Month: March 2021

• Coupe d’une maison parisienne

  

  This is an interesting article by ArchDaily, looking at the “evolution of the house plan in Europe” between 1760 and 1939. The article focuses on London, Paris, Amsterdam, and Moscow and includes floor plans, photographs, as well as well-known illustrations like the one shown above. Created by Bertall in 1845, the drawing shows a section through a Parisian house and is called The Five Floors of the Parisian World.

  What it shows is the declining opulence that used to exist in Paris’ apartment blocks as you moved upward. If you were rich, you lived on the second floor, right above the ground floor lobby. The ceilings were higher on this floor and maybe had a balcony overlooking the street. If you lived on the third floor it meant that you were a less rich. And if you lived in the top floor attic, you were poor. That is what this comic is showing.

  Now, all of this changed over time as new technologies, namely the elevator, were brought to multi-family buildings. All of a sudden it became convenient to live higher up and all of a sudden people wanted better views and to get further away from the chaos of the street. What I’m curious about, though, is how posterity dealt with the lower ceiling heights on these upper floors.

  2021.03.31

• Are Amazon’s private labels any different?

  

  Amazon is sometimes criticized for its private labels. The way this generally works is that Amazon uses the data that it collects from its platform to see what customers are buying. It then goes out and makes its own version of these products and sells them in competition with the other products in its marketplace. The reason why Amazon (and others) do this is because the margins are generally better on private labels, even though they are often positioned to the end customer as being a value-oriented alternative. That is, they’re cheaper.

  Some people think that Amazon shouldn’t be doing this, particularly as its third party marketplace continues to grow. This side of its marketplace deals with inventory that Amazon doesn’t own. It is the stuff of third party sellers who come to the platform to access Amazon’s customer base and reach, and to possibly use its fulfillment services. This marketplace now makes up about 60% of Amazon’s sales volume and so it has become a dominant part of its business. It’s a way to grow without having to spend money on additional inventory.

  Is it, then, acceptable for Amazon to mine this data, replicate products, and compete with its own customers? The truth is that this isn’t all that new. As Benedict Evans points out in this recent post, retailers have been doing this for more than a century. The above table taken from a 1932 report on “chain store private brands” shows that about 80% of stores in the US at this time were selling private label brands. Furthermore, it represented about a quarter of their overall sales. Is this time any different?

  Table via Benedict Evans

  2021.03.30

• The views from Capital Point

  

  

  These are two photos taken from the roof of our Capital Point project (office strata) in Burnaby, BC. They represent the views from about 19 storeys up. In the first photo you can see downtown Vancouver and the mountains that surround it. And in the second photo you can see the Metrotown town center (second largest in the region) and the SkyTrain station that services it. It’s certainly hard to beat British Columbia on a beautiful sunny day.

  2021.03.29

• It’s okay for urbanism to be a bit messy

  The urban-to-rural transect is a New Urbanist planning framework that prescribes a smooth continuum of settlements that go from least dense to most dense. The six zones are as follows: natural (T1), rural (T2), sub-urban (T3), general urban (T4), center (T5), and core (T6).

  Part of this framework is about rejecting single-use Euclidean zoning. Instead of segregating uses, New Urbanism looks to return to a mix of uses within close proximity of each other. This is a good thing.

  But the transect also advocates for a certain orderliness. There should be a smooth transition as you move outward from T6 toward T1. It is about placing things in their useful order and maintaining a certain kind of character.

  Witold Rybczynski makes an interesting observation about this in a recent post called “urban discontinuities.” The point he makes is that some of the most remarkable urban moments are the result not of smoothness, but of “odd juxtapositions.”

  Think:

  – Mount Royal (T1) in the middle of downtown Montreal (T6).

  – The North Shore Mountains (T1) that terminate views from within the building canyons of downtown Vancouver (T6)

  – The walls of tall buildings (T6) that frame Central Park (T1) in Manhattan

  – The wonderful ravines (T1) that cut through Toronto’s urban fabric (T6)

  These are contrasting zones in the transect bumping up against each other. And it turns out that most of us really like these moments. But I think that the bigger point to be made here is that urban environments aren’t always neat and tidy, and that’s because they are a constantly evolving organism.

  That’s not a bug. It’s actually a feature to be celebrated.

  2021.03.28

• Need vs. want and what that means for pricing

  

  Seth Godin recently posted this four quadrant chart on his blog. It is for plotting different products based on price and based on want vs. need. In his post, he asks his audience to think about what they’re offering and which quadrant it fits within. It can only be in one.

  I am fascinated by questions of pricing. At at some point on this blog, I wrote about a pricing class that I took at Rotman while I was doing my MBA about a decade ago. It stands out to me as one of my favorite university classes.

  So let’s consider these four quadrants.

  In the top left, you have inexpensive products that are wants and not needs. This quadrant is where you’d place those novelty sunglasses you picked up for your friend’s theme party. Fun for that moment, but if they break or you lose them, that’s probably okay.

  In the top right are expensive wants. Seth uses the example of a Hermès purse. The need is a place to put your belongings, but that’s not how these sorts of items are priced. The real value, arguably, comes from their “signaling” and how they make the owner feel.

  This is the luxury goods category. Demand will likely be cyclical and sporadic, and so you’ll need to make sure that you have fat margins.

  In the bottom right are expensive needs — like a pacemaker. Seth’s point is that these products need to work exceptionally well, all of the time. In the case of a pacemaker, it is truly a matter of life or death. At the same time, there’s going to be less price sensitivity.

  In the bottom left are the inexpensive wants. Low cost products that people really want and are infinitely useful. Seth’s example is Amazon Web Services.

  This quadrant of products is attractive because demand will naturally be extremely high. Cheap and invaluable will do that. However, Seth’s caution is that you still need to sustainably deliver the goods. These aren’t novelty sunglasses.

  I find it helpful to think of products as existing in only one quadrant. But most offerings aren’t going to exist all they way in one corner. It’s perhaps important to consider the “job to be done.” (To borrow from the late Clayton Christensen.)

  Take, for example, housing. On a fundamental level, it’s a need. We all need shelter. But it can also be a want, or have aspects of want. I need a place to live. But I want a place in the mountains. This subtle difference means something very different when plotted precisely.

  Image: Seth Godin

  2021.03.27

• Accessory dwelling unit (ADU) supply in California

  This recent article by Bloomberg CityLab, about “how California set off a backyard apartment boom,” has some interesting stats about the extent in which accessory dwelling units (ADUs) are quickly being adopted and delivered across the state.

  For one, a majority (87%) of jurisdictions have enacted at least one ordinance related to ADUs, though many have several. These policies might include everything from by-right zoning to some form of financial assistance if you build. Here is a graph showing the cities and counties that have created ADU ordinances since 2013:

  

  All of this has translated into housing supply. In 2019, California homeowners brought over 12,000 accessory dwelling units to the market (based on permits issued). Though a relatively small quantity based on the state’s overall housing deficit, this number is surely growing thanks to policies and programs, like this one here, that are working to remove the barriers to building.

  

  For the full CityLab article, click here.

  2021.03.26

• A modernist utopia at Summit Powder Mountain

  

  About 60 miles north of Salt Lake City is the largest ski resort in America, called Summit Powder Mountain. It’s some 10,000 acres. But beyond just being big, there is also a fascinating story and philosophy behind the mountain.

  It was started by four partners — Elliott Bisnow (of Bisnow events), Brett Leve, Jeff Rosenthal and Jeremy Schwartz — who partnered up with Learn Capital in 2013 to buy the mountain from a distressed seller for $40 million.

  The four guys were already running a successful invitation-only event series for entrepreneurs and creative types called the Summit Series, and big part of their vision for the mountain was to recreate this same ethos.

  The idea was to create a community focused on relationship-building, entrepreneurship, innovation, environmental sustainability, and good design. Put differently: a kind of utopia for rich people.

  So far, about 80% of the home buyers at Summit Powder Mountain are members of the Summit Series.

  All of this has translated into some pretty cool mountain architecture (see above). In fact, people who buy vacant lots within the community are effectively banned from building the kind of faux chalet stuff that permeates a lot of (or most?) mountain towns.

  Here is a taste of some of the homes that have already been built.

  Image: Paul Bundy for the Wall Street Journal

  2021.03.25

• The resilient story of Toronto’s tall towers

  

  The Urban Land Institute Toronto is hosting an event and panel discussion on April 8, 2021 about the future of high-rises in our cities. Here’s the blurb:

  Against the backdrop of the pandemic and its toll, what is the future of high-rises in our cities? What role do tall towers now play in shaping Toronto’s identity? While the pandemic has accelerated existing large trends, residential tall towers are proving the durability of a quality urban centre and hyper-urban lifestyles in Toronto and around the world.

  An introduction will be provided by James Parakh (author, Fellow of the Council on Tall Buildings and Urban Habitat, and Urban Design Manager for the Toronto & East York District) and then a discussion will be moderated by Robyn Player (Director, BTY).

  The discussion will be focused on what ULI is calling three of Toronto’s most exciting tower projects under development: Pinnacle One Yonge, One Delisle, and 11 Yorkville.

  I will be on the panel (talking One Delisle) alongside Lee Koutsaris (VP, Sales and Marketing, Metropia) and Anson Kwok (VP, Sales and Marketing, Pinnacle International).

  If you’d like to register, you can do that over here. It should be a great/timely conversation.

  2021.03.24

• To yield or not to yield

  If you’re building a multi-family rental building, you’re almost certainly building it “on spec.” What this means is that you’re building an empty building and, once it’s done, you will then work to rent it out. (Nobody rents an apartment years in advance.) In this scenario, you will know what your costs are once the building is complete, but you won’t really know what your revenue will be until you start leasing. If demand is strong and the market has moved since you started building, maybe your rents will be a pleasant surprise. If the market has moved in the opposite direction since you started building, your rents might be an unfortunate surprise. The laneway house I recently completed is an example of a spec rental building. I built it without a tenant, but I assumed that I could rent it out upon completion. That proved to be true, but mind you it was only one unit. So it was relatively low risk.

  If you’re building an office building, it is bit more common to have some pre-leasing in place. Early on in my career, I worked on an office development where we started construction with about 25% of the leasing complete. This wasn’t enough for construction financing, but we saw that demand was strong and we needed to start right away in order to meet our lead tenant’s occupancy timing. And so we made the decision to go. We ran on equity for the first bit of construction, but once we completed enough leasing we were able to place our construction facility and lower the project’s overall equity requirement. We took a chance and everything ended up working out okay. But it could have not worked out. What would have happened if a pandemic hit after we started construction? Leasing activity would have completely stopped.

  If you’re building a condo building (at least in this city), you’ll likely be pre-selling your suites. You don’t necessarily have to do this. There are examples of well-capitalized condo developers building on spec without any pre-sales whatsoever. (Build, lock in your costs, and then sell.) But generally most developers will pre-sell, secure their construction financing, and then begin construction. In some ways this lowers your risks, as well overall systemic risk in the market. It also lowers your equity requirement as a developer. But it does create another possible risk. Once you pre-sell, you’re effectively locking in and capping your revenues. So you better have a very good handle on your costs. Otherwise you could be exposing yourself to cost escalations without any way to claw back some of your margins.

  The other thing to consider is whether you want to yield or not. Is it better to sell all of your suites as soon as possible (bird in hand) or sell only what you need, holdback the rest, and hope that prices increase going forward? I don’t think there is a right or wrong answer here. Some developers don’t want any market risk and so they take the bird in hand when they can. Other developers prefer to profit maximize and/or safeguard themselves against unforeseen costs, and so they sit on inventory. If you have unsold suites, you can always push revenues. Either way, what is hopefully clear from this post is that development is risky. This is just one example of some of the decisions that need to be made. There are countless others. Sometimes you’ll get it right. And sometimes you won’t. Hopefully the former happens more than the latter.

  2021.03.23

• Housing supply and house price dynamics in the UK

  In the fourth quarter of last year, the average house price to earnings ratio in the UK was about 8.4x. Apparently this is about as high as it has been in the past 120 years. But interestingly enough, if you go back to the 19th century, this ratio was even higher. It was over 12x back in 1845, but then went on a steady decline until about the 1920s. What changed, according to some researchers, is three things: homes got smaller (making them more affordable), incomes rose, and supply increased.

  So what’s going on today? The obvious answer is perhaps that interest rates are low. But in this recent FT article by Martin Wolf, he argues that that’s not really the primary driver. Part of his logic is that low interest rates are a global phenomenon. And so how is it that real home prices in the UK rose 93% between 2000 and 2020, but only 29% in Germany? There must be some other structural force(s) at work. (Germany has a lower homeownership rate for whatever that’s worth.)

  

  Wolf argues that it’s a problem of housing supply. Very little housing was built during WW2, for obvious reasons, but housing delivery did really spike in the post-war period in the UK. Local authorities also played a major role. If completions from 2000 to 2019 had averaged the same rate seen between 1950 and 1970, the country would have 2.9 million more homes today, representing a 13% increase to total dwelling count.

  This, Wolf argues, would be having an impact on house price dynamics.

  Chart: Financial Times

  2021.03.22