March 29, 2023
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/imagine prompt: A silver Land Rover Defender driving through a snowstorm in the mountains of Utah

Like everyone else, I have started playing around with Midjourney to create AI-generated images. Here are two that I created last night using the prompt: “A silver Land Rover Defender driving through a snowstorm in the mountains of Utah.”

Now, you can tell that these are AI-produced images, but it’s still wildly impressive that something like this can be easily generated in a matter of a few seconds. And that’s the thing about AI: it’s easier to get, especially compared to crypto. It’s immediately useful and it’s immediately clear what this can and will disrupt.

Levis, for example, just announced that it will start using AI-generated photography in lieu of actual fashion photoshoots. This is obviously suboptimal for photographers, models, makeup artists, and so on, but a hell of a lot easier for Levis. I would also imagine that the same thing will happen to real estate renderings and many other things beyond just imagery.

Ben Myers and Steven Cameron recently speculated on their podcast — Toronto Under Construction — that AI could be used for reviewing development applications. Imagine how much this would speed up reviews and the delivery of new housing! So there are very good reasons for why the hype cycle has moved over to AI from crypto and NFTs.

However, I’d like to go on the record saying that my gut tells me that this will only make what crypto offers even more important. Permissionless public databases (as opposed to databases controlled by individuals/companies) and the ability to demonstrate authenticity/ownership, feel like two important things to me in a world where computers are constantly generating a flood of new content and nobody knows what is “real” anymore.

It’s certainly a lot less tangible than, “hey, check out this badass Defender driving through the snow.” But I feel strongly that these two innovations will end up working together.

March 28, 2023
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How to spend city money

This is an intriguing idea:

Many cities around the world practice some form of participatory budgeting, but even among those that do, Cascais [Portugal] is an outlier. It spends prodigiously through the system: in Paris, five per cent of the city’s annual investment budget has been allocated to participatory projects in recent years, but in Cascais, more than fifteen per cent of the budget flows through the program, and the percentage can float higher if voter turnout rises. Cascais is surprising in another way: its mayor, Carlos Carreiras, is both a champion of participatory budgeting and a member of a center-right political party. Participatory budgeting is often considered a tool of the left, but its role in Cascais suggests that it could have a broader appeal; part of the theory behind it is that citizens can be better than officials at knowing how money should be spent.

Of course, it won’t solve all of our problems:

Even in the best of circumstances, participatory budgeting faces some structural limitations. Citizens can’t use it to raise the minimum wage, for instance, or to reconfigure affordable-housing policy, or to ban single-use plastics. As it stands, the approach “will never change the destiny of a poor neighborhood,” Giovanni Allegretti, a senior researcher at the Centre for Social Studies at the University of Coimbra, told me. Allegretti noted that participatory budgeting is mainly a competitive process involving limited resources with no long-term strategy; it doesn’t eliminate the need for other policy interventions. But when it functions effectively, participatory budgeting can give direct political power to those who might otherwise have very little of it.

There is something very compelling about empowering people to come up with new ideas, compete with others for the best ones, and then participate in public decisions. It also strikes me as a possibly efficient way to force: “We only have this much money to spend. What should we spend it on? Spending on this means not spending on that. Time to make a decision.”

And now it has me wondering: If we asked Toronto whether it wanted to spend over $1 billion to rebuild the Gardiner Expressway east or spend it on other things, what do you think it would say?

For the rest of the above article, click here.

March 27, 2023
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New York’s iconic Flatiron Building just sold

Well sort of.

Previously leased to Macmillan Publishers for the last 60 years, the building has been sitting vacant since 2019 and supposedly needs something like $100 million in CapEx to make it leasable again. Four of the five current owners have wanted to renovate it, but the fifth kept blocking it, and so the other partners sued for a “partition auction.”

That auction happened last week, and even though the four owners were really trying to lock down the 25% share that they didn’t own, the auction was won by an outsider at $190 million. That said, a 10% deposit was to be due the following day and, apparently, that never happened. So maybe it hasn’t sold yet. But whatever, it’s still interesting to think about its purchase price.

According to Wikipedia, the Flatiron Building is 255,000 square feet. So at $190 million, the building was “purchased” for $745 per foot. Assuming that it needs another $100 million, that’s another $392 psf, for a total of $1,137 psf.

What I am curious about now is how this compares to other office buildings in midtown Manhattan. Is there any sort of premium for being the Flatiron Building? And what would space in this building lease for following a renovation? i.e. What cap rate is the market demanding right now for an empty office building needing $100 million in renovations? Or, is the play to convert to residential?

I don’t know enough about the real estate market in midtown Manhattan to answer these questions with any sort of precision, but I’m hoping some of you do and that you’ll leave a comment below.

March 26, 2023
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Peaks and plains

On the exact same day last week, the Toronto Star published two articles about housing. The first one, this one here, is about how “Toronto has protected huge parts of the city from anything denser than detached or semi-detached houses” and how this has resulted in an “uneven city.” The second article, this opinion piece, is about the “many repercussions to replacing little bungalows.” And one of the implied repercussions is that 3-storey sun blockers that invade privacy might actually kill people. Hmm.

In effect, these are the two sides of this debate. If you zoom out and look at Toronto, you will largely see a contrasting and uneven city of tall buildings and low-rise housing. Instead of building like Paris, which is consistently mid-rise — but also far denser on average than Toronto — we have chosen peaks and large plains to constrain new housing. And if you zoom in across those plains, you’ll find many areas without sidewalks, along with people, such as the author of the second article above, who believe that nothing more than a single storey is appropriate for human health.

All of this has persisted because it has been politically popular. But time continues to show us that it actually runs counter to our goals of building an inclusive and globally competitive city region. Thankfully, it feels like we are finally reaching a tipping point.

Photo by Jackson Case on Unsplash

March 25, 2023
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Leadership is a great burden

I went to bed last night watching President Biden’s address to the Canadian Parliament (full transcript, here.). And I woke up this morning to this Globe and Mail article about Canadian competitiveness. In it, Tony Keller talks about some of the things that are broken in this country (shockingly housing comes up), and compares Canada to Argentina (an example of too many bad decisions) and to South Korea (an example of many good decisions).

All of this got me thinking about leadership.

Leadership is a great burden. As a leader, people are looking to you for decisions, for direction, and for you to instil confidence. They are also scrutinizing your every word and action. And in today’s world, they are waiting to criticize you on social media and/or make a funny meme out of your most recent misspeak. As a developer, I get to interface with municipal politicians probably more than your average person, and I can tell you with confidence that it is a thankless job I would never want.

I can only imagine having to constantly worry about your employment and what people are thinking. Given this incentive structure, I’m sure we’d all act accordingly. It is truly public, service. At the same time, I know that it is not only unproductive — but dangerous — to pander to just what is thought to be politically popular. And we have spoken many times before on this blog about housing and land use policies that may be popular, but aren’t at all effective — or worse, are counterproductive.

What we should be demanding from our leaders are difficult decisions. These are the decisions that probably feel uncomfortable and that may require some personal sacrifice, but that are ultimately the right decisions for our collective long-term prosperity. It is about ambitiously deciding where we want to go and who we want to become, and then taking meaningful actions, however unpopular they may be, to get there.

Don’t just tell me what I want to hear. Lead me. Push me. Be bold. In the end, we will respect you for your personal sacrifices and the difficult decisions you are making on our behalf. This is the great burden — but also the great opportunity — of leadership, and it behooves us to empower it. To borrow from Tony Keller, “there’s no reason we [Canada] can’t be the most prosperous and successful society on earth.”

March 24, 2023
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Skyscraper construction speed by city

Brian Potter, of Construction Physics, recently tried to determine which cities build skyscrapers the fastest.

Here’s how he went about that:

  • He started by looking up the 50 largest cities in the world on Wikipedia
  • He then pulled data from the Council on Tall Buildings and Urban Habitat to get a list of every skyscraper completed between 2000-2020 that was over 100 meters, had a start and completion date, and had a gross floor area
  • The result was a list of 986 skyscrapers completed in 39 cities, most of which (~740) were completed in the US, China, Japan, and Canada
  • Finally, he calculated completed square feet per year and made some charts

Here are the results:

And here’s one thing he had to say about them:

Interestingly enough, the huge outlier in slow construction isn’t the US, but Canada, with an average skyscraper construction speed of half that of the US’s.

For a lot more information on this topic, click here.

March 23, 2023
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One Delisle has started the big hole part

The most boring part of constructing a high-rise, like One Delisle, has got to be installing the shoring piles. Sure there are big rigs moving about on site but, for the most part, there’s almost no visible progress. That is, until you start excavating. Then you get to see said piles and you also end up with a big hole, which is something.

Thankfully shoring works are now complete at One Delisle and we have started on the big hole part (see above photo from our rooftop cam). The next major milestone will be our “bottoming out,” and that’s when the tower crane will go up and our massive raft slab foundation will get poured. Visible progress is certainly more fun.

March 22, 2023
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Thoughts on Opendoor Exclusives

My most recent post about Opendoor, the so-called iBuying company, is about how it wants to become the “transaction layer for homes.” What that means is they would like to start facilitating third-party transactions between buyers and sellers, and move away (either partially or completely) from actually owning homes for a period of time.

The company is still trying to sell homes that it purchased in Q2-2022, which, as we all know, was a very different kind of housing market. So by doing this, Opendoor would be both reducing the market risk that it takes on and making its business model less capital intensive.

Knowing this, I actually think that “iBuyer” is the wrong moniker for their business. As I see it, the long-term objective is not to just be an iBuyer of homes. The objective is to ultimately facilitate transactions in a capital efficient kind of way. The point of iBuying is/was to seed their two-sided marketplace with sellers.

As we have discussed before, two-sided marketplaces usually always have a chicken-and-egg problem. No sellers equals no buyers, and vice versa. So you have to figure out a clever way to attract one side. Of course, now that Opendoor has sellers, the company can start to aggregate the demand side (i.e. buyers). And that is exactly what it is doing with Opendoor Exclusives.

Exclusives works like this:

  • The inventory consists of “off-market” homes that have yet to be listed on MLS
  • The homes are discounted about 2-4%
  • They are available for 14 days
  • You can’t negotiate the price — it’s first come, first served
  • If your appraisal comes in lower, Opendoor will price match
  • And finally, Opendoor will not pay any buyer commissions (which is reflected in the above discount)

As I understand it, if the home doesn’t sell, it then gets listed on MLS and all of the normal terms and practices would apply. But before that happens, the key objective is to facilitate a quick transaction in one of two ways.

The first way is for the seller to request an offer from Opendoor’s network of buyers. In this scenario, Opendoor never needs to own the home or perform any improvements (which is usually what it does when it iBuys). It is an intermediary earning some sort of take.

The second way is for Opendoor to do its usual thing and make an instant offer to buy the home. But here’s the thing. With enough buyers on its platform and by creating a sense of urgency (hey, here’s a lower price!), presumably the idea is that it may never need to close on a number of these homes. It just needs to find another buyer within 14 days.

If it works, this could be an interesting business.

March 21, 2023
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Royal Bank of Canada to employees: “Get back in the office”

Royal Bank of Canada, which is one of the largest employers in the country, sent an internal memo to employees this week with statements like these:

“When our teams come together on-site more frequently, we are solving complex problems faster, learning and growing more effectively, and ultimately building deeper connections with one another.”

“Without frequent in-person engagement our long-term competitiveness is at risk.”

I feel strongly that we are going to continue to see more of this. Current work-from-home arrangements are not at all static. We have not yet reached a post-pandemic equilibrium. That will likely take a few more years.

More flexibility, rather than less, is something we all want, and I don’t believe that’s going away. But I do believe that for the most productive and congealed teams, the default workplace will remain the office.

P.S. Office Space (embedded video above) is a great movie.

March 20, 2023
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Population density map of the world

I came across this interactive world population density map over the weekend and I immediately thought to myself, “this is going on the blog.” It uses data from the Global Human Settlement Layer (GHSL) produced by the European Commission and by CIESIN (super long name) at Columbia University. And it’s a fascinating way to explore how our world is urbanizing.

What you will want to do is make sure that you head over to China and check out regions like the Yangtze River Delta (shown above). If you hover over a location, it will also bring up a graph and table showing you how that place has evolved from 1975 to 2015. Note: Shanghai’s peak population density in 2015 was 104,400 people per square kilometer!