingly common.

RETAIL

Seeing the gold in the grey

SHIFTING DEMOGRAPHICS The West Coast goes global

BC REAL ESTATE

Canada’s aging population means seniors’ housing will offer attractive opportunities in the future.

Foreign investment keeps Vancouver housing prices high, with capital inflows of US$697 million pouring into the city in the last 12 months. Source: PwC Emerging Trends in Real Estate Report 2015

FOREIGN INVESTMENT IN BC A 2013 report by Sotheby’s International Realty Canada found that foreign buyers account for about 40% of demand for Vancouver’s luxury single-family homes. Vancouver is increasingly seen as “hedge city”, a place where the super-wealthy can invest in local real estate as a hedge against risk.

RISE OF THE SMALL HOME6 Examples of small homes:

17,893 housing units of

What is a small home? Less than 500 sq. ft. for one or two people, 750 sq. ft. for a household of three or more. Increase in one-person households – 27.6% of all Canadian households.

300-500 sq. ft. in BC as of 2014.

micro-apartment, laneway home, or tiny house on wheels

People interested in buying or renting micro-apartments have housing budgets of $900-$1000/month.

A 2012 City of Vancouver survey of laneway home owners found that 68% chose a small home because it’s a detached dwelling. 57% live in a small home due to affordability.

HOW BIG IS A HOUSE? Visual comparison of average new home sizes around the globe (2009 data). Average new Canadian home size is 181 sq. m. (1948 sq. ft.).

6

Best practices and lessons learned with small market units, The Real Estate Institute of BC

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Hong Kong 45 United Kingdom 76 Japan 95 France 112

China 60 Sweden 83 Germany 105 Denmark 137

Russia 57 Italy 81 Spain 97 Greece 126

Canada 181

Australia 214

United States 201

Average new home size around the globe in m2 Source: Shrink that Footprint (using sources CommSec, RBA, UN, US Census). Note: data for 2009 builds. *China figures urban only.

Urban Development in Vancouver: The Rise of Vancouverism

C

onsistently voted as one of the world’s most livable cities, the success of Vancouver, as a city, is often attributed to Vancouverism and the city’s value-based development process. Vancouverism is an urban planning and architectural style characterized by mixed-use developments and the preservation of views and green spaces. T h e c i t y ’s 2 7 v i e w c o r r i d o r s , maintaining views of the North Shore mountains, the downtown skyline, and surrounding waters, has contributed to Vancouver’s spectacular skyline while promoting density in the downtown area. In “How Vancouver Invented Itself”, an article for the Urban Land Institute, writer Patrick Kiger says the key to Vancouver’s success has been its “deliberative, values-driven evolutionary process, in which local government planners, developers, and the citizenry have labored over the past few decades to form a consensus vision of what their city should be like—and then come up with creative solutions for achieving it.” A lasting legacy of Vancouverites’ involvement, and protest against development, is marked by the lack of freeways surrounding or bisecting the city. Kiger writes about how Vancouver escaped a fate of freeways in the late 1960s and early 1970s

when “municipal officials of the time— who, like their counterparts elsewhere, feared urban stagnation and decay— proposed a massive urban renewal project that would have obliterated historic neighborhoods such as Chinatown and Gastown to build elevated throughways.” Kiger further recounts how Vancouverites rebelled and had the politicians behind the proposed development turned out of office. “That rebellion—driven by a youthful, idealistic Vancouver counterculture that would later spawn the environmental organization Greenpeace—created a new mandate. Vancouver, founded in the late 1880s as a port and railroad center for the region’s timber and mineral wealth, was still a Victorian-style urban village, and residents wanted it to remain that way, instead of morphing hastily into a typically car-centric modern metropolis.” Today, Vancouver still has the layout of an old streetcar city. Kiger quotes former city councillor and urban planner Gordon Price about the city’s layout: “It still works in the pattern that was laid out in that era. People get around by walking and cycling and taking public transit—enough so that the car doesn’t dominate the way it does in Calgary or Phoenix.”

With the goal of maintaining an urbanvillage lifestyle, city officials focused increasingly on how to add density. Kiger outlines how in the 1970s, “then– planning chief Ray Spaxman favored the sort of urban development he had seen in his native England, and developers packed the city ’s West End with apartment buildings. Vancouverites were willing to accept mixed-use neighborhoods with population densities that might have been resisted elsewhere—in part, because the city also offered amenities such as 1,000acre (405 ha)Stanley Park.” But will Vancouver be able to maintain its urban-village roots in the future? Kiger concludes that in a “digital technology–driven culture in which people increasingly focus on their devices rather than on their neighbors, it is unclear whether Vancouver residents will continue to accept regulations and limits intended to benefit the common good. Government efforts to build inner-city bike paths and bring some outlying lower-density neighborhoods in line with the city’s high-density model have met with uncharacteristic resistance and protests.” For an in-depth look at Vancouverism, read: “How Vancouver Invented Itself” by Patrick J. Kiger for Urban Land magazine published by the Urban Land Institute. SUMMER 2015

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Designing New N

Why These Seven Design Principles A By John Steil

W

hen city planners begin to design a neighbourhood, whether starting from scratch on a greenfield site or adapting an existing neighbourhood for the future, they strive to build a better community. They want to create a place that people value—not only from a real estate perspective, but also because it creates quality of life for existing and future residents.

Respect for context:

A new neighbourhood must fit seamlessly into its surroundings—with a network and pattern that interconnects with the larger community, locates homes near to employment areas, matches density to public transit opportunities, and minimizes conflicts that might occur between different land uses.

Complete & resilient:

There needs to be broad variety and a mix of uses that work together—including an inter-mixed diversity and affordability of housing types for a varied population of different ages and lifestyles, with residential areas supported by services and amenities (including parks and commercial, educational and institutional services) to foster a more complete, resilient, and healthy neighbourhood.

Compact & walkable: An efficient use of land requires a sustainable density, with services and amenities close—based on a pedestrianfriendly system that fosters interaction. A walkable community is often a healthy community.

Interconnected networks: A fine-grained, modified grid pattern of “complete streets” (supplemented by pedestrian connections and multi-use trails) provides a more balanced model that supports walking, cycling, and transit; disperses traffic; and offers convenient and continuous access.

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I N D U S T R Y U P D AT E

Neighbourhoods

Are Key to Successful Neighbourhoods Times have changed. For reasons as diverse as climate change and the fiscal issues that often come with urban infrastructure, most people accept that we can’t continue to replicate the suburban sprawl that we used to build. We need different ways of doing things. Using a set of guiding principles, planners are exploring new approaches and updating familiar practices.

In harmony with nature: It is critical to maintain and protect valuable natural features with open spaces, parks, boulevards, and corridors to create an integrated, looped, and connected system—connecting the community with nature, fostering biodiversity, and providing recreation. Just think about how comfortable it is to walk in older neighbourhoods with their large overhanging tree canopies. Green infrastructure:

Infrastructure should be designed using principles of low impact development and best management practices— including the incorporation of stormwater facilities as part of the open space system. This approach will lead to infrastructure that can be sustainably operated over the long term. This keeps taxes down as well.

A sense of place:

Neighbourhoods need a unique and exceptional community character, in both built form and public realms, that residents will cherish. This requires an emphasis on street orientation and placemaking, a high quality of urban design of public spaces, a focus on a vibrant “village heart” with mixed uses, a dispersed pattern of open spaces, and a diversity of character. Maintaining heritage character in a redeveloping neighbourhood helps develop a sense of place. Even public art! Adherence to these principles should lead to a more livable and sustainable community.

A Principal with Stantec in Vancouver, John Steil is an urban and regional planner with over 39 years of experience. His comprehensive approach and ability to marry community, planning, environmental, development, and engineering concerns instils confidence in his clients. John is a Fellow and Past-President of the Canadian Institute of Planners.

SUMMER 2015

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Digital Disruption in Commercial Real Estate Catalyst for Growth? Deloitte Canada Insights Report

Digital disruption can, in fact, be a dynamic catalyst to transform operating businesses and advance productivity in Canada. Real estate can also itself become a catalyst for change, influencing organizations to invest in business infrastructure, redesign spaces, and transform their business models to become more competitive within the global marketplace. What Are the Implications for Real Estate? Those that occupy real estate — whether office, retail, industrial, institutional, or residential— page 10

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have the opportunity to use a real estate event such as a lease expiry, property acquisition, refinancing, or redevelopment to drive change within their organization.

I N D U S T R Y U P D AT E

A t t h e s a m e t i m e, re a l e s t a t e owners, investors, developers, and managers need to take notice and adapt business models and delivery systems to embrace this change. Real

estate issues ranging from building construction, sustainability, site selection, accessibility to infrastructure and amenities, branding, property management, and an array of other issues specific to each real estate asset class need to be considered. The challenge facing the real estate industry is the fact that buildings are fixed and difficult to quickly or costeffectively change in order to embrace technological advancements. A Harvard Business Review article noted that “the more difficult the barrier, or the more barriers a disrupter faces, the more likely it is that customers will remain with incumbents.”1 The problem with this decision is that these companies will face tremendous global competition, c o s t d i s a d v a n t a g e s a n d, m o s t importantly, productivity challenges. The real estate industry has traditionally lagged behind other sectors, largely due to the nature of our buildings and infrastructure. Properties that are held by individuals, investors, or owners remain unchanged for decades, with leases that extend from five to 20 years. As a result, with insufficient capital funds for improvements, some real estate market participants aren’t prepared for, and have been slow to react to, technological transformation.

Digital Disruption Affects All Real Estate Asset Classes Digital innovation will affect all real estate asset classes as space users and advanced technologies continue to transform workplaces, shopping centres, distribution centres, and h o m e s. M o b i l e e m p l oye e s a n d consumers will transform how they 1 S urviving

Disruption. Harvard Business Review, 2012.

work, shop, and live. Robotics and advanced manufacturing technologies question the viability and efficiency of factories across North America. The need to rethink traditional factory infrastructure, recognize decreased reliance on labour from emerging markets, and identify potential reshoring of workers signal changes in job creation, design, and overall operating models.

Traditional Office Morphs into the Workplace of the Future In real estate, the office sector is being impacted through the integration of technology, mobile devices, and infrastructure that empower workers to work virtually anywhere. Traditional work environments have typically been places where workers go to complete their tasks within the 9-5, Monday-to-Friday timeframe. They connect with their co-workers, access their files, and meet with customers. According to many industry analysts, the office was the original social network. With market globalization creating an increasingly competitive environment, cost cutting is becoming a key focus for many organizations. Since an organization’s people and real estate are its largest resources – as well as its largest combined expense – they remain a natural focus for cost cutting. However, heavy-handedness in this area often causes employee disengagement, a lack of collaboration and a decline in productivity and innovation, balanced against the benefits of an ever-shrinking square footage cost per employee. The average space per employee is a target for many organizations and is shrinking

from the 200-250 sf/FTE range to 100150 sf/FTE for efficiently planned offices across North America. Concurrent with globalization, the introduction of technology allows employees to work anywhere, at any time. Organizations recognize that employees need more technology and flexibility, which dovetails with the need to decrease costs associated with real estate. While alternative work arrangements allow for just that, it is clear that such a significant change to the workplace model must be part of an overall strategy that takes both efficiency and effectiveness into account. Modern office work is inherently a social endeavour that requires interaction between people. The ability to choose how and where to work is fundamental to having engaged and productive employees, but so is having a space for them to connect and collaborate. Technology creates a more diverse, geographically dispersed organization that is more mobile and virtual, but, as social animals, the more distributed we become, the more connectedness is needed. The physical work environment provides that connection point.

Transforming Workplace Environments Enhances Collaboration and Drives Productivity Workplaces play an important role: they are the physical manifestation of an organization’s brand, culture and principles, and, when well-designed, help to achieve employee retention and recruiting objectives. The best examples of this are the campuses created by the high tech industry. Google is viewed by most as SUMMER 2015

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Digital disruption... (cont’d) a desirable place to work, not only for the type of work it offers employees, but also because of its office spaces. Organizations that find an optimal mix between traditional and innovative workspaces will have a competitive advantage. They will be using their workspace more effectively and efficiently, increasing productivity, and employee engagement, and creating a stronger brand that ultimately results in more satisfied customers.

Omnichannel: Transforming the Retail Landscape Even here, the effect of digital disruption is felt. Consumers are driving change in the retail industry due to the amount of information they now can access, thanks to technology. The power is shifting from retailers to consumers, and the implications for the

real estate industry cannot be underestimated. Over the past 15 years, online retailing has transformed the operating models of traditional brick-and-mortar retailers. This has resulted in the disappearance of some venerable retailers, the amalgamation of others, and the need for others to look for other ways to survive the disruption. Retail continues to be a technological hotbed of entrepreneurship and innovation in both the storefront locations as well as in the back office environment. Consumers are increasingly taking a non-linear path to purchase, combining both traditional store and Internet channels. This approach

The big picture for commercial real estate: More change than any time since the Industrial Revolution Employees work anywhere, anytime Changing the space means more connected place OFFICE

 orkplace is a business enabler to collaborate W and drive productivity Consumers can shop anywhere, anytime Store networks are at the beginning of a major shift

RETAIL

Empowered consumer driving new business models North America becomes increasingly competitive Not everything is moving offshore, some re-shoring

INDUSTRY

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 igh tech and advanced manufacturing poised H for a rebound

I N D U S T R Y U P D AT E

defines the omnichannel environment and has implications for retailers’ real estate strategies in terms of store locations, footprint, warehousing, logistics, and fulfilment. Consumers are doing their research and homework well before stepping foot into a physical location. This ability to be armed with competitive intelligence means buyers are better able to negotiate, demanding cheaper products and better service, and retailers have no choice but to respond.

Technology has Significantly Decreased the Cost of Entry for Online Retailers Compared to New Brick–and-Mortar Competitors Online retailers can reach far more global customers than any retail location, no matter how many physical outlets the latter may have. Online sales are predicted to grow steadily to US$370 billion in 2017, up from $231 billion in 20122. No longer does the real estate mantra of “location, location, location” matter; a website’s server can be located anywhere without affecting the site’s ability to reach all target markets.

Accordingly, retail sector square fo o t a g e h a s d e c re a s e d d u e to changing retail buying patterns, the efficiency of omnichannel distribution, and the changing behaviour of millennials. All these factors result in reduced store traffic in the US3, and Canadian retailers need to take note and recognize that the physical store, although as important as ever, today plays a different role today in the eyes of the consumer. As in the office sector, real estate is a significant driver of cost, accounting for anywhere from 5%-20% of sales depending on the type of retail. The shift to online shopping and maturing retail markets has meant more focus on profitability and sales over growth. The ability for retailers to decrease the capital-intensive cost of real estate means those funds can be redeployed elsewhere, such as in developing new channels to reach customers, improving logistics, and developing warehousing and fulfilment strategies. Retail proper ty owners need to continue evolving their “shopping experience” through the addition of food, entertainment, and a wide array of retail offerings. Technology needs to extend to more than just the storefront; the back office needs to be able to capture customer preferences and tap into data analytics to suppor t and help drive sales. Understanding big data will be a key driver of long-term retailer prosperity.

From a Real Estate Perspective, the Retail Industry is Undergoing a Profound Change Physical stores remain core to creating an innovative and long-lasting shopping experience, but they are no longer the sole touch point for a retail brand. Instead, stores are positioned as part of the omnichannel customer engagement model, combining physical inventory, online access, and an environment that is customized to enhance the customer experience. Much of the real estate portfolio for retailers will not be expanding, but undergoing redevelopment as existing spaces are transformed to provide that unique store ambience.

Omnichannel, Supply Chain, and Manufacturing Trends are Transforming Industrial Real Estate Once more, digitization is disrupting an industry that isn’t always associated with being on the leading edge of technology. Digital disruption in the retail sector has a corresponding i m p a c t i n m a n u f a c t u r i n g. T h e increase in online sales has meant that warehousing and distribution markets have grown, with many large retailers investing in highly sophisticated technical fulfilment centres. The shrinking footprint of retail stores has moved the inventory into warehouses where it can be shipped directly to customers. As the cost per square foot of warehousing

space is cheaper than retail space, retailers are realizing cost savings. The omnichannel model, technology, and process improvements are where most of these savings are being reinvested.

Manufacturing is Experiencing the “Third Industrial Revolution” The other side of the industrial market is manufacturing, which is also changing due to technology again impacting the “where and how.” The Economist has noted that manufacturing is undergoing a third industrial revolution as it moves into the digital age. 4 Mass production has moved into mass customization thanks to advances in software, new materials, more dexterous robotics, 3D printing, and the delivery of webbased services.

From Disruption to Innovation As digital disruptions continue, the corresponding fallout will inevitably change real estate. The k ey to surviving and thriving in this new order is to adapt to these disruptors while maintaining a core vision and developing a flexible approach that can withstand future volatility and drive growth. Real estate should do more to create value and drive operational excellence and growth. Now it can. To read the full version of this article, visit deloitte.ca and search for insight reports in the real estate industry.

2 US Online Retail Forecast, 2012 To 2017. Forrester, 2013. 3 Stores Confront New World of Reduced Shopper Traffic. The Wall Street Journal, 2014. 4 The Third Industrial Revolution. The Economist, 2012.

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Professional Development Opportunities for Missed registering for our popular Executive Programs earlier this year? Register now for these fall sessions before spaces fill up.

The CFO as Navigator This program is designed to provide you with a highly applied and interactive experience, and to make you a complete CFO.

October 7-10, 2015 | Beach Club Resort, Parksville (Early bird deadline August 21)

The Controller’s Management Program This program is designed to provide you with the theory, best practices, tools, and skills to take your leadership to the next level.

October 14-17, 2015 | Westin Whistler, Whistler (Early bird deadline August 21)

The Controller’s Operational Skills Program This program is designed to enhance your role on the management team by sharpening your skills in risk management and controls, ethical leadership, planning, budgeting and forecasting, performance measurement approaches, and financial reporting.

October 18-21, 2015 | Westin Whistler, Whistler (Early bird deadline August 21)

The CFO’s Operational Skills Program This program delivers the core CFO competencies that organizations expect and demand. Get up to speed on corporate governance and risk management and the latest tools and applications.

November 15-18, 2015 | Westin Whistler, Whistler (Early bird deadline September 15)

The CFO’s Leadership Program This is an intensive and interactive program that blends best practices, case studies, group discussions, and role-play to allow participants to advance their leadership skills to being a strategic partner.

November 18-21, 2015 | Westin Whistler, Whistler (Early bird deadline September 18) page 14

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I N D U S T R Y U P D AT E

A SELECTION OF FALL SEMINARS We have ACCOUNTING ASPE: Real Estate Industry This seminar will explore the ASPE standards that are applicable to the real estate industry, and make a link to REALpac in a practical manner. It will discuss accounting issues encountered by builders, developers, and landlords that have direct or indirect ownership of the real estate. It will also cover the disclosure requirements of ASPE and other issues specific to the real estate industry.

October 26, 2015 | Vancouver November 16, 2015 | Victoria January 28, 2015 | Vancouver

ASPE: Construction Industry This course will explore the ASPE standards that are applicable to the construction industry in a practical manner. It will also cover the disclosure requirements of ASPE and other issues specific to construction contracts.

November 3, 2015 | Vancouver

IFRS: Revenue Recognition Standards (IFRS 15) The objectives of this course are to provide participants with an understanding of the new five-step revenue recognition framework under the new standard, including how to determine when, and the amount of revenue, to recognize.

October 28, 2015 | Vancouver February 11, 2016 | Vancouver

CONTROLLERSHIP & MANAGEMENT ACCOUNTING Essential Topics for Controllers This seminar will deal with seven topic areas that you will be expected to be proficient at, or at least have knowledge of, as your career progresses: conducting employment interviews; strategic planning basics; negotiating skills; performance evaluations; managing versus leading; communication skills; and termination of employees.

November 3, 2015 | Vancouver

Members in Industry

Highlights from the CPABC Professional Development Program for Fall 2015

e many more titles available this fall — for a full listing, please visit the CPABC PD website at pd.bccpa.ca.

Financial Statement Analysis

COMMUNICATION

Regardless of career choice, professional accountants will be involved in the review and analysis of financial statements. This is a skill that might deteriorate over time. By actually reviewing financial statements throughout the day, this seminar will strengthen your financial statement analysis capabilities.

Speeches of Leadership

November 4, 2015 | Vancouver

FINANCE/TECHNOLOGY

Leadership is about helping others change. “Speeches of Leadership” is about using oral communication skills to bring about that change. This seminar will be of interest to those who lead others formally, or those who perceive a need to move others to act or to respond to change. This is a day filled with self-exploration exercises and oral communication activities related to helping others change.

November 16, 2015 | Vancouver

Modelling Business Cash Flows in Excel This half-day, hands-on workshop will explore how to build a robust monthly cash flow forecast model in Excel using modelling best practices. By the end of this workshop, participants will be able to model business cash flows on a weekly/monthly basis; structure a cash flow model so that it is easy to follow and update; and appreciate the importance of clearly identifying and documenting cash flow assumptions.

We Have to Talk – Having the Difficult Performance Conversations

October 21, 2015 | Surrey October 28, 2015 | Vancouver October 28, 2015 | Kelowna November 4, 2015 | Victoria November 19, 2015 | Prince George

November 13, 2015 | Vancouver

Modelling Business Valuation This one-day, hands-on workshop will enable participants to confidently build an equity valuation model in Excel. Participants will learn how to forecast corporate financial statements, and undertake a discounted cash flow free cash flow valuation. The session will be of particular benefit to members who are interested in business valuation and how best practice valuation models are built in Excel.

November 5, 2015 | Vancouver March 4, 2016 | Kelowna

Conduct a Google search, and you will find dozens of books on the topic of crucial, fierce, important conversations. One common theme emerges from this literature – the fear of difficult conversations is often more stressful than the actual conversation. This seminar will place difficult conversations at the core of successful work relationships.

TAXATION GST/HST and PST Update The objective of this seminar is to provide a brief review of important recent legislative changes, important court cases, and government pronouncements that attendees may have missed, as well as a brief review of ongoing common reporting and audit issues.

October 14, 2015 | Kamloops October 15, 2015 | Kelowna October 21, 2015 | Victoria October 23, 2015 | Abbotsford October 26, 2015 | Parksville November 2, 2015 | Nanaimo November 5, 2015 | Surrey December 7, 2015 | Vancouver January 27, 2016 | Vancouver

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Building BC Members share their perspectives on BC’s real estate industry

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ndustry Update spoke with members working in real estate and development to gain their insights into the industry, its future outlook, and areas of growth. Recently, we spoke with Lynn Cook, CPA, CGA, chief financial officer, US at Colliers International, and Cynthia Lim, CPA, CGA, partner and chief financial officer of PCI Developments Corporation.

Industry Update: Can you give a brief overview of your organization and your role within it? Lim: PCI Developments Corporation is a Vancouver-based

merchant real estate developer and investor. We specialize in urban transit-oriented, mixed-use developments and value-added repositioning of existing buildings. Our projects are often completed in close collaboration with anchor commercial tenants with project costs ranging from $10 million to $400 million. At PCI, I am a partner page 16

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and chief financial officer and my responsibilities include overseeing operations, human resources, budgeting, and financing. Cook: Colliers is a global leader in commercial real estate

services, with more than 16,000 professionals operating out of 67 countries. Colliers delivers a full range of services to real estate occupiers, owners, and investors worldwide, including global corporate solutions, brokerage, property and asset management, hotel investment sales, valuation, consulting and appraisal services, mortgage banking, and research. As chief financial officer of the US business, I’m a member of the executive leadership team for our largest region. I am involved in strategic planning and accountable for the financial performance of the business. A large part of my role is mergers and acquisitions as we continue to rapidly grow our business.

Industry Update: The real estate and development industry has been a key driver of the BC economy for many years. Do you see this continuing? Lim: Yes – Metro Vancouver has been one of the strongest

real estate markets globally over the last 10 or 15 years, and despite ongoing caution, there aren’t signs of this trend changing. Immigration and investment of foreign capital seeking security in BC’s stable market are the most obvious factors, but the resilience and growth of our office market is also notable, particularly for technology and other knowledge-based companies.

Industry Update: The commercial real estate market in BC has seen huge growth in the last couple of years with many new office and retail spaces opening in 2015-2016 — such as Telus Gardens and Pacific Centre/Nordstrom — and the growth we’ve seen in Surrey. How do we attract head offices to BC to fill these new spaces? Cook: Recent office development in Metro Vancouver

has been led by increased demand for downtown space by various industries, especially technology and digital media companies. We expect demand to continue to grow, especially with the lower Canadian dollar generating increased relocation activity from American cities, such as San Francisco or Seattle.

Industry Update: For any business to grow, certain key success factors must be present. What factors are crucial for the continued growth of BC’s real estate and development industry? Lim: Population growth, job creation, livable communities,

and a skilled and educated workforce are key growth factors for the real estate industry. While BC has many of these elements, the high cost of living, particularly the affordability of real estate, and increasing competition for skilled workers are potential impediments to continued growth.

Cook: The health of the underlying economy, and in

particular population growth, drives expansion in business and the retail industry. Commercial real estate is driven by demand from businesses needing office space and new retailers moving into our market. The fundamentals are solid for future growth, as BC has good infrastructure and global accessibility because of our ports, proximity to the US border, and an international airport, along with a growing population of young, highly educated workers.

Industry Update: What trends are you seeing within the real estate industry? Lim: Proximity to rapid transit is very important with

increasing demand by residents, office workers, and retailers alike to be in mixed-use developments on transit corridors, such as our Marine Gateway development at Cambie Street and Marine Drive in Vancouver. There is growing recognition of the benefits of such large-scale, mixed-use developments on transit routes with a complementary mix of office, residential, and retail allowing convenience, sustainability, and security. More women are not only pursuing careers in the real estate industry, but also achieving executive roles. There are many organizations mentoring women entering the industry and preparing women for leadership roles, in particular CREW Vancouver (Commercial Real Estate for Women). Real estate is a great business and I strongly encourage anyone interested in real estate to start networking to see if it may be a fit for them. Cook: One trend we’re seeing in Vancouver is the increase

in mixed-use developments replacing lower-density, single-purpose buildings along major corridors near major transit hubs. The development of Cambie Street along the Canada Line is a prime example. The rise of mixed-use development is directly connected to the “live-work-play” community direction outlined in the Metro Vancouver 2040 Regional Growth Strategy.

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CPABC Career Connect Employer Profile

Connecting with CPABC: A Q&A with John Kump, CPA, CA, chief administration officer of the Ledcor Group of Companies

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ne of North America’s most diversified construction and services companies, The Ledcor Group of Companies has 10 lines of service: building, communications, environmental, forestry, infrastructure, mining, oil and gas, power, properties, and transportation. Founded in 1947, and headquartered in Vancouver, the company has about 6,000 employees across 20 offices.

As a diversified construction company, Ledcor builds projec ts throughout North America and specializes in project and construction management, preconstruction services, design-build, general contracting, and public-private partnership (P3) delivery models for their clients. Most recently, the company has grown its transportation division with investments in its marine operations and an expanded fleet; they also have one of Canada’s largest fleets of compressed natural gas vehicles. Ledcor has been recognized as one of BC’s Top 55 Employers for the past five years, and is a 2014 recipient of Canada’s Top 10 Most Admired Corporate Cultures award. Industry Update spoke to John Kump, CPA, CA, to find out what it’s like to work at the company, and why CPAs have an edge over other hires. At Ledcor, Kump is the chief administration officer and has held various roles with the company over the past 14 years. Kump provides support to Ledcor’s human resources, information services, and finance and accounting groups across the company. He also oversees Ledcor’s investments in publicprivate partnerships.

Industry Update: What makes Ledcor a unique place to work? Kump: Our culture is what stands out. We talk about our

True Blue culture where family, community, teamwork, and a personal commitment to safety drive our success. The company has grown significantly, but we continue to foster an entrepreneurial spirit by encouraging our people to look at new opportunities, be innovative in solving challenges, and bring value to our clients.

Industry Update: What qualities are common among your most successful employees? Kump: They strive for success, are committed to our values,

are comfortable in a fast-paced organization, and deal well with change. They’re team players who take pride in our collective accomplishments.

Industry Update: Ledcor has a number of CPAs in the organization. What sets CPAs, and CPA candidates, apart from other hires? Kump: CPAs typically have broad experience. This makes

them well suited for dealing with the change and new challenges we see at Ledcor. That broad experience also allows them to take on new opportunities that arise in our business units. CPABC Career Connect recognizes leading companies that provide an effective working and training environment for our designated members, students, and candidates and affirm the value of CPA-trained accountants and finance professionals within their organization. To learn more about the program, visit www.bccpa.ca/careers/career-connect-employers.

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ing the Mar ket? Driv o’s Wh

Market Implications of Foreign Buyers By Cameron Muir and Brendon Ogmundson

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ousing affordability has long been a thorn in the side of the Metro Vancouver story. Indeed, the rapid acceleration in home prices that occurred during the 2002-2008 period still has many people gobsmacked. Recent news stories have focused on the foreign buyer segment of the market, concluding that foreign investors are unduly inflating home values and driving potential domestic buyers out of the housing market, especially those looking to purchase their first home. However, data and analyses from a number of sources suggest that foreign investment is insufficient on its own to page 20

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impact a market as large and diverse as Metro Vancouver, save for a small segment of luxury homes. In addition, significant upward pressure on singledetached home values is largely driven by land scarcity and densification policies in the metro region. These efforts have achieved relative stability in the values of apartments and townhouses that now comprise twothirds of the housing stock. The British Columbia Real Estate Association (BCREA) finds that while no hard data exists on the number of foreign buyers in the Metro Vancouver housing market, the available data and analysis on the housing stock and

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flow of residential transactions in the region suggest that foreign ownership of housing is considerably less than five per cent of the housing stock and not more than five per cent of sales activity. The proportion of vacant dwellings, as well as the proportion occupied by foreign and/or temporary residents in the Vancouver Census Metropolitan Area (CMA) during the 2011 Census, did not diverge significantly from other large Canadian or provincial urban centres. Domestic investors are three to four times more active in the region’s housing market than foreign

investors, adding much-needed rental accommodation supply. In addition, adjusting for inflation and wage growth, apartment condominiums have become more affordable over the past five years. Further, relatively stable prices have provided little incentive for short-term speculative activity in the apartment market segment. The single-detached home stock has declined in both absolute and relative terms in the Vancouver CMA. This increasing scarcity has led to significant price appreciation as consumers compete for the available stock. Regional residential densification efforts have led to relative price stability in multi-family housing over the past five years, as home builders have kept pace with demand. Multifamily housing now comprises twothirds of the Metro Vancouver housing stock and approximately 80 per cent of new home construction activity. The average home price in the region is an inadequate yardstick for housing affordability. Nearly 70 per cent of all MLS® residential transactions in Metro Vancouver during 2014 were below the average price of $738,000, with 32 per cent of homes sold below $400,000 and 82 per cent below $1 million.

The Changing Housing Stock Metro Vancouver is Canada’s thirdlargest census metropolitan area and is home to over 2.4 million people distributed across approximately 950,000 households. Its geography is constrained on all sides by natural a n d l e g a l i m p e d i m e n t s to t h e supply of developable land. The vast suburban sprawl associated with many North American cities wasn’t able to fully take root in Vancouver

as the relative scarcity of land forced housing stakeholders to look up rather than farther afield. Densification in Metro Vancouver has largely been a success, with the supply of multifamily housing more or less matching demand. Increasing residential density has also enabled the production of more compact communities with better transit and smaller ecological footprints. The flip-side to Vancouver’s density story is that single-detached homes are becoming scarce, both in absolute and in relative terms. Between the 1991 and 2011 census periods, the total stock of single-detached homes in the Vancouver CMA actually declined by over 1,000 units. More significant is the fact that the share of single -detached homes declined from 50 per cent of the housing stock in 1991 to barely a third in 2011. Single-detached homes are now a lot less common in Metro Vancouver and are fast becoming a luxury segment of the housing market. Indeed, fully 80 per cent of new construction activity in the Vancouver CMA is typically devoted to multifamily housing. Media reports have tended to focus on single-detached homes in the City of Vancouver. However, that market segment only comprises 15 per cent of singledetached homes in Metro Vancouver and just 5 per cent of the total housing stock.

Affordability and Housing Stock Dynamics The dwindling supply of single detached homes relative to multifamily types has led to significant upward pressure on pricing. Over the past five years, the MLS® Benchmark

price for a single detached home climbed 32 per cent to $1.1 million in the Real Estate Board of Greater Vancouver (REBGV ) area. However, apartment condominiums nudged ahead less than 7 per cent over the same period, largely the result of adequate new supply. Since wages have grown at a faster rate and mortgage interest rates are lower today than five years ago, apartment condominiums are more affordable today than in 2010. A common practice to measure affordability is in relation to the average home price in the region. This has proven to be an inadequate measure in Metro Vancouver as the housing stock is increasingly diverse. A more realistic measure would be how many households can afford lowerpriced homes. The average MLS® residential price in Metro Vancouver was $738,000 in 2014. However, nearly 70 per cent of the homes sold were below this threshold. Using the average price as a first-time buyer yardstick implies that a significant number of first-time home buyers should be able to purchase a home priced in the top third of all home values. Typically, around 30 per cent of home buyers in Metro Vancouver are purchasing their first home. It is no coincidence that 32 per cent of homes sold in the Metro region were priced below $400,000 in 2014.

Assessing Foreign Ownership While no hard number on foreign buyers in the Metro Vancouver housing market exists, there are data and analyses available. After surveying the relevant data both locally and internationally, we found SUMMER 2015

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Who’s Driving the Market... (cont’d) that estimates of foreign ownership tend to cluster around 5 per cent. We have been unable to find any outliers of data to suggest the impact is more pronounced.

Canadian Data In the Metro Vancouver context, data relevant to measuring foreign investment does exist from the 2011 Canadian Census, the Canada Mortgage and Housing Corporation (CMHC), Urban Futures and REBGV. While none of these measures are perfectly designed, they were independently produced and converge around a similar central tendency in regard to foreign ownership in the Vancouver housing market. The classification of a foreign-owned versus a vacant unit is somewhat fluid in Census data. Statistics Canada recommends grouping together the share of private dwellings that were either unoccupied or occupied by foreign or temporary residents on Census day. Census data tells us the proportion of housing occupied by foreign/ temporar y residents in Metro Vancouver was 0.78 per cent in 2011. This is below the 1.40 per cent average of the largest Canadian urban centres and less than the provincial proportion of 1.01 per cent. In addition, the share of unoccupied dwellings in Metro Vancouver was 5.35 per cent compared to an average of 6.45 per cent across the same urban centres. The 2011 Census data is fur ther suppor ted by data from CMHC ’s rental market survey in which CMHC asked property managers to provide information on condominium apar tment units owned by nonCanadian residents. As of the end of page 22

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2014, the share of foreign ownership in the Vancouver CMA condo market was estimated at 2.3 per cent. This compares to 2.4 per cent for Toronto, 1.1 per cent for Victoria and 1.5 per cent for Montreal. In addition, private sector groups have attempted to measure the share of foreign ownership in the market. In 2010, consultants at Urban Futures, using BC Assessment data, analyzed the mailing addresses of tax assessment notices and found just 0.4 per cent of tax notices were sent outside of Canada. An informal monthly poll conducted by REBGV of about 200 REALTORS® shows that home sales to foreign investors have gradually trended higher, from 2.6 per cent of residential transactions in 2009 to 3.6 per cent this year, and have averaged 3.2 per cent over that period. For perspective, local/domestic investors averaged 12 per cent of transactions over the same period. The general lack of capital appreciation in the apartment market has led to a slight downward trend in the share of transactions by domestic investors, with speculative activity likely near decade lows. According to CMHC, about 50,000 apartment condominiums were actively in the rental stock in 2014.

International Data While Canada does not formally track foreign ownership in the residential real estate markets on a monthly or annual basis, other jurisdictions do. In the United States, international buyers are surveyed by the National Association of REALTORS® (NAR) and Australia directly measures foreign investment via its Foreign Investment Review Board.

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The foreign investment trends in these two jurisdictions can be informative for BC, given their similar proximity to Asian markets. According to a 2014 NAR sur vey, international buyers contributed to 7 per cent of total US home sales. Of that total, Chinese buyers accounted for 24 per cent of international sales, and about 5 per cent of total California home sales, which were mostly split between San Francisco and Los Angeles. In Australia, official data shows that for the past decade, approvals for foreign investment in the residential sector have remained between 5 and 10 per cent of dollar volume and roughly half of that number for total unit sales. Perhaps most importantly, according to research conducted by the Reserve Bank of Australia, rather than competing with first-time home buyers, foreign investment is concentrated in higher-priced market segments. Moreover, foreign investment largely occurs in the highdensity areas of major cities such as Sydney and Melbourne, and is not for short-term speculative purposes. They also note that foreign investment creates a supply response that stimulates new home construction, generates employment, increases economic output and provides a larger tax base. Cameron Muir is the chief economist for the BC Real Estate Association. Brendon Ogmundson is an economist with the BC Real Estate Association. This abridged report is published with the permission of the BC Real Estate Association.

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