canadian property management | january 2016

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Smart Technology for Accessible Building Intelligence

SUSTAINABLE UNDERPINNINGS

FOR BUILDING OWNERS, ASSET AND PROPERTY MANAGERS

VOL. 30 NO. 8 • JANUARY 2016

P A R T O F T H E P A R T O F T H E

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THE STALLED CONSTRUCTION PROJECT, notoriously idle on a prominent downtown Toronto block for more than a decade, is long since built and occupied – its once totemic embodiment of a great real estate crash now largely forgotten. The mammoth London development that famously bankrupted a great real estate company is now the anchor of a vibrant commercial district – exactly as its original proponents envisioned.

Neither was ever a bad project. They just suffered from a blip of bad timing.

Precarious timing is a given in a cyclical industry that requires years to bring new product to fruition. Thus, 2016 begins with uncertainty about the imminent arrival of new office space in some markets that are already experiencing rising vacancies and declining rents. It's generally acknowledged that this isn't the best of times for the Canadian economy at large or the real estate sector in particular, but it's neither an unprecedented nor insurmountable scenario.

Key sectors of Alberta's economy are struggling, with flow-through repercussions for office, retail and industrial real estate in Calgary and Edmonton, but, elsewhere, demand for office space has been steady to upbeat. The Bank of Canada calls it a "protracted process of reorientation towards non-resource activity" while real estate analysts predict better days ahead for industrial and warehouse/distribution space in markets like Toronto and Montreal as surging U.S. demand and the lower Canadian dollar provide some very welcome propulsion for the manufacturing sector.

Still, the Bank of Canada also offers a qualifier. (Go figure.) "The complex nature of the ongoing structural adjustment makes the outlook for demand and potential output highly uncertain," it warns. Or, in other words, we'll have to wait and see.

There's no stopping largely completed office projects at this point, regardless of the economic climate. Nor would their developers want to since it's actually the older existing towers that are expected to lose out in a battle with beguiling newcomers.

Accordingly, hints that the new federal government's promised infrastructure/economic stimulus program might include incentives for energy efficiency upgrades in commercial buildings are interesting indeed. That would be investment with positive economic spinoffs now and permanent environmental benefits into the future.

Barbara [email protected]@BarbaraCarss

editor’snote VOL. 30 NO. 8 JANUARY 2016Editor-in-Chief Barbara Carss [email protected]

Publisher Sean Foley [email protected]

Contributing Writers Meghan Cowan, Mathew Good, Joshua Hutchinson, John Kopf, Cynthia Sefton, Jiri Skopek

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Published and printed eight times yearly as follows: Feb./Mar., April, May, June/July, Sept., Oct., Nov., Dec/Jan. by MediaEdge Communications Inc. 5255 Yonge St., Suite 1000, Toronto, Ontario M2N 6P4(416) 512-8186 Fax: (416) 512-8344 e-mail: [email protected] Rates:Canada: 1 year, $60*; 2 years, $110* Single Copy Sales:Canada: $12* Outside Canada:US 1 year, $85 International $110 *Plus applicable taxesReprints:Requests for permission to reprint any portion of this magazine should be sent to [email protected].

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Authors:Canadian Property Management Magazine accepts unsolicited query letters and article suggestions.Manufacturers:Those wishing to have their products reviewed should contact the publisher or send information to the attention of the editor.Sworn Statement of Circulation:Available from the publisher upon written request. Although Canadian Property Management makes every effort to ensure the accuracy of the information published, we cannot be held liable for any errors or omissions, however caused. Printed in Canada

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4 January 2016 | Canadian Property Management

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According to a new report from Urbanation, the number of condo apartments rented through the MLS system during 2015 in the Greater Toronto Area soared by 19 per cent to reach 27,166 units. Q4 saw a particular surge of rental activity, with a 26 per cent year-over-year increase to 5,628 units.

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The impact of the built environment on human health and wellness is becoming a more important topic in the industry. As the buildings industry attempts to meet new demands related to human health and wellness, an important concept that has emerged is the use of various building materials and fi nishes.

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SMART BUILDINGS could be characterized as a venue for colliding cultures as real estate moves away from a tradition of proprietary systems and IT takes on a growing role in operations. A seminar at the recent PM Expo in Toronto even presented that theme in an energy management vs. building automation context, albeit largely as a teaser for a discussion of the broader

linkage of technologies to deliver high-performance buildings.

"I think we're at a point where it is no longer a conversation about a building automation system or an energy management system or about water management. It's a conversation about the environment," observed Chris Piché, a Principal with the engineering and green design firm, Integral Group, and one of the seminar presenters.

Elsewhere at PM Expo, real estate owners/managers and IT service providers likewise explored how smart technology and innovat ion are transforming buildings, as part of a panel discussion sponsored by the Building Owners and Managers Association (BOMA) of Greater Toronto. They pointed to the efficiencies and savings that can come with real-

smartbuildings

Open, Convergent Systems are Building Blocks for PerformanceBy Barbara Carss

REAL ESTATE REAPS SMART TECHNOLOGY PAYBACKS


smartbuildings

Canada, recounted how HR staff at Deloitte's new Internet-of-Things-enabled headquarters in Amsterdam scruti-

nize data from coffee makers to gauge how much time employees are spending at offsite coffee shops. Or, from a regional mall manager's perspective, heightened connectivity can improve logistics for patrons with the ancillary environmental benefits of reducing cir-cling space-hunters in the parking lot.

"If we can connect available parking spaces to where people want to go in

the building, I think we are addressing one of the pain spots of the shopping experience," said David Giddings,

Director of Real Estate Management, National Programs, with Oxford Properties.

"The smart approach is getting that data so people can have a better experience," concurred Robert Murchison, Principal and Co-founder of the consulting firm, IntelligentBuildings LLC. "Getting things open, no matter what you want to do, is fundamental."

time monitoring and operational r e sponses , which a l so suppor t competitiveness in the marketplace and asset value through enhanced ability to attract and retain tenants.

"I suspect the evolution of technology in our buildings is going to come rather quickly," mused the discussion moderator, Lachlan MacQuarrie, Vice President, Real Estate Management, with Oxford Properties Group. "My advice would be: you probably don't have as much time as you think you have."

Network infras t ructure figures prominently in the first steps to get open systems converged on a platform fo r co l l ec t i on , i n t eg ra t i on and dispersal of data. From there, i t becomes something of a discovery process for data applications – ranging from the obvious, such as energy-use monitoring and verification, to the perhaps more esoteric.

Andy Schonberger, a Business Devel-opment Engineer with Cisco Systems

“Smart is not necessarily a thing. It's a destination. To start, I would keep it simple.”

Canadian Property Management | January 2016 11

RETURNS, SAVINGS & TENANT RETENTIONAs with other kinds of capital investments in high performance, proponents maintain the paybacks are abundant and relatively quick. Scott Collins, Project Executive, Construction, with Bedrock Real Estate Services, a major commercial landlord in Detroit, traced his company's evolving view of smart technology from an amenity that would help differentiate

a building in the marketplace to a key management tool.

"We can diagnose the building real-time instead of being reactive, as we tend to be in real estate development," he said. "Our philosophy is: technology leads; money follows. We see predictable paybacks in a year to two years."

For example, Michigan's electricity rate structure – which features on-peak and off-peak time-of-use pricing and applies a separate demand charge based on business customers' highest consumption during the billing period – helps make the business case for

greater flexibility to manage and shift peak demand.

"I now have an interruptible meter across a 10-mil l ion-square-foot portfolio. That puts us in negotiating space [with the utility]," Collins noted.

Using Oxford Properties' big-picture lens on retrofit paybacks, MacQuarrie placed smart technology upgrades in the context of overall building returns,

with yields currently in the 5 to 6 per cent range with a 20-year payback. "If we are able to drive a 10-year payback that's, candidly, accretive from the get-go," he said.

Smart technology can fulfill tenants' explicit demands for control of the space they occupy – also reducing heretofore inescapable 'too hot; too c o l d ' c o m p l a i n t s t o bu i l d i n g management – and meet more implicit expectations that the workplace should be able to keep pace with ubiquitous smartphone use and advancements.

"Your expectations of how you interact with an environment have changed," Murchison theorized. "There's just a need for a better mousetrap, and that can't be done without technology."

Savvy leasing teams are also pitching it as building-based support for tenants to conduct business faster, better and more cost-effectively. "The key is, we've enabled tenants by putting systems in," Giddings said.

SYSTEM CHOICES & STAKEHOLDER BUY-INInvestors in smart technology should probably expect a learning curve. Service providers advise that many of the puzzle pieces are readily in place since most building systems have

convergence capability. Open protocols – which the Open Standards Consortium for Real Estate (OSCRE) has been leading and championing – are indelible to the process, while system vendors may need a nudge to accommodate convergence.

"Your vendors are all too aware of it. Some don't necessarily want to advance it, but many are because they see this is the way to go," Giddings said.

"Challenge the norm," Collins added. "I think our company does a pretty good job of saying: I don't believe that is the only way to do it."

Tr a i n i n g , s t a f f bu y - i n a n d collaboration are also central to successful adoption. "When you start the journey on smartness, you need to start bringing all the stakeholders with you on the journey," advised Bill MacGowan, Director of Smart and Connected Real Estate with Cisco Systems Canada.

Casey Witkowicz, founder, President and CEO of the telecom infrastructure consulting firm, RYCOM Corporation, r e c o m m e n d s ow n e r s / m a n a g e r s determine what they want to achieve and then find the appropriate smart technology, which could be a small-scale cloud-based option initially. While many of the panellists' examples pertained to large bui ldings or portfolios, he emphasized that smaller buildings can also be smart – and can realize the same kinds of return on investment.

"The building blocks of smart really are not size dependent. Smart is not necessarily a thing. It's a destination," he said. "To start, I would keep it simple."

Schonberger and Piché reiterated the importance of collaboration and the opportunity to reap greater insight from system integration in their presentation on smart technology's building performance outcomes. Piché sees both a means to learn more from operating buildings, and a need to provide more support for operations and maintenance staff.

"We play marriage counsellor s o m e t i m e s b e t w e e n f a c i l i t i e s management and IT," Schonberger quipped. "These skill sets need to be in-house. That means the IT and core business need to work together." zz

smartbuildings

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BROKERS WAKE UP TO OPERATIONSOccupant Satisfaction Factors into Value Proposition

By Jiri Skopek

AS OPERATIONAL COSTS of commercial buildings rise faster than income, building owners must pay more attention than ever to operational performance. Cost is not the only issue. Smart building systems, big data and building analytics increase complexity and require that operators understand these systems.

There is a saying that a building can be only as smart as its operators. When BAS-building automation systems were first introduced, computer specialists (geeks) were hired to operate them. They knew about computers, but not much about building operations. Consequently they often sat behind the BAS systems screens playing

solitaire while the BAS operated in default mode. With the introduction of smart buildings, there is a concern that history could repeat itself.

A recent post-occupancy study on some of Canada’s most prestigious green buildings, Do our green buildings perform as intended?, indicates a correlation between building performance and the quality of the management, as well as the impor tance of commiss ion ing . Unfortunately, many smart buildings are designed without taking into account the fact that the building operators do not entirely understand how they work. Given the shortage of facility operation

and maintenance managers, and the attrition due to retirement, this could be the perfect storm.

OWNER COMMITMENT CRITICAL In November 2015, ASHRAE convened a Building Performance Alliance workshop to review industry needs and barriers to effective building performance as it relates to building owners and frontline operators. Participants noted that no major improvements can take place without the owner’s active interest.

Yet building owners are not particularly interested in operational details. That’s because building operations represent a relatively small factor in the overall financial

smartbuildings


high-quality building environment and securing a long-term sustainable property income stream. Buildings that are well managed tend to be efficient in all areas, including energy.

CONTINUOUS TRAINING REQUIREDNot surprisingly, one of the themes of the Building Performance Alliance workshop was that the rise of smart building technolo-gies requires continuous training of building operators. There are many online courses and the more progressive property management firms often have their own online universities for their operational staff.

Public Works and Government Services Canada (PWGSC) has created communities of practice for collaboration and knowledge sharing. Re-commissioning agents are also an excellent source of hands-on training for building operators in the course of re-commissioning a building. The Building Operator Certification is another means to ensure that building operators are properly trained and certified.

In order to derive the full benefit of smart building technologies in terms of health, comfort, productivity, energy and operational

savings, the industry needs to identify the necessary competencies for building operations staff. These include: understanding energy policy; analysis of utility bills; regular energy assessments; knowledge of the building systems; the skills to operate them efficiently in a proper and timely manner; and recognition of the importance of ongoing commissioning.

The challenge, of course, is that systems and buildings are all somewhat unique, and so competencies must be tied to each particular building system. This makes it somewhat difficult to develop a generalized set of rules and appropriate training that will apply to all buildings.

Also, despite the introduction of full-fault diagnostics, there is still little knowledge of the true cost of undiagnosed alarms. Consequently, while there is no doubt that building operations have never been more crucial, and that training is the key, there is still much research needed to establish the true value proposition of building operations. zz

Jiri Skopek is Managing Director, Sustainability, with JLL. For more information, see the website at www.jll.com/sustainability.

picture – perhaps several hundred thousand dollars, compared to the price of the building, which can constitute several million dollars. Also, with triple net rents there is little incentive for the owner to demand dramatic operational improvements as this does not impact costs.

When it comes to investment advice, however, there is one person whose advice an owner will consider – his trusted broker. And the good news is that brokers are starting to understand the importance of good building operations.

Brokers are seeing how the workplace is changing – how tenants want more than just granite in the lobby. They are finding that good lighting, clean air and thermal comfort are operational characteristics that can make or break the appeal for occupants.

Building operational performance not only impacts the occupants' satisfaction, but also the use of energy and hence carbon emissions. With the renewed focus on reducing carbon emissions from buildings there are three drivers: 1) codes and regulations ensure a minimal standard of performance; and 2) incentives and voluntary programs can help.

The third driver is the growing focus on the operational aspects of maintaining an overall

smartbuildings


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WITH AN OPERATING LIFE measured in decades, new boiler technologies take a long time to become the status quo. Today, cast iron, non-condensing boilers still account for about 60% of installations, but the market continues to shift as building system designers, owners and managers demand greater efficiencies, advanced controls and the ability to integrate with renewable energy.

Energy-efficient condensing boilers first appeared in the market in the late 1990s and their sales have since grown exponentially. These boilers condense hot water vapour into liquid water to extract additional heat from the exhaust gases. Recovering this latent heat of vaporization makes the condensing boiler heat exchanger up to 10% more efficient than a conventional boiler operating in the proper conditions.

Standard efficiency is anything below 90% annual fuel utilization efficiency (AFUE), while more than 90% is considered high efficiency. To reach levels above 90%, specifiers s h o u l d c o n s i d e r i n s t a l l i n g a condensing boiler, as these units offer the greatest thermal efficiencies. Typical aluminum or stainless steel condensing models offer efficiencies greater than 90% AFUE.

Some boiler manufacturers currently add a secondary heat exchanger or recuperator to improve the efficiency of conventional, non-condensing boilers. In this case, a secondary heat exchanger recovers the latent exhaust heat from the flue gases, condensing water vapor in the process. In theory, it can increase the efficiency of a standard cast iron boiler by up to 10%.

CONTROLSMultiple preset systems are a popular new boiler control feature. These units feature pre-set heating systems for typical operating conditions built into the controller so installers don’t have to enter specific supply or return temperatures during installation. The contractor only inputs the specific application – such as radiant heat, snow removal or domestic hot water – which reduces installation costs and time while increasing reliability.

In addition to ease of installation, condensing boilers feature significant advancements in boiler control that include remote control and diagnostics, boi ler-to-boiler communicat ions, modulating from maximum input to minimum input, rotating lead lag and integration with building automation systems (BAS).

Facility managers want immediate access and control of a mechanical room no matter the location. Boilers today can be controlled through an iPhone or Android phone, computers and tablets and other devices, allowing an operator to change and optimize settings, review alarms and adjust parameters to changes in weather.

Many institutional buildings such as schools or hospitals have multiple boiler setups for redundancy and reliability. Other facilities have installed or retrofitted to multiple modular boilers for various reasons like cost or space restrictions. In this case, installation of an intelligent boiler sequence control can provide significant energy savings.

Modern condensing boilers also have the ability to communicate with building automation systems. The benefits of building automation are improved occupant comfort, efficient operation of building HVAC systems and reduction in energy consumption and operating costs.

Another advancement is 0-10 VDC output signal. This feature provides easy integration with older boilers, such as cast iron, that don’t have sophisticated controls, and is especially valuable if a boiler fails in a facility with multiple boilers.

Boiler Technology Advances, but Switchover Takes Time

LONG LIFE CYCLE SETS PACE OF CHANGE By John Kopf

smartbuildings


With 0-10 VDC, instead of replacing all boilers, a facility can install one condensing boiler to improve efficiency and run that unit as the primary boiler. If more heat is needed, the output signal turns on an older boiler – which is most efficient at full capacity anyway – and then modulates the condensing boiler. This hybrid system improves the overall efficiency of the system and requires less initial investment for the customer.

Programmable zone options have also advanced in design. In the past, boiler manufacturers offered zone pump or zone valve controllers for maintaining separate conditions in different areas of a facility. This feature would activate either the pump or valve that controls the flow of water through the radiator. Today's technology enables different programmable zones that don’t require additional external panels.

MAINTENANCEThe ease of cleaning and maintenance of condensing boilers varies based on the type of technology and material design. Stainless steel condensing boilers feature either a water tube or fire tube heat exchanger. The water tube stainless steel heat exchanger consists of water inside a spiral tube with the flue gases on the outside. These units can be more difficult to clean due to the spiral design.

The fire tube contains the flue gases on the inside and water on the outside. These are typically straight tubes, allowing a facility manager/operator to open the lid and easily clean them. As a result, fire tubes are becoming more popular in stainless steel condensing technology than water tubes.

Aluminum condensing heat exchangers feature separate sections bolted together and include a clean-out plate. Inside the

heat exchanger are pins to increase the heat transfer area. Maintenance personnel simply remove the front plate to access the inside of the heat exchanger. The areas between the pins can be then easily cleaned and flushed with water.

Predictive maintenance is another new trend, giving maintenance personnel a predictive analysis of what may happen to a boiler over a specific length of time such as the next six to 12 months. Manufacturers have developed this technology by factoring a certain set of parameters and based on changes in those factors can predict when specific maintenance procedures – such as cleaning tubes or a heat exchanger – should occur to prevent catastrophic failure.

DURABILITYCondensing is a fairly new technology, so it’s difficult to prove the durability of these units. With proper maintenance, it’s likely that these units can last anywhere from 15 to 20 years.

Annual efficiency monitoring of the heat transfer fluid in condensing boilers with aluminum or stainless steel heat exchangers is recommended. Depending on the results, action can be taken to improve boiler efficiencies, resulting in lower annual operating costs.

Standard, cast-iron boilers, on the other hand, can have a longevity advantage. It’s not uncommon for a cast iron boiler to have a useful life between 30 and 50 years. These conventional boilers are also designed to access tight spaces such as narrow hallways and small elevators, often a key factor in retrofit applications – which make up 90% of boiler installations. The installer can bring one cast iron section at a time where a complete boiler assembly is too large for the available entryway.

Another new development in improving the life of condensing heat exchangers is the development of a non-metallic condensate base, which greatly reduces heat exchanger corrosion. While highly durable composite bases are not affected by acidic condensate, aluminum or stainless steel bottoms are affected. A non-metallic heat exchanger base protects against corrosion due to aggressive condensate resulting in long-lasting service.

RENEWABLESThe future of boiler design is integration with renewable heating sources such as solar energy, geothermal, wind and biomass. Solar energy, for example, is popular in western U.S. states to pre-heat water tanks.

A solar water heater typically will not provide enough heated water by itself, but it can increase the energy efficiency of the system and work in tandem with a boiler. When water temperature drops below a certain level the boiler is activated to provide supplemental heat.

In mild climates, geothermal energy is becoming more prevalent. This application uses ground source heat pumps for heating and for cooling. Geothermal heat pumps use the natural warmth of the ground several feet below the soil to pre-heat water. A geothermal heating method can reduce the amount of natural gas, electricity or oil that a boiler uses to save energy. When more heat is needed, an electric or a conventional hydronic boiler is activated.

The use of boilers installed in combination with renewable technologies and eco-friendly heating systems to improve efficiencies is on the rise. zz

John Kopf is Senior Product Manager with Weil-McLain, a designer and manufacturer of hydronic comfort heating systems for residential, commercial and institutional buildings. For more information, see the website at www.weil-mclain.com.

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Untitled-3 1 15-03-03 12:39 PM



RENTAL HOUSING landlords sometimes think of themselves as the most regulated real estate operators, but healthcare engineers and facilities managers make a good case for claiming that title. Responsibility for ensuring consistent service provision for a large, varied and vulnerable occupancy comes with many complex specifications.

"There is a never-ending barrage of codes and standards," John Marshman, Director of Engineering and Plant Operations with the William Osler Health System, told seminar attendees at the recent PM Expo in Toronto.

He, and co-presenter Roger Holliss, Director of Engineering and Biomedical Services at St. Mary's General Hospital in Kitchener, Ontario, outlined operational directives that address everything from infection control to project financing and elder-friendly design to energy-use reporting. Three CSA standards – 8000, 8001 and 8002 – provide the guidance backbone of how healthcare facilities should be built, commissioned and operated,

Highly Regulated Workplace is the Norm for Healthcare Engineers

By Barbara Carss

FM IN A SENSITIVE ENVIRONMENT

facilitiesmanagement


but dozens more have bearing even if they aren't an outright statutory requirement.

"It's hard to argue due diligence if something happens in the absence of following a standard," Holliss noted. At the same time, standards such as the CSA 'big three' are often embedded in provincial building and fire codes making them de facto regulations.

While keeping up with the regulatory landscape, which, in the case of CSA standards are reviewed, revised and reissued at five-year intervals, is a sectoral challenge in itself, the presentation focused on recently emerging trends affecting healthcare operations. Some, such as infection control requirements and increasing electricity loads from medical equipment, arise from healthcare's core purpose – treating patients. Others relate to government imposed actions. Ultimately, though, Holliss emphasized the one underlying objective.

"It's our job to create a clinical environment so clinical specialists' time is focused entirely on patients," he said. "We want to maximize the clinical utility of doctors and nurses."

FOCUS ON OLDER FACILITIESCurrent concerns and approaches to infection control can present a particular challenge in older facilities. Marshman noted that the older buildings in William Osler's portfolio, which includes sites in Brampton and west Toronto, have considerably fewer isolation rooms than is now the standard for new healthcare construction.

"It (infection control) drives a fairly onerous infrastructure regime around systems that are typically fairly hard to control," he said. "That's driving some significant changes to how we approach HVAC systems and the layout of certain areas."

After an era of active new construction in the 1990s and early 2000s, the Ontario government's focus has turned to retrofits and upgrades of older existing facilities, via the provincial Healthcare Infrastructure Renewal Fund (HIRF). Marshman traced this shift in priorities to the Facility Condition and Assessment Program launched in 2008.

"I think the output of that exercise was pretty terrifying for the government in terms of deferred maintenance that was discovered," he suggested.

The influx of retrofit funding comes in sync with new guidelines for financing and procurement in the broader public service (BPS), which also apply for municipalities, school boards, universities and colleges. BPS guidelines mandate an open RFP for any capital project with a budget in excess of $100,000, and the Minister of Health's approval for any capital project valued at $10 million or more. Cost must also be given the greatest weight among bid evaluation criteria.

"On procurement, we are very restricted," Marshman said – also noting that the process brings added pressure for bidders, who must now comply with the so-called two-letter system requiring separate technical and financial proposals.

ENERGY MANAGEMENT URGENCYRequirements under Ontario's Green Energy Act to report annual energy consumption and carbon emissions have now exposed healthcare operations to new kinds of scrutiny. Marshman noted that it's not uncommon for patients and/or visitors to comment on the facility's energy-use intensity, which can be found online.

While philosophically supportive of public accountability – "I have an obligation as the facility manager to spend the taxpayer's money as best I can," he asserts – the numbers alone don't necessarily provide for a fair comparison of facilities, given the diversity of building vintages and the energy-intensive equipment, like MRI machines, that some house.

Healthcare operators face challenges similar to those experienced in the commercial building sector in absorbing the Global Adjustment charge in Ontario's electricity rate structure. Large facilities would typically have the 5-megawatt electricity load to qualify as a Class A

customer, but less flexibility to take advantage of options to reduce costs.

Class A consumers are charged a Global Adjustment rate prorated to their energy use during the five hours of the year with the highest total provincial demand – a formula that tends to benefit consumers with the means to cut energy loads during those times. "Industry has the flexibility to be able to shut down. We don't," Marshman said.

This is helping to make a business case for investing in on-site cogeneration. "It gives a lot of flexibility in terms of dodging the Global Adjustment and load-shedding off the grid into gas-fired," he explained.

However, Ontario's imminent cap-and-trade system might make that a short-term prospect. While healthcare facilities are not designated emitters now, that could change as the emissions cap drops. Cap-and-trade emission allowance costs will also flow through to all natural gas purchasers, as has already begun to occur in Quebec.

PROFESSIONAL DEVELOPMENTAll these demands heighten the relevance of professional associations like the Canadian Healthcare Engineering Society (CHES) and accreditation like Canadian Healthcare Certificate, which has recently been launched as an equivalent to the longer established U.S. ASHE certification for healthcare facilities operations.

Holliss, who serves as chair of the Ontario chapter of CHES, and Marshman already report an increasing number of professional engineers, like themselves, working in the sector. Both also reiterated that it's a rewarding career.

"What drew me to healthcare was the opportunity to get out of bed every day and say: I'm going to help make sick people better," Marshman reflected. zz



RETAILERS GRAPPLE WITH MULTI-SITE PROCUREMENT

Project Initiation • Facilities or real estate/construction

departments initiate most projects (about 80%) whereas store/retail operations and finance departments initiate only 11 to 14% of the projects.

Sourcing Department Organization• About half, 46%, of the retail organizations

have a stand-alone sourcing division for each department (e.g. IT vs. merchandise vs. facilities). About one-third, 36%, of the retailers have a single sourcing division for the entire organization.

• About 45% of retail organizations have an international presence. Of these companies with stores in other countries, only 29% have oversight for global sourcing.

Departments Involved in Sourcing Decision-making• Facilities is almost always involved in the

decision-making process.

• Facilities provides input and direction for repair/maintenance and replacing equipment in the store with minimal involvement from procurement/sourcing and finance. However, capital projects require approval from finance and real estate/construction departments influence a majority of the decisions.

• Finance has no input in the supplier selection process while procurement/sourcing is heavily involved in this decision making process. However, the finance department does consult on the contract terms and duration.

National and Regional Suppliers Favoured for Different Tasks

The Professional Retail Store Management Association (PRSM) conducted a survey in the summer of 2015 to examine sourcing and procurement practices. Responses were gathered from 85 unique multi-site operators, representing retail stores, grocery stores, convenience stores, restaurants, educational/test preparation centres and office locations in a retail environment. The following is an overview of the key findings – Editor.

RETAILERS GRAPPLE WITH MULTI-SITE PROCUREMENT

Strategic Sourcing• The most common triggers leading to

search for a new supplier is the service level agreement (SLA) not being met and expiration of a contract. Popular reasons listed in the "other" category are poor performance from current supplier or the supplier’s inability to handle increasing requirements. Additionally, rotating suppliers every few years is a way for the retail organizations to maintain quality, ensure cost of services are kept up-to-date and competitive, as well as find partners with innovative solutions.

• Two-thirds of retail organizations research supplier company risk by checking financials and supplier management plans. About half of the retailers, 53%, use third-party reports. Only one-third of the retailers check business continuity plans.

• The most widely used metric, used by 68% of retail organizations to evaluate the performance of a sourcing department, is total savings achieved as a percentage of sourcing spend. At least half of the retailers use metrics such as on-contract spend as a percentage of total spend, on-time completion from suppliers, cost per invoice, and cost per store.

• It is interesting that savings from sustainable initiatives are tracked by 34% of the retailers but the environmental benefit is tracked by only 11%.

Supplier Selection• For trades such as waste management,

energy management, fire, life & safety and pest control, national suppliers are used more than regional. However, for trades like carpentry, handyman and plumbing, regional suppliers seem to be preferred.

• For trades such as energy management, pest control, HVAC and mechanical, self-performing suppliers are used more than sub-contracting suppliers. Sub-contracting suppliers are used more for

trades such as doors, locks, windows/glass, general maintenance and pavement management.

• 45% of the retailers evaluate preventative maintenance suppliers and break/fix suppliers separately.

• Two-thirds of the retailers invite three to five suppliers to participate in a Request for Proposal (RFP), about 15% invite five to seven suppliers and another 15% have more than seven suppliers participating in each RFP.

• 39% of the retailers take two to four months to select a supplier. Only 23% of the retailers complete the supplier selection process in one to two months and 13% of the retailers take more than six months.

Technology• Retail organizations most frequently use

third-party software to track expense and capital spend against budget. Almost half of retailers employ third-party tools like CMMS (Computerized Maintenance Management Systems), accounting systems or sometimes even CRM (Customer Relationship Management) systems. About a third of retail organizations surveyed utilize in-house technology and a quarter of the retailers use spreadsheets.

• 96% of retailers have termination rights and required levels of insurance in their service agreements and 92% include scope of work, liability and indemnification in their agreements. However, about one-quarter of retailers, 24%, have non-competitive agreements in their service terms.

• 62% of retailers do not use e-sourcing tools (e-Request for Information / e-Request for Proposal) tools like Ariba or CombineNet and only 17% use e-sourcing more than half of the time.

SOME CONCLUSIONSThrough the RFP process, retailers strive to find good quality supplier partners who will fit well into their facility program and organization. The main selection challenges spring from inability to objectively validate and qualify suppliers based on the requirements as well as evaluate suppliers on a single platform on the basis of total cost of ownership.

For example, higher hourly labour costs quote from one supplier may not look favourable initially, but the supplier may be very efficient leading to a lower total cost of ownership. A rating scale similar to the one Yelp employs for suppliers in the industry with reviews and feedback from previous jobs could be helpful.

Other challenges retailers face include changing requirements, not having a p r e - d e t e r m i n e d p r o c e s s a n d communication cadence among different departments and brands within the organization. Most facility professionals indicated that they are working through these challenges in order to source proactively, and not reactively. It was also indicated that many rely heavily upon numerous trade associations for relevant sourcing information and identifying quality supplier partners.

Overall, there is a lack of consistency across retail brands in sourcing processes, criteria for selection, number of suppliers used, etc. Retailers have different preferences and requirements for suppliers with specialized skills versus all-purpose suppliers; national versus regional; self-performing versus subcontracting, etc. Sourcing processes are fragmented across the industry and there is an opportunity to align processes for facilities sourcing. zz

For the complete text of PRSM's 2015 Benchmarking Report, Strategic Retail Sourcing and Procurement, see the website at www.prsm.com.


39% of the retailers take two to four months to select a supplier. Only 23% of the retailers complete the supplier selection process in one to two months and 13% of the retailers take more than six months.



FOR MANY YEARS, the majority of Ontario workplaces have required that an employer establish a Joint Health and Safety Committee (JHSC), which is comprised of both worker and employer representatives and acts as an advisory body to raise awareness of health and safety issues in the workplace. Ontario's Ministry of Labour puts great emphasis on the role of these committees as a workplace preventative tool. In practical terms, a JHSC can assist employers in identifying potential safety concerns and in designing and implementing solutions to address such concerns.

The need for and composition of a JHSC is dependent on the number of workers at a workplace, and the type of work being performed. If a workplace has one to five

workers, there need not be a JHSC, unless there are designated substances (for example, asbestos or lead) in the workplace, or unless a Director’s order has been issued with respect to that workplace.

For businesses with six to 19 workers, the workplace must have a health and safety representative selected by the workers. For a workplace with 20 to 40 workers, there must be a JHSC with at least two members.

Finally, for workplaces with more than 50 workers, the JHSC must have at least four workers. At least half of the members must be workers who do not exercise managerial functions and who are selected by the workers. In a unionized setting, worker members must be selected by the union.

JHSC members have already been required to receive health and safety training under s. 9(12) of the Occupational Health and Safety Act, but employers must ensure new and additional training as of March 1, 2016. Existing legislation requires that at least one member of the committee representing the employer and at least one member representing workers must be "certified members". This means that each has received provincially approved training and certification made up of two parts: Part One, Basic Certification; and Part Two, Workplace-Specific Hazard Training. (JHSC members participating in a training program to become certified are considered to be at work and therefore must be paid by their employer for time spent in training.)

TRAINING FOR A SAFE WORKPLACENew Requirements Imminent in Ontario

By Cynthia R. C. Sefton and Meghan Cowan

compliance


GENERAL & SPECIFIC OBLIGATIONSEffective March 1, 2016, employers will be required to ensure that JHSC members receive training comprised of three parts. These new rules are designed to ensure that the JHSC members have the necessary skills and an understanding of the obligations of the workplace parties to make a real contribution to safety. These new rules are not onerous and all employers should take steps to be in compliance since a breach of these rules is completely preventable.

Part One training is a three-day process that covers more general topics relevant to the workplace, including: occupational health and safety law; rights, duties and responsibilities of the workplace parties; hazard recognition, assessment and control; joint health and safety committees; the duties and responsibilities of JHSC members; and health and safety resources.

Part Two training, which also takes three days, is more focused on specific topics in the workplace, such as hazard recognition, assessment and control, and the application of these concepts to a minimum of six hazards relevant to their own workplace. Of course, this

requires that these hazards be identified in order to make use of the training in a meaningful way.

Each JHSC member certified under the new rules, must take Refresher Training every three years, which covers a review of key concepts and any updates to legislation, standards and practices. As with the existing requirements, workers attending training programs to become certified must be paid by their employer for training time.

JHSC members who received training under the existing certification requirements are not required to complete any additional training to maintain their certification. However, if these individuals have completed only the Basic Certification (Part One) training under the existing requirements, they will need to take the new Part Two training as well as the mandated Refresher Training.

BEST PRACTICE IMPLEMENTATIONIn order to ensure some quality control on training providers and their expertise, JHSC certification training can only be by provincially approved service providers. For the property management industry, the use of a common approved

trainer or trainers can help ensure that the same information is provided across the industry. Employers may also want to consider whether they ought to apply to the province to have their own trainers become approved for certification training.

While this may appear to be a technical change to JHSC training, it provides an opportunity for employers to assess their overall training programs to ensure they comply with the law and changing industry practices and technology, and to compare procedures agains t bes t practices. This not only assists in demonstrating safety, but, of course, will promote safety.

Documentation is also critical. Without proof of training, it is almost as if it didn't occur. Whether in electronic form or in hard copy, keep al l t ra ining and certification documents in an organized and eas i ly access ible p lace , and implement the new training requirements in advance of March 1, 2016. zz

Cynthia R.C. Sefton is a Partner with Aird & Berlis LLP. For more information, see the website at www.airdberlis.com.

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STEADY URBANIZATION and the associated need for environmental controls could bolster demand for Canadian goods and services in two of the world's most dynamic economies. However, would-be entrepreneurs are advised to partner with credible local players in China and India to help navigate the complexities of deal-making and project delivery in what can often be unfamiliar business terrain.

Seminars at the recent PM Expo i n To r o n t o e x p l o r e d opportunities in real estate development, infrastructure design and construction and energy generation and transmission, with insight from speakers with records of success in the two countries. China's aggressive target to reduce greenhouse g a s ( G H G ) emiss ions and India's ambitious scheme to embed information and communica t ions technology (ICT) in urban development and infrastructure are now tagged as prominent opportunities for Canadian investors, businesses and professionals.

INFRASTRUCTURE AND IT EXPANSION"When the projects come up, they are very large," noted John Farrow, Chairman of LEA Group Holdings Inc., a planning and engineering consulting firm with more than 20 years experience in India. "This is a fast developing country, and

some of it is very sophisticated and some of it is very basic."

He pointed to the in-progress national road-building initiative with a projected $40-billion annual budget through to completion. This includes a vast network of toll roads, representing $3 billion in recently announced new projects.

Canadian pension funds and other investors in alternative assets classes may also be interested in the approximately 675 partially completed

Joint Ventures Instrumental in Cracking Unfamiliar Markets

LOOKING ABROAD FOR BUSINESS OPPORTUNITIES

businessoutlook

By Barbara Carss

toll roads that now require refinancing af te r the or ig ina l deve lopment proponents were financially distressed and unable to continue.

Toll roads, upgrades to railways and the redevelopment of 400 railway stations are part of larger scheme to develop industrial corridors. "Along them, like pearls on a necklace, there are going to be new towns that are going to

be built," Farrow explained.Concurrently, Prime Minister Narendra Modi's 100 Smart Cities

project is aimed at stimulating innovation through civic

competition for available funding. Selected cities,

w h i c h w i l l b e announced in stages, will receive 1 billion rupees (CAD $21 million) annually for a five-year period to invest in smart infrastructure with an emphasis on the basics of city life: water; solid waste management,

transportation; and energy."There are going to

be 100 capital works programs spreading

forward over 10 to 15 years," Farrow said. Looking at one large capital

project, co-presenter Richard Samson, Senior Vice President with

Formglas Products Ltd., discussed his company's experience as a supplier and contractor on the Mumbai International Airport. As the manufacturer of the custom ceiling shapes suspended over 50,000 square metres (500,000 square


feet) of the airport's main hall and retail area, the company came to the project through its relationship with the architect, New York based SOM Architects.

BRIDGING BUSINESS CULTURES"India is a complex market to get into," Samson said. "We bid the job like everybody else and, fortunately, ended up with it."

Among the complexities is the bidding process itself. "There is a ton of paperwork to fill out and if you mess it up, you get tossed out. The paperwork can drive you up the wall, but you have to get through it to get into the market," he said.

Proponents were expected to bid on supplying and installing the product, even though the company typically doesn't do installation. To meet that condition, Formglas partnered with a company that it had previously worked with on overseas projects.

Farrow suggested outsiders should retain Indian legal counsel and accounting expertise to guide business transactions. Some laws and regulations such as those enshrined in the Planning Act appear to be similar to Canadian counterparts, but legal interpretation can be very different. Meanwhile, labour laws can make it more onerous to terminate workers.

"The system doesn't always act the same way every day. It's so large and so complex, you get confused," he said. "Hire local staff. I think that's critical."

D i f f e r i n g p e r s p e c t i v e s o n communications and negotiations can also lead to culture clashes. Samson cited Indian reluctance to outright reject the other party's position, and the relative rarity of delegating authority to underlings.

"You have to get to the top person to create a personal relationship," he observed. "Everything is person-to-person and the (hierarchical) ladder is quite clear over there."

Both presenters voiced skepticism that corruption is unavoidable or bribery the norm. "Just say: We don't do that. You only have to say it about three times and everybody is fine," Farrow advised.

"I feel, basically, that in Canada we are fairly respectful people," Samson concurred. "If you talk directly to people and tell them like it is, they will respect you."

AMBITIOUS AGENDAFarrow credits a progressive outlook in Prime Minister Modi's government. "They are interested in new ideas and they want to get it done. China is what they want to emulate," he theorized.

That might be something of a stretch given India's status as the world's largest democracy – a governing structure that is clearly a more unwieldy agent of change than China's state policy. Nevertheless, both China and India are in a transformative mode and grappling with many of the same issues in a rapidly urbanizing society with large diverse populations spread across vast territories, and both present lucrative potential along with a learning curve for Canadians hoping to penetrate their markets.

PM Expo presenters recommended joint ventures and using Hong Kong as a gateway to gain experience and make connections that can be helpful in China. On the flipside, Canadian investors can bring much needed capital to a country where the five-year interest rate is currently in the range of 20 to 30%.

"It is hard for them (Chinese developers) to borrow money from banks and the interest rate is quite high compared to Canada," reported Yan Liu, principal with Y. Liu Law Firm, one of the first Chinese firms to practice in Toronto's financial district. "In China, there could be opportunities for foreign investors to partner with Chinese companies."

She flags environmental services, pharmaceuticals, accessibility and transportation as sectors with potential. Many secondary cities are currently building transportation infrastructure and, despite economic downturn, housing prices are still climbing in the big three cities, Shanghai, Beijing and Shenzhen. State policy is now targeting economic restructuring with an emphasis on high-tech and mitigating the environmental fallout of progress to date.

"They are trying to get away from labour-intensive manufacturing, which helped them grow," explained Alan Tsui, a Chinese business consultant and real estate development specialist. "China is going to be in big trouble in the environment, but they are going to catch up fast."

ADMINISTRATIVE PRACTICALITIESAs in India, local expertise can be critical to help outsiders decipher business practices and bridge cultural differences. "You need something to understand them and you need something to help them understand you," Tsui said.

In particular, he stressed the importance of retaining Chinese legal guidance in making contracts, and the need for patents. "The ethics are different. You don't protect yourself, your product is stolen," he asserted.

Liu also outlined some administrative practicalities – reiterating that businesses will need an IT server based in China, and that Western standards like Google and Facebook will not be accessible.

"If you are considering doing business in China, you better get WeChat on your phone," she instructed. "You will have to consider redesigning your website because most websites are censored. You might consider getting a Chinese name, just like we get English names, because it's easier." zz

LOOKING ABROAD FOR BUSINESS OPPORTUNITIES

businessoutlook

IN NOVEMBER, the B.C. Supreme Court issued an important decision in the long-running litigation saga arising from the construction of the SkyTrain’s Canada Line between Vancouver’s downtown, the suburb of Richmond and Vancouver’s international airport. The decision has significant implications for public infrastructure projects, in identifying those kinds of claims that may successfully be brought as a result of large-scale construction and the limits on such claims. This is particularly topical given the federal government’s announcement that it intends to fund a series of major public infrastructure projects across the country in the near term.

In Gautam v. Canada Line Rapid Transit Inc., the Court gave reasons after a common issues trial in a class action about the impact of the Canada Line’s construction on a group of merchants and property owners along Cambie Street in Vancouver. Built in part for Vancouver’s 2010 Winter Olympics, the Canada Line was a massive infrastructure project built through a public-private partnership. There have been a series of individual and group actions related to this construction dating back to about 2005.

Two construction methods were employed on the Canada Line. The first was “tunnel boring” to create a path underground without disturbing the surface. The other technique, known as “cut and cover”, was used for much of Cambie Street.

This more intrusive method entailed excavating a large trench, constructing tunnels in the trench, and then rebuilding the street. More than 250 businesses and approximately 70 owners of property located on Cambie Street sued the members of the publ ic-pr ivate construction partnership for losses alleged to have resulted from the decision to use cut and cover on that section instead of tunnel boring.

The class members claimed for both nuisance and injurious affection. The Court held that the claim of nuisance failed because the defendants were exercising a discretionary statutory authority and there was no practically feasible alternative to cut and cover.

Giving deference to the defendants, and after a careful review of the evidence including the procurement process and available technical alternatives, the judge concluded that tunnel boring was impractical because of the associated risks. He found that technical problems endemic to tunnel boring could have had catastrophic consequences for the Canada Line project in regard to costs and the construction schedule. In the circumstances, the method of construction employed by the defendants was the only practically feasible course open to them.

The Court allowed the claim for injurious affection, however. This is a statutory cause

of action under the Expropriation Act (a B.C. statute that has analogues in most Canadian jurisdictions). This encompasses injury to land, but not injury to a person or business.

In a precedent-setting judgment, the Court determined that the cause of action was available to all members of the class, landowners and commercial lessees alike. The Court went on to find that injurious affection permitted claims for temporary injury to rental values. A negative impact on rental values constitutes injury to land sufficient to ground the cause of action, even if this impact is only temporary.

Having found that the Canada Line’s construction negatively impacted rental values for some properties held by the class members, it was open for the plaintiffs to establish injurious affection and claim compensation on an individual basis. The amount of any such compensation will be dealt with at a further hearing.

This decision sets limits on the ability of plaintiffs to claim nuisance against major infrastructure projects being built for the public good, and shows that the courts will exhibit deference to practical project planning considerations beyond mere financial costs. This type of approach will likely result in the elimination of most business loss claims, which is the largest part of any construction related action.

At the same time, the Gautam decision identifies rental values as a new type of loss in Canada for which unsatisfied landowners and leaseholders may pursue builders. It is a circumscribed type of claim because it is not the loss of rent that is compensable, but the consequent loss of value to the land. It remains to be seen how expensive these types of claims will be, but those involved in these types of mega projects should be aware of this new risk class. zz

Mathew Good is an Associate with Blake, Cassels & Graydon LLP based in Vancouver. Joshua Hutchinson is a student-at-law For more information, see the website at www.blakes.com.

COURT PERMITS RENT LOSS CLAIMSTransit Project Compensation AwardedBy Mathew Good and Joshua Hutchinson

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