From the outset, people have been predicting that the internet would become a decentralizing force for cities. That is, technology would allow us to spread out and work from anywhere — perhaps from a small mountain town in the BC interior. While working from home (WFH) and working from anywhere (WFA) does appear to be on the rise, it hasn’t made cities irrelevant. (US Census data from 2018 estimates that only about 5.2% of Americans work entirely from home.) In fact, the “new economy” seems to have made superstar cities, such as London, seemingly even more important. It has concentrated economic activity; so much so that we’re searching for ways to spread out income and wealth more evenly.
But could it be that the technology simply wasn’t there yet? Fred Wilson posited on his blog today that right now might be video conferencing’s moment. Between not wanting to travel (coronavirus, carbon footprint, time, etc…) and advancements in the actual technology, companies such as Zoom are changing the way people and companies engage over long distances. It is happening in our offices. And come to think of it, there are probably a bunch of meetings that I could and should switch over to Zoom. I’m not yet convinced that it will become a decentralizing force for cities. But it does seem to be empowering less travel and more flexibility.
The media tends to describe agglomeration economies — one of the benefits of big urban areas — as being entirely serendipitous. Minimize travel. Maximize chance encounters at the local coffee shop. And then all of a sudden patents will go up and new startups will emerge. That does that happen, I’m sure, but there’s a bit more structure to a lot of these encounters. Economies of agglomeration is not just about serendipity. It is about the benefits of and the decision to concentrate economic activity.
Last week, a think tank in the North of England (IPPR North) published a report outlining, among other things, job creation and productivity across England. Based on these metrics, London and the South East dominate, with “productivity” in London being by far the highest. Almost half of England’s new jobs over the last decade were in these two regions. Above is a chart from the Financial Times. The trade-off is wealth and income inequality. And the report does look to how the government could address this centralization of power and wealth.
At the beginning of this year, Singapore expanded its preschool subsidies and improved its support for assisted reproduction and fertility treatments. The goal: more Singaporean children. According to the World Bank (via the Wall Street Journal), Singapore has one of the lowest fertility rates in the world at about 1.14 children per woman as of 2018. This is down from about 3 in 1970, when the government was actually worried about the opposite problem — too many children.
Of course, this trend is not unique to Singapore. This is generally the way the winds are blowing in the developed world. Young people are spending more time on education, career, and travel. And they’re delaying marriage (or not getting married). On top of this, family-sized housing has become fairly expensive in most big cities. The fastest solution is to ramp up immigration, but many countries, including Singapore, have concerns about what this does to the “national identity.”
So there seems to be a preference for throwing money at the problem and promotional material with slogans like this one: “Have three, or more if you can afford it.”
LA-based startup, Canoo, is trying to rethink urban transport and, more specifically, how people use and consume electric vehicles. They aren’t planning on launching in Los Angeles until next year, but here’s what is apparent so far.
(1) The vehicles (pictured above) are far more utilitarian in their design — though still attractive. The focus does not seem to be on creating objects of desire, which is how cars have historically been sold.
(2) The interiors are more living room-like in their seating configurations. This makes them feel less like a car and more like public transit (or a prom party limo).
(3) The plan is for these vehicles to be available through a commitment-free monthly membership, as opposed to through a traditional lease or purchase option.
These features are the sorts of things that many have been predicting would happen. But they remain signals for the future of the “car.” They are also perfectly well suited to autonomy.
If you’d like to join their waitlist, you can do that here. I just did and apparently I’m #5967 in line. I have no idea when they hope to launch in Toronto, but who doesn’t love a good waitlist? The illusion of scarcity can be a powerful motivator.
Update: My position in line has improved to #229 because of all of the “referrals” generated by this post. Canoo has done a good job using their waitlist system to generate exposure and solicit early customer feedback.
Bullpen Consulting and Batory Management published their Q4-2019 land insights report for the Greater Toronto Area today. According to the report, there were 36 high-density apartment land transactions in Q4-2019. The average sale price was about $111 per buildable square foot and Bullpen estimates that these future projects — assuming they go condo — will sell for just under $1,000 psf on average.
But that’s blended across the entire GTA.
Looking at the core of Toronto (former City of Toronto boundaries), the average price per buildable square foot was about $187, which represents a year-over-year increase of 28%. There’s also a premium for mid-rise sites. Bullpen pegs the average price of a mid-rise site in the City — unzoned but with an active development application — at about $231 pbsf. These numbers will obviously translate into much higher condo/apartment prices.
If you’d like to download a copy of the report, click here.
Architect Michael Green’s new house in Kits Point, Vancouver was recently featured in the Globe and Mail. He and his family went from a 3,500 square foot home in the suburbs to a 1,500 square foot semi-detached home in the city, close to downtown. The house is simple, sparsely decorated, and about 13-feet wide.
Here’s why he decided to do it: “I didn’t want to have to commute by car any more,” he says. “I wanted to be able to bike everywhere. I also wanted my kids to be able to bike everywhere. I wanted them to develop a sense of freedom, to have mobility, something too many kids don’t get these days.”
As we all know, there is typically a very real trade-off in cities between space and location. The further you move out from the core (a generalization), the more affordable space usually comes. But at the same time, your transportation costs also increase — both directly and indirectly if you factor your time and your quality of life.
Depending on how you value each of these items, you might be inclined to pursue more space or pursue more reasonable transportation costs. A 2,000 square foot reduction in space might seem like a lot. But if you’re heavily weighted toward freedom and mobility, as Green clearly is, it could be a perfectly rational decision.
I started watching Parasite on a flight home this past weekend (I know, I’m behind). The first couple of scenes immediately hooked me and so I ended up watching the full movie over the weekend. It’s one of the most creative movies I have seen in a long time. (To be fair, I don’t watch a lot of movies these days.) I won’t spoil it all for you here, but if you haven’t seen it yet, I would highly recommend it. One of the principal themes is social inequality. And it’s interesting to see how that gets told through the spaces within the film. The poor family lives in a “semi-basement” at the end of what appears to be a laneway. And the rich family lives, higher up, in a house designed by a famous architect. Naturally it has a big and perfectly manicured backyard. At one point in the film, you also get to see which housing type is more environmentally resilient.
I’ll leave it there. But it’s worth checking out if you are into award-winning Korean tragicomedies.
Wired recently published a long read called, “I stumbled across a huge Airbnb scam that’s taking over London.” Apparently the people who do these sorts of things on the platform (things that are both illegal and questionable) call it “systemizing.” This is the process of trying to create scale. Secure lots of units. Create a bunch of fake/duplicate accounts. And try and maximize revenue.
This obviously runs counter to Airbnb’s mission of “authentic places”, “community”, and “local hosts.” But as Benedict Evans points out in his latest newsletter, “where there is money and people, there will be scams.” And Airbnb is obviously doing everything it can to quash this kind of activity, especially as it prepares for a possible IPO this year. The company has a policy of zero tolerance.
Fraud and government regulation are likely to be the two biggest kinks to work out as the company gets ready for public consumption. I am sure an equilibrium will be found; it’s just going to take some time and a few lawyers. It goes to show you just how challenging startups can be when you combine digital (tech) and physical (real estate).
Building new housing — in the places that really need it — is exceedingly difficult. This recent New York Times article by Conor Dougherty is a good example of that. It tells the story of a man named Steve Falk.
Steve was previously city manager for Lafayette, California (a suburb of San Francisco), but he eventually grew frustrated by his inability to affect positive change, and actually build things. He ended up resigning.
Below is a quote from the article. Steve is talking about housing affordability and supply.
“I’m not sure individual cities, left to their own devices, are going to solve this,” he told me once. “They don’t have the incentive to do so, because local voters are always going to protect their own interests instead of looking out for people who don’t live there yet.”
Steve is right in this assertion. I think it was Charlie Munger who once said, “Show me an incentive and I’ll show you an outcome.”
I don’t know the specifics of the proposed 315 unit apartment building in Lafayette (perhaps it was ugly), but the article claims it was an as-of-right proposal close to a BART station (transit).
How does that turn into 0 units and numerous lawsuits, while we all continue to debate housing affordability? Something is broken.
There’s a lot of data/speculation out there about the impact of ride-hailing apps. Many dense urban centers are claiming that they have increased traffic (slowed average speeds) and pulled people away from public transit. The University of Toronto published this study last year. And the WSJ recently published this chart for Chicago:
To be honest, I’m not sure how much of the above is a result of ride-hailing apps, overall urban growth, e-commerce deliveries, public transit disinvestment, or other factors. But what is clear is that ride-hailing is pretty convenient and most (if not all) cities are seeing massive growth in this space.
But all of this feels to me like a bit of a red herring. People will obviously choose what is most convenient and relatively affordable. And congestion was a problem well before people started using these apps (demand > road supply). The only solution I have seen work is to price congestion/roads.