Building on the North Shore and Beyond with Jason Turcotte

Listen On: Apple Podcasts | Spotify | Google Podcasts

Jason Turcotte, President of Darwin Properties, joins us to talk about building on the North Shore, navigating Vancouver’s fall market and the future of development in Vancouver. How can we improve housing affordability and labour shortages? Are interest rate hikes over? And what will the market look like in 2024?

Who is Jason Turcotte?

I’m the President of Darwin Properties and we’re a North Shore focused development company. I’m a North Shore guy through and through and have been doing development work for 20 years, previously with Cressey.

Real estate was a family event. I grew up on construction sites with my father and decided to pursue the business side of things. I phoned Scott Cressey when I graduated and told him I wanted to work on the development side. The rest was history.

Why did you decide to shift from Cressey to Darwin?

It’s a great group at Cressey and still feels like family to me. I had been there a very long time and still have a tremendous respect for the team. I was ready to take on a new challenge and try something new when the Darwin opportunity came up. There were also some younger guys at Cressey who were ready to step into my role.

The team at Darwin put together a project showing me everything they were working on. It was all on the North Shore and in areas where I grew up. It was exciting to join a group at a different stage in their life cycle.

Tell us about Darwin’s decision to focus development on the North Shore.

I think it was an interesting decision for Oliver at Darwin to pursue. He decided to focus on his own backyard – the area he knew the best. He had to get creative with deals because it was a young company. So having that local and intimate knowledge allowed him to put together those deals.

The strategy served Darwin well in its early days but there are also challenges to having all of your eggs in one basket. City council might get tired of seeing you all the time and you can outgrow an area.

What are some of the differences working with a smaller, upstart company?

You have to be more nimble. We are a small company but we do have a large portfolio through partnerships and creative deals. I think you need defined roles but you do have to be more dynamic in a small company.

My primary role is to be an advisor. I want to be a resource to our teams, coach them through challenges and share experiences I had to learn the hard way.

How did Darwin Properties grow as a small company without much capital to start off with?

It starts with Oliver’s creativity as a dealmaker. We’re one of the larger landowners on the North Shore as a consequence of that hard work.

There’s also a history of our company as a contractor. That afforded our group the opportunity to pursue these deals. We had a platform to seize the opportunities.

Has 2023 been a surprising year in the market?

From the second half of 2022, we knew we were going into an uncertain time and 2023 has fulfilled that promise. You think you’re back on track but then inflation goes up again and interest rates get hiked.

I do think the cooling economy has already happened and we’re done with interest rate hikes for the foreseeable future. I think there will be a new normal on the other side of this. 2023 has been a bit of up and down, but that will be the future. Nothing catastrophic, but a bit of up and down.

What’s happening with interest rates?

We had low interest rates for a long time because of the technological revolution. But that can’t go on forever as costs of living and transportation rise around the world. Goods are more expensive to produce and that means interest rates need to stay a bit higher.

We have to get used to interest rates closer to where they are now than where they were two years ago.

How have construction costs changed?

Construction hasn’t gotten any cheaper and there hasn’t been a significant infusion of technology in the way we build. Buildings are more complicated but they generally go together the same way. So the cost pressures are insane!

To a large degree, what is dictating the cost of new homes is what it costs to build them. Most developers I talk to are just trying to satisfy lenders.

The persistent demand and persistent construction costs will hold the pricing of new housing high because you can’t afford to make houses cheaper.

We’ll see more pauses and fewer starts until the economic conditions change. The government has to figure out how to help finance and build projects without them being 60-70% pre-sold. If it weren’t for the CMHC programs, there would be zero supply of rental projects.

Can we build the number of houses we need as fast as we need them?

It’s hard to build in a meaningful way because the labour isn’t there. We need to build faster and more efficiently – but we’ve actually gone in the opposite way.

At the beginning of my career, you could do a one year rezone and build a four-storey project in 18 months. Now that same project would take 2-4 years to rezone and three years to build.

We’ve made the process more complicated. But to what end? I’m not sure we’ve actually created more sustainable buildings in that time. Everyone wants affordability but we keep making buildings more complicated and more expensive to build.

Why hasn’t building technology changed?

It’s difficult because projects are built in a non-controlled environment. You’re not building thousands of the same thing in a factory. You build a project once and you never build it again. Even if you’re formulaic about your approach, no two projects are exactly the same.
Much of the talk around forward-thinking buildings is done in textbooks or university classrooms, but I don’t know how effective they are in reality.

How can we improve housing affordability?

We’re never going to create affordability. Our objective as builders and policymakers should be stopping the city from becoming more unaffordable.

I’d love to make things more efficient on the supply side; let’s make it easier to build in terms of approvals but also in terms of what we build. We need buildings to happen more quickly.

The second part of the conversation is creating prosperity. If people have more money, the affordability is better. Let’s put more money in people’s pockets.

How do we solve our labour issues?

We need more people building buildings and more labour in every sector. That comes into immigration policy and bringing in the people with the skills we need.

We also need to look at how we’re influencing our young people in high school. Why aren’t we creating an environment for people to pursue skilled trades and encouraging that in the same way we do a university degree? There are incredibly well paying jobs in the trades; it’s hard work but it’s gratifying work.

Will we see demand shocks in a post-covid marketplace or will there be a new normal?

What we’ve witnessed over the past 20 years was unique. We have to get used to slightly higher interest rates in the 4-5% range. That means a greater demand on capital and fewer deals.

The unknown is the government involvement piece. Will there be changes to the immigration policy and foreign investment? Without knowing that, the simple conclusion is we’ll see slower growth in real estate in the next ten years than the last.

Thoughts on foreign investment and its impact on the market:

Where the topic of affordability went rampant is when we saw affordability on the rental side go bananas. Because condos and single family homes have been unaffordable for as long as I’ve been in this business. During that time, we had an undervalued rental market.

But in the past few years, we’ve seen a reversal of that. We are now the highest rental rate in the country. And that happened when they announced the foreign buyer tax in Canada.

The unintended consequence of banning foreign buyers is it put so much demand on purpose built rental and took so much supply out of the rental market that rates went crazy.

Does the world want to invest in Vancouver real estate right now?

Maybe not like they once did but there’s still huge worldwide appeal for Vancouver. People want to move to Vancouver, so there is investment demand. But the more difficult it is to invest here, the more likely investors will look elsewhere.

Are we doing enough to incentivize purpose-built rental?

I don’t think we could do enough. The programs we have through CMHC are a good start but the challenges are still very real. Interest rates are high, construction costs are high, municipalities are adding complications, etc.

GST was a massive cost to building rental housing – which has been changed with the new announcement about GST for purpose-built rental.

Tell us about Weston Place.

We acquired it from the District of West Vancouver with Kiwanis Housing, who are handling the affordable housing piece. We have designed 57 homes, averaging 1200 square feet, well suited for lifestyle upsizers. They’re coming out of a single family home but still looking for some space.

Watching the market, we see our customer at Weston Place as less interest rate sensitive. Many won’t have a mortgage at all but are looking for stability in the marketplace. They want comfort in their decision to sell their home and move into their next phase of life.

Where are you excited about in the Lower Mainland and BC?

We have nothing active in the Lower Lonsdale area but I live close to there and I love the vibrancy in the area. It’s night and day compared to what it used to be when I lived down there. The patios are full, kids are running around, restaurants are packed, the hotel is doing well, etc. The proximity to downtown and the North Shore amenities make it a great neighbourhood to live in.

Across BC, there are so many great places. The trend through covid to head to smaller communities is less pronounced now but I think it will continue. Places like Penticton and Salmon Arm are great. Are they growth markets like Vancouver and Victoria? Maybe not. But they need to keep growing because we don’t have enough cities in Canada.

Where would you recommend someone invest $1 million in the Lower Mainland?

It’s so personal. My advice is to decide where you want to live and love where you are.

You should buy where you want to be. Location is key.

Buy concrete, if you can. Wood frame is better than it used to be but I’m partial to concrete. You also want to know who you’re buying from. You want to buy from someone who has a track record and knows what they’re doing. You’ll never go wrong when you buy quality.

What does the 2024 real estate market look like?

I wouldn’t be surprised if we saw a little bit of a run on prices in the second half of next year. I think we’ll be in a stable rate environment and there’s a lot of capital out there.

Once rates come down, which I expect to happen in mid 2024, there will be a re-engagement. I think it will be more measured then we’ve seen in the past though.

That’s why I have some confidence in presale. You’re buying at today’s values but don’t have to commit to a mortgage for a few years. So I could see presale being more active than resale, which is a great thing.

The 5 Wire: Getting to Know President of Darwin Properties, Jason Turcotte

What is one book you recommend to our listeners?

I read a book a while ago called The Happiness Advantage by Shawn Achor that I want to read again. Anyone could benefit from reading that book.

What new belief, behaviour or habit have you adopted that has most improved your life?

I had the opportunity to do some therapy and worked a lot on how to empathize with others. You can take that into the work context and in your personal life. It’s been a cool journey for me.

What have you been binge watching lately?

We just got into The Blue Zone and it’s a fascinating thing looking at the theories around the longevity of life.

Favourite band or musician?

I’ve started to get into some of the new country music coming out now, like Chris Stapleton. It’s cool stuff! I play a little guitar so anything I can play along with is great.

What is something you’ve purchased recently for under $1500 that has had a positive impact on your life?

I have to cheat because it was a bit over $1500, but we bought my wife a bike. We went on a number of rides together this summer and it was so much fun.