July 05, 2016 Rubber Hits the Road for Six‐Storey Wood‐Frame Construction New Ontario Building Code (“OBC”) amendments to permit six-storey wood-frame construction were enacted early in 2015, creating considerable buzz from developers trying to gain a competitive advantage, as well as planners looking to introduce a mid-rise and mixed-use development format into challenged urban environments. The amendments increase the permitted height for multi-residential, commercial office, and other mixed-use format developments from the previous four-storey cap. For their part, the residential industry appears to be ready to embrace this significant new construction technique wholeheartedly, thanks in part to the strong and ongoing market success of four-storey wood-frame residential construction across Southern Ontario. Product affordability is particularly important; a majority of mid-rise buildings are structurally simple, with minimal suite variations, and fewer common elements, helping to reduce construction costs. The key competitive advantage for six-storey wood-frame residential and mixed-use construction in Ontario is that it provides an opportunity to realize noteworthy hard-cost savings relative to the costs of typical concrete or steel construction methodologies. However, our recent experience tells us that these savings may not be realized immediately, nor by every developer in the industry. The primary efficiency is accomplished by pre-assembling customized structural panels off-site in a controlled facility which operates year-round. There are currently very few panelization plants in Ontario, creating a competitive advantage for those who own their own facility or have established relationships with existing plant operators. Once additional plants are added to the supply chain, a more competitive pricing environment should allow for greater cost-savings, industry-wide. Another limiting factor on potential cost savings are the (appropriately) stringent fire suppression requirements that require advanced sprinkler systems and the use of non-combustible materials in the construction of fire exit stairwells, corridors, and exterior cladding. As a result, we expect that the cost savings realized by many developers constructing in six-storey wood-frame will likely to be modest or negligible for the first few years of implementation. While every developer’s financial pro forma is unique, a decrease in above grade development costs can have measurable impacts on the way in which residential developments are positioned in the marketplace. If developers pass these project cost savings on to purchasers, the influences of six-storey wood-frame housing could be manifold, including: A reduction in market risk for mid-rise development in market areas that were previously not robust enough to support the revenues necessary to offset the costs of concrete construction; A higher pace of sales absorptions through lower unit pricing; An ability to deliver larger apartment units at the same price of a comparable “concrete” project; Improved marketability through an accelerated construction schedule, allowing purchasers to move into their new unit faster than is customary in larger high-rise projects; and, An acceleration in development schedules also reduces developer costs from debt financing and exposure to other property carrying costs. From a planning perspective, the introduction of six-storey wood-frame construction permissions in the OBC promote opportunities to satisfy municipal and Provincial planning objectives, including urban intensification, the efficient use of land, economic development, greater housing choice, housing affordability and environmental sustainability. For municipalities across the province, this could mean improved real estate economic conditions which support residential and mixed-use intensification along key corridors or growth areas where high-density residential development has not historically been viable en masse. Although project planning is well under way for six-storey wood-frame construction in many municipalities in Ontario, the best Canadian examples of existing six-storey wood-frame communities are currently found in southern British Columbia. The Wesbrook Village master-planned community on UBC’s Endowment Lands is a particularly appealing, largely wood-frame community. Wesbrook features a pedestrian-scale main street, grade level retail and services, a grocery store, a bus route, ample green spaces, and has been popular with young families. While developers have been investing substantial resources into wood-frame development, we can expect a prolonged learning curve as builders, suppliers, municipalities, consultants and trades adapt to this new form of construction. We expect there will also be a need to address attitudinal biases and information gaps for this new form of construction, including fire and mold suppression techniques, and noise transmission between floors. These are exciting times in Ontario as an entire industry eagerly awaits the first wave of six-storey wood-frame residential projects to complete. Will they measure up to the hype? Let’s hope so. 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