Gerald Tostowaryk

Commercial and Residential Real Estate

(780) 732-0977

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Here is the AREA market report on the Alberta real estate market. AREA is a REALTOR® organization providing services to its members. A valuable resource for REALTORS and their clients, it provides great market information such as this report. A link to the actual report is at the bottom of the article, enjoy!

Alberta home sales down year-over-year in April; listings near record high


Residential sales activity reported through the MLS® Systems of real estate boards in Alberta numbered 5,017 units in April 2018. This was down 7.9% from April 2017.


The provincial average price for homes sold in April 2018 was $386,939, down 4.9% from a year earlier. The more comprehensive year-to-date average price was $389,164, edging down 2.6% from the first four months of 2017.
Nationally, home sales activity was down 13.7% from year-ago levels in April 2018. The national average price, by comparison, fell 11.3% on a year-over-year basis to $495,100 in April 2018. Sales of all property types in Alberta numbered 5,280 units in April, down 8% from April 2017. The total value of all properties sold was $2.1 billion, decreasing by 12.4% from last year.

A total of 1,895 home sales were recorded through the MLS® System of the Calgary Real Estate Board in April 2018, down 20.8% from a year earlier. The combined value of home sales activity in Calgary was $875.8 million, down 23% from year-ago levels.
There were 1,842 home sales recorded through the MLS® System of the REALTORS® Association of Edmonton, down 1.6% from April 2017. The total value of home sales in Edmonton was $682 million in April 2018, down 4.9% on a year-over-year basis.


Across Alberta, monthly residential average prices were up from year-ago levels in Lloydminster (+5.8%) and Alberta West (+5.6%). By contrast, average prices declined in Grande Prairie (-0.5%), Central Alberta (-2.4%), Calgary (-2.8%), Edmonton (-3.4%), Lethbridge (-3.7%), Medicine Hat (-5.9%), South Central Alberta (-7.2%) and Fort McMurray (-17.1%).


Active residential listings numbered 33,516 units at the end of April. This was an increase of 15% from the end of April 2017 and marked the second highest-ever levels for this time of the year after 2008.
The dollar value of all home sales in the province in April 2018 was $1.9 billion, decreasing by 12.4% from the same month in 2017.
The dollar value of all home sales in Canada fell 23.7% on a year-over-year basis. The months of inventory ratio (total inventory / monthly sales activity) continues to be an important market indicator, comparing the number of months it would take to sell current inventories at the current rate of sales activity. This ratio can suggest if the market is moving quickly or slowly, and how long the average property may stay on the active market. The April months of inventory ratio was at 6.7, up from the 5.3 months recorded at the end of April 2017 and above the long-run average of 4.2 months for this time of year. A score of 6.4 is still generally thought of as a “balance market,” not favouring either the buyer or seller.


Here is a link to the AREA website and the actual article

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Our sources for this edition are all the usual suspects and one or two extra; Govt of Alberta, City of Edmonton, Realtors Association of Edmonton, ATB “The Owl”, CoStar


Oil Prices Up


The price of West Texas Intermediate ended 2017 at over US$60


Oil Is Up, So Are Railway Carloads of Bitumen - Near Record

The amount of Alberta bitumen moving by rail is up from lows of under 5000 cars/month back in mid 2016 to over 12,000 in November, nearing the record high of 15,000 back in parts of 2014/2015. Over the 12 month period ending in November, the number of rail cars of oil was up 28% from the previous 12 months.


Bitumen up - Construction down

While the movement of Alberta bitumen is on its way up, construction is on its way down. According to StatsCan, the number of building permits issued by Alberta municipalities dropped 11% from November to December.

Housing starts in Edmonton were down 32% in Q4 2017 from Q3, dropping from 2430 to 1646.


Construction Down - Employment Up (in Edmonton)

In December 2017 employment in the City moved up by about 1500 positions. The gains were entirely in part-time sectors (construction, education, logistics). Losses were experienced in manufacturing and professional services. The unemployment rate dropped from 7.8% in November to 7.5% in December, but part of this was people dropping off the debatable “actively looking for work” category.

The national unemployment rate also dropped, from 5.9 to 5.7%, the lowest since comparable data began being collected in 1976.


Employment Up - Inflation Down


The inflation (on an annual basis) rate dropped noticeably in Edmonton from 2.7% in November to 2.2% December. Gasoline prices moved lower while shelter costs and electricity moved higher.


Inflation Down - GDP Up


Alberta GDP turned around in 2017 from several years of negative growth (I love that word “negative growth”, I guess it sounds better than “shrinking economy”), while final number is not known yet it is expected to be a very healthy 4.1%. GDP growth for 2018 is currently being predicted to come in around a reasonable 2.3 or 2.4% for the year.

Office Vacancy Rates Still High


Calgary’s overall office vacancy rate ended the year at around 15.8% while Edmonton’s ended off a little lower, around 10.8% after spiking briefly to 11.7% due to new product entering the market.


Industrial Vacancy Rates Mixed

Calgary’s Industrial vacancy rate dipped to 6.7% while Edmonton’s moved up to 6.3%. Naturally this was reflected in slightly increased asking rates in Calgary ($9.36 average) and slightly lower rates in Edmonton ($9.51).


Edmonton Residential Market on the Upswing

In February Edmonton area the average year over year price for all residential sales rose 3.9% to $374,361 while single family was up 3.7% at $442,206 and condos were up 1.48% at $236,808. Listings are up 8.6% from this time last year to 6,797 and sales are up 2.4% to 1,941 for the year to date. Average days on market are similar to last year’s numbers, 65 days for all residential, 59 single family and 75 for condos. Average days on market numbers are a little higher than long term averages which one would expect given that the sales/listings ratio is 44% which is on the low end of average. Anything between 40-60% is generally considered within the realm of a reasonably balanced market.


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Some really interesting articles in this edition of Bits 'n Bites including the latest on Service Monkeys so let's delve right into the stories!

As usual, my sources are the Institute of Real Estate Management, the City of Edmonton, and ATB's The Owl

Class A building? Class B? Class C? Or Class In-Between?


With the big changes in technology in recent years, many aging buildings are going through major renovations and the lines of distinction between building classes are getting blurred. Existing building classifications are beginning to come under increasing need for updating. Instead of a certain class of building, many tenants are now just seeking certain features.


Do you allow Service Monkeys in Your Building?


What? Service Monkeys? That’s right, while dogs are most common, believe it or not there are service birds, pot-bellied pigs, miniature horses, and yes, service capuchin monkeys. Believe it.

Birds assist with hearing, capuchin monkeys provide hands, and pot-bellied pigs have the ability to alert of seizures. Miniature horses have double the life span of dogs and so they are gaining popularity as service animals.

As a building manager, how’s that for some new things to consider for your building policies? Maybe Class A buildings of the future will have Service Monkey feed stations.


Increasing Identity Fraud among Multifamily Applicants


With the advent of online applications for everything these days, many fraudsters are applying to rent apartments online using stolen identities. Once they move in they stop paying rent and cause significant damage before they can be evicted.

Identity verification services are cropping up to deal with the situation, offering services like two-step identification and red flagging.


Amazon Making A Move on Big Apartment Package Delivery


For the honest tenants that aren’t making fraudulent rental applications, parcel delivery is taking a new direction.

Amazon has struck deals with numerous large apartment owners and managers to install their Amazon “Hub” delivery lockers in buildings representing over 850,000 units in the U.S. I imagine they are similar to Canada Post supermailboxes where a key is left in your mailbox and you use it to open the locker with your parcel.


Edmonton Inflation Rate Remained Unchanged


From August to September, Edmonton’s CPI stood unchanged at 1.1%. While gasoline costs rose, residential rents and home heating costs dropped, causing a net zero effect. The City expects the inflation rate to hold between 1.0 and 1.5% in the foreseeable future.


Edmonton Unemployment Rate Drops to 8.5%


While Alberta employment numbers dropped by 7800 jobs in September, Edmonton gained approximately 4000 employment positions. The even better news is that they were all full-time positions mainly in health care, construction and the energy industry.

Even though the working age continues to rise, which contributes to a larger labour force, the rise in jobs was enough to drop unemployment from 8.7 to 8.5%


Q3 2017 Housing Starts move up in Edmonton


Q3 saw construction commence on 2430 housing units, compared to only 2258 in the second quarter. Single family starts jumped up 9.9% while multi-family unit starts saw a healthy 5.9% increase.

It is believed though that high vacancy rates in Edmonton combined with high inventory levels (over 8500 MLS residential listings in the Edmonton area) will have a moderating effect over the coming year.


Vehicle Sales on the Increase


While housing inventory may have a moderating effect on housing starts, new vehicle sales are on the rise in Alberta. After dropping steadily since the fall of 2014 from a peak of 55 vehicles/mo/10,000 people to a low of about 43 in the summer of 2016, sales have been rising steadily and are now back to about 48/mo/10,000. It is not expected that they will reach the numbers of the good old days for the foreseeable future.


Target Stores Round 2


After taking some heavy losses in their last big expansion, Target Stores are taking a different approach in some of the major centres in the US to fend off competition from Wal-Mart and Amazon.

It plans to renovate over 1,000 locations by 2020, including opening smaller stores paired with online shopping and same-day delivery. It already has 55 of these smaller stores in business and hopes to have 130 in the US by the end of 2019.

Because the stores are smaller they have to take deliveries of groceries more often and because they are in city centers, the real estate costs more. For these reasons, the stores are more costly to operate. The flip side is that there are generally no Wal-Marts in city centers to have to compete with.


Reserve Your Parking Spot at the Mall


This could be coming soon to a mall near you. In the U.S. there is a new app, Miami based MyPark, that has started working with malls to offer reserved premium parking stalls. And of course it’s not free; at the huge Mall of America it costs $6 to reserve a spot for up to 2 hours and $3 for each additional hour. Hmmm, charging for parking at the mall, I wonder how that will fly over the long term.

I wonder if the new, smaller Target stores will offer that?


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All right, let’s have a look at some recent news briefs from around the commercial real estate world. The sources for the information below are the City of Edmonton, ATB’s “The Owl”, and IREM (Institute of Real Estate Management).


No Change in Edmonton Inflation Rate


The City of Edmonton reports that our inflation rate was steady at 1.1% (annual) in September. Decreased home heating and rental rates offset increased gasoline prices. The rising dollar is expected to moderate the cost of imported consumer items such as groceries and clothing, and the lovely carbon tax has probably been completely absorbed so inflation is expected to hold between 1.0 and 1.5% for the remainder of the year.


Inflation Eats into Eating


While the rising dollar is expected to moderate food prices, one could say it is about time. Over the last 10 years, grocery prices have risen much faster than most other consumer items. Since 2007, Albertans’ grocery prices have climbed 27% compared to 15% for all consumer items combined. No surprise, the cost of the food bill when eating out at restaurants has coincidentally increased over the same time period by almost 29%.


Unemployment down in Edmonton


While Alberta saw a decrease in employment in September, Edmonton actually recorded a gain of about 4,000 full-time positions. The main areas of growth were construction, energy and health and the gain was in spite of positions lost in professional services and public administration.
While the province lost 7,800 positions overall, our (Edmonton) unemployment rate dropped from 8.7% to 8.5.


Alberta’s Agriculture Sector enjoys Increasing Sales


Maybe the increasing food prices have something to do with it, but since 2000, Alberta’s farms have seen cash receipts increase from just under $8B to almost $14B. As of last year there were almost 51,000 people employed in agricultural work with nearly another 21,000 employed in food and beverage manufacturing. Gross farm revenue grew 5.4% during 2015, the first year of the recession. Sales of manufactured food products increased 7.1% during the recession years of 2015 and 2016.


The Impact of Technology on Real Estate Management


One of the big buzzwords these days, especially when referring to technology is “disruptors”. The Institute of Real Estate Management (IREM), at its recent Global Summit, held a session on disrupting technologies and their effects on real estate management. She’s a brave new world out there, one of the latest technologies employs beacons and stickers with embedded processors to personalize content on screens and other computing devices. So, for instance, when you are walking through an airport, you get ads for content tailored to your interests, previous purchases, and line of work. I don’t know, but “personalized” isn’t the word I would use for that.
Another program makes constant minor adjustments and corrections to a building’s HVAC systems to save energy and labour.


Fracking Isn’t Just for Oil Anymore


At IREM’s Global Summit, another session discussed “Fracking” of real estate assets. With 90% of the world’s data having been created in the last couple years, fracking is a new technology to break real estate assets apart and reassemble them into something more productive. For something so “new” it sounds very familiar to me. If you’ve ever seen the movie from some years back “Other People’s Money” with Danny de Vito about corporate raiders buying an old steel mill and selling off the assets for more than the firm was worth as an operating entity, one begins to realize that sometimes new concepts are just new coats of paint on older ideas.

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Bits n’ Bites is my regular column providing a few details on various happenings in the wonderful world of commercial real estate and the economy;

Information is sourced from the Realtors Association of Edmonton, the Institute of Real Estate Management, Alberta Treasury Branches, and the City of Edmonton.



Edmonton Inflations Stays Stable

The City of Edmonton reported that the CPI (Consumer Price Index) stayed stable at an annual rate of 1.1% growth in August, up very slightly from 1% in July. Rising natural gas and gasoline costs were offset by falling food and rental accommodation costs. Inflation is expected to remain within 1 – 1.5% in the coming months.


EI Payments continue to fall

June was the eighth month in a row in which EI payments in Alberta fell. There were 69,740 benefit cheques issued, 15% levels one year ago. It appears that most of the drop is due to folks finding work, but remember our governments (quite conveniently) don’t count you as unemployed anymore once your benefits run out.

They did bump back up again in July to 71,460 so the next few months will be interesting to watch.


Demand for Medical Office Buildings Could be Steady through 2055

The US Census Bureau projects that the number of Americans 65 and over will double to 92 million by 2055, comprising approximately 33% of the nation’s population. Needless to say, the medical office sector continues to perform well everywhere.


5 Tips to keep Renters for the Long Term

The Apartment Association of Greater Dallas lists five incentives they believe to be the top five in keeping renters in your building longer. Drum roll please…No. 1 – Reserved Parking, No. 2 – Paint and Cleanliness, keep it looking “new”, No. 3 – Give long term residents more upgrades and updates as a reward, No. 4 – Become a Part of Their Routine. Here they suggest things like the management office offering free premium coffee to residents in the morning.

No. 5 – Establish a sense of community through simple events and social gatherings.

Ever notice how the best ideas are so common sense?


Alberta Rents Coming Down, Especially in Calgary

No surprise here, with our recent economic downturn and resultant rising vacancy rates, rental costs are coming down. Interestingly, Calgary’s rents, when compared to 2002 levels, are much lower than Edmonton’s. Edmonton is at 140% of 2002 rents while Calgary is only at 125%. Remember though that actual rents are generally higher in Calgary, this is just compared to each city’s 2002 level.


Balanced Residential Real Estate Market in Edmonton in August

The Realtors Association of Edmonton reported a sales to listings ratio of 52% in August which is pretty much equally balanced between sellers and buyers. The average sale price YTD is $376,950 which is basically unchanged over the last 4 years, about 3% higher than in 2014.


Oil patch hiring, but paying less

Oil and gas sector average weekly wages fell to $2172 in June. Of course that’s still nearly double the provincial average for all workers ($1132) but it is down over 9% from the peak. The patch is hiring (over 17,000 new jobs last year) but is paying less.


Alberta Exports Continue to Slide

Most Alberta exports, not just petroleum products, have been on a slide since 2014 although they have recovered as of late. While we are still well below 2014 levels (around $10B annually then versus about $7.6B currently), exports have risen significantly since bottoming out in spring of 2016 at around $5.5B.

Amazon looking for new headquarters

Amazon is going out for bids from major North American cities for it’s “HQ2” second headquarters that could offer as many as 50,000 new jobs. Cities with over 1 million metropolitan area inhabitants, an international airport, good mass transit and a good hockey team (okay just kidding about the hockey team) can bid for the project. Edmonton?


Millennials Value Flexible Workspaces

Amazon will do well to pay attention to this study. A Work Environment Survey from Capital One found that 85% of professionals feel they work better in flexible work spaces with options like nursing rooms, artwork, natural light, and environmentally friendly programs. 80% said they don’t care about innovating unless their workspace is innovative also, and 70% don’t care about local culture.


Building Permits Continue to Slide

For the second month in a row, building permits have fallen throughout Alberta. In July, just over $1B in permits were issued, down 7% from June. Compared to last year we are down 9%.

The good news for Edmonton is that the majority of work took place here. Our activity level fell 1.4% in July compared to 13% for Calgary.

Residential permits were up in Edmonton in July by 4% and governmental/institutional activity was up over 4 times, but commercial activity continues to slide.


Alberta Language Characteristics from Census Canada

No surprise, 76% of Albertans have English as not only their sole mother tongue (first language learned). Only 1.8% list French as their sole mother tongue, compared with 21% nationally. 23% of Albertans list an immigrant mother tongue, higher than the Canadian average of 22.3%


Alberta Oil Production on the Rise Lately

Oil extraction in Alberta rose by almost 6 million barrels (7.6) from April to May. The last 12 month period was a whopping 40% higher than the previous one, of course the Ft. McMurray fires contributed significantly to that. Unfortunately the U.S. continues to pump out oil at near record highs, contributing to the lower prices.

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It sure is difficult to write a blog when it’s a beautiful sunny Friday before Canada Day and I’ve already got visions of sitting outside at Café Bicyclette eating a yummy croissant and sipping on a hot coffee, but if I don’t get it done I will feel guilty while chewing on my croissant so I may as well just do it and consider the treat a reward for my diligence. So let me provide you with a few bits ‘n bites before I go grab a few of my own.


The sources for the below tidbits are (in no particular order) the Government of Alberta, IREM, ATB Financial, the Edmonton Journal.




Alberta Budget Deficit a whopping $10.3 Billion

It’s been an interesting few weeks of news, not the least of which is our recent Alberta Government budget announcement. OUCH! we had a $10.8 billion deficit in fiscal 2016 and our total debt is now $33 billion. To make matters worse, the future numbers don’t look any better with us being on track to hit a $10.3B deficit this year and similar numbers in the cards for the foreseeable future. Maybe I’ll forego the croissant and just have a coffee.

Wait! Apparently the recession is over and Alberta is predicted to lead the country in GDP growth this year. Croissant is back on the menu.


Alberta Experiencing Net Population Losses

During the recession Alberta experienced net out-migration. Throughout 2015 and 2016 our population dropped while much of the gains went to Ontario and British Columbia. Surprisingly Alberta still experiences net in-migration from Saskatchewan.


Deficit or Not, Alberta Still Big in the World of Beer

Recession or not, Alberta’s barley production is on a roll. Statistics Canada reports that Alberta farmers grew 4.4 million tonnes of barley last year, around 50% of the nation’s production. 55% went to livestock feed and 44% went to malting barley.

Alberta malt accounted for 53% ($241 million) of Canada’s malt exports. Hmmm beer and a croissant this afternoon maybe?


Alberta Wages Still Lead the Nation

Despite the recession, Alberta wages still lead the nation…by a good margin. In April, average weekly earnings for an Albertan were $1,125, 16% above the national average. Second place was – take a guess – Newfoundland. Whoda thunk?


Edmonton Employment Back on the Upswing

Employment has been on the rise in Edmonton since the beginning of the year. While employment growth did take a big dive starting in spring last year, bottoming out a -4% growth (yes minus 4) in December, it’s been back on the rise since January and rose by approximately 3,700 positions in May alone.




 Retail Malls Investing in Technology to Compete with the Internet

The retail landscape has undergone lots of change in the last few years due to technology and the pesky internet. Many mall landlords are investing in technology to help protect themselves from the winds blowing in the retail marketplace. Changing consumer habits and e-commerce are taking their toll.

Stores are placing beacons that emit signals picked up by smartphones that offer shoppers personalized coupons or promotions.

Another large mall owner wrote off $10 million in an idea that didn’t go so well. They invested in a firm that designs pop-up stores with interactive features like display tables but the costs were higher than projected and the project failed. The idea is interesting though and maybe these folks were just a bit ahead of the curve? And what happens if someone breaks the internet?


Healthcare and Retail Joining Forces

Keeping on the retail theme, with the healthcare sector shifting away from inpatient care to outpatient care (you’re all better, get out), more and more providers are moving into locations closer to patients like, you guessed it, shopping malls. While outpatient clinics are growing, retail health clinics are also and Wal-Mart is piloting a venture in this field so the stakes are rising.


Alberta Real Estate Market Still a Strong Sector

While Vancouver and Toronto’s real estate markets may be high on the radar screen, Alberta’s market is also important. According to ATB, total investment in Ontario residential real estate during the first three months of this year came in at $12B, 10.5% higher than last year.

Now BC and Alberta can’t compete with that but together our investment was $9.1 B (BC $5.0B, Alberta $4.1B), no small potatoes. The good news story (for us) is that even with 2 years of recession, residential investment didn’t dip that much in Alberta and is growing again.


Amazon to Buy Whole Foods Market in the US announced a couple weeks back that it intends to purchase Whole Foods Market in the US. This marks Amazon’s entry into the bricks and mortar world of retail, and in a big way. The deal is a whopping $13.7 B and should shake up the retail market. This should provide Wal-Mart with some strong competition, but I will still get my café and croissant at Café Bicyclette, speaking of which, see you later!

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Well here’s some interesting information on popular remodeling projects. This information is presented courtesy of the National Association of Realtors, and is taken from “Remodeling in 2016: Kitchens Reclaim Top Spot From Baths” – National Association of Home Builders’ Eye on Housing Blog, May 5, 2017.

Keep in mind this is American information and may differ somewhat from Canada, but none of the items seem to me to be related to warm climate countries so I suspect it may be a fairly accurate representation of Canadian renovation projects also.

  • Kitchen remodeling: 81%
  • Bathroom remodeling: 80%
  • Whole-house remodeling: 53%
  • Room additions: 45%
  • Windows/door replacement: 36%
  • Finished basement: 27%
  • Repairing property damage: 27%
  • Decks: 25%
  • Bathroom additions: 24%
  • Roofing: 23%
  • Enclosed/added porch: 23%
  • Handyman services: 22%
  • Siding: 19%
  • Second story additions: 16%
  • Enclosed/added garage: 12%
  • Historic preservation: 9%
  • Finished attic: 7%

What the NAHB survey found most interesting is the 53% of folks who undertook “Whole House Remodeling”.

It is also the first time since 2006 that more than half the respondents cited anything other than kitchens and bathrooms as common remodeling projects.

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Well after quite some time absent from blogging, I may as well ease myself back into the saddle. What better way to do that than to do it the same way we ease ourselves into a nice meal – with some appetizers.

So let’s have a look at a few bits ‘n bites from around the real estate world. Today’s tidbits (with the exception of the first article, sourced from the City of Edmonton) were sourced from the IREM newsroom, which can be viewed at if you wish to source out the direct sources.

Bon appetite!


Lower Rents Contribute to Lower Inflation in Edmonton and Calgary

Edmonton’s annual rate of inflation (CPI) eased to 2.5% in February. Lower costs for rental housing and electricity more than made up for a rise in gasoline prices.

A more rapid decline in rental accommodation costs and utility fees were the main contributors to Calgary’s rate of inflation coming in at 2.1%


52 US Cities now Renter dominated

According to the US Census Bureau, 52 of the 100 largest cities are now majority renter cities, and the trend is expected to continue as baby boomers downsize into rental housing.

Given that long-term home ownership in Canada averaged 65% from 1997 through 2014 it will be interesting to see what happens in these cities


Online Shopping an Increasing Dilemma for Property Managers and Developers

The volumes of packages residents are getting delivered these days is skyrocketing and the products being delivered are increasingly diverse.

As an example, food vendors deliver packages to residents who are sometimes away and, well, it starts to rot so some buildings have installed commercial refrigeration units. Some buildings now have automated locker systems.


Speaking of Online Shopping, Retail Centres Brace for New Uses

More and more shopping centres are being left with holes in their buildings as businesses fall victim to online shopping.

Many centres are taking in non-retailers like fitness centres, health clinics and vocational schools while some are totally re-purposing buildings into call centres, apartments, and well anything really.


World’s First 3D Printed Skyscraper to be Built in UAE

No I’m not kidding, Cazza in Dubai plans to build the world’s first 3D printed skyscraper in the United
Arab Emirates.

3D buildings have been built before, offering lower costs and speedy completion. Believe it, they will be printing concrete and steel, among other materials.


Less Parking Allocations Becoming More Common

Downtown core revitalization combined with the advent of Transit Oriented Development is a phenomenon right across North America as well as other areas.

Right here at home in Edmonton, with infill becoming common, and with changing lifestyles (i.e. environmental sustainability) the need for parking spaces is on the decline. If you build within a certain distance of a Transit station, reduced parking requirements could apply.

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Many economists and social advocates are fretting these days about the job market. It seems that more Canadians are working in low-paying, part-time jobs. Benefits and pensions are becoming less common, and job security is eroding.


The concern is understandable. In the language of philosophers and anthropologists, the 21st century labour market is in the liminal space. It’s at a threshold. The old patterns and rituals are rapidly passing, but the new has not yet fully arrived. It is that point between chapters of a person’s life when all seems ambiguous, confusing and even terrifying.


The old economic model of work was born in the Industrial Revolution. Shift work, where you punch-in and punch-out at regular hours each day, is a relatively recent idea in the history of humankind. It was translated into the service sector and office economy in the 20th century. As Dolly Parton belted out in 1980, “Working nine to five, what a way to make a living!”


The full-time, full-benefits, full-pension model of work is gradually fading away, making many feel anxious or angry. There is legitimate concern over the working poor who are struggling economically by piecing together two or three part-time jobs. The hours are unpredictable, there are few or no benefits, and a pension is a pie-in-the-sky dream.


The 20th century version of employment is now morphing into something new, and it’s normal to feel anxious about it. We are in the liminal space where the old is passing but the new has not yet arrived.


But if we can set aside our biases and longings for the good ol’ days of full-time employment, we can start to glimpse the job market of the future—and it may not be as discouraging as some may think.


The future of work is evolving into a series of tasks or activities that we do in exchange for something else. It may be cash, as it was in the 20th century. But it may be something else, like shared accommodation or transportation. The sharing economy—exemplified by things like Car2Go and Uber, is the 21st century response to those less interested in accumulating physical assets. The Toronto Tool Library allows users to sign out tools just like library books, recognizing that every house does not need a drill sitting idle almost all of the time.


The Gig Economy, as it’s called, fits well with Millennials and their general ambivalence to what the Baby Boomers or Gen X’ers considered a good job. A corner office, a dedicated parking stall, a secretary to pour our coffee, a gold watch at retirement—for Millennials, it seems about as strange as living on Mars.


Stringing together a series of tasks or “gigs” makes interesting new demands on workers. Skills must constantly evolve. You’re always meeting new people, encountering new ideas, and adjusting to changing conditions. Nothing is static, everything is fluid and evolving. Loyalty to corporations is replaced with connections to other human beings.


For millions of full-time workers in the 20th century, none of this applied. It was a beige cubical, mundane tasks, and unreasonable bosses. The occasional long weekend or two weeks vacation offered the only relief. Thirty years ago, everyone knew precisely what Belinda Carlisle meant by Manic Monday.


But in the Gig Economy, Monday will become just another day, no more or no less manic than any other day. Shift work will become part of a steady flow for people quite capably juggling a series of tasks. The panicky phrase “The boss is coming! Look busy!” will lose all meaning.


Gen X’ers have a difficult time wrapping their heads around the Gig Economy. Where’s the economic security? Where are the health benefits and pensions? How can these kids ever expect to retire wealthy? These questions make perfect sense to those of us raised between 1950 and 2000 because that’s all we ever knew.


A common reaction has been to lobby governments for policies to promote more full-time work and benefits. But rather than focusing on our 20th century notions of employment, we’d be better to concentrate on equipping young people with the skills they’ll need to surf their way through the Gig Economy. Creative problem solving, social skills, the ability to learn on the fly—these will be more important than showing up at work before the boss does.


We don’t know precisely what work will look like in the future. But that’s OK—we’re in the liminal space.



Reprinted with permission from Todd Hirsch. Todd is the Calgary-based chief economist of ATB Financial, and author of “The Boiling Frog Dilemma: Saving Canada from Economic Decline”

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Commercial and residential property owners commonly enter into service contracts with third-parties for services such as snow and ice removal from their premises. If a contract is properly drafted it will contain insurance and indemnification provisions intended to allocate responsibility to the contractor. For example, to carry liability insurance with specific terms and in minimum amounts with the owner named as an additional insured, and to indemnify and save harmless the owner for claims made by third-parties such as a “slip and fall” due to the act or omission of the contractor..


In August 2011, the Ontario Superior Court of Justice in Papapetrou v. 1054422 Ontario Limited dealt with a motion for summary judgment by a building owners against their contractor as a result of the owners and contractor being sued for injuries suffered by a woman when she fell on icy steps. The owners’ motion sought the plaintiff’s action be dismissed against the owners, or in the alternative, for an order that the snow removal contractor assume the defense of the owners.

The contract with the snow removal contractor provided for the contractor to:

A. maintain a commercial general liability insurance policy with minimum limits of $2,000,000;

B. name the Owners as additional insureds under the policy;

C. assume sole responsibility for its work, take all reasonable and necessary precautions to protect persons and property from injury or damage and to indemnify and save harmless the Owners against all claims etc. incidental to or arising out of the performance or non-performance of the contract by the contractor.

Unfortunately, the insurance policy taken out was for $1,000,000.00 and did not show the Owners as additional insureds. The Owners brought this motion to force the contractor to defend them at its cost and expense and to indemnify them for any damages awarded to the plaintiff in the action. It was not stated whether or not the Owners received and failed to check the insurance policy prior to the contractor commencing work.

Although the contractor failed to obtain liability insurance in accordance with the contract provisions, the court held that this failure to meet its contractual responsibility should not permit it to escape responsibility to defend/indemnify the Owners. The court ordered the contractor to assume the property owner’s defense, and indemnify it from any damages awarded to the plaintiff in the action.


The Lesson: Make sure your service contracts include insurance and indemnity and save harmless clauses with coverages and in amounts that are reasonable in the circumstances and that you are named as an additional insured. Then make sure you or your property manager obtain a copy of the policy or a certificate of insurance and send it to your insurance advisor to ensure you are covered adequately.

In this case the Owners spent time and money – even though the Court found in their favor –that they could have saved merely by getting the contractual insurance evidence at the commencement of the contract. If the contractor went bankrupt (and its insurer was not a party to the Owners’ motion so arguably the insurer could claim it was not required to cover the Owners) then the ruling in favor of the Owners would be a “hollow” victory. Once again, an example of how being proactive by ensuring that the terms of your services contract are fully complied – especially where claims are common – is more cost effective than having to go to Court to enforce contractual terms that the parties failed to enforce.


Disclaimer: This article is for general information purposes only and not intended as or to be relied upon for legal advice. Consult with a lawyer for your unique situation.


Reprinted courtesy of Darrell Gold LLB with Robins Appleby LLP

120 Adelaide St. West

Toronto (416) 868 1080

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Wasn’t that the Carpenters that used to sing that song “Don’t they know it’s the end of the world…”? Now admittedly that song wasn’t about the price of oil and the resulting imminent end of the economic world as we know it, it was a love song. But whether its love or oil prices, when things go bad, it isn’t (so far) the end of the world.

I remember as a young salesman in the industrial chemical industry when the price of oil went down to $6 or $8 per barrel, I too thought it was the end of the world. But it wasn’t, and I don’t think it will be (or anything anywhere near it) this time either at $70 or $80. Why not? Well this is going to be more of an opinion piece today than a fact based analysis so allow me a little leeway here, but here I go. Let me start with the big picture.

Butterflies in China

With technology, the world is rapidly becoming smaller and indeed, when a butterfly flaps its wings in China, we feel it over here. The economies of the world’s countries are becoming ever more intertwined. I just finished a good book Plutocrats about just that. It documented the rise of the richest 1% of people in the world over the last 50 years and some of the probable reasons behind their ability to grow their incomes exponentially while the rest of ours (well mine anyways) have languished. The reasons are many (and some not so nice), and I don’t want to spoil the book for you but one of the big reasons is technology and the internet. We see this every day when we talk to a tech support person half way around the globe or buy goods made in China.

Okay so my point…finally. The countries of the world have been through a pretty big economic downturn since the financial meltdown of 2007-2009 (the book talks about that too) and economic indicators seem to suggest that the worst is behind us. Now I will be the first to admit the mess we got ourselves into this time is a big one and the climb will take many years, but I just don’t believe the downward risk is that great at the moment. The world is on a slow but positive economic mend and that is a good thing.

US Economic Factors

It is my opinion that the US is still in a big economic quagmire but everyone there knows they can’t just keep printing the greenbacks at will anymore and so they are ever so slowly fixing the mess their plutocrats (gotta read the book) have created. Their economic indicators are certainly not incredible but things are heading in the right direction and GDP is improving.

Local Economic Factors

Locally, the news is even better. With the one wild card of Canadian personal debt (still not under control) the country is in reasonably strong financial shape and the rest of Canada is improving economically. The CDN Dollar continues to be low which is good for exports and oil is an export business.

So all around us, the indicators are continuing to slowly chug along in the right direction. Even at the current $75 per barrel price range, it is still worth pumping the stuff. Our provincial government’s budget is going to take a hit for sure and that is a concern, so let’s hope the price crawls back up some soon.

I think perhaps a $70 or $80 barrel of oil for a while may be a good thing. Things have been pretty active in Alberta lately and when our economy gets overheated it often ends badly. A little cooling off will bring everyone’s expectations back down to normal and, in my humble opinion, extend the good times. One of the reasons governments became more active in controlling economies after the depression of the 30s was to smooth out the bumps, creating more good times for all.

The end of the world? No I don’t think so. In fact in a couple years we may be glad things cooled down a bit.

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Hello everyone! Doing my civic duty here, and inserting a great public service message on behalf of our friends at Cleanit Greenit Composting System Inc. and the City of Edmonton Reuse Center. Please note that funds raised will go to charity!


Marco, Kirstin, and Karo Castro-Wunsch and all our volunteers, are hosting a fun event to show there is beauty in waste and recyclables and if the community could just see it, maybe we would throw out less. The event is on October 11, 2014 in the new McKernan community hall (11341-78 Ave.). Artists are donating pieces of art made from waste and recyclables to bring awareness about the stuff we throw out every day that is reusable, recyclable, and that doesn’t compost. Proceeds go to “Renacimiento Verde” an environmental stewardship grant program for school kids in Mexico.
So come out and wonder at the extraordinary scope of objects considered waste and make promises to yourself to reduce your impact. Fall in love with a work and bid on it!
Evening includes wine, tapas, music, multimedia shows, fun activities, all environmentally themed for $50 per ticket. Join us for some environmental fun!
Main sponsors are Cleanit Greenit Composting System Inc. and The City of Edmonton Reuse Center.
The Castro-Wunsch’s have been operating Cleanit Greenit Composting System in Edmonton since 1998, and have seen a lot of uncompostables come through the site. This got them thinking, and now our whole volunteer environmental team is thinking about waste too. We want to give you an evening to think environment too while having a little fun. We sincerely invite you to join us for this fun, fun evening to fight back and rethink waste.
Please donate by buying tickets, and maybe some art, so our school kids in Mexico can earn school grants by doing sustainability projects. If you are unavailable on October 11 please donate anyway and we will give your tickets in your name to artists or persons who want to come but cannot buy a ticket.
Please pass this on to a friend who might be interested or even get an association to circulate it. Please come out and bring a couple like minded friends.

To buy tickets go to or call Alia at 780 488 7926.

Sincerely Kirstin Castro-Wunsch, P.Eng. CEO
Cleanit Greenit Composting System Inc.

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Edmonton Commercial Real Estate - Dumb Money or Smart Money?

I really enjoy reading Investor's Digest magazine, a periodical focusing on the stock market and investing in stocks, bonds, mutual funds, etc.

The current edition has a front page article entitled "Invest wisely: don't follow the "dumb" money". Now I don't know about you, but a headline like that sure caught my attention. I think the headline is pretty self-explanatory so I will get straight to the point after this quote from the article. Speaking of the frenzy around income trusts in 2007 and Finance Minister Flaherty's tax amendment blocking the loophole, he says "Yet even before Mr. Flaherty's move, I knew the sector was ready for a hit. I'd been tracking the inflow of capital by retail investors, the so-called "dumb money" (if you're a retail investor, how do you feel now?) into new issues, as well as into mutual funds holding income trusts. So when I saw money pile into income trusts, I knew the good times would soon be over. As a result, I cashed out, thereby saving my investors a lot of grief."

I love the next line; "Still is it really fair to call investors who follow the crowd dumb? In a word, yes. Not only are they usually the last to get into a particular sector, they're usually the last to get out as well."



Remember he said that, not me. But my next question is the million dollar question (literally). Is investing in Edmonton now "following the dumb money". Well I think that I'd be pretty dumb to say yes to that question in public, but honestly I don't think so. I think investing in Edmonton is still pretty smart. But....I think the small investor does need to be careful. Let's talk about this. Firstly,

Why is investing in Edmonton Commercial Real Estate still Smart Money?

We can analyze economics to death and produce flashy full colour charts, spreadsheets and prognostications, but really, one thing tells me more than all the analyses in the world...where is the big money going? The big money is more likely to be the smart money than us little guys' miniscule forays into the world of commercial real estate. I'm talking players who invest in the hundreds of millions of dollars. And the good news is that a lot of that money is flowing into Edmonton. If Edmonton is good enough for the big boys, it's good enough for me.

So I'm safe to plunge all my money into Edmonton?

Well I wouldn't go that far. There are a small but growing number of institutional investors becoming wary of investing in Edmonton and that is understandable. Valuations are growing, rents are increasing, and new projects are underway every day. So small investors need to be wary in this kind of market. A hot market brings a lot of speculators and a lot of unsavoury individuals. Yes, things are going up and up. And what goes up....


Well you'll just have to wait (not long) for my next blog post to find out. I will discuss the boring details behind what my thoughts are for Edmonton real estate in the coming few years.

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When I googled the old saying “There is a thin line between genius and insanity” I wasn’t able to determine its origin but did have a cute line by Oscar Levant, “There’s a fine line between genius and insanity. I have erased this line”.

I guess one could say there is a fine line between investing and gambling and Edmonton is erasing that line. If you read my blog in March about Alberta economic indicators, we are firing on all cylinders. I guess you would have to have been in a cave for the last 10 years to not know Alberta is on fire, but at the moment we are really on fire. Commercial real estate prices, industrial especially, have been rising noticeably. The annual Edmonton Real Estate Forum (#EREF2014 on Twitter), which was held recently on May 8, had (for the umpteenth year in a row) all the speakers talking positively about Edmonton’s economic future. And I would have to agree for numerous significant reasons;

 - The rest of the world has been scraping bottom for long enough to (relatively) safely say we are in the trough of a longer economic cycle and the only way out of a trough is up…eventually

 - Ft. McMurray has been getting better and better at getting oil out of tar sands for less money than in the past, increasing the sustainability of the process

 - They aren’t making any more conventional oil

 - Canada is still relatively stable fiscally, especially compared to many western nations

But the question weighing on my mind, and apparently many others, is how long the current hot market can last? I mean industrial land in the Edmonton area has been rising and is now north of $700,000/acre with one knowledgeable agent stating at EREF2014 that it was hitting $800,000.
Well, the interesting thing to me was what was being said “between the lines” at EREF2014. While everyone was talking good signals for Alberta, many if not most of the builders, developers, and buyers were lamenting Edmonton prices. Just recently at a meeting at our office with an active large buyer of real estate, the gentleman stated that he wasn’t interested in a lot of the transactions happening in Edmonton because the numbers “just didn’t make sense”. And therein lies the key. Those three simple words “don’t make sense” are words you usually hear when the price of something becomes unsustainable.

More comments were made about other aspects of real estate valuations in Edmonton and Ft. McMurray, but you get the point.

Okay, so the bottom line. I feel Edmonton (and Alberta) is still in for many good years of economic activity but I suspect the hot market will moderate some. More developable land will come on line and/or more sophisticated buyers will feel that numbers “don’t make sense”.
Remember though, there’s a thin line between predicting the future and insanity. I’m sure I’m blurring the line.

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As many of you know from reading my exciting, vibrant, always interesting blog posts, I occasionally have guest blogs. I hope you enjoy this very informative one from Ward Henkel of Efficient energy Solutions Inc;


While clearing out the warehouse and washing the floors, don't forget about one of the most important components that keeps everyone happy in the office, your central air conditioning system. Because your air conditioner is most likely on the roof of your commercial building, it is easily forgotten. The best time of the year to ensure that your air conditioning unit is running efficiently is in the spring when companies may offer special deals and technicians may be more available.


Many contractors now offer service contracts under which they will inspect and service your cooling equipment once a year and provide emergency repair service when or if it is needed. Before purchasing a service contract, be sure to weigh its cost and coverage against the cost and likelihood of future repairs. If your system is new, it probably comes with a warranty, which is included in the purchase price of the system. If you sign a service contract, be sure that it spells out what parts and service are provided and that it doesn't duplicate coverage you already have under the warranty. Because service contracts vary significantly in coverage, compare the coverage offered by several different companies.


Although it is common to find a contractor who will do both service and installation of roof top air conditioners, (replacements and new) there are some contractors who specialize in “service only” and some in “replacement only”.  It may be wise to have two companies on board, the installer and the service company. This way you have two good choices, if things go wrong in a very busy cooling season. Nothing worse than having to wait 2 weeks for your air conditioner to get repaired in the middle of August.


You may do some of the maintenance work on your own. If your system has disposable filters, check them every two months and replace when necessary. Clean permanent filters as directed by the manufacturer, and make cleaning duct outlets and registers a part of your regular cleaning routine.


Efficient Energy Solutions Inc.



Ward Henkel

Certified Gas Fitter

Certified Plumber

Certified in Combustion Analysis

Past C.A.H.I. Certified Home Inspector

Building Codes A&B Cert.

Certified and Licenced

Heating Contractor

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Well hello again my friends. It has been a few months since I have written a blog post. Business concerns have taken up a lot of my time for the last 5 months but things should be easing back to normal and I can now bore you to tears again with my favorite subject…economics!!

And what better way to get back into the swing of things than with some positive economic indicators – but first a Battle of Alberta, Edmonton vs Calgary, on Consumer Price Index.


Consumer Price Index

I guess depending upon how you look at it, both Calgary and Edmonton can claim victory on this one. Alberta’s overall CPI in February was 2.4% while Edmonton’s dropped from 2.2 to 1.9% and Calgary’s stood at a whopping 2.9%.

Lower gasoline costs and moderately higher accommodation costs helped keep Edmonton’s inflation rate down but a tightening residential vacancy rate will likely drive rents higher in the near future. Price increases in other components may drive Edmonton’s CPI as high as 2.5% in the coming months.


Housing Starts

New home construction has been slower in Edmonton for a few months but picked up in February with 363 single-detached starts, up 25% from January and 32% from February 2013. Continuing gains in employment and in-migration, coupled with low mortgage rates have been supporting the growth.


Employment Gains

The working-age population and participation in the labour force have both been increasing as of late, contributing to a higher number of job seekers in Edmonton. This growth in employment has helped boost Edmonton’s wages by 4% over the last year. This should contribute to increased spending in housing, clothing, automobiles and appliances.

The growth in labour force statistics have been service oriented, pointing to a move away from construction and manufacturing and toward services. Edmonton has had a labour shortage as of late and these increasing numbers are a reflection of that, as more workers help to address the shortage.


Residential Construction Permits at Highest Level in Decades

Needless to say, all this activity has resulted in Edmonton’s residential building permits posting one of the highest monthly gains in Canada, along with Toronto and Vancouver (not Calgary J). Residential permits in January 2014 came in at just a tad under $400 million with all permits (residential and non-residential) reaching $523, a 34% increase over December and a 39% increase from January of 2013.


Needless to say, 2014 is expected to be another good year in the Edmonton area. It’s nice when the good news just keeps on coming, isn’t it?

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Okay here we are at the fun part, lease documents. If you are at the document stage that means you have found a property that will work for you and you want to try and lease it. The bad news is that lease documents get very lengthy and cumbersome full of endless clauses written in boring legalese. Regardless of whether you are a landlord or a tenant, it is of utmost importance that you read that document carefully and you waste, I mean invest, a bunch of money having your lawyer review it also. You should never enter into a lease without having your lawyer review it first. So with that caveat, let’s have a look at the various documents you may or may not encounter.




The first document you may encounter is the Letter of Intent. This is probably the most variable document in the process; sometimes it is used and sometimes it isn’t. So what is an LOI and why is it sometimes used and sometimes not?

The lease negotiation process can be quite lengthy and complicated, and go on for weeks or even months in extreme cases so there is no use wasting that much time if the parties don’t at lease agree on the most important terms in a lease. For that reason, an LOI is a short, non-binding (usually) document that spells out the major items (you guessed it, money) such as amount of rent, amount of operating costs, length of term, and any Landlord financial incentives to the tenant. If the parties agree on these major terms then there is a much greater likelihood that they will successfully negotiate a lease and so they then proceed with the next document, the Offer to Lease.

So the benefits of using an LOI is that it saves a lot of time wasted negotiating leases that will never come together. The LOI is also non-binding so this is an advantage if you are the landlord and a disadvantage if you are a tenant because the landlord is still able to accept other offers/LOIs. The non-binding nature of an LOI does have one major drawback to both parties and that is that there is a small chance a court could find it binding. The law is never black and white and courts make some pretty unexpected decisions sometimes. I recently read of a court case where the court decided that an LOI was indeed binding even though it specified that it wasn’t. So always beware when using LOIs. Never forget that who wins in a legal battle is really of little consequence. The main thing to remember is that the property is tied up for months or even a year or more in extreme cases and so is your wallet and your future while you duke it out in court. That being said, legal fights over an LOI are very uncommon and as long as your lawyer is involved the risk of a problem is very very low.


The Offer to Lease


The next document you will encounter (and sometimes the first) is the Offer to Lease. The OTL is a binding document but it is not the final document. The OTL spells out the terms and conditions of the offer in much more detail than the LOI and IS a binding document once agreed to by both parties.

The OTL will go into detail on things like parking, detailed breakdown of expenses and who pays them, rent calculations including things like percentage rent or rent escalations (commercial lingo for rent increases), rentable area, useable area, access, hours of operations, etc., etc., etc.

Since it is a binding document it is of utmost importance to have proper conditions to protect you. Some common conditions are;



Approval of tenant’s financial status
Approval of tenant’s use
Approval of board of directors (for large landlord firms)



Approval of Landlord’s Standard Lease (don’t ever forget this one!!)
Approval of financing (for tenant improvements, operating capital, whatever)
Approval of development and building permits by Municipality
Approval of business permit by Municipality
Approval of build-out costs (contractor will estimate costs)

There are many more possible conditions and your real estate agent can help you determine which conditions to add in, these are just some of the more common ones. Once both parties agree on the OTL the next (and usually final) document is the Landlord’s Standard Lease.


Landlord’s Standard Lease


The Landlord’s Standard Lease, just called The Lease usually is the most important document of all as it is usually very lengthy and often contains very important clauses hidden in the middle of the document. From the tenant’s perspective, remember there is no such thing as a Standard lease. Every lease is different and don’t let the word Standard intimidate you. Every clause is negotiable and it is best to discuss the lease with your real estate agent and your lawyer before signing. Once you sign this document it is done. You are bound to every term and condition in it.
From the tenant’s standpoint, make sure that the Lease properly reflects what was negotiated in the OTL. It is not unheard of for the Lease to not properly reflect the terms and conditions negotiated in the OTL.
So how much can be negotiated? Well technically a tenant could entirely re-write a landlord’s lease but in reality how negotiable it is depends on which party has more power in the process. For example if you are a just opening your first retail store and you managed to convince the Landlord of a major regional mall to let you lease, you will have very very little negotiating power. On the other side of the equation, when companies like Wal-Mart lease space they will present their standard lease to the Landlord and the Landlord will likely have very little negotiating power. Often the landlord and tenant are somewhat matched and some of the most important clauses can be negotiated, but more often the landlord does have the edge. Of course this also changes as the market changes. The more lease space available the more power tenants have and vice-versa.


So there you have it, the most common lease documents you will encounter in leasing property. While there may only be two or three documents in your negotiation process, each one is very important and be sure to have proper professional assistance along the way.


In our next installment in the series we will address;



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So last week we discussed in some detail lease negotiations; this week I was going to address Lease Costs and Lease Documents but Lease Costs turned out to be a more complex topic than I had estimated so let's talk about lease costs you are likely to encounter in a lease negotiation so that you can more confidently negotiate your lease and next week we will discuss;

Small Leases: Part IV - Lease Documents

Lease Costs

This is actually a relatively simple topic but in practice it becomes complicated mainly due to improper usage of some of the terminology used in leases. Let’s discuss those terms, what their textbook meanings are, and how they are used in practice.

Textbook Definitions


The textbook definition of rent is the amount you pay to occupy the space. All other costs are above this amount so utilities, taxes, maintenance, insurance and any other cost is in addition to rent.  This is more appropriately called Net Rent. If all the taxes, insurance and maintenance were included in your rent that would be called Gross Rent.

Additional Rent/Operating Costs/Common Area Maintenance (CAM)

Depending on the scenario, according to textbook, the property taxes, property insurance, and property maintenance are either called Additional Rent (usually retail setting), Operating Costs (industrial) or CAM charges (office).


This generally refers to utilities specific to your occupied space. Utilities for the common areas of the building are usually covered in Additional Rent. Depending upon whether or not the building has separate meters for each space your utilities will either be your own responsibility (separately metered) or included somehow in Additional Rent. If they are included in Additional Rent, have your accountant or lawyer check the formula.


Common Usage

In common usage these terms get intermingled quite a bit. Net Rent is usually used correctly but sometimes Net Rent may include some of the Additional Rent or even some of the utilities. Gross Rent is most often misused and often only includes some of the items of Additional Rent as well as some or even all of the utilities. The key takeaway is to make sure what is or is not included in “Rent” is clearly specified.

If Rent is being misused you can be sure that the term Additional Rent (Operating Costs, CAM costs) is also being misused. The bottom line is the same in any scenario; forget what terminology is being used and just ensure the lease spells out what items are or are not included in “Rent” or “Additional Rent”. Generally the larger the landlord, the more likely the terms are being correctly used, but this is not written in stone.

Additional Rent

In retail, and especially in shopping centre settings, Additional Rent can mean a few things. In major shopping centres, landlords will often charge a Percentage Rent. This is basically a charge based on a percentage of your sales, so the more you sell the more rent you pay. At first this seems unfair (and sometimes is for small tenants in large malls) it is an incentive for the landlord to make their shopping centre more attractive to shoppers. The more attractive their centre is, the more money you make. I guess it’s a win-win…of course the landlord probably wins a bit more than you do.

In any setting (industrial/office/retail) with multiple tenants in one building or complex there can often be Gross Up charges. How this usually appears is if you are renting a space of, say, 2400 sf, you pay rent on 2425 or something like that. Why? What this is, is a way of making sure each tenant pays for their share of the common spaces of the building like a foyer, hallways, washrooms, elevators, etc., etc. This is common and if done properly is perfectly legitimate.


Okay, with those two comments out of the way, additional rent is, as mentioned before, the Property Taxes, Property Insurance and Property Maintenance. Some first time tenants wonder why they have to pay these costs if they don't own the building. The short answer is one way or another tenants pay for everything. Is this unfair? No. Investors (landlords) invewst their money to make a return. If they don't make a certain return, they don't invest.


If you are in a multi-tenant building, additinal rent must somehow be apportioned properly between tenants. This is normally done on a square foot basis. In otherwords if your space is 12% of the entire leasable space you pay 12% of the total additional rent. In larger shopping centres with "anchor" tenants (large well-known retail firms that attract a lot of shoppers) will sometimes pay less than their share or none at all, and you can guess who picks up the slack. While this may not be fair, there are only two things we can really say about that. First, nobody ever said it would be fair and secondly, the argument made is that the anchor brings in all these people that end up buying some of your products. The bottom line is that this is normal in retail shopping centre leases.

Many multi-family properties do not have separate meters for utilities and in these cases, utilities are often included in additional rent. In these cases, you want to pay particular attention to how those utilities are calculated. What if your neighbor is a type of business that uses a lot of water? How is water apportioned?




This is a fairly simple topic. In common practice, utilities are pretty much the same as textbook. The tenant pays all their own utilities and their neighbor pays for all hers or his. This does get a bit tricky in situations as mentioned above where there is no separate metering of utilities. If there is separate metering you can easily determine your utility usage. If there isn't, the lease will specify how utilities are to be apportioned.


A Final Note on Lease Costs


If there is one precept to burn into your memory for lease negotiations, remember that there is very little legislation governing commercial leases. In otherwords, whatever that lease says, goes! Whatever you agree to will likely be upheld in court. Residential leases have The Residential Tenancies Act (Alberta - similar ones in other

provinces) but there is nothing for commercial leases.

If you are a landlord, definitely visit your lawyer and get a "Standard Lease". Read it through carefully and be sure you understand each clause because some of them are rather complicated and written in legalese. You can be sure sophisticated tenants will want to negotiate some of the clauses and you need to be sure you understand what you are negotiating away.

If you are a tentant, don't be intimidated by a landlord's "Standard Lease". Every lease is negotiable (although check my last post in this series for just how much some leases are or are not negotiable). So beware.

Most landlords are very fair people but you can be sure the leases will be written in the landlords favour, wouldn't you? Read them and have your lawyer read them first.


See you next week for...


Small Leases: Part IV - Lease Documents

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Well last week we covered some of the basics of small commercial leases; this week we delve into negotiating the lease. Negotiating is without a doubt the key link in the leasing chain. The consequences of the negotiations are critical. Poor negotiating can lead to no agreement (lose-lose scenario), or one party having undue benefits and power over the other party (win-lose), or a great five year relationship for both parties (you got it, win-win).


 Win-Win vs Win-Lose


I can't emphasize enough how many folks are still stuck in old, ineffective win-lose negotiating. So many go into negotiations to get the "best" deal they can for themselves at the expense of the other party, not understanding that especially in a lease scenario, this is the worst thing to do. Stop and think for a moment. You are negotiating a relationship with someone that is going to last at least five years and, with renewals, as long as twenty. How do you want that relationship to begin? How do you want it to develop? How you act now will set the stage for the next five years; trying to take advantage of someone doesn't go far in building trust.


Trying to get as much for yourself as you can with traditional win-lose negotiating may seem like the best thing to do, but usually isn't. The other side may not appreciate your negotiating and may spend the next five years returning the favour whenever the opportunity arises. With win-win negotiating, you still look out for your own interests, but look for opportunities to concede something to the other side if it helps you win something you need in return.


As an example, if you are the tenant and the landlord absolutely won't give you any free rent up front, maybe negotiate a larger tenant improvement allowance to help defray initial costs.


Know The Other Side


Have you ever watched the show Mantracker where an experienced tracker tries to find a couple of "prey" who are trying to get to an objective point miles away without being found? What does he say at the beginning of every show? "Know your land, know your prey".


The same applies in any negotiation process. Find out whatever you can about the other side. Search engines like Google are an amazing resource these days for researching people or companies.


Am I dealing with a large firm or a small "mom and pop"? Do they have more properties? If the other side is the landlord, maybe talk to a couple of their existing tenants, and view how they manage their buildings. If the other side is a tenant in other locations, go visit their sites and see how they maintain their lease space, maybe contact their landlords. Don't ever listen to anything someone said who knows somebody who rents from someone. That is not research; that is gossip.


If the other side is a large public company, your public library is likely to have loads of information on them including annual financial statements. If you have a stockbroker or online trading account, you can review more financial information about public companies.


The Players


To negotiate a good lease, you will need varying degrees of assistance from a few professionals. Depending upon the size of the lease in question, you should have on hand a good agent, attorney, accountant, design and construction people, and your lender. Good leasing agents and lawyers will do their best to keep it professional and negotiate in a win-win manner. A good agent will be able to do what is called "Net Present Value" calculations to help you compare several different lease scenarios to determine which will cost you the least or make you the most. If your agent can't, your accountant should be able to. Design and construction people can give you an idea of whether or not your idea is do-able and how much it will cost. Of course, keeping your lender informed goes without saying.


Preparing to Negotiate


The two most important things to keep first and foremost in any negotiations are your goals/objectives and the other side's. Clearly knowing your objectives will help keep you on track when the negotiations start to take unexpected twists and turns. Knowing (or estimating) the other side's objectives help you to give meaningful concessions to help get more of what you want or need. There is no use in conceding something to the other side that doesn't help them achieve their goals, but conceding something that helps them meet their needs in return for something you need is the hallmark of good negotiating.


The next thing you need to determine is your walk-away point. You need to know in stone above or below which point you will not go. There is nothing more powerful when negotiations stall than an ultimatum that is not a bluff. Remember, ultimatums are not good negotiating, in fact they are usually more destructive than constructive, but when you are at your limit, a real ultimatum as opposed to a bluff send a clear message you will go no further.


Offering a bluff ultimatum is very risky; it may get you what you want but if they call your bluff you have just lost a lot of negotiating power.


Once you know the other side, goals and objectives and your walk-away point, you are ready to negotiate. Just negotiate in good faith, using the professionals mentioned above to assist you, remember win-win and you can’t go wrong. Well okay, it’s a bit more complicated than that. In our next installment next week we will discuss two important topics in more detail, lease costs and lease documents, so stay tuned for


                              Small Leases: Part 3 – Lease Costs and Lease Documents

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As a commercial real estate agent in a mainly residential office, I often deal with smaller tenants. Most smaller tenants ("mom and pops" as the slang goes) are much less sophisticated than large national and international organizations with substantail commercial leasing experience, and can only draw upon the experience they have...residential real estate. And therein lies the problem. In residential real estate clients often fall in love with and buy something totally different than they set out to buy. In commercial real estate leasing, that doesn't happen; you must lease a property that fits your needs which is why that commercial agent asked you so many questions before showing you the property you called on, and in the end wouldn't even show you the one you called on. What's up with that? Well, let's find out as we examine How To Search For Commercial Lease Space. Please note that these comments are intended for the Edmonton commercial real estate market and surrounding areas.


The first thing you absolutely need to do is put your needs down in writing, and be specific. Even if you fall in love with a space, if it doesn't meet all your needs it won't be long before you wish you never signed that lease.
Some of the obvious things to consider are;


Size of Space: Forget how much it costs, just ask yourself in a perfect world how much space is not too big or not too small.


Cost: At this point, don't get into analyzing different spaces, just ask yourself realistically how much you can afford. Remember leases have three components: Lease Rate, Operating Costs, and Utilities. We will discuss this point in more detail later as it is a major issue in small leases, but for now determine your budget for all three combined.


Location: Where would your customers expect you to be? What works best for you? Remember where you live and where your customers are.


And the less obvious things to consider are;


How Pretty Are You? Financially speaking of course. Just because you want a space, the landlord is not going to escort you in on the red carpet. At the end of the day/lease, you leave and the landlord still owns the property. Most landlords will want to know intimate financial details about you and your company. Do you have a business plan? How many years have you been operating? Show me your last 3 years of financial statements. The larger the landlord the more demanding they will be. Their cash flow and the value of their properties depends upon the quality of the tenants. Get your financial information ready.


Employees  When choosing a location, if you have any employees will the want to drive to that location? Be sure to consider where they live also.


Ceiling Height  This is most commonly important in industrial situations but is often important in retail also.

Parking  Is there enough parking for your employees and clients? How many stalls (if any) are assigned to you? Is parking on a scramble basis? Is there on-street parking


Accessibility: What sort of accessibility do you need? Left turns onto or off of a busy street will chase customers away. Gas stations locate so that people can turn right into and out of their stations on their way homes after work. Drive through coffee shops locate for right turns on the clients' way to work in the morning (gotta have that morning coffee).


Visibility:  Is your business a destination business where people come to you specifically for your service or the products you carry, or is your business dependent upon walk-in or drive-by traffic? Remember high visibility locations cost more.


Utilities: Do you have any specific utility needs?

Layout:  What would be your perfect layout? You will likely never find it, but having a draft design of the perfect layout will help you choose your space better.


Tenant Improvements:  Since you won't find the perfect layout, you had better budget a realistic amount for tenant improvements.


 I could go on endlessly, but there is a good list to get you started. This covers the main points to consider when preparing to lease space.


The Search


When To Start Searching


I am often surprised by the number of folks who call on lease space and I find they need something within a month or two. Not going to happen, at least not in the foreseeable future in the Edmonton commercial real estate market. Even in a balanced market, you need to commence your actual search at least six months as a minimum before you need to locate. The search will take at least a couple months (possibly more), the negotiations will likely be about a month, and you will need at least a month, more likely two, to complete your tenant improvements and move in.


Commercial Real Estate Agents


So many small tenants do their own searching, calling the listing agent on each property they find. Let me put this gently...don't do that. Check with any regulatory body in the real estate industry and they will tell you it is in your best interests to have your own agent working for you. When we list a property for sale we are legally bound to get the most money and best terms and conditions for our your expense. So if landlords have their own agent getting them more, why not have your own helping you pay less?

Do your research before you begin your property search. Interview several agents and find ones that are prepared to work with you. Check what their experience is, the services they provide, how they get paid and what their expectations are from you. Don't be surprised if you are asked to sign what is called "Buyer's Agency". Real estate agents don't get paid a penny until you actually lease space through them and subsequently take possession. Adding to that, the agent's fee on a small lease is not very large and many agents, especially the better (and busier) ones, will not be likely to take you on as a client without a reasonable assurance of a payday at the end of the day.


The Actual Search


Don't be surprised if you find numerous properties your agent didn't find (or didn't tell you about). Commercial real estate is much different than residential. Most properties for lease never make in onto a listing service like the MLS. Because of this, searching for commercial properties is much more difficult and time comsuming than searching for residential properties. You will be in this together with your agent. The real benefits of your real estate agent show up in the lease negotiation process...and that is our next topic in this series next Friday...


Small Leases: Part 2 - Negotiating The Lease

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