Thank you.
By way of introduction, REALpac is Canada's senior national industry association for owners and managers of investment real estate. Our members include publicly traded real estate companies, real estate investment trusts, private companies, pension funds, banks, and life insurance companies, each with investment assets in excess of $100 million. We're further supported by large-owner occupiers and pension fund advisers, as well as individually selected investment dealers and real estate brokerages. All told, we represent about $180 billion in assets across the country. REALpac members have enjoyed long-standing relationships with federal government tenants as owners and managers across Canada. They have an inherent interest in the topic of today's committee hearing.
I am delighted to be here with fellow industry representatives to speak to you about a policy area that has long been a priority for REALpac and its members companies: sustainability in commercial real estate. REALpac recognizes the significant environmental, social, and economic impact of Canada's commercial real property sector, the need for an industry-driven approach supporting national and commercial provincial strategies on greenhouse gas reduction, the importance of reasoned discourse with political and policy officials, and the value of persuasive arguments for sustainable economic growth. We also recognize the need for industry-wide green benchmarking data and shared best practices, and we continuously work with our constituents and national and international counterparts to ensure that the sector is well positioned for a sustainable future.
This is why REALpac prides itself on being a leader in this space. We were the first in North America to draft and publish a green office lease, now in its third version. We also, to our knowledge, published the first office building normalization methodology in the world and challenged our members to meet and exceed voluntary energy targets.
To paint an overall sustainability picture, the last several years have seen significant achievements for the Canadian real estate market in regard to the environment and energy efficiency. While improvements to design standards and energy introductions have not stalled, REALpac believes that it is imperative for the federal government to work hand in hand with our sector to maintain highly efficient and effective buildings. We believe improving the energy and water performance of buildings will undoubtedly help support the government's economic goals for the country while substantially reducing the nation's overall economic footprint.
I have included in the package submitted to the clerk a more detailed briefing of ways we think the federal government can make considerable advancements in green policy, and in particular increase the adoption of green building principles. But I'd like to take the next few moments to outline several key points for what we call a robust federal sustainable development strategy.
Sustainability in today's real property environment is driven almost equally by social and economic factors. However, these factors differ considerably based on whether we are looking at the construction of a new building or whether we are examining the possibility of a major retrofit to an existing one. From a new construction standpoint, the cost of building green is increasingly palatable because of innovative building techniques, the ability to set rents at a level to offset these expenditures, and the realized energy cost savings. In this light, REALpac has long been a supporter of certification programs like LEED for new construction, and BOMA BESt for ongoing targets and certifications. We would like to challenge the federal government to mandate and achieve high-level certifications for any new buildings, either leased or owned. Not only will this commitment speak volumes about top-down leadership; it will also have a net-positive effect on energy reductions across the country, given the considerable portfolio buildings within your inventory.
In addition, a clear commitment should be made by all federal government buildings and buildings receiving federal funding to achieve ongoing targets for energy, water, recycling, use of materials, and indoor air quality. What a program like this allows for is continued monitoring of performance to ensure that all new federally owned and occupied buildings are operating at the desired level.
The case for new construction and lease agreements in green buildings, then, is relatively straightforward. So I would like to touch on the more difficult task of making major energy retrofits to existing buildings, many of which the federal government currently owns or occupies as a tenant from REALpac members.
From a financial standpoint, major energy retrofits can be extremely cost prohibitive. Depending on a variety of factors, major energy retrofits can easily creep into the tens of millions of dollars for larger buildings across Canada. For government-owned buildings, these retrofit costs are necessary to maintain continued leadership in the environmental space for our industry to follow. However, for privately owned buildings, with long-standing government tenants, major energy retrofits do not always carry a sound or attractive business model. With the tendency for costs to skyrocket, depending on age and intensity of work needed, REALpac believes that favourable tax treatment for energy efficient equipment will help property owners conduct these major energy retrofits.
Currently, large expenditures like boilers and chillers are treated like any other fixed capital investment, generally allocated a tax depreciation rate of only 4%. REALpac is advocating for tax incentives that would provide a 50% average depreciation rate, and if designed correctly, would deliver increased investment in major energy retrofits and a renewal of Canada's building stock, all while enhancing job creation and profitability, and reducing energy consumption, greenhouse gas emissions, and air pollution.
This favourable tax treatment would undoubtedly be utilized by a broad array of buildings and building owners, including those with federal government tenants, making the business case for major energy retrofits all the more attractive to the benefit of the government, the economy, and the environment.
In closing I'd like to reaffirm that sustainability in the real property sector is no longer a pipe dream or something with financially crippling ramifications. It is a necessary action for future generations of Canadians to enjoy the same quality of life this generation has, and REALpac is a firm believer that these goals can be achieved through a strong working relationship between government and industry, a clear commitment from government to conduct its business in sustainable ways, and investment in energy-efficient retrofits in the short term so we can realize the significant social, environmental, and economic gains in the long term.
Thank you.