The Commercial Market from Victoria to Calgary with Gordon MacPherson

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Join hosts Cory and Melissa this week in a captivating interview with Gordon MacPherson, President of Elevate Development Corp.

Gordon provides expert insights into the current real estate market and its dynamic nature. We talk about how different asset classes have been affected since the pandemic and gain valuable knowledge on the evolving trends in walkable village concepts within various areas. Get ready to broaden your horizons as Gordon shares what he perceives as investment opportunities across the country.

Whether you’re a seasoned investor or just starting out, this episode offers a wealth of information to help you navigate the ever-changing real estate landscape. Tune in now to gain valuable insights from one of the industry’s most knowledgeable voices, and unlock the secrets to successful real estate investing. Lets go!

What is Elevate Development Corp?

Elevate was founded in early 2010. I had put together a number of deals on my own before Elevate and then had a fortuitous golf date with my future business partners. Our first build was their large office project in Surrey.

We started as a merchant redeveloper, identifying assets that had a value-add opportunity. We stayed away from raw land sites but have done some over the years. But I never had to go out and raise capital.

How is the office market post-pandemic?

From our standpoint, it’s not an asset class we’re trying to grow. But we’re also not looking to sell the office assets we own. We’re not staying away from office permanently.

Before covid, there was a drive to maximize efficiency in offices and fit as many people in as possible. But that was the least desirable thing during covid. Now the office market has to reinvent itself.

So coming out of covid, companies need to figure out how important it is to have people in the office. Maybe it’s three days in the office instead of five or people have a desk for the day instead of a permanent desk.

We also have to look at parking. Office has always had the highest requirement for parking but with today’s development costs, developers are having to build fewer parking stalls. Municipalities are also pushing for fewer parking stalls and more transit accessibility.

Has there been a shift in office leasing pre and post pandemic in Victoria?

Victoria is a different animal. There are more office buildings designed for government use, because the government drives their office market. Their office market has evolved and there is growing demand from the tech sector. It comes down to liveability. Victoria has the mildest climate, great restaurants and lots to do which is attractive to young tech workers.

Victoria was dealing with historically low vacancy pre-covid and even during covid, their rates didn’t go up dramatically. So we’re seeing a lot of movement. When I used to do office leasing in the Valley, it was $12-14 and now it’s in the low $20s. That all happened in the last 6-7 years.

Can you tell us about your project in Mission with commercial & residential components? How did covid change that project?

It was a very interesting project for us. I believed in the market and it seemed like a no-brainer to develop in Mission after the growth we saw in Maple Ridge and Abbotsford. Condo projects in those areas were pre-selling really well. But when we hit the Mission market in 2017, we were the first new apartment building built since 2001.

Mission has a lot of similarities to Squamish with lots of cool stuff to do. It makes a lot of sense for people looking for work-life balance, especially with the West Coast Express connecting Mission to downtown.

The project is 130 apartment units across two buildings and about 100,000 square feet of commercial space. It was a learning experience for us. I can’t say we’re going to rush to do another condo project.

We’re huge fans of the village format: park your car on Friday and don’t use it again until you go back to work on Monday. Everything you need is a short walk away. We even have an elevator that connects the residential area to the commercial area, essentially letting you get to shops in your basement.

Covid was a big shift for that project. We had planned to have a casino inOutlook Village but when covid hit, they were gone. So we decided to fill that space with a food anchor, which proved to be unbelievably sustainable through covid. We were able to put together a deal with Co-Op and when word got out, everything shifted. Retail lease rates went from mid to upper 20s to high 30s/low 40s. It was a game changer for the entire development.

Tell us about your new project in Vancouver on Oak and 49th.

We purchased a site in Burnaby a number of years ago from 7/11 and then worked with them again for this site in Vancouver. We’re just about to go to the city with a design that we’re really excited about.

It will be rental apartments in the village format where the lower two levels will have a grocery store and a daycare. This will be a place for families to rent apartments that are designed efficiently but still fit a king size bed, have a patio, etc.

Where is the commercial market right now and where are we a year from now?

Interest rates are such a driver in the market right now. We’re still looking for good quality, value-add assets we can keep long term but we’re not seeing those in the Lower Mainland at the moment. The cap rates are very sticky; they haven’t moved like the interest rates have moved.

You want your yield to be above the cost of borrowing but we’re just not seeing that in the current Lower Mainland market.

If we don’t see another quarter point raise by the Bank of Canada in July, I think we’ll see it in September. The hope is that that will be the top. We will then go into a long waiting period. By 2025, we hope to be back into a normalized interest rate range of 4-5% as opposed to the low to mid 6% in commercial right now.

Where are you looking for real estate right now?

We like the Interior and the Island. But we’re most excited about Calgary, as well as Edmonton, right now. We prefer primary markets. Calgary, from an investment standpoint, still has a lot of opportunities, even with the high interest rates. It’s one of the fastest growing cities in Canada and is very resilient. The population is young, educated and growing.

Industrial, because it has proven to be so resilient, is at the top of everyone’s wish list. Food-anchor is another asset we really like. Emerging markets like Balsac in Calgary are definitely on our radar.

The 6 Pack: Getting to Know President of Elevate Development Corp, Gordon MacPherson

Favourite vacation spot?

It has to be Kihei in Maui. Great beaches!

What would your last meal be on death row?

I think it would have to be omakase. I tried omakase during covid where essentially you put your taste buds in the hands of a Japanese chef. I had no idea what I was eating but everything was unbelievable!

Favourite band or musician?

I have to go with U2. I grew up with them and it brings me right back every time I hear “With or Without You.”

One book recommendation

I’m not a huge reader but I would recommend The Richest Man in Babylon by George Samuel Clason. The message is all about the benefits of compound interest, done in a very playful and biblical way.

What is your go-to karaoke song?

Every Rose Has Its Thorn by Poison. But I won’t break into song unless tequila is involved!

What is something you’ve bought for $1500 or less that has had a positive impact on your life?

I’ve gotten into this whole cold plunge thing where some friends and I jump in the river at Lynn Valley. I spent $100 on water shoes because it’s quite rocky down there.

• Elevate Development Corp.