Climate resiliency and low carbon were among the five critical priorities for Canadian innovation in real estate identified by the R-LABS I+T Council in the 2004 Industry Innovation Agenda report released earlier this year.

Ensuring Canadian real estate can withstand extreme weather events and reducing the industry’s carbon footprint to meet Canada’s 2030 climate goals must be a key focus for the sector, along with addressing affordability and labour shortage issues while increasing productivity and supply.

Despite the urgent need for innovation around environmental and climate change issues, it can be tempting for firms and investors to put ESG agendas on the backburner given current economic pressures and uncertainty. One respondent to PWC’s recent Emerging Trends in Real Estate survey even suggested that “the sentiment among investor feedback is that it’s maybe less important than the year before.”

However, climate change is no longer a distant threat, but a pressing reality demanding innovative solutions from Canada’s real estate and construction industries. Extreme weather events – and the extensive damage that comes with them – are becoming alarmingly more frequent, causing billions of dollars in insured losses and contributing to the rising cost of living for Canadians.

Investing in innovation to increase climate resiliency is no longer a nice to have, it’s a must.

The growing issue of urban flooding is a perfect example of the pressing need for innovative solutions to address the effects of climate change.

“The most expensive thing you can do is be unprepared,” says Chris Godsall, CEO and Co-Founder of NOAH Intelligence, a Canadian climate analytics platform that unlocks land value, addresses flood risk, and enhances flood resiliency currently preparing for growth stage at R-LABS. “And whatever we were prepared for is no longer relevant when urban flooding occurs annually.”

While climate change brings with it a myriad of challenges that will affect generations to come, Godsall and NOAH co-Founder Steve van Haren refer to flooding as a “here and now problem.”

Case in point: on July 16, 2024 Toronto saw close to an entire month’s worth of rainfall in roughly three hours – the city’s third “once-in-100-years” storm in under a decade. Flooding, caused by both the volume and intensity of the rainfall left drivers stranded on roadways, halted public transit, knocked out power and left billions of dollars in damage in its wake.

Godsall points to the flooding caused by extreme rain and overwhelmed storm systems as proof that we no longer live in the environment that current sewer and storm systems were meant for.

Even spaces designed with the most sophisticated engineering systems and built specifically to mitigate flooding such as The Evergreen Brickworks, a community hub located in the Lower Don floodplain, were overwhelmed by the July storm and now require a multi-million dollar effort to recover from the flash floods.

In 2021 alone, asset managers, lenders and insurers incurred $99 billion in losses due to an insufficient understanding of property-level risks. By 2050, annual losses are projected to soar to $5.6 Trillion.

With extreme rainfall only expected to increase in both frequency and severity, protecting property and defending against flooding is a modern ESG response strategy that has clear and near-immediate economic impacts.

The mounting financial and human costs of each extreme rainfall event only increase the need to deliver solutions, and fast – but modernizing storm water systems and municipal infrastructure is expensive and slow, taking upwards of 15 to 20 years to complete.

Not only that, but there is no unified, coordinated flood mitigation or response strategy across individual property owners, cities, regions, provinces or at the federal level – increasing anxiety as flood damage continues to compound and contributing to further uncertainty on who owns the problem. This siloed approach has made it difficult, if not impossible, for asset managers, insurers and financial institutions to agree on who owns the contingent liabilities that come with flooding, blocking the potential for innovative solutions.

Godsall admits that the current situation is scary, but is optimistic that solutions are available to mitigate risks and protect against damage from floods in the future.

“The nightmare scenario is that there is nothing that we can do, but that’s not the case,” Godsall says. “There are concrete steps we can take. Investments in innovation and climate resiliency are unlocking the opportunity for individual property owners to take actions today to understand their precise flood risk and implement practical defense strategies.”

There is no one single solution to solve the pressing issues of flood risk, damage and real estate resiliency in the face of extreme weather – it will take a series of innovative solutions at all levels to win the fight.

That’s where NOAH’s advanced technological solutions come in. The platform provides asset managers, lenders and insurers with precise flood risk visualization and insights at the property level, enabling effective risk management and mitigation strategies.

That’s good news, not just for the individuals, but for everyone. Protecting one property from flood risk and damage has a domino effect, it also reduces the risk for the surrounding community. This buys governments the time that they need to create stormwater infrastructure that’s needed for our new climate reality, while also reducing damage and associated costs from the next storm.

The challenges posed by climate change, particularly the increasing frequency and severity of extreme weather events, demand urgent action. By investing in innovative solutions like NOAH’s intelligent technology, individuals, communities and industry can mitigate flood risk, protect property values and build a more resilient future for generations to come.

An integral part of the economy, the Canadian real estate sector is currently facing a number of complicated and interrelated problems – from unprecedented affordability to sustainability and climate resilience challenges.

Addressing these simultaneous challenges in the coming years will require monumental efforts from all players across the ecosystem. Yet when we look carefully, we find that no one is in charge of real estate and housing despite the fact that we are all involved – governments, industry and consumers.

In October 2023, issues around leadership and institutions were identified as a key challenge in real estate innovation from the R-LABS Industry Issue + Transformation Council (I+T Council).

The I+T Council launched the Innovation Pledges initiative to encourage stakeholders in the private and public sectors to take leadership and undertake specific, measurable actions to enhance real estate innovation in Canada.

The initiative aims to help address the bottlenecks to innovation described in the Industry Innovation Agenda and facilitate a culture of small-scale experimentation and information sharing. Pledges directly relate to the critical priorities for Canadian real estate identified by the Council which include:

• Affordability and Supply: Meeting Canada’s housing supply challenge and addressing high costs and low productivity leading to a lack of affordability.
• Climate Resiliency and Low Carbon: Ensuring Canadian real estate can withstand extreme weather events and reducing its carbon footprint to meet Canada’s 2030 climate goals.
• Optimization: Canada’s existing building stock is not used optimally due to factors such as a lack of transition options and a lack of flexibility to convert one form of building use to another.
• Capital, Labour and Supporting Infrastructure: Ensuring firms have the essential building blocks for success.

To date 20 diverse organizations from across Canada have taken an Innovation Pledge. George Carras, Founder & CEO of R-LABS, sees the momentum as evidence of a “growing cluster of innovation that is bringing new solutions through new companies that create new, higher productivity jobs.”

Among the pledges, Engaged Innovators such as PropTy, a blockchain enabled platform to invest in fractional rental properties across Canada, have committed to actively contributing to the idea and validation of at least one novel real estate solution or pilot project.

GroundBreak Ventures, an early-stage investor in home innovation and property technology, is just one of many Active Investors who have signed on to invest in at least one early-stage company delivering novel real estate solutions and innovation skills and capabilities.

As part of the initiative, R-LABS has pledged to invest up to $1 million in early-stage startups focused on solving key problems facing the real estate industry. With R-LABS partner company NOAH ready to launch, the venture studio has several more companies in the early stages of validation, each contributing to a more resilient, affordable and sustainable housing ecosystem.

There is no single solution that will solve the multiple, complex challenges facing Canada’s real estate and construction industries; but the first 20 Innovation Pledges are a bold step towards enabling the kind of small-scale experimentation needed to discover the transformation necessary to meet the sector’s ambitious goals.

And this is only the beginning.

Imagine a Canada where housing is not only affordable but also sustainable, where homes are built to withstand climate challenges, and where innovation is the foundation of every real estate development.

The Innovation Pledges are more than just commitments; they are catalysts for transformative change. A few years from now, we could see a thriving ecosystem of startups, greener cities, and smarter infrastructure, with new jobs and solutions that lead the world. This is the future we are building—together.

Maintaining momentum and building on the foundation of leadership displayed by cross-sectoral players will be top-of-mind as the I+T Council prepares to reconvene this fall and looks forward to the next phase of the initiative.

Individuals and organizations across the Canadian real estate space, from the private sector, governments and not-for-profits are invited to pledge their support and commitment to innovation.

Review the full slate of pledges and take the Innovation Pledge today.

Canada’s real estate sector is a cornerstone of the economy, but it faces a number of complex challenges. The recent Innovation Industry Agenda Report released by The Industry Innovation and Transformation Council, outlines the five pressing issues facing the industry today from low carbon and climate resiliency to housing affordability.

Innovation is key to overcoming these hurdles, but the real estate and construction industries face a critical roadblock: a skills and labour shortage.

Canada faces construction labour challenges

The Canadian Mortgage and Housing Corporation has estimated that Canada needs to build an additional 3.5 million homes above the business-as-usual case before 2030 to restore affordability to the market. These homes are above and beyond the 1.66 million that the CMHC forecasts will be built during this period, requiring the construction of 5.1 million homes – triple the current rate of housing completions.

But labour shortages are a significant challenge for the real estate sector and puts this ambitious goal at risk. In the second quarter of 2023, there were more than 62,000 job vacancies in the construction industry – a job vacancy rate in the sector of 5.1 percent compared to the 4.4 percent vacancy rate across the economy.

Innovation across policies, systems, products and processes will be required in order for Canada to meet this ambitious goal – but without the labour needed to execute the work, it will be impossible to meet the demands.

New skills required to drive innovation

In addition to having people to do the work, it is also essential that the real estate sector has the skills needed to drive innovation.

Innovation requires a complex mix of skills such as creativity for problem-solving; continuous improvement to identify challenges and iterate; and risk assessment. Social and emotional skills such as communication, relationship building, team- and client-oriented skills are also required, as well as digital skills that range from general to advanced.

As the construction industry evolves to integrate technology, industry professionals will need a new set of skills. Digital tools for project management, collaboration and communication are fast becoming mainstays on job sites. And as new building processes and materials are developed, they require technical skills to execute.

At the leadership level, innovation relies on managers with the skills to identify opportunities and implement and manage innovation. For many Canadian firms, the lack of leadership is one of the most critical impediments to our ability to commercialize innovations, integrate and compete in international markets, and ultimately grow local, innovative companies.

From climate concerns to affordability and supply, industry leaders must shift away from conventional silos and commit to collaboration 

Canada’s real estate and housing sector is in crisis.

An integral part of the Canadian economy, a well-functioning real estate sector is needed to ensure that companies have room to grow and expand, and families have access to attainable housing that meets their needs near employment opportunities.  

Yet today we find ourselves in an environment where many complicated and interrelated problems exist – from affordability and supply to sustainability and climate resilience. And there is no one single stakeholder at the helm to lead to the change the industry needs to address these complex challenges.  

At the launch of the Industry Innovation Agenda report in March 2024, R-LABS founder and CEO George Carras remarked that when it comes to real estate “we’re all in this together, but no one is in charge.” 

Traditionally, the real estate and construction industries have functioned in silos. While this fragmented approach might have worked in a more stable environment, collaboration is the key to unlocking the innovation and transformation needed to address the complex challenges faced by the sector. 

To enable the kind of small-scale experimentation needed to discover the big transformations necessary to meet the sector’s ambitious goals, Canadian organizations and individuals need to commit to creating a collaborative space for innovation and continuous learning throughout the sector.  

Key advantages of collaboration include:  

• Enhanced Problem-Solving: Diverse perspectives lead to more creative solutions. 
• Technological Innovation: Collaboration between fast and nimble startups and established firms can accelerate the adoption of new technologies that streamline processes, improve transparency, and enhance customer experience.
• Risk Mitigation: By sharing market data and insights, industry players can collectively assess risk and develop cross-functional strategies to migrate them.
• Building a Sustainable Future: Reaching Canada’s carbon emission goals means players across the sector must collaborate to find new and innovative ways to build and retrofit buildings to ensure they are low-carbon and climate resilient.  
  
  

Collaboration in Action: The Industry Innovation & Transformation Council 

After a successful event at R-LABS in 2022 that explored the formation of a global cluster of innovation for the Canadian real estate industry, the I+T Council first convened in 2023. The I+T Council is a group of trusted industry leaders with deep and diverse expertise in real estate and housing industry challenges. 

Supported by R-LABS, the work of the I+T Council ensures that industry innovation is catalyzed across the real estate and housing sub-sectors. This collaborative approach will enable the sharing of outcomes from innovative practices, ensuring that the real estate industry can withstand extreme weather events, meet the country’s housing construction goals, and improve affordability for all Canadians.  

Collaboration in the real estate industry is essential to address the pressing challenges of housing supply, affordability, and sustainability in Canada. By fostering a culture of innovation and risk-taking, stakeholders from government, not-for-profits, and the private sector can work together to create a more resilient and adaptable real estate landscape.