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.

Subscribe

Month: June 2021

  • Electric vs. internal combustion engine

    Porsche released its first electric car back in 2019. It was the 2020 Porsche Taycan, which was fairly similar to the Porsche Panamera sedan in terms of price, performance, and styling, except that it was fully electric. So if you were in the market for a very expensive sedan, it was more about whether or not you wanted an electric vehicle or a vehicle with an internal combustion engine (ICE).

    In the quarter in which it launched (Q4 2019), the Taycan ended up only representing about 7% of Porsche North America’s overall sedan sales. But by the second quarter of the following year it was nearly 50%. And in the first quarter of this year (2021), it was over 80% of their sedan sales. That was fast. Pretty soon, I would imagine there will be no point in even making the Panamera.

    Now, the Panamera and Taycan aren’t exactly mainstream vehicles. But I found the above chart (which is from Bloomberg Green) interesting in that it feels like an all-things-being-equal kind of question. If you happen to be in the market for a six-figure Porsche sedan — and all things are kind of equal — would you rather an electric model or one that runs on gas? Already most people are choosing the former.

  • The 2021 Serpentine Pavilion

    Each year, the Serpentine Galleries in London commission a leading architect to design a new temporary summer pavilion in Kensington Gardens. The installation usually runs from June to October. Sometimes it then travels around the world, as was the case with Unzipped Toronto (Bjarke Ingels).

    Now in its 20th year, the Serpentine Pavilion is a tradition that started in 2000 with a building by architect Zaha Hadid. (There was no pavilion last summer because of COVID.) And as I understand it, the commission is usually awarded to an architect who has not yet completed a building in England.

    This year’s pavilion will open to the public on June 11. Designed by Sumayya Vally of Counterspace, the pavilion is intended to be a “puzzle of many different [historic] elements.” See video above. Vally also happens to be the youngest ever architect to be commissioned by the Serpentine Gallery.

    Architecture tends to take a long time. The Serpentine Pavilion happens much faster and happens every year (when there isn’t a pandemic). This strikes me as a very good thing for the world of architecture. I think we should do something similar — but of course better — here in Toronto.

  • Ecommerce as logistics

    Benedict Evans asks some great questions in this recent post about ecommerce penetration. Instead of just looking at the product itself and/or the way in which we buy it (online versus offline, for example), he focuses on the logistics model that accompanies the transaction.

    What can be parceled and shipped via Amazon? What can be delivered using a bicycle? What requires some sort of special delivery or collection method?

    The point he is making is that different things need to happen for a new fridge to make it to your home, compared to say a Chipotle burrito. And these differences matter when it comes to how we should be thinking about ecommerce and the real estate in our cities.

    Personally, I find it helpful to reframe the questions in this way.

    Here’s an excerpt from the post:

    But if I buy online and then drive to the store to collect it, is that different to phoning and reserving it? We didn’t have a statistics category for ‘telephone ordering’. If I use an app to order pizza instead of phoning the restaurant, has that become ‘ecommerce’ or is it still pizza delivery? 30 years ago, if I drove to Walmart instead of walking to a neighbourhood store, or drove to Best Buy instead of going to a department store, we didn’t call that ‘car-based commerce’. So is this a tech question, or a retailing question, or an urbanism question?

    For the full thing, click here.

    Chart: Benedict Evans

  • A story about oranges

    A friend of mine circulated this tweet storm over the weekend. It is an explanation of how NYC’s housing market works using the example of oranges. The author ends by saying that, “it is a parody and an exaggeration, but I promise you it’s not much of one.”

    The crux of this story about oranges is that if you don’t deliver enough to meet market demand, you’re going to invariably run into a problem of affordability. If people really want oranges, they are going to bid up the price of whatever oranges they can get their hands on. The same is true for housing.

    But there are, of course, some obvious differences between homes and oranges. People don’t live in oranges. And I would imagine that there are other ways to get your daily recommended intake of vitamin C.

    As far as I know, people also don’t buy oranges with the hope that they can derive a rental income stream and/or that they will be worth more tomorrow. And so I’m sure that many of you will be quick to point out that it is perhaps the speculative nature of housing that makes it different from most oranges.

    Still, there’s no denying that, in most cities around the world, we do a lot to make it exceedingly difficult to build new housing. We constrain supply — such that we perpetually underserve the market — and then we wonder why prices continue to rise.

    Disagree with this take? Let me know in the comment section below.

  • Popular times — how live is live?

    I was searching for a location this morning on Google Maps and I came across the “popular times” chart that many of you are probably familiar with. It shows you how busy the location you’re looking at tends to be throughout the day. But this time around, I noticed a pulsing “live” dot and it got me wondering: How live is live?

    Google collects this data from of our phones.

    It is aggregated and anonymized Location History data from anyone who has opted in on their Google Account. If you’re using Google Maps and have your location services set to “always”, you can actually see a timeline of the places you’ve visited — even if you haven’t explicitly navigated to them (see above).

    So the short answer is that the live data is really live. If there’s a spike in the busyness of a particular venue — one that doesn’t match historical busyness patterns — the Google network can pick it up.

    I’m fascinated by this kind of city data because I see it as part of the future of city building. Why not use more data to inform the way in which we plan and build our cities. Retail data, traffic data, migratory patterns, population densities — all of this and more is now available to us.

  • Ground-related housing vs. apartment permits across the Greater Golden Horseshoe

    Here are two charts from a recent blog post by Ryerson University’s Centre for Urban Research and Land Development. The charts compare residential building permits issued for ground-related housing vs. apartment suites.

    Over the last two quarters (Q4 2020 and Q1 2021), the Greater Golden Horseshoe (GGH) issued a record (all-time record?) number of permits: 39,734 housing units. This represents a 56% year-over-year increase.

    The biggest contributor to this increase is, not surprisingly, apartment units. These permits saw a 73.6% year-over-year increase. There’s simply no other way to deliver this amount of new housing — at least in the context of the GGH. You have to go up.

    But given the price increases that we have seen across the region for ground-related housing, Ryerson’s CUR concludes that there must be a strong home buyer preference that is simply not being met by the amount of low-rise supply we are delivering.

    Notwithstanding this potential mismatch, I don’t see things changing anytime soon.

  • Too much low-rise — Theresa O’Donnell in conversation with Larry Beasley

    I attended the above talk last night over Zoom. (Shoutout to Michael Mortensen for inviting Slate’s development team and for helping to moderate the Q&A.) The talk was a conversation between Larry Beasley (former Director of Planning for the City of Vancouver) and Theresa O’Donnell (the newly appointed Director of Planning for the City of Vancouver). Prior to this, Theresa was the director of planning for cities such as Las Vegas, Nevada, and Arlington, Texas.

    I’d like to point out two comments that she made last night that I found interesting.

    The first is that community meetings over Zoom actually aren’t all that bad. And the reason that they’re not all that bad is that they tend to draw out larger crowds (they are easier to attend), and so the feedback on development applications tends to be a bit more inclusive / representative. I agree with this overall view and I’ve been arguing for years (here on the blog) that the typical approach to community engagement is pretty much broken. The opinions become lopsided when you erect too many barriers to participation.

    The second point has to do with the amount of land in Vancouver (and other North American cities) that is dedicated to low-rise housing. It’s too much and it’s going to need to be addressed in order to increase overall housing supply and to chip away at the housing affordability problem. This won’t be news to this audience, but it’s interesting to see how widespread this belief has become. Of course, the big questions remain: How gentle should gentle density be? How much intensification should these neighborhoods see?

    I also appreciated her comment that it’s pure lunacy (my words, not hers) to have higher order transit lines running through mostly low-rise neighborhoods. We need much higher densities to sustainably support these kinds of investments in infrastructure. For us Torontonians, a good example would be (most of) the underdeveloped Bloor-Danforth subway line, though there are other culprits.

    Welcome Theresa.

  • Small suites — responding to the market or social engineering?

    Let’s talk some more about floor plan designs and the economic constraints that form part of the decision making process. There continues to be a narrative out there that for-profit developers only want to construct small apartments (a form of social engineering perhaps) and that they aren’t focused on livability. So let’s dig into some of the constraints.

    Consider that the average price of a new construction condominium in downtown Toronto last quarter (Q1 2021) was $1,419 per square foot. And I bet that this number has already increased. Now consider that, in the City of Toronto, the “growing up guidelines” suggest that an ideal family-sized three bedroom suite should be around 1,140 square feet.

    When you multiply these two numbers together, you get an “ideal” three bedroom suite that costs just over $1.6 million. Of course, this is without parking. So if you want downtown parking, add another $100-200k (which, at this price point, is still almost certainly going to be a loss leader for the developer).

    All of a sudden, you’ve now got a $1.7 – 1.8 million residence. This will work in some submarkets and in some locations, but certainly not all.

    So what happens is that the end price becomes a constraint. And in order to make the suite more affordable, the developer will naturally look for ways to make it smaller. Turn this into a 900 square foot three bedroom and all of a sudden you shave off over $300k from the price.

    The point I am hoping to make is that developers generally aspire to respond to what the (sub)market wants. If the (sub)market wants a certain price point, developers will try and meet that need. If the (sub)market wants massive apartments, developers will gladly deliver. (We’re working on combining some supremely awesome suites at this very moment in fact.)

    It is “what if” instead of “should be” thinking.

    Photo by Loewe Technologies on Unsplash

  • Floor plan comments, and thoughts on inset bedrooms

    I came across the above floor plan over the weekend. I reshared it on Twitter and there was then a pretty good discussion about what people like and don’t like. I mean, who doesn’t like looking at floor plans?

    The suite is 790 square feet with 2 bedrooms and 1 bathroom. It rents, at least according to Bobby’s original tweet, at $2,600 per month. That’s $3.29 per square foot. I’m guessing that the apartment is in Philadelphia solely based on Bobby’s location.

    The divisive thing in this floor plan is the two inset bedrooms. Some people don’t like these. But designing a good floor plan is like working through a puzzle. You have all these constraints (some of which are just personal preference) and you have to find ways to work around them.

    When you’re working with a deep urban floor plate, you pretty much have no choice but to design floor plans with inset bedrooms. Otherwise, the suites get too big and they stop making economic sense. I have talked about this a few times before on the blog.

    So what you do is “bury” the bedroom(s) and keep the main living space as open as possible. In this case, the living/dining dimensions are about 17′ wide x 10′ deep. So a pretty good size, and certainly a very good width.

    An alternate solution might be to flip one of the bedrooms up towards the main glass (keeping the second one inset). But given that you only have 17 feet to work with here, something is going to have to give. So if you made the living room 9′ wide, you’d then only have somewhere around 8′ for your bedroom.

    Personally, I don’t mind inset bedrooms, especially if they allow for more generous living spaces. So I think that this is a fairly reasonable and functional suite layout. I would have absolutely lived in an apartment like this when I was going to school in Philadelphia. (Is this even the right location?)

    But if I were to make a few tweaks:

    I would compress the bedrooms slightly to enlarge the living space even more. (Though if the target market is student roommates, perhaps the idea is to allow for a desk in the bedroom.) I would then flip the closets to the partition wall between the two bedrooms to improve sound attenuation.

    I would also try and get the kitchen out of the hallway and into the main living/dining area. I don’t know where all the plumbing stacks sit (see, constraints), but perhaps it just slides up toward the glass. Another solution might be on the other side of the upper bedroom (where there is currently a closet).

    But what are your thoughts? Would you rent this apartment? Comments welcome below.

  • Economic update with Benjamin Tal — get ready for the second half of this year

    Benjamin Tal — CIBC’s Deputy Chief Economist — is seemingly everywhere. And earlier today, he was delivering an annual economic update at an online event hosted by Brattys LLP (our condo lawyers) in partnership with CIBC. Below are a handful of slides that I found interesting and that I tweeted out during the event.

    All of our personal risk curves changed during this pandemic. When the first wave hit, we all had no idea how bad this was going to be and what to expect. And so we all stayed home and washed our hands and our groceries. That changed with each subsequent wave. And now we’re all ready and anxious to be done with this.

    Tal referred to this as one of the most unequal recessions we’ve ever seen. If you had a high paying job, you probably kept it. And after you stopped spending money on eating out, entertainment, travel, and watching the Leafs lose in person, you likely had a meaningfully higher savings rate. That has created some $100 billion of “excess cash” sitting on the sidelines.

    This cash wants to be spent and I think we’re going to see it flying out the door in the second half of this year. Much of it will also flow into services, which should help to prop up the hardest hit segments of the economy. So while there has been some real pain, many are expecting the economy to snap back pretty quickly. Get ready for some euphoria in the second half of this year.

    This last slide is particularly relevant to the kind of things we often talk about on this blog. It is essentially showing the increased demand for housing outside of the city during this pandemic (as of Q4 2020).

    A flatter line (Vancouver, Calgary) indicates that year-over-year price growth was less affected by “distance from the city center.” On the other hand, a steeper line (Toronto, Ottawa) indicates that price growth was stronger the more you moved outward from the core. In the case of Toronto, it was nearly 20% YoY when you got about 60-70 kilometers out of the city.

    But it’s important to keep in mind that the core of Toronto still grew at about 5% year-over-year. About the same as in Vancouver. And in the case of Ottawa, the number looks to be about 17.5% in the city center. These are meaningful numbers and not the kind of symptoms you would expect to see from downtowns in the middle of a death spiral.

    I would argue, as I have many times before, that this last chart is the result of short-term phenomena. I bet we’ll see a number of these pitches reverse by the time Q4 2021 arrives.