Daily insights for city builders, delivered every morning at 6 AM ET. I’m Brandon Donnelly — a Toronto-based real estate developer and founder of Globizen. I’ve been writing here since 2013.

Month: February 2019

  • Finding meaning in life and business

    I started my undergraduate degree as a computer science and physics student. But despite my love of technology (and physics, incidentally), I quickly realized that I didn’t want to end up as a software developer. I was interested in so many other things: art, design, business, real estate, entrepreneurship, cities, and so on. And at the time, I was struggling to remain focused on writing code.

    So by the middle of my second year, I decided to drop every single one of my classes and construct my own program until I figured out what I truly wanted to major in. My course schedule ended up spanning everything from the urbanization of ancient cities to the philosophy of aesthetics. It was a pretty great program if you ask me. But others wondered what I was doing.

    I did, however, already have leanings toward architecture. It felt like the perfect combination of art and science. And so while enrolled in my made up program, I started exploring the possibility of transferring schools and switching majors. Around this time I also started meeting with architects to try and learn more about the profession and see if this is something that I really wanted to pursue.

    I’ll never forget this one lunch. The architect I met with — who will, of course, remain nameless — told me very clearly: “You should do anything besides architecture. If you like drawing become an animator. If you like design, do graphic design. Just don’t become an architect.” Naturally, I came out of that lunch and decided to spend the next seven years getting two degrees in architecture.

    And even though I never became a licensed architect, and almost certainly never will, I would do it all over again given the option. I loved the journey and it is this circuitous journey that led me to where I am today, which is in a highly fulfilling career in real estate. I create new things and those things have the opportunity to improve people’s everyday lives. I’m grateful for that. But the path was anything but clear at the time.

    I am telling all of you this story because I was reminded of it when I read this fantastic article by Charles Duhigg called, Wealthy, Successful and Miserable. It is the story of how Charles, a Harvard Business School graduate, discovered that — despite obtaining boatloads of financial success — many of his classmates actually ended up miserable after school.

    Sure, we all need and deserve basic financial security. And when we don’t have it, money can really buy a great deal of happiness. But there’s lots of research out there, some of which I have written about before, that suggests that happiness quickly plateaus once our basic needs are met.

    As soon as we’re no longer worried about money, we actually crave other things from our paychecks. We want it to also be a source of purpose and meaning. To give one concrete example, the article cites a study about a set of enthusiastic and high performing janitors in a large hospital. What was ultimately found was that they saw their jobs not just as cleaning, but as a kind of healing for the patients. They had purpose.

    But what I found most interesting about the article was the discovery that finding happiness in life and business might require, or be aided by, a bit of struggle along the way:

    And many of them had something in common: They tended to be the also-rans of the class, the ones who failed to get the jobs they wanted when they graduated. They had been passed over by McKinsey & Company and Google, Goldman Sachs and Apple, the big venture-capital firms and prestigious investment houses. Instead, they were forced to scramble for work — and thus to grapple, earlier in their careers, with the trade-offs that life inevitably demands. These late bloomers seemed to have learned the lessons about workplace meaning preached by people like Barry Schwartz. It wasn’t that their workplaces were enlightened or (as far as I could tell) that H.B.S. had taught them anything special. Rather, they had learned from their own setbacks. And often they wound up richer, more powerful and more content than everyone else.

    We are, of course, talking about the “also-rans” at Harvard Business School. They’re no slouches struggling to find work. But I don’t think that negates the point being made here. It can be easy to get caught up doing what we think we ought to be doing when in reality we should be finding meaning in something we hopefully love doing.

  • Implications of new housing supply

    There’s a lot of debate within urbanist circles about whether or not supply alone can solve or at least mitigate housing affordability concerns. Richard Florida and others will say that, while beneficial, increasing supply isn’t the be all end all. We need to be building affordable housing.

    Edward Glaeser, Joseph Gyourko, and others have, on the other hand, argued that middle-income housing is a supply problem and that low-income housing is quite simply a demand-side problem, which could be solved through things like a housing voucher program.

    In other words, the cost of housing isn’t necessarily the problem, it’s the low income levels. One of the benefits of supplementing people’s incomes is that it empowers mobility. People can then move to where there are jobs, as opposed to being tied to a specific neighborhood or city.

    But this debate is arguably just about the extent of the supply benefits. Intuitively, it makes sense to try and match new housing supply with demand and economic growth. But how far can that take us, particularly in high demand and high productivity cities?

    Glaeser (Harvard) and Gyourko (Penn) have a relatively recent paper out called, The Economic Implications of Housing Supply, which looks at, among other things, the “implicit tax” imposed on development as a result of land use restrictions and other supply constraints.

    Here are two excerpts:

    We will argue that the rise in housing wealth is concentrated in the major coastal markets that have high prices relative to minimum production costs, and it is concentrated among the richest members of the older cohorts—that is, on those who already owned homes several decades ago, before binding constraints on new housing construction were imposed.

    But in a democratic system where the rules for building and land use are largely determined by existing homeowners, development projects face a considerable disadvantage, especially since many of the potential beneficiaries of a new project do not have a place to live in the jurisdiction when possibilities for reducing regulation and expanding the supply of housing are debated.

    If you’re interested in this topic (and sufficiently nerdy), you can download a PDF copy of the paper here.

    Photo by chuttersnap on Unsplash

  • Price of a new condominium in Toronto increased 12.5% over the last year

    This morning BILD and Altus Group released their January 2019 new home sales figures for the Greater Toronto Area.

    Here are the highlights:

    • 1,362 new homes sold in January 2019 across the GTA. This is up 14% compared to last January.
    • Of these, 942 (~69%) were condominiums (includes low, mid, and high-rise, as well as townhouses). And 420 (~31%) were single-family homes (includes detached, semi-detached, and freehold townhouses).
    • Condominium sales volume is sitting only about 5% below the 10-year average and the benchmark price increased this month to $803,638, which represents a 12.5% year-over-year increase.
    • On the other hand, single-family home sales are down about 53% from the 10-year average and the benchmark price decreased by about 8.1% compared to last year. It is sitting at $1,130,046.

    While there continues to be a bifurcation in the new home market, we are seeing improvements across the board and the data is consistent with Altus’ prediction that 2019 will see an increase in overall sales.

    It is also important to consider how geography might factor into the above numbers. Here are the January sales numbers for the last three years broken down by region within the GTA:

    Just under 80% of the new condominiums sold last month took place in Toronto, whereas only about 1.2% of the single-family homes sold last month took place in the city. You can count them on one hand. There were only 5.

    So rather than just look at this in terms of housing type, I think the other way to interpret the data is that it could suggest strong and continued demand for centrally located and transit-oriented communities.

    And that just so happens to translate into a condominium.

    Photo by Eugene Aikimov on Unsplash

  • Electric scooter startup Lime raises $310 million series D round

    Earlier this month it was announced that the on-demand electric scooter and bike startup, Lime, had closed a $310 million series D round. This values the 18-month old company at around $2.4 billion and brings its total raise to $867.1 million. For comparison, Bird — its main competitor — has raised around $400 million.

    These numbers should tell you about the kind of growth that the “micromobility” startup is seeing. They are now in 15 countries and its riders have taken over 34 million trips. In the last 7 months alone, the company reports that it has seen a 5.5x increase in ridership. They are seen as an affordable last-mile solution. Supposedly 1/3 of its users report an income of less than $50,000 per year.

    Lime entered the Canadian market last fall via Waterloo. They have yet to expand anywhere else, though I suspect we’ll see them in Toronto this spring/summer. One of the barriers is that their scooters (with airless tires) aren’t equipped to deal with snow, so they currently pack them up during the winter months.

    This is in addition to the regulatory challenges they are facing in cities all around the world. But like Uber, I am sure there is a compromise to be had.

  • The top 30 cities for tech and startup companies

    The third edition of Savills’ annual Tech Cities report is now out. Savills is a global real estate company headquartered in London and a few years ago they started looking and what makes a successful “tech city.” As always, you should take these rankings with a healthy dose of scepticism. But this one is based on over 100 individual metrics across 6 main categories:

    • Business environment (such as the size of the financial services industry)
    • Tech environment (such as the amount of inward VC investment)
    • City buzz and wellness (is it a cool place to live?)
    • Talent Pool (is the city creating and attracting young/smart talent?)
    • Real estate costs
    • Urban mobility

    Here are the top 30 cities for tech and startup companies:

    New York takes the top spot, supposedly because of its deep talent pool and position as one of if not the capital the world. But my friends in the Bay Area tell me that their housing shortage is also starting to impact SF’s tech dominance.

    Generally, the report finds that the above “tech cities” should see their GDP rise by 36% over the next decade, compared to 19% for other developed cities. I’m not sure how much of this has to do with tech, but the above list does differ from what you’d see in a more conventional global cities index. Here you have Austin ahead of global cities such as Hong Kong. And you have Toronto ahead of cities like Tokyo and Paris.

    One takeaway that shouldn’t come as a surprise to readers of this blog is the rise of Chinese cities in the index. Beijing is ahead of New York, London, and San Francisco by a wide margin in terms of annual VC investment. And Chinese cities as a whole are starting to take a greater share of global VC dollars (second chart below).

    If you’d like to download a PDF of the full report, you can do that here.

    Image: Photo by Jason Briscoe on Unsplash

  • Airbnb empire comes to an end in NYC

    At the beginning of this year, the City of New York filed this lawsuit in an attempt to shut down an Airbnb business that has supposedly generated around $20 million in revenue since 2012. It is currently illegal to rent out an apartment in most buildings in the city for less than 30 days unless the owner/permanent tenant is present. And that’s not how this business was being operated.

    Here are the locations of the rentals named in the lawsuit (map from the New York Times):

    The defendants include a real estate brokerage, the three partners behind the business (more on them here), as well as others. NYC has been trying to pass legislation that would force Airbnb to disclose more information to the Mayor’s Office of Special Enforcement. Information such as the full name(s) and address(es) of every host and whether the short-term rental is an entire dwelling or a room. That presumably would have helped here.

    For more on the lawsuit and the backstory, click here.

    You may also find it interesting to go back to the five-point plan that Airbnb put forward back in 2016. It was intended to serve as a framework for new short-term rental legislation. The points make a lot of sense.

  • A visit to BMW World

    Today we visited BMW Welt (World) and the BMW Museum in Munich.

    BMW Welt was designed by COOP HIMMELB(L)AU out of Vienna. It is the result of a design competition that the BMW Group held in 2001. Construction of the ~73,000 square meter facility was completed in 2007.

    The project is centered around a great hall and an elevated vehicle delivery area known as Premiere. It was designed — and this includes the HVAC system — to handle 40 car deliveries per hour, or 250 per day. I guess they don’t work a full 8 hours.

    Below are two photos that I took of the delivery area. The circles you see on the floor in the second picture are rotating platforms. This is where you want to pick up your new car.

    And here is a plan of the entire Welt space via COOP HIMMELB(L)AU:

    I also really enjoyed the BMW Museum, which is housed in a separate building adjacent to the BMW Tower (the one that looks like engine cylinders).

    The “art cars” were a lot of fun. I’m sure that many of you will be able to guess the artist behind this one:

    But what I enjoyed most were the classics like this one here:

    The least interesting cars for me were the ones that weren’t old enough to be “classic”, but also weren’t new and shiny. This can happen with architectural styles as well. Designs sometime need time to settle in.

    For more photos of BMW Welt and the BMW Museum, follow me on Instagram.

    Drawings/Isometrics: COOP HIMMELB(L)AU

  • 200 km/h on the Autobahn

    We drove on the Autobahn today. Our Ford remained as smooth as ever. They take their cars seriously here and force regular inspections.

    But this got me wondering about safety records and why more countries haven’t adopted similar approaches to highway driving.

    Here is Germany’s 2014 record from Wikipedia:

    It turns out that the injury and fatality rates on the Autobahn — measured per billion vehicle kilometers traveled — are actually relatively low compared to urban and rural road classes.

    It is also relatively low compared to international standards. Here is a 2012 comparison, also via Wikipedia:

    Europe as a whole does very well in this regard (not that this specifically addresses Autobahn safety). Generally, fatalities have declined significantly over the last few decades.

    Here is a chart from the World Health Organization:

    What is clear to me after seeing this data, though, is that the greater problem looks to exist outside of our highways and motorways.

  • How America uses its land

    Last summer Bloomberg ran a visual essay on how America uses its land. In case some of you missed it, I thought I would share it here today.

    They started by breaking the country down into 6 main land uses. Each square represents about 250,000 acres.

    What likely won’t surprise any of you is that urban areas punch well above their weight:

    Even though urban areas make up just 3.6 percent of the total size of the 48 contiguous states, four in five Americans live, work and play there. With so much of the U.S. population in urban areas, it’s little surprise that these areas contribute an outsize amount to the economy. The 10 most productive metropolitan areas alone contributed to about 40 percent of U.S. GDP in 2016.

    Here’s a further breakdown of the map:

    There is a lot that is interesting here. Note that golf courses made the cut.

  • Redeveloping the Port Lands — among other things

    On Monday, Christopher Hume of the Toronto Star responded to the recent backlash against Sidewalk Toronto with a piece called, Anger over Google’s vision for Toronto waterfront is misguided.

    The below excerpt is what I was trying to diplomatically allude to with my post on net present value. We need to look at what we are getting and what we are giving up (by way of foregone revenue).

    What had civic (and provincial) nabobs gnashing their teeth was Sidewalk’s suggestion that it should receive a share of city property taxes and development fees. And what would the New York-based outfit do in return? A few things, it turns out. Specifically, it would finance the long-delayed Queens Quay LRT, build the infrastructure necessary to remake much of the Port Lands, launch a new wood-based construction industry and, oh yes, kick-start redevelopment of 140 hectares of long neglected landfill.

    I also don’t understand how the possibility of expanding into the Port Lands has come as a surprise to anyone. That was always integral to the opportunity here in Toronto.

    What your thoughts?