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Thursday, April 20, 2017

Where does sustainability fit into your investment strategy?

By Amy Erixon and Rodney McDonald (Toronto)

As weather patterns become increasingly difficult to predict, and extreme weather events begin to wreak greater havoc on buildings across the globe, the time has come for all real estate investors – not just a few developers or institutions – to incorporate sustainability into their investment decision-making process.

If you’re still wondering if such a shift in thinking is worth it, consider these facts:

More clients and tenants looking for sustainable real estate
If you operate a real estate investment management company, you likely field questions regularly about sustainability options. This situation arises because many investment funds – such as the Healthcare of Ontario Pension Plan – today have their own investment sustainability criteria that guide their investment decision-making process across diverse assets, including real estate, stocks and bonds.

Similarly, many tenants are increasingly attracted to green buildings. In a recent PGIM survey, 78% of tenants said that energy efficiency and green building operations are either important or very important to them.

Sustainability has positive impact on returns
Yes, more sustainable buildings are good for the environment – but they’re good for investors’ bottom lines, too. A 2016 study by Drs. Nils Kok and Avis Devine, published in the September 2016 issue of the Journal of Portfolio Management, looked at 10 years of financial performance data for landlord Bentall Kennedy’s North American office portfolio. The study showed that by reducing energy consumption by 14%, the company was able to increase renewal rates (5.6%), tenant satisfaction (7%), rent (3.7%) and occupancy (4%) – and decrease concessions 4% as well.

In today’s era of rapid social, economic, global and geopolitical change, it’s essential to do your due diligence when acquiring and managing an asset. While many investors and investment management companies use data to guide their decision-making process, they often continue to overlook climate data. Such an omission could be costly down the road. Using climate maps as data points today can help you protect your long-term returns – for example, by helping you to identify areas prone to flooding and take proactive measures to mitigate the financial impacts of severe flooding on your real asset portfolio.

Such foresight will not only help protect your building(s) from environmental damage in the future, but also allow you to avoid higher insurance premiums.


(Amy Erixon is a Principal of Avison Young and Managing Director, Investments. Rodney McDonald is a Principal of Avison Young and leads the firm’s consulting and project management services in Ontario. He also leads Avison Young’s Global Citizenship affinity group, implementing the firm’s corporate social responsibility, sustainability and philanthropy strategy. Both Erixon and McDonald are based in Toronto and can be reached at (416) 955-0000.)

Sunday, April 9, 2017

Calgary Stampede chuckwagon tarp auction an indicator of local business confidence

By Susan Thompson (Calgary)

While not a widely analyzed or recognized economic indicator, the annual Calgary Stampede tarp auction for the chuckwagon races is a solid indicator of business confidence in Calgary.

Chuckwagon racing is one of the most exciting events held annually at the Calgary Stampede, with teams vying for more than $1 million dollars in prize money. Every year, businesses bid on the opportunity to be a sponsor for, and have their logo displayed on, one of the chuckwagons participating in the GMC Rangeland Derby.

Because Calgary’s economy is so strongly tied to the world price of oil, WTI crude oil is one of the most tracked commodities locally. When WTI prices are high, the economy booms. When WTI prices are low, things slow down substantially. As a result, the total amount spent each year on chuckwagon sponsorship packages actually ends up tracking well for economic confidence in the Calgary market.






The monthly average WTI spot price was $30.32 per barrel in February 2016 and $37.55 per barrel in March 2016, while the spot price for February 2017 was $53.47 and $47.70 at close on March 23, 2017, the day of the auction. The total spent on the chuckwagon tarp auction for 2017 was approximately $2.4 million, a better result than the $2.3 million total for 2016 and the low of $1.7 million recorded in 2009.


While recovery remains a long way away, it would appear that thanks, in part, to the recent increase in oil prices, confidence is increasing in Calgary’s business community. It is hoped that this confidence can be maintained and strengthened in the months to come.

(Susan Thompson is the Research Manager in Avison Young’s Calgary office.)


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