Brandon Donnelly

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.

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Month: December 2020

  • The case for speculative asset bubbles (and happy new year)

    This is an interesting perspective. It is from Fred Wilson’s annual what-happened-this-past-year post:

    But here is the thing about speculative frenzies – they are generally directionally correct but off in their order of magnitude. And they finance the trend that they are directionally correct about. It may be the case that Tesla’s market capitalization is too high, but that allows Tesla to raise $10bn without diluting more than a few percentage points. And that $10bn will go towards accelerating the conversion of the auto industry from carbon-based fuel to renewable energy. And that is a good thing for society.

    When I first read this my mind immediately went to tulip mania. Was that directionally correct? Did tulip bulbs ultimately rebound and maintain their value over the long-run? I actually don’t know.

    But if you think about the dot-com bubble, that was directionally correct. Sure, infamous “companies” like Pets.com never ended up going anywhere, but the idea of tech and the internet becoming dominant was absolutely right.

    Fast forward twenty years and you can be sure that many people are now buying their pet supplies online, along with pretty much everything else. Sometimes we simply overshoot and get the timing wrong.

    This is perhaps a good thought for all of us to consider as we welcome 2021 and say goodbye to what was one weird and terrible year.

    Being directionally correct means that it’s okay for there to be bumps, mistakes, and speculative frenzies along the way. They are expected. What matters is the path forward.

    Happy new year, everyone.

  • Amazon opens up its maps platform

    More than half of Amazon’s US deliveries are now completed using its own fleet. So at some point, the company will no longer need to rely on FedEx and/or UPS. It’s also on track to quickly surpass them in terms of packages delivered per year, if it hasn’t already.

    But this also means that Amazon has had (and has been developing) its own maps platform to help support its delivery vehicles. Up until recently it was an entirely internal and proprietary tool. But this month, the company started to open it up in preview form (via an API).

    What this mean is that if you have a web or mobile application that needs a map or some other kind of location-based feature, you now have the option of using Amazon instead of Google or Apple or some other company.

    What’s interesting about this move is that it’s exactly what Amazon did with AWS (its dominant cloud infrastructure business). AWS is a meaningful part of Amazon’s overall business — in fact, it’s responsible for over 10% of the company’s total revenue, and an even bigger part of its operating income.

    So this quiet little announcement could be something.

  • The Great Dispersion

    It’s that time of year again. It’s time to make predictions for the upcoming year and time to look back on the ones we all got wrong from a year prior. I don’t recall many people (if any) predicting that a pandemic would cripple the global economy.

    I like how Scott Galloway put it in his 2021 predictions post. It’s obviously better to be right than wrong, but it’s okay to be wrong. The value in writing down your thoughts is that it forces you to think. It’s the reasoning that matters. (It’s one of the reasons why some people write blogs.)

    A key theme in Galloway’s predictions post is something that he calls “The Great Dispersion.” This involves two things: (1) The physical distribution of products and services over wider areas and (2) the bypassing of gatekeepers and other intermediaries (which is something the internet has always been good at).

    You could interpret this as being directly antithetical to cities. Urbanism, after all, is all about agglomerations. But I think it’s more nuanced that that. Cities have generally always had both centralizing and decentralizing forces. The two can co-exist.

    I will get into this in more detail in my own 2021 predictions post. But in the mean time, I would encourage you check out what Scott Galloway recently published, over here. And if any of you have any thoughts about what’s in store for us in 2021, please leave a comment below.

    Don’t worry, it’s okay if you’re not right.

  • Toronto’s condo market in 2021

    “If everyone is going left, look right.” –Sam Zell

    The right time to buy things is usually when other’s aren’t, which is why I’ve felt that this year was a great time to buy a centrally located condo. Cities aren’t going anywhere. This isn’t their first pandemic. Downtown demand will return as soon as urban life returns and the majority of people are back in their offices next year.

    I’ve also been predicting that the run-up in single-family home prices that we have seen this past year here in Toronto will eventually lead to a surge in demand for condos (and perhaps even for larger suites). It’s a question of relative affordability. And so it was interesting to see Shaun Hildebrand of Urbanation predicting the same thing for 2021 in this recent Toronto Star article.

    Hildebrand thinks the soaring prices of single-family homes will also push more buyers back to the condo market.

    As of November, the average price gap between condos and detached houses was $596,000. The gap between a condo and a semi-detached or townhome was about $217,000. Both of those were at their second-highest levels since the market peaked in late 2016-early 2017, he said.

    “This could really start to swing demand towards condos in the second half of the year,” said Hildebrand.

    Realosophy data shows condo sales were already up year over year prior to the holidays — 23 per cent the first week of December, 31 per cent the second week and 72 per cent the week of Dec. 14. That means 727 condos sold that week, compared to 418 in the same week last year.

  • Crossing the chasm in Austin

    I can’t open Twitter these days without seeing someone in the tech industry talking about moving or talking about someone who just moved to either Austin or Miami. “What’s the best neighborhood in Miami for startups? My friend just moved to Edgewater. Where did so-and-so move?”

    Here’s a recent article from the WSJ talking about how accelerated tech-fueled growth is straining Austin. And below is a set of charts (from the article) comparing home prices in Austin and San Francisco. (Reminder, the California-to-Texas migratory pattern recorded the highest number of “net movers” last year.)

    But in reading through the article, I am reminded that the challenges facing Austin are not entirely unique. Growing cities all around the world are being put in a position where they need to decide whether they want to remain car-oriented and relatively low-density, or if they want to make the shift toward more transit-oriented urbanism.

    It’s admittedly not easy, both politically and practically speaking. It’s hard to rewrite deeply entrenched built form. But Austin is naturally looking at what happened in San Francisco, where restrictions on new development are thought to be partially (largely?) responsible for the city’s unaffordable housing.

    According to the same WSJ article, voters in Austin turned down two previous transit proposals. One was in 2000 and the other was in 2014. There was concern over too much urbanization. There was concern it would induce more people to move to the city. And there was concern that it would threaten the city’s low-rise single-family homes.

    But this year a transit plan was approved that includes three new rail lines, one of which will tunnel through downtown. Provided that Austin can effectively pair this with more housing, more uses, and more density — which is generally what you need to make transit work — then it may be well on its way to crossing, if you will, the chasm of urbanity.

    Charts: WSJ

  • Hilltop homes along the Humber

    Camera: Fujifilm X-T3, 23mm, f/2.0

  • A new Frame Home in Brooklyn

    Fred Wilson (venture capitalist) and Joanne Wilson (also an investor) have been working on a passive house apartment building in Brooklyn for the last five years. Their development company is called Frame Home. And this past week they received a pretty great Christmas gift in the form of a Temporary Certificate of Occupancy from NYC Buildings.

    At 5 storeys and with only 10 two-bedroom units, you could classify this building as the kind “missing middle” housing that gets so much air time here in Toronto. And so not only have they managed to build relatively small, but they’ve done it using passive house design principles.

    Here are some of the apartment building’s features:

    • Cross-laminated timber (CLT) structure
    • Passive house design approach
    • Triple-pane windows
    • Interior polished and insulated concrete walls (presumably to act as a thermal mass to moderate heating/cooling throughout the year)
    • Solar panels installed on the upper facade and roof (passive house design should, in theory, allow these to supply a big chunk of the building’s energy needs)
    • No fossil fuels used throughout the building — everything is electrical
    • Fully sub-metered units
    • Outdoor circulation spaces/stairs, providing access to a shared rooftop courtyard (I’m assuming these also serve as required egress for the building)
    • Dedicated elevator entrance for every suite (i.e. no interior circulation/corridor spaces)
    • Composting facilities within the building
    • Bike room connected to the ground-floor lobby

    There’s also a co-working and community space planned for the ground floor called “Framework.” Interestingly enough, they have already responded to the current pandemic. Instead of open-air desks, you rent fully enclosed 8′ x 8′ pods that are sound-proofed and come with their own HVAC systems.

    Congratulations Fred and Joanne on such an exciting and pioneering project. (I would love to see the development pro forma!) If you’d like to learn more about Frame 283, here is their website and here is a profile that the New York Times did on the project back in January. Building with CLT is apparently prohibited in NYC. Frame 283 got an exemption.

  • Merry Christmas everyone

    I’m taking the day off from blogging (kind of), but I would be remiss if I didn’t leave you all with something city related. And so here is an article by Bloomberg CityLab talking about how the quality of municipal Christmas trees can serve as a kind of proxy for a city’s current state of affairs. In other words, the inability to execute on a reasonably good Christmas tree is perhaps a signal of other municipal problems.

    For those of you who celebrate Christmas, I hope that you’re somewhere with a tree that doesn’t look like a toilet brush or a plucked chicken (these are some of the dubious monikers that have been given to bad Christmas trees around the world). I know that this is not the Christmas we all ideally want. This time of year can be lonely without family and friends. But I think we have every reason to be optimistic about 2021.

    I wish you all health and happiness. Merry Christmas everyone.

    Photo by Roberto Nickson on Unsplash

  • Thinking exponentially and the rule of 72

    I came across the above Twitter thread last night before bed and I thought it was great. It’s about the importance of thinking exponentially, as opposed to linearly, when it comes to finance and investing.

    In it, the author provides a quick rule of thumb to help reframe our mind when it comes to compounding. It’s called the “rule of 72” and it works like this.

    To calculate the approximate number of years to double your money, simply take 72 and divide it by the annualized rate of return (%). For example, if you had an annualized rate of return of 10%, this rule of thumb would tell you that you’re going to need 7.2 years to double your money.

    If the annualized rate of return were to increase to 18%, it would now only take you 4 years to double your money. Of course, this rule of thumb is an approximation. It only really works within a certain band of returns.

    If the annualized rate of return were 100%, this formula would spit out 0.72 years, whereas an annualized rate of return of 100% actually means that you’re doubling your money in the span of one year.

    It’s a rule of thumb. The reality is that compound returns are incredibly powerful over the long-run, not only for finance and investing, but for life in general. Worthwhile things take time. If you’ve got the patience and discipline, the long-run curve ends up looking pretty sweet.

  • The bank robbery capital of the world

    Between 1985 and 1995, Los Angeles’ retail bank branches were robbed some 17,106 times. In 1992, which was the the city’s worst year for robberies, the number was 2,641. This roughly translated into about one bank robbery every 45 minutes of each banking day. All of this, according to this CrimeReads piece by Peter Houlahan, gave Los Angeles the dubious title of “The Bank Robbery Capital of the World” during this time period.

    So what caused this? Well according to Peter it was facilitated by two phenomenons. One is indigenous to Los Angeles and the other was a result of the party scene that started to emerge in the city in the late 1970s during the disco era. Peter argues that this spike in robberies was the result of (1) the city’s sprawling car-oriented urban landscape and (2) its widespread use of cocaine at this time.

    The former allowed robbers to quickly flee the scene (many banks were located near highway on-ramps) and the latter is what seemed to motivate people to actually do it. They needed a way to fund their addictions. By the early 1990s, it was estimated that up to 85% of all bank robbers in Los Angeles were suffering from some sort of drug addiction, and the surveillance photos seemed to reinforce this. Repeat offenders were noted as looking progressively worse.

    But what’s perhaps most interesting to this blog audience is point number one. To what extend did the built form of the city actually facilitate this kind of behavior? Surely Los Angeles wasn’t the only place that started enjoying disco music, and some other things. And so did bank robberies, in a way, get coupled to the city’s labyrinthian freeway network? Was this the cover that robbers needed to make them feel like they weren’t going to get caught?

    For Peter’s full story, click here.

    Photo by Dillon Shook on Unsplash