First National Financial LP

First National’s team on the ground surveys B.C. storm damage and long-run implications

  • Dec 9, 2021
  • Michael Yeung, Regional Vice President, Commercial Financing, Western Canada

Michael Yeung is First National’s Regional Vice President, Commercial Financing, Western Canada. Like other residents of British Columbia, Michael has watched as his Province copes with back-to-back natural disasters and the cleanup. Unlike others, he leads a team that invests in B.C.’s commercial property market. We turn to Michael for an assessment of the damage and possible long-term implications.

Michael this has been a difficult year for your Province.

True, we’ve seen unprecedented natural disasters disrupt what I consider the best place in Canada to live and invest. From late June to early July, a heat dome hovered over B.C., killing 600 people.  With the highest temperatures ever recorded at our part of the 49th parallel, over 1,580 wildfires burned 868,619 hectares of land. This was the third worst forest fire season on record. Then in October, we were hit by a storm with the lowest central pressure system ever recorded in the Pacific Northwest which knocked out power to parts of Vancouver Island and the mainland. Then, two tornados touched down in Vancouver. If that wasn’t enough, in November, massive rainfall including atmospheric rivers smashed more than 20 records and led to mudslides, rockslides and extensive flooding.

The media have covered these stories, but have they captured the true extent of the devastation?

You have to be here to really understand. Atmospheric rivers damaged an estimated 200 area highways in the Interior and south coast. Farms in the Sumas Prairie area of Abbotsford found themselves five feet underwater leaving livestock imperiled. Power has been knocked out in many areas more than once, supply lines have been cut, gas and groceries rationed, and we saw hoarding of eggs, milk and bread.  

First National has many customers in B.C. How are they making out?

We’ve made a point of contacting everyone and so far, so good. But let’s be honest about this. There are knock-on effects particularly for developers who are building new apartments, condos, homes and industrial spaces. Building material supply chains were already under stress because of COVID and now there are additional complexities because shipping routes have been disrupted by flooding and landslides. Poor conditions and road closures have made trips through B.C. longer for truckers with detours adding fuel and labour costs. Restrictions have been placed on truck loads, which means it will take longer for heavy machinery to make it to construction sites including dewatering equipment. Excavations completed before the flooding may have to be redone. And there is the impact on construction workers: getting to work in some areas can be difficult. These are inescapable realities.

What do you see as the long-term implications of these natural disasters?

Everybody in B.C. is now talking about climate change and wondering what more can be done to protect us and why we didn’t, as a society, pay more attention to past reports about climate risk and mitigation measures. Sustainability and the initials ESG are making their way into the mainstream of our society, which is a good thing. There is also a lot more concern about insurance as in, will I be able to insure my property in the future and how much will it cost because of climate-change-induced flooding risks? What we thought was a once in a 100-year storm frequency may be once in 50 years or once in 20 years. This also puts the spotlight on what type of land is truly suitable for development. I think you will see people gravitating more and more to areas that are not susceptible to flooding, which reduces the already tight supply of land for future development. These outcomes, taken to their logical conclusion, will mean higher costs but should also have some positive impacts.

Let’s talk about the costs first.

If we agree that we need to put more emphasis on building resiliency into the Province’s physical infrastructure and doing it a lot faster because of climate change, then money must be spent, and it has to come from one or more sources. The readily available ones are higher property taxes, higher utility rates and higher development charges. In Richmond, where I live, scientific forecasts suggest that by the year 2100, sea levels will rise by one metre. Coastal areas like mine will need to spend substantial sums to upgrade dyke and pump systems and we can’t wait for 75 years to do it.

The B.C. government has shown leadership on climate risks with measures like carbon taxes. Has it taken other measures specific to building codes?

In 2017, it introduced the B.C. Energy Step Code. As the name suggests, it’s a five-step path to achieve a level of energy efficiency in new construction that goes above and beyond the requirements of the Building Code to get B.C. to net zero by 2032. If a new build meets say Step 2, it has achieved a 10% improvement in energy efficiency over the standard building code.  Step 3 is a 20% improvement. Step 4 is 40% and Step 5 is achieving net zero emissions. In Greater Vancouver, most municipalities are trying to implement Step 3, recognizing that buildings produce something in the neighbourhood of 30% of all GHG emissions.

Presumably there is a cost to this type of program.

I’ve seen estimates suggesting that for a large single-family home, the cost to achieve Step 5 can be over $50,000 and in some cases $100,000. Homes here are already very expensive and building according to this escalating Code certainly has an impact on the development industry both in terms of cost and complexity. On the other hand, the intention is to improve comfort for building occupants, reduce energy bills and GHG emissions, so very practical implications.

Could programs like this influence the direction of the housing market?

Yes, it means building design improvements but also that the barrier to single-family home ownership will get higher and with it the demand for rental units should get stronger. If you own a multi-family residential property, it is a positive for occupancy and rental rates and should also reinforce government policies meant to incent additional apartment and condo construction.

After this year’s natural disasters, presumably it becomes harder to argue with measures that protect the environment?

It’s no longer a question of if we need to take action, it’s a question of when, what and how much. Think of the risk that will be avoided when homes are not built on flood plains and when landscaping with trees and grass and tree-planting generally gets more attention because of water absorption. When more emphasis is placed on building resiliency into our infrastructure and doing it faster, it’s a win.  

You mentioned ESG as a positive theme. What did you mean?

Environmental, Social and Governance or ESG is essentially a way of thinking about how to make our society more resilient, our institutions more responsible, our neighbourhoods cleaner and our building materials greener. Events like COVID and now the natural disasters in B.C. provide us with opportunities to learn from experience and take a serious look at what we’re doing, how we’re doing it and where we’re sourcing supplies. Creating stronger supply chains for everything from food and fuel to building materials alone will help us to deal more effectively with future pandemics and future storms. Better environmental management also holds the promise of reducing the frequency of storms. If we are smart about this, we can all benefit.

As a lender, ESG matters to you?

Very much so as it is an inherent part of managing risks and protecting our investments. I also think awareness of ESG will be helpful to our clients as they secure public incentives and realize cost reductions by taking measures to improve building efficiency and shoring up properties against potential storm damage. It will certainly help to combat the potential for higher insurance premiums. A landlord who takes ESG measures may also find tenants more willing to pay higher rents because units have been designed with the environment and risk in mind.

Final question: is First National still committed to investing in B.C.?

Absolutely. 2021 has been our most successful year yet based on lending volumes – Core Conventional, insured and construction – in British Columbia. As a sign of confidence, we added to our West Coast teams and with greater expertise, we hope to grow again in all directions in 2022. We are here for the long term as businesspeople and as residents.

Michael Yeung is recognized for his expertise in real estate financing including high-value commercial construction lending. If you would like to speak to Michael or any member of our Western commercial team, you can do so by calling 778.887.8433 or emailing Michael at