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: February 2023

  • Why construction productivity lags other sectors of the economy

    Construction is an essential sector of the economy, responsible for building and maintaining the physical infrastructure that underpins our society. However, it’s no secret that construction productivity lags behind other sectors of the economy, such as manufacturing and information technology. So why is this the case?

    One of the main reasons for the productivity gap is the unique nature of the construction industry. Unlike other sectors, construction projects are often one-off, bespoke endeavors, making it challenging to achieve the economies of scale that are typical of manufacturing or technology. Each project requires a different set of skills, tools, and materials, which can be costly and time-consuming to source and manage. This leads to a lack of standardization and efficiency, which can hinder productivity.

    Another factor that contributes to low productivity in construction is the reliance on manual labor. Despite the increasing use of technology and automation, much of the work in construction still relies on physical labor, which is subject to human limitations and the potential for errors. This can result in delays, rework, and additional costs, all of which impact productivity.

    Moreover, the construction industry faces challenges in terms of supply chain management and workforce development. The industry relies heavily on a complex network of suppliers, subcontractors, and laborers, all of whom must be coordinated and managed effectively. This can be difficult, particularly in light of the current labor shortage and skills gap in the industry.

    To address these challenges, the construction industry needs to embrace innovation and new technologies to improve efficiency, standardize processes, and reduce waste. There is also a need to invest in workforce development and training to upskill the existing workforce and attract new talent to the industry.

    In conclusion, the construction industry faces unique challenges that make it challenging to achieve the productivity gains that are typical of other sectors. However, with the right investments in technology, training, and process improvement, the industry can overcome these challenges and continue to build the infrastructure that our society relies on.

    Maybe you didn’t notice. But if the above doesn’t sound like me and my writing, it’s because today’s blog post is brought to you by ChatGPT (AI). The prompt I used was, “write a short blog post about why construction productivity lags other sectors of the economy.”

    On some level, it’s unsettling that AI can now, almost instantaneously, spit out a blog post like this. It would now be pretty easy to set up a daily blog, like this one here, and use ChatGPT to populate it each day.

    But of course, while that might be interesting initially, it would quickly become a banal baseline. Anyone and everyone could copy what you’re doing. AI is going to change a lot. But our jobs remain the same: find new ways to create value and be remarkable.

  • 12th annual

    For those of you who are long-time readers of this blog, you might remember that I do an annual ski and snowboard trip with a group of close friends from both Canada and the US. This year should technically be the 14th annual, but we took two years off during the pandemic (though some of us did meet up to ski), and so we’re referring to this as the official 12th annual. The last one was in February 2020 in Fernie, BC, and this weekend we’re off to Park City, Utah.

    This annual trip is something that I look forward to all year. And it has really cemented my love of snowboarding and the mountains. For me, it’s this wonderful combination of outdoor activity, beautiful landscapes, unplugging, and catching up with friends that I have known, in many cases, for over 20 years. In fact, I know that this trip is the reason that a few of us decided to get together to build Parkview Mountain House (our upcoming “creative mountain retreat” in Park City).

    A big part of what we want to do with the house (when it’s hopefully ready next winter) is share our love of the mountains with others. We want others to experience what we experience when we go on these trips. At the same time, we felt like there was a huge gap in the market. Park City is a world-renowned ski and snowboard destination, and yet it still feels hard to find modern and design-focused places to stay. So we decided to create our own.

    There is, however, one small problem: my right knee. It has been bothering me for the last few years whenever I snowboard, and usually only when I snowboard, to the point where I have to get off the mountain. This obviously pisses me off. So I decided to spend the last 2 months training my tender knees with Noah Mandel. We’ll see if that did anything this weekend. But I’m so committed to the mountains that, if it helps, I’m even prepared to switch to skiing!

  • How affordable is a Nabr home?

    We have been speaking about Nabr and the productization of housing for the last year (and, more broadly, about prefabricated housing for probably as long as this blog has existed). And now it is possible to go on to Nabr’s website and reserve a new home in their San Jose project. Here’s what that looks like:

    What is immediately clear is that this is an obvious improvement over the way that new homes are typically purchased. The pricing is transparent. You can easily see the floor plan and features of each home. And if you’d like to reserve one, you can go ahead and do that right away for $1,000:

    You can also specify whether or not you’re interested in Nabr’s lease-to-purchase program (known as LEAP). More information on that can be found, over here.

    But the exciting question remains whether thinking about and executing on this new housing as a product, rather than as an individual project, will ultimately bring greater cost efficiencies and savings. In other words: can it make housing more affordable?

    Today, the base pricing for SoFA One looks something like this:

    • Home 1002: $1,415,000, ~1080 sf (excluding exterior space), $1,310 psf
    • Home 1003: $2,144,000, ~1547 sf (excluding exterior space), $1,386 psf
    • Home 1108: $938,000, ~795 sf (excluding exterior space), $1,180 psf

    These are just the first 3 homes that showed up for me when I opened the website. And while I’m not intimately familiar with the San Jose housing market, Realtor tells me that the median sold price is $1.2 million and that the median list price per square foot is about $766.

    Though not really an apples-to-apples comparison, this suggests to me that the above pricing may not be as affordable as some people were hoping for. However, it is more or less where I figured pricing would need to be in order to make a high-rise project like this pencil.

    Does this change over time with more product scale? I think it could.

  • Tesla to open (a portion of) its charging network to all EVs

    The current electric vehicle plan in the US is to build a national network of 500,000 chargers and have EVs make up at least 50% of new car sales by 2030. (Here’s where we are today with adoption.) To this end, a big announcement was made today that included lots of public funding, a Made-in-America agenda, and lots of other goodies. But perhaps the two most important points are that (1) Tesla has, for the first time, agreed to open a portion of its charging network to non-Tesla EVs (so that it can gain access to the new $7.5 billion EV charging initiative) and (2) there is a requirement for all of the station connectors to use the “combined charging system” (CCS). I’m not a connector expert but, in my mind, this is both exciting and directionally right. To fully transition to electric vehicles, we need universality.

  • The Centre Pompidou in Paris now owns NFT art

    Last week, the Centre Pompidou — which is Europe’s largest modern art museum — announced that it has acquired its very first NFTs (18 pieces by 13 artists) and that it will be exhibiting the collection this spring. This makes them the first museum in France to own NFT art and, I’m guessing, one of the first in the world. (The Los Angeles County Museum of Art recently got some as well.)

    This is fun for a few reasons. The obviously fun reason is that it’s good for NFT collectors and people who generally support this space. Big institutions bring legitimacy. It’s one thing to say that these JPEGs are stupid while sitting at home on your computer, but it’s an entirely different thing to travel to Paris, visit the Centre Pompidou, look at its white gallery walls, and then say that these JPEGs are stupid!

    The other fun thing about this is that it shows a continued openness to new ideas and new technologies. Here are some words from the Pompidou (that have been translated, by Google, from French):

    The idea was not to be the first, but to bring together a relevant collection, which could testify to a creative and critical appropriation of a new technology by artists, and how this disrupts and displaces the art ecosystem. From its creation, the Center Pompidou has relied on the idea that contemporary technological creation and creativity should be at the heart of the institution. From 1974-1975, therefore even before the opening of the Center, the National Museum of Modern Art acquired major works and installations by Dan Graham and Bruce Naumann. Video installations using real time, and it was the very first institution to do so.

    This wasn’t always the case in France. One of my favorite art history classes from university was one that covered Impressionism. Partly because I thought their work was cool, but mostly because Impressionist painters were, in a way, early modernists. They rejected the academic approaches to painting and instead decided to make up their own rules.

    At the time, in the 19th century, this was seen as entirely radical. And it meant harsh criticism from the established art world and an inability to meaningfully exhibit at the Salon (which was everything at the time). But history has a way of showing us that if something is inherently a good idea, you can only remain stubborn for so long.

    The Impressionist painters began hosting their own exhibitions starting in 1874 and, by 1881, the government had withdrawn its official sponsorship of the annual Salon. The jurors wanted to cling to only traditional painting styles and the world wanted to move on. And here it is doing that again, today.

  • Non-Canadians can’t buy a lot of real estate

    The Prohibition on the Purchase of Residential Property by Non-Canadians Act — which came into effect in January of this year and bans foreigners from buying residential real estate in the country for two years — is weird.

    We can debate whether banning foreigners from buying residential real estate is really helpful for housing affordability and if it’s the most impactful place to focus our attention (and we have talked about this many times before), but the part that is particularly odd is this feature here:

    …the law’s definition of residential property includes land that is zoned for residential use or mixed use, which covers huge swaths of commercial land across the country. As well, an entity is deemed foreign if a non-Canadian owns a minimum of 3 per cent of the entity.

    What this means is that the following scenario is now technically a problem (not actual legal advice!):

    • You own a commercial property with zero homes
    • You have long-term commercial leases in place that also generally preclude you from building new homes in the foreseeable future
    • The zoning of your property allows for residential uses (which you like having in your back pocket)
    • And your cousin from Italy owns 3% of the entity that owns the real estate

    This is a scenario where residential homes do not exist and they are unlikely to exist any time soon. It seems clear cut, but I suppose one could argue that it’s exceedingly onerous to try and figure out which sites are soft sites and could actually be developed with new residential. And so if you have the potential to build and then own residential, you should be regulated as if you might ultimately own some of it one day.

    But even here, I don’t know why we would want to restrict the supply side of the housing equation. If you’re a developer in Canada where housing is known to be kind of expensive and you want to build more of it for Canadians, isn’t that a good thing? And isn’t it also a good thing if we can get some non-Canadians to help pay for these new homes?

  • Transit-oriented vs. single-family

    Michael Beach used to have a YouTube channel where he “looked at Google Maps a lot.” Meaning, he would pan around various cities and comment on their planning and overall built form. Technically the channel still exists, but he stopped making new videos a few years ago. Here is one where he talks about Dubai being “an absolute mess” (3.8 million views) and here is one where he looks at North York (in Toronto) and asks: “why is it here?”

    The most important point from his North York video is that it illustrates the deep divide that exists in Toronto (and other North American cities) between single-family “Neighbourhoods” (a defined planning term) and higher-density transit nodes, where things like tall buildings are allowed to go.

    In the case of North York, this contrast is perhaps at its most stark. Even the street network is designed to stop these two urban forms from commingling with each other too much. There are ring roads that surround the transit-oriented density, and separate, more suburban streets on the other side of it:

    This contrast is why there are so many people talking about the “missing middle.” And I’m sure that if you started asking random people on the street, most would agree that it would be nice if we could build more moderately-scaled housing. You know, like those buildings you see in Paris.

    The problem: Where should it go? Some people would probably suggest the left side of the above ring road. Just don’t build as tall, okay? But this kind of land is already a scarce commodity in a city like Toronto. We need these tall buildings because most of the city is codified to look like the right side of the above ring road.

    So if we have any chance of actually finding the missing middle, it is going to need to happen here, on the right side. Some progress has been made, not just in Toronto but across North America, with accessory dwellings (laneway suites). But it’s not going to be enough.

    This was simply a first step. It was us finding a solution to, “how can we add some more housing here without changing the look and feel and character of these residential streets in any way?” But even this small and incremental change has proven to be exceedingly controversial. People still react to new laneway suites like this:

    https://twitter.com/evboyce/status/1624840523516182528?s=20&t=Q9gCZfTGLz51rVyupxJDPg

    There are complex dynamics at play here.

    If you’re a homeowner that decides to create a new rental home at the rear of your property, you might be viewed as greedy. You are creating something (a home) that someone needs, and you intend to make a small margin on the transaction. It’s like making and selling bread for a small margin, except that selling delicious bread to people is typically viewed in a positive light. On the other hand, ensuring that the value of your house remains as high as possible is generally good practice here. Greed doesn’t factor in this way because, you know, single-family homes.

    There is no surprise why the missing middle is missing. It is missing because we have decided that we want it to be. But hey, $2,145 per month seems like a very reasonable price for a 2-bedroom house.

  • Walkable areas are a scarce commodity in cities

    According to this recent report by Smart Growth America, which looked at “walkable urbanism” in the largest 35 metro areas in the US, only about 1.2% of land is, on average, built out in this way. Everything else needs to be driven.

    But here’s the thing. Humans seem to really enjoy walkable urbanism, and will usually pay more for it:

    City dwellers will pay to live in a walkable location. Real estate in these areas averages a 34% price premium per square foot in for-sale housing and 41% for multifamily rental apartments.

    It also, by definition, punches above its weight:

    Walkable neighborhoods in just those 35 metro areas account for 19.1% of the total US real GDP and 6.8% of the total US population, by the researchers’ calculations.

    That’s how density works. You get to do more, with less.

    At the same time, not every place should be Midtown Manhattan (which the report labels as the highest walkable urban place with a floor area ratio of 40). There are a wide range of densities that will work, including modest ones (FARs between 1-3).

    Here in Toronto, many of our single-family home neighborhoods have densities that are zoned for a maximum FAR of 0.6, which is quite restrictive if you’re hoping to build something like a multi-unit building.

    This is, of course, the point. But imagine what all could be done here with even an incremental change.

  • No right on red, except with green arrow

    I have a road sign question for all of you today. Here is a photo (from Google) of Bloor Street West and Symington Avenue in Toronto. It is an offset intersection. And as you will see, there are signs saying no right-hand turns on red, “except with green arrow.”

    Also present at the intersection is a traffic light with the ability to communicate in four different ways: a green circle, a yellow circle, a red circle, and a green arrow pointing right. My question to all of you is this: when is it permissible to turn right?

    It is clearly not permissible to turn right when the light is red. But can you turn right with either a full green circle or a green right arrow, or can you only turn when there’s a green arrow pointing right? i.e. No right when there’s just a green circle.

    If you can, please leave a comment below. Depending on how this goes, I could be either winning a bet or losing a bet.