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: April 2024

  • Toward more rental housing

    The Greater Toronto and Hamilton Area is expected to see 6,821 new rental homes completed this year. This is a “multi-decade high”, according to Urbanation’s latest rental report. Indeed, you need to go back to the 1970s to get rental supply figures of this magnitude.

    A big part of this has to do with the fact that we are now taxing rental housing less. Toward the end of last year, the federal government removed their portion of the HST on new rental housing and, then in November, the province of Ontario followed with theirs.

    This was “a big first step” for the industry, according to leading apartment developers like Fitzrovia.

    But there’s another reason that many developers are now looking to purpose-built rentals: fewer people are buying new condominiums. And if you can’t presell condos, well then you’re going to need to find another path forward for your land.

    However, flipping over to rental is not necessarily a panacea. The margins are generally razor thin (+/- 50 bps). It requires more and different capital (typically). And you need to believe in some fairly non-consensus assumptions (high rent growth, low cap rates, etc.).

    It’ll be interesting to see how many developers are able to successfully flip over to rental and how sustained this rental supply number will be.

  • Why cars keep getting bigger

    Last week we spoke about parking space dimensions. And my point was that these dimensions can dramatically change parking designs in new developments. In the comment section of this post, you’ll now find a number of examples of how these dimensions vary by city.

    But the reality is that cars do keep getting bigger — at least in this part of the world. In the 1970s, SUVs and trucks made up less than a quarter of new car sales in the US. Today, this number is greater than 80%. It has become the standard kind of car.

    So this week, let’s touch on why this has happened.

    One argument might be that this was just what consumers inherently wanted. But there’s lots of evidence to suggest that this wasn’t really the case; it was instead encouraged by government policy.

    One specific example is the creation of Corporate Average Fuel Economy standards (also known as CAFE). This was first introduced in the 1970s, but importantly, it was done with two different fuel economy standards: one for cars and one for light trucks.

    Since the light truck standard was less onerous (see above chart), this created a strong incentive for car makers to just make and sell more light trucks. And curiously enough, that’s exactly what they did.

    For much more on this topic, check out this comprehensive Vox article by David Zipper.

  • Three ways to optimize investments in transit

    Sometimes I’ll hear people in Toronto talk pejoratively about all of the development that’s been happening at Yonge & Eglinton (in midtown). They’ll say it’s too much density.

    But then you come across charts like the ones above (source previously shared here) and you realize that this location is the only section along the new Eglinton Crosstown LRT line that is actually starting to have enough people.

    Based on 2021 Census data, there were about 40k people within 800m of the future Eglinton and Mount Pleasant stations. In contrast, there are many downtown stations along the Ontario Line (also under construction) with around 80k people.

    Why this is important is because if the objective is to get people to ride this new transit and collect a lot of fares, then the single most important factor is going to be the amount of people that live, work, and play adjacent to each station.

    Now, I’m not a transportation planner, but in my mind there are three simple ways to think and go about optimizing for this:

    1. You can look at where population densities are already high and then add new transit to service these densities. This is what is happening with the Ontario Line and it was long overdue. We know that ridership is going to be relatively high because of the chart at the top of this post.
    2. You can look at where there’s existing transit and then work to optimize the land uses around it. This is what we should be doing a better job of along the Bloor-Danforth line, where certain station areas have actually lost people over the last few decades. This is the opposite of what you want next to transit investments.
    3. Lastly, you can also proactively plan new transit while simultaneously encouraging more density. An example of this would be the Vaughan Metropolitan Centre (just north of Toronto). Extend the line and encourage growth. This is good. The only thing with this approach is that it can seem a bit misaligned if you’re currently failing at #1 and #2.

  • Ballin’ out for charity

    Today, Rad Marketing and Blackline hosted their second annual “Ballin’ Out For Charity” basketball tournament. And it was a fantastic event. My sore lower back proves it. It’s always fun getting so many Toronto real estate people into one room (or onto a giant court at the University of Toronto). But more important is the fact that it was for a good cause. This year’s tournament raised money for the MLSE Foundation (which you can learn more about here). And last year’s tournament raised over $70,000 for the Daily Bread Food Bank.

    I’m looking forward to this becoming an industry staple. Everyone involved in the organizing of this event should be very proud of what they accomplished. Great job.

  • Toronto’s unstable neighborhoods

    This is a telling map from Jens von Bergmann. It shows the changes in population density across Toronto from 1971 to 2021 (measured in people per hectare). What is obvious is the spikiness of our city. We have been very effective at adding lots of people downtown, along the central waterfront, and in certain other pockets. But at the same time, we have let our older inner city neighborhoods move in the opposite direction and lose people.

    The irony of this outcome is that we have long created policies that refer to these areas as being “stable” neighborhoods. The idea was that they weren’t supposed to change, at least not too much. But what this data shows is the opposite. By restricting growth, we actually created the right conditions for them to lose people as demographics changed and household sizes got smaller, among other things. We created unstable neighborhoods.

    Thankfully, we have started to change course and allow some intensification. We’re not there yet, but I do believe that the next 50-year map will look quite different than the one you see here.

  • Open-air corridors and exterior exit stairs

    Montreal is, in many ways, a city of winding exterior stairs. If you’ve been there, then you know. The city is overwhelmingly a city of low-rise apartments (less than five storeys). And with these, comes lots of exterior circulation. But this tradition doesn’t just apply to older buildings. Here is a contemporary tall-building example which follows a similar approach.

    Designed by MSDL Architects, the project, called The Laurent & Clark, consists of two tower volumes. They read as two separate towers, but they’re connected and share egress paths. On the east side is a conventional “scissor stair” tucked behind two elevators. And on the other end, connected by an open-air corridor, is an exterior exit stair that runs all the way up the tower.

    Here is a circulation diagram via Azure:

    This is novel (at least in this part of the world). The suites in the west tower are all dual aspect; meaning, they have windows on both ends.

    They also have direct elevator access (see cores above), which means a lot less non-revenue generating circulation space. I mean, if you think about it, the open-air corridor on the north side of the west tower is akin to building a simple balcony. Extend the slab and add a guard rail. And so you could argue that this portion of the building has a near 100% efficiency factor.

    However, the downside is that you need more elevators. Here, it looks like they have 6 for their 356 suites. That’s an overall ratio of just under 60 suites per elevator, which is lower (i.e. better) than what you’d typically find in a conventional tower. The crude rule of thumb is 1 elevator for every 100 suites. That said, these direct-access suites would be premium.

    But perhaps the most important takeaway is this: If cold and snowy Montreal is cool with open-air corridors and exterior exit stairs, then maybe your city should be as well.

  • Rents are lower, but what does that ultimately mean?

    Paris is the first city in France to implement some form of residential rent control. The first came in 2014 (enacted in the market in 2015), but this was later removed in 2017. The second came in 2019, and this current program remains in place until November 2026, at which time it will be reviewed.

    But given that it has already been in place for a number of years, people have started to analyze it’s effectiveness. Here is a study by Atelier Parisien d’Urbanisme (APUR) that was published this month.

    The report is in French, but I can tell you that, what they did, was compare the Paris region to 8 other cities in France — all of which do not have the same rent controls. They were: Aix-en-Provence, Grenoble, Marseille, Nantes, Nice, Strasbourg, Toulon, et Toulouse. These were allegedly chosen because their housing markets are thought to be similar to that of Paris’.

    What they found was that from July 2019 to July 2023, legislated controls in Paris lowered rents by approximately 4.2%, compared to where they would have been without any market intervention.

    At the same time, they noticed that these same controls seemed to become more effective over time. From July 2019 to June 2020, they lowered rents by 2.5%, but from July 2022 to June 2023, they lowered rents by 5.9%.

    Finally, they also found that the controls seemed to impact smaller places the most. For apartments between 8 and 18 m2, rents were 10.2% lower than expected during July 2019 and July 2023.

    This is all interesting stuff, but in many ways, it is expected. Rent controls are intended to depress rental growth. That’s the whole point. And based on this data from APUR, it is working in Paris.

    But the really tough questions pertain to the possible knock-on effects. If rents are 4.2% lower, but operating costs are now growing faster than rents, then this is a problem for the housing market. You’re on an unsustainable path.

    And if lower rents mean that fewer developers are going to build new housing, then this is also a problem, because less supply will eventually translate into more upward pressure on rents. I don’t know for sure that this is happening in Paris, right now, but these are crucial considerations.

    It’s never as simple as just looking at rents and thinking lower is better for long-term affordability.

  • How big (or small) are your parking spaces?

    There is an ongoing architecture/development joke that the way you design a building is by first starting with the parking. Once you’ve figured out how the parking will work, you can then move on to, you know, the secondary stuff, like figuring out how actual humans will occupy your development. I’m calling it a joke, but there’s obviously some truth to this. Parking is almost always a challenge, especially if you’re developing in a city that still has parking minimums.

    Previously, I’ve talked about the benefits of “unwrapped” above-grade parking. This is generally counter to how most cities like to think about parking. But for a few reasons, it can make a lot of sense. However, to be clear, I’m not advocating for more parking. My point was simply that — if you absolutely have to build parking — then maybe you should look at spaces that give you some flexibility in the future.

    At the same time, there’s another more nuanced thing to consider: how big are your actual parking spaces? Here in Toronto, a standard parking space is 2.6m wide x 5.6m deep (about ~157 sf). This is larger than some apartments. But these minimum dimensions can vary greatly by municipality. Oftentimes you’ll hear planners say, “well, people here like their big cars.” The problem with this is that these dimensions will dramatically change your parking design.

    So today I thought it would be interesting to gather a few data points from all of you. What are the minimum parking space dimensions in your city? Please leave a comment below so that everyone can see. As far as I know, there isn’t a globally accepted set of dimensions for parking spaces. Perhaps because some places like big cars and other places don’t care. But maybe there should be.

  • New York’s first all-electric tower

    Here’s the thing:

    Nationwide, the biggest single source of emissions is transportation, dominated by low-occupancy cars and trucks. But in New York, most people use mass transit instead of driving. That means buildings “are by far the largest source” of climate pollution in the city, said Christopher Halfnight, senior director of research and policy at the Urban Green Council, a nonprofit focused on energy efficiency in buildings. Gas- and oil-burning furnaces and water heaters are together responsible for 40% of NYC emissions, according to Halfnight.

    In response to this, New York City has been passing laws that restrict greenhouse gases and that by and large incentivize electrification. One of these is Local Law 97, which will generally require buildings over 25,000 sf to reduce their GHG emissions by 40% (relative to 2005) by 2030.

    Already the market is responding. Alloy Development has just completed the city’s first all-electric tower at 505 State Street in Brooklyn. Tenants began moving in on April 5.

    When team members asked what the complex would look like absent gas, the answers were fairly straightforward. “Instead of a gas boiler, an electric boiler; instead of a gas cooktop, it was an induction cooktop. And literally that was it,” said Pires, noting that they had to revise the design of the electrical room to allow for higher amperage, since more incoming electricity would be needed for a larger electrical load.

    Some, or perhaps many, in the industry are fighting these new laws. In 2022, a co-op in Queens apparently went to the New York Supreme Court. But directionally, this certainly looks to be where we are headed. So you can either fight it, or you can try and get ahead of it, as Alloy has done here.

    For more information on 505 State Street, go here (Bloomberg) and here (project website).

  • XS in Philadelphia, not Tokyo

    This is the sort of housing project that you’d fully expect to find in Tokyo. Seven homes built on a small urban lot measuring only 11 feet wide by 93 feet deep. But in this case, it’s not Tokyo; it’s Chinatown, Philadelphia, where a residual lot that was created when the sunken Vine Street Expressway was carved through the middle of the city in the 1950s.

    Designed by Philadelphia-based Interface Studio Architects (ISA), the project contains 7 levels of livable space. What’s interesting, though, is that from a building code perspective this is still a 4-story building. There are two mezzanine levels that don’t get counted (and that create some great double-height spaces). This also seems to be what allowed them to get away with a single egress stair in the middle of the building.

    The other technique that was used to maximum density is facade projections. Philadelphia’s zoning code allows for projections up to 3 feet in the horizontal dimension. And if you look at the above plans, you’ll see that these were used to “top up” or extend the site’s 11 foot width to 14 feet, when it made sense to do so from a programming standpoint. The result is some very livable spaces.

    I am endlessly fascinated by these sorts of projects because they demand creativity and because you ultimately end up unlocking something that the market had been overlooking. Here is an example of a small leftover urban parcel that was previously used as surface parking for two cars. Now it’s seven beautiful homes.

    Photos/drawings: ISA