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 2023

  • Canada is growing a lot

    This week it was announced that Canada’s population grew by approximately 430,000 people over the last quarter (+1.1%). And that it represents the highest population growth rate of any quarter since the second quarter of 1957. Even more impressive, though, is the fact that in the first 9 months of this year we have already added over 1 million people in total. This beats all full-year periods since Confederation in 1867!

    Here’s what all of this starts to look like visually:

    The unfortunate side of these records is that it is coming at a time where we’re, perhaps counterintuitively, building a lot less new housing; which is to say that construction starts are declining. In fact, I was on a call this week where people who examine development and construction costs all day were predicting a 5-6% decline in hard costs in the Toronto region next year. And this is a direct result of fewer new projects getting started.

    Broadly speaking, this is how things tend to work in real estate development: there are heavy lags between changes in demand and changes in supply because of how long it takes to build new buildings. But what’s happening right now is more than this. Interest costs are impacting everyone. And investor interest in pre-construction homes has softened significantly, demonstrating how much our industry relies on individual investors. Many projects cannot go.

    What I ultimately think this is going to do is exacerbate our current supply-demand imbalances. Meaning that when the market does come back — and it of course will — it’s going to come back with a vengeance. And that’s because it is going to need to catch up to all of the new demand that is accumulating as we speak.

  • Pink glow

    Here’s a potentially hypothetical question.

    If you were in the market for a 3-bedroom penthouse, and its 1,100 sf wraparound terrace with skyline views just so happened to have an enormous neon-like sign above it, would you consider this to be a feature or a bug?

    The sign does turn off at 11PM, but before then, it creates this awesome/lovely pink glow on the terrace. My sense is that this will be fairly divisive. You’re either going to love it or you’re going to hate it. Which side are you on?

    Let me know in the comment section below.

  • Spatial videos

    If you have an iPhone 15 Pro (and iOS 17.2), you can go into Settings -> Camera -> Formats and turn on a setting called “spatial video.” It will then enable this (excerpt from Om Malik):

    Spatial video is a mixed-reality video format that allows videos to record the depth and spatial information of the scene, and when you play it back, you get a more immersive, three-dimensional (3D) experience. The iPhone 15 Pro utilizes its main lens and the ultra-wide lens to capture the depth and spatial information of the videos. The spatial videos are captured at 1080p, 30 frames per second, and use the HEIC format.

    What you can then do is watch your videos on something like an Apple Vision Pro. It’s not going to be exactly perfect right now — given that the Vision Pro display is over 8k and the above is 1080p — but it will give you an indication of what’s to come for photography, video, and many other use cases.

    Some examples.

    As a regular consumer, this might allow you to capture videos from a trip and then more fully relive the moments once you’re at home. And as Om argues in his post, this will inevitably change photography/video. Because how we consume media, impacts how and what we capture.

    If you’re in the business of selling real estate to people, you can also imagine this set up having a profound impact on virtual tours. Because now you have something that’s pretty damn close to reality, if not eventually indistinguishable. Why even go in person until you have to?

    Of course, all of this will depend on whether Vision Pro actually sees widespread adoption. But if the technology is as good as everyone who has tested it seems to think, then surely there will be at least some initial users who find immediate value.

    And if that is the case, it opens the door for the masses. To once again quote Om: “It is not hard to be excited about the possibilities.”

  • How effective will a catalog of home designs be at improving housing supply?

    Last week, the Canadian federal government announced that it will be developing a catalog of pre-approved housing designs in order to accelerate the delivery of new homes.

    This is not a new idea. A similar approach was taken after the Second World War in order to quickly house veterans returning home. But in this current iteration, the catalog is expected to be focused on missing middle housing such as small multiplexes and student housing, and then later on higher-density construction.

    We have also spoken about this idea before in the context of ADUs in Los Angeles. And at that time, I wrote that the way to encourage more of something is to reduce friction. I continue to believe that this is the case, and so I do think that pre-approved designs are a positive thing, especially for smaller projects.

    However, it’s important to keep in mind that this is not the biggest barrier to new housing supply. The problem is not that developers and builders are all sitting around thinking “if only I had a design for a 5-unit multiplex.” The problem is that they’re sitting around thinking “if only I could make some money building a 5-unit multiplex.”

    So while reducing the barriers to entry is a good thing, the really important question for the designs in this upcoming catalog is: Can developers actually make any money building them? Because if the answer is no, it doesn’t matter that they’re pre-approved and ready to go. They won’t be built.

    Hopefully somebody is thinking about this because it will take some work. Every market is different. What works in one place, may not work in another. On top of this, what works today, may not work tomorrow.

  • Blockchain applications in real estate

    I opened up X this afternoon and I saw a photographer tweet that he hadn’t sold a single NFT in the last four months. His conclusion: The NFT market is dying, if not already dead. There are no collectors left. Damn.

    I’m sure it probably feels this way to most. But the reality is that there are a lot of asset classes that feel this exact same way today. (I know that many of you will contest whether NFTs are actually an asset class.) There aren’t a lot of buyers out there right now.

    But that doesn’t necessarily mean that the NFT market, in particular, is done with. In fact, if you look around, there are countless signs that point to the opposite.

    I, for example, find it interesting that if you’re an architect or a city planner in the US, and looking to check off some continuing education units, you can now register for a course at Harvard called From Crypto to the Metaverse: Blockchain Applications in Real Estate.

    And if you look at the learning objectives, it includes things like demystifying how Blockchain technologies work, how they might impact real estate businesses in the future, and what opportunities they may create. This suggests we’re still early.

    Right now just feels like that time in the cycle that tests both your conviction and your discipline. It’s easy to believe in something when everyone else does. But what about when most people don’t?

  • This is how many more people Toronto could house if it increased its population density

    As a follow-up to yesterday’s post about infill housing and overall urban densities, let’s look at some basic math.

    The City of Toronto has an estimated population of 3,025,647 (as of June 2023) and a land area of 630 square meters. That means that its average population density is about 4,803 people per km2. Obviously this number will be higher in some locations, and lower in others. But overall, this is the average.

    Now let’s consider how many people we could actually fit within the existing boundaries of the city (city proper not the metro area) if we were to simply match the average population densities of some other global cities around the world.

    Again, what this chart is saying is that if we took the same physical area (Toronto’s 630 square meters) and just increased the population density to that of, say, Paris, we would then have a total population of over 13 million people and we’d be housing an additional 10,011,573 humans on the same footprint.

    I am not suggesting that this is exactly what should be done. (Though, you all know how much I love Paris.) What I’m suggesting is that calling a place “full” isn’t exactly accurate. How would you even measure that? What someone is really saying is that they are content with the status quo in terms of built form and density.

    Note: The above population densities were all taken from Wikipedia, except for Toronto’s figures, which were taken from here.

  • We’re far from full

    I tweeted this out yesterday:

    What I was getting at is that there’s lots of available room within our existing boundaries for infill housing. We are nowhere near full, despite what some people will tell you. In fact, most areas are not dense enough to properly support modes of transport that aren’t the car.

    Of course, there are a number of ways that one could be offended by a statement like this.

    One, you could argue that more density would make the city unlivable. Two, you could get into the chicken-and-egg game of whether a more expansive transit system is needed before allowing more density. Three, you could say that we already have enough zoned and unbuilt housing supply — so why do we need more? And I’m sure that there are many others that I’m not mentioning here.

    Density can be a counterintuitive feature for cities. It can actually make a place more livable by encouraging more amenities adjacent to where people live and work, and it can also reduce traffic congestion by empowering alternative forms of mobility. If the only reasonable way to get around is by car, then of course most people will drive.

    We also need to avoid the chicken-and-egg mental trap when it comes to mobility infrastructure. Land use and transportation always work hand in hand and need to be thought of and executed on simultaneously.

    Finally, the objection of already having lots of sites zoned for new housing is an enticing one. But zoned and delivered are two vastly different things. And the unfortunate reality is that there are a lot of zoned sites that won’t be able to develop in the short and medium terms because the market isn’t there. But that doesn’t mean that other housing typologies couldn’t be built.

    At the same time, we need move away from “cruise ships of urbanity.” Broadly speaking, Paris — to cite just one of many examples– is at least and on average about 4x denser than Toronto. And somehow, people still like living and visiting there.

  • It shouldn’t take 17 years to build affordable housing

    If you are the Los Angeles County Metropolitan Transportation Authority and you own excess land next to a transit line that you’ve just recently built, one possible option could be to give this land to a non-profit housing developer so that they can build some affordable housing. And this is exactly what was agreed to in 2007 with the Lorena Plaza site in the Boyle Heights neighborhood of LA. The proposal: 49 affordable units geared toward people making 50% of the AMI.

    However, like all things in development, things do take time. And when building new 4-storey housing complexes, there is always the real possibility that you might face several years (or longer) of fierce opposition. In the case of Lorena Plaza, it apparently took the developers from 2013 to 2020 to reach a settlement with the local councilman and their immediate neighbor (a commercial plaza). In the end, this project is now expected to occupy next summer (2024), which brings the total project timeline to 17 years.

    This is probably an extreme example and, thankfully, some of the rules have since been changed to help speed up projects like this one. Still, it is no wonder we can’t build enough new housing. (Los Angeles wants to build some 450,000 new homes by 2029.) Time isn’t free. And according to the WSJ, this relatively small project ended up costing US$34.2 million to build. That’s nearly US$700k per suite. A number that will buy you a lot of home in many cities across the US.

  • The laneway love continues

    The momentum around wanting mixed-use laneways in Toronto continues, or the algorithms just know what gets me going. Either way, I continue to be both impressed and surprised by the number of “hidden” laneway-based businesses that exist in this city and that keep surfacing online.

    Here are some further examples:

    I honestly think that someone should create a directory/mapping of these businesses. If anyone wants to do this or help do this, I own lanewaylove.com and I’ve been reserving it for projects just like this.

    I also think that this has the potential to become a hallmark of Toronto urbanism. It’s already somewhat endemic, it would seem. So imagine what will happen once we actually allow and encourage these uses to their fullest extent. Yes, once.

    If you know of any other laneway-based businesses, whether here in Toronto or in your city, please share them in the comment section below.

  • Snowboarders are annoying

    There are three resorts in the United States that do not allow snowboarding. They are: Deer Valley and Alta in Utah, and Mad River Glen in Vermont. New York-based Extell is also developing a new resort next to Deer Valley that was previously known as the Mayflower Resort. For a while, it was up in the air whether they would allow snowboarders, but this past summer it was announced that it will become part of Deer Valley and that their snowboarding ban will remain firmly in place.

    As a snowboarder, I’m not overly fussed by this. There are, of course, lots of other places that will welcome my kind. But I do think it’s both interesting and worth poking fun at. It speaks to the tribal-like nature of humans. I get down the mountain on this device and you get down the mountain on that device. So we are fundamentally different humans. And I do not want to associate with you. At the same time, I do respect the ability for private resorts to make their own decisions. And this seems to be what their paying customers want.

    But what about if the resort happens to be on public land? Does that make things any different? Deer Valley sits on land that is privately owned; whereas Alta sits on land that is owned by the National Forest Service. Which is why in 2014, a bunch of cantankerous snowboarders sued the resort, claiming that its ski-only policy violated the 14th Amendment to the Constitution. I’m not a lawyer, but I am told that this is typically used in cases involving discrimination.

    Alta ultimately won the case. They argued that even though the land they sit on is public, their lifts are still private. And so they get to decide who uses them. I guess that’s fair. But at the same time, this technically means that snowboarders are allowed on the mountain, they just can’t use any of the lifts. I tried to confirm this fact with Alta on X the other day, but they have yet to respond.

    In any event, my prediction is this.

    Snowboarding is a relatively young sport. It grew massively in popularity during the 1990s (which is when I switched over from skiing), and so its participants tend to skew younger (my assumption). This is probably why fancy resorts like Deer Valley don’t feel the need to cater to them. However, young people tend to both grow up and, you know, make more money. And so at some point — when there’s a real business imperative — we may find that people suddenly change their minds.

    If you’re trying desperately to sell luxury condominiums at the base of a resort and if snowboarders keep showing up at your sales office, for how long will you continue to say no to their money?