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What Makes a Great Neighbourhood?

Market Implications of Foreign Buyers on

BC Real EstateDigital Disruption in

Commercial Real Estate

A Look at BC’s Real Estate Industry

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SUMMER 2015 | page 3

S U M M E R 2 0 1 5

BUILDING PERMITS BY THE NUMBERS

HOUSING DEMAND3

Commercial Real Estate Outlook

HOUSING MARKET UPDATE2

Average Home Prices

Residential Real Estate Outlook

Real Estate Industry in BC

Source: BC Stats, residential & non-residential building permits, July 8, 2015

Finance, Insurance, Real Estate & Leasing Industry:

25% of BC’s total GDP.1 $48 billion investment in residential real estate in BC by consumers in 2014.Source: BCREA

Economic Spin-OffAverage BC residential housing transaction generated $64,500 in related expenditures in 2011. Source: BCREA

Industry employed

153,500 British Columbians in 2013.1

$884 Average weekly earnings of British Columbiansin the real estate and rental and leasing industry.Source: Statistics Canada, CANSIM Table 281-0083, May 2015

Residential Construction

Victoria

Drivers of housing demand:

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.

Industrial

Commercial

Institutional & Government

+30.4%

+3.7%

+8.8%

-1.6%-5 0 5 10 15 20 25 30 35

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)

Nine of BC’s 11 real estate

board areas are forecast to

experience increased housing

demand in 2015.

• Vancouver & Fraser Valley

are forecasted to lead the

province with a 16% to 17%

increase in residential sales.

Kamloops

Okanagan Mainline

Kootenay

BC Northern

Greater Vancouver

Fraser Valley

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

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.

low mortgage interest rates

economic growth

$318,020

$409,162

$296,011

$262,384

$922,326

$572,888

$536,553

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

institutional buildings

industrial sector

1 WorkBC industry profile: finance, insurance, real estate and leasing, workbc.ca 2 BCREA Housing Market Update (July 2015) 3 BCREA Housing Forecast, second quarter – June 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

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

Source: BCREA Housing Market Udpate, July 2015

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

Permits Issued by Sector

consumer confidence

7 Urban Development in Vancouver: The Rise of Vancouverism

8 Designing New Neighbourhoods

10 Digital Disruption in Commercial Real Estate

16 Building BC: Member Q&A on BC’s Real Estate Industry

18 CPABC Career Connect Profile: Ledcor

20 Market Implications of Foreign Buyers

In this Issue

Where We Live and Work – The Real Estate and Development Industry in British Columbia

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 ever-

shrinking size of condominiums are hot topics with British Columbians.

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.

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

residential real estate market, and a Q&A with members working in the

real estate industry.

Also included in this issue is a list of professional development courses

being offered this fall. Those members working in real estate and

development won’t want to miss our ASPE accounting seminars for the

real estate and construction industry.

We hope you enjoy this edition of Industry Update, and we look forward

to your feedback.

16

20

2010

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.

AboutCPABC Industry Update is the organization’s

online magazine for members working in industry. Published quarterly, Industry Update is distributed

to over 36,000 members, candidates, and students in British Columbia. Opinions expressed

are not necessarily endorsed by CPABC. Copyright CPABC Industry Update 2015.

Contact usVisit us online at bccpa.ca, or email

[email protected]. Editorial inquiries can be sent to Tiana Mah at [email protected].

4 Industry Snapshot: Real Estate

14 PD Opportunities

23 Connect with CPABC Online

in every issue

Click to return to In this Issue (page 3)

Look for this icon throughout Industry Update

8

| I N D U S T RY U P DAT E page 4


HOUSING DEMAND3



Average Home Prices







Industry employed




Victoria









to 94,300 units in 2015.

Industrial

Commercial


+30.4%

+3.7%

+8.8%

-1.6%-5 0 5 10 15 20 25 30 35





demand in 2015.





Kamloops

Okanagan Mainline

Kootenay

BC Northern

Greater Vancouver

Fraser Valley









economic growth

$318,020

$409,162

$296,011

$262,384

$922,326

$572,888

$536,553



industrial sector






Net rent suburbs $19.21 $23.00 $14.88






consumer confidence



HOUSING DEMAND3



Average Home Prices







Industry employed




Victoria









to 94,300 units in 2015.

Industrial

Commercial


+30.4%

+3.7%

+8.8%

-1.6%-5 0 5 10 15 20 25 30 35





demand in 2015.





Kamloops

Okanagan Mainline

Kootenay

BC Northern

Greater Vancouver

Fraser Valley









economic growth

$318,020

$409,162

$296,011

$262,384

$922,326

$572,888

$536,553



industrial sector






Net rent suburbs $19.21 $23.00 $14.88






consumer confidence


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.

Examples of small homes: micro-apartment, laneway home, or tiny house on wheels

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

17,893 housing units of

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

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.

Increase in one-person households – 27.6% of all Canadian households.

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

Hong Kong 45United Kingdom 76

Japan 95France 112

Canada 181

China 60Sweden 83

Germany 105Denmark 137

Australia 214

Russia 57Italy 81

Spain 97Greece 126

United States 201

Source: Shrink that Footprint (using sources CommSec, RBA, UN, US Census). Note: data for 2009 builds.

*China figures urban only.

Source: PwC Emerging Trends in Real Estate Report 2015

HOW BIG IS A HOUSE?

Average new home size around the globe in m2

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

EMERGING TRENDSIN REAL ESTATE

2015

RISE OF THE SMALL HOME6

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

Beyond the cubicle

OFFICE SPACEIn a bid to attract and retain the best talent, employers are seeking workspaces outfitted with the newest technology and the most attractive amenities.

Mixing it up

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

Seeing the gold in the grey

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

The West Coast goes global

BC REAL ESTATE

Foreign investment keeps Vancouver housing prices high, with capital inflows of US$697 million pouring into the city in the last 12 months.

The new normal

URBANIZATION

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.

FOREIGN INVESTMENT IN BC


Urban Development in Vancouver: The Rise of Vancouverism

Consistently 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

c h a r a c t e r i z e d b y m i x e d - u s e

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

histor ic neighborhoods such as

Chinatown and Gastown to build

elevated throughways.”

K i g e r f u r t h e r r e c o u n t s h o w

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 urban-

village 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 1,000-

acre (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.

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 pedestrian-

friendly 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.

Designing New NeighbourhoodsWhy These Seven Design Principles Are Key to Successful Neighbourhoods

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.

By John Steil


Designing New Neighbourhoods

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.

Why These Seven Design Principles Are Key to Successful Neighbourhoods

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.

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.



Catalyst for Growth?

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.

Digital Disruption in Commercial Real Estate

What Are the Implications for Real Estate?Those that occupy real estate—

whether off ice, retai l , industr ial,

i n s t i t u t i o n a l , o r r e s i d e n t i a l —

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.

At the same t ime, rea l es ta te

owners, investors, developers, and

managers need to take notice and

adapt business models and delivery

systems to embrace this change. Real

Deloitte Canada Insights Report


estate issues ranging from building

construction, sustainabil i ty, s ite

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 cost-

effectively 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 ClassesDigital innovation will affect all real

estate asset classes as space users

and advanced technologies continue

to transform workplaces, shopping

centres, distribution centres, and

homes. Mobi le employees and

consumers will transform how they

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 re-

shoring of workers signal changes

in job creation, design, and overall

operating models.

Traditional Office Morphs into the Workplace of the FutureIn 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 100-

150 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 ProductivityWorkplaces 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 1 Surviving Disruption. Harvard Business

Review, 2012.


Digital disruption... (cont’d) real estate industry cannot

be underestimated.

Over the past 15 years,

o n l i n e r e t a i l i n g h a s

transformed the operating

m o d e l s o f t r a d i t i o n a l

brick-and-mortar retailers.

This has resulted in the

disappearance of some

venerable retai lers, the

amalgamation of others,

and the need for others

to look for other ways

to survive the disruption.

R e t a i l c o n t i n u e s t o

b e a te c h n o l o gi c a l h o t b e d o f

entrepreneurship and innovation in

both the storefront locations as well

as in the back office environment.

Consumers are increasingly taking

a non- l inear path to purchase,

combining both traditional store

and Internet channels. This approach

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 LandscapeEven 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

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 CompetitorsOnline 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.

Employees work anywhere, anytime

Changing the space means more connected place

Workplace is a business enabler to collaborate and drive productivity

Consumers can shop anywhere, anytime

Store networks are at the beginning of a major shift

Empowered consumer driving new business models

North America becomes increasingly competitive

Not everything is moving offshore, some re-shoring

High tech and advanced manufacturing poised for a rebound

The big picture for commercial real estate: More change than any time since the Industrial Revolution

OFFICE

RETAIL

INDUSTRY


Accordingly, retail sector square

footage has decreased due 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.

Retai l 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 support 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 ChangePhysical stores remain core to creating

an innovat ive and long-last ing

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 EstateOnce 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

impac t in manufac tur ing. The

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 industr ial

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 web-

based services.

From Disruption to InnovationAs digital disruptions continue, the

corresponding fallout will inevitably

change real estate. The key 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.


Professional Development Opportunities for Members in Industry

ACCOUNTING

ASPE: Real Estate IndustryThis 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 IndustryThis 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 ControllersThis 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.


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

The CFO as NavigatorThis 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 ProgramThis 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 ProgramThis 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 ProgramThis 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 ProgramThis 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)

A SELECTION OF FALL SEMINARS We have many more titles available this fall — for a full listing, please visit the CPABC PD website at pd.bccpa.ca.


Professional Development Opportunities for Members in Industry

Financial Statement AnalysisRegardless 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.


FINANCE/TECHNOLOGY

Modelling Business Cash Flows in ExcelThis 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.

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

Modelling Business ValuationThis 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

COMMUNICATION

Speeches of LeadershipLeadership 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.


We Have to Talk – Having the Difficult Performance ConversationsConduct 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 UpdateThe 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

Highlights from the CPABC Professional Development Program for Fall 2015

A SELECTION OF FALL SEMINARS We have many more titles available this fall — for a full listing, please visit the CPABC PD website at pd.bccpa.ca.

Building BC


Members share their perspectives on BC’s real estate industry

Industry 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

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.


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

CPABC Career Connect Employer Profile


One 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 bui lds projects throughout

North America and specializes in project

and construction management, pre-

construction 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 public-

private 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.


Market Implications of Foreign BuyersBy Cameron Muir and Brendon Ogmundson

Who’s

Drivi

ng th

e Mark

et?

Housing 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

impact a market as large and diverse

as Metro Vancouver, save for a small

segment of luxury homes. In addition,

significant upward pressure on single-

detached 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 two-

thirds 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

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

h o u s i n g m a r k e t t h a n f o r e i g n


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. Multi-

family housing now comprises two-

thirds 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 StockMetro Vancouver is Canada’s third-

largest census metropolitan area and

is home to over 2.4 million people

distr ibuted across approximately

950,000 households. Its geography

is constrained on all sides by natural

and lega l impediments to the

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 multi-

family 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 multi-

family 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 single-

detached 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 multi-

family 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 lower-

priced 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


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/

t e m p o r a r y re s i d e n t s i n M e t ro

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

supported by data from CMHC’s

rental market survey in which CMHC

asked property managers to provide

i n fo r m a t i o n o n c o n d o m i n i u m

apartment units owned by non-

Canadian residents. As of the end of

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.

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 survey, 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 f i rst- t ime

home buyers, foreign investment

is concentrated in higher-priced

market segments. Moreover, foreign

investment largely occurs in the high-

density 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.

Who’s Driving the Market... (cont’d)

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