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: May 2024

  • Why we shouldn’t blame Uber for traffic congestion

    It has become fairly common to blame Uber (and ridesharing in general) for increased traffic congestion. I hear it all the time: “If only there weren’t so many Ubers on the road, traffic would flow more freely.” While there are studies suggesting that “deadheading” miles do have a negative impact and that Uber can draw people away from public transit (that’s bad), I think it’s important to consider the bigger picture here. So let’s try and do that today.

    Firstly, let’s think about who traffic congestion directly impacts (indirectly it’s everyone). If you’re a pedestrian, you don’t care about traffic congestion. In fact, maybe you gain satisfaction from seeing other people stuck in it. (There’s even a German word for this feeling.) Similarly, if you’re riding the subway, taking any form of transit on its own right-of-way, or riding a bike, you likely also don’t care about traffic congestion. It doesn’t directly impact you.

    Where you do care about congestion is if you’re in something like a bus that is stuck in traffic or if you’re driving. In the former case, you’re probably thinking, “hey why can’t these people take the bus like me. Then we’d have less traffic!” And in the latter case you’re probably thinking, “if only there weren’t so many Ubers and bike lanes, then I wouldn’t be stuck in traffic!” Ironically, this is arguably the biggest segment of people who feel they are being impacted by Ubers.

    Secondly, let’s think about how Uber vs. driving might impact traffic congestion differently. In both cases, I would think that the majority of use cases involve one person (excluding drivers in the case of Uber) going to their desired destination. So from a raw space per person perspective, they both take up a similar amount of urban space.

    The differences are that the Uber likely had some amount of deadhead miles. In other words, it spent time driving around looking for its next passenger. And it likely targeted already busy areas because that’s where it was more likely to find someone. Individual drivers don’t do this. They go from point A to point B.

    However — and this is a big however — drivers do require parking once they get to where they’re going. Ubers don’t. This both takes up more space and oftentimes requires some amount of circling around. This is a significant difference and it begs the question: which is worse? Deadhead miles or all of the parking that cars generally require? I would argue the latter.

    Where I’m going with all of this is that I think the criticism of Uber is misdirected. It doesn’t get at the real underlying problem. If traffic congestion exists, it is because they are too many cars for a finite amount of road space. This includes the people who choose to drive themselves around. In fact, you could argue that they’re the most impactful to cities. The way you solve this is simple: you price congestion and you encourage alternative forms of mobility.

    Everything else is just a distraction.

  • Eating by algorithm

    Grocery shopping is one of those things that — despite a lot of people really trying — has remained a stubbornly in-person activity. However, the pandemic did give online grocery shopping a significant boost, and lot of that has stuck, even if it has been trending slightly downward from its peak. Here are a few slides from Dan Frommer’s Consumer Trends: 2024 Food & Wellness Special report:

    Part of the challenge may be that the majority of people say they actually like grocery shopping, and doing so in a physical store:

    So it is very possible that, for the foreseeable future, there will always be a large segment of buyers who prefer to shop in-store. But then again, if you asked me these same questions, I would also tell you that I like grocery shopping and that I prefer buying in-store. However, that doesn’t mean I wouldn’t be open to alternatives. I just haven’t explored and found a suitable online option.

    At the same time, and according to the same Consumer Trends Survey, about 10% of Americans say they currently dislike grocery shopping. Maybe this is the same 10% who are right now shopping online. Either way, this is already a large segment of people who would rather not go into a grocery store.

    Intuitively, as the online offerings get better, one would expect this number to grow. Here, for example, is an interesting overview of the service Hungryroot. One part “meal kit” delivery and one part online grocery shopping, the company uses machine learning and algorithms to determine what its customers might want to buy. Already, about 70% of what it sells is picked automatically.

    On the back end, McKean explains, among other actions, Hungryroot is “clustering” its new customer with other users who have answered its onboarding survey similarly and have already been with the service for multiple years. “And so we can say, ‘okay, people who filled out that signup flow like you… they loved these top recipes with high probability, so we think you’re going to love these recipes with high probability’.”

    What I like about this is that it requires fewer decisions; it has the potential to feel like you have a private chef (one that learns what you like and adjusts accordingly); and it promotes dietary variety. For the typical American, 75% of what they buy in a grocery store is the exact same as what they bought the last time. There’s very little variety, because it’s always easier not to have to think.

    Given this stat, it is maybe surprising that this 75% hasn’t become more automated for more people. Perhaps it’s the 25% that keeps most of us going into stores. I’m not sure, but I think I’m ready to try a service like Hungryroot.

  • Happy May long weekend

    This morning, I went cycling with my good friend Austin Kjorven up in Milton. And it was a stark reminder that he is an athlete and holds a Guinness World Record, and that I spend the vast majority of my days sitting at a desk.

    I’m excited for more riding this summer. Happy May long weekend, everyone.

  • Salt Lake City wants to turn Main Street into a pedestrian promenade

    Last year, I wrote about how Salt Lake City wants to build a new linear park around its downtown. That post can be found, here.

    Fast forward to today, and the city’s Department of Economic Development has just published a new comprehensive 215-page study that supports turning Main Street into a pedestrian promenade.

    Specifically, the area running from South Temple to 400 South, and including 100 South from Main to West Temple:

    As part of the study, they highlight a number of successful case studies from around the world, including 16th Street Mall in Denver, Bourke Street Mall in Melbourne, and Queens Quay here in Toronto.

    In the case of Denver, they cite the one-mile stretch as single-handedly generating over 40% of the city’s total downtown tax revenue! And in the case of Toronto, they refer to Queens Quay as a global destination. (Toronto readers, do you agree?)

    Like most city building initiatives, this vision is will take years to realize. But it’s interesting to note that, of the eight design alternatives included in the study, there is already one clear preference within the local community — option B.

    Option B is a pedestrian/transit mall, but with multi-use trails. In other words, it is a no-cars-allowed alternative that would still allow bicycles and scooters. Here’s the street section:

    If you’d like to download a copy of the full Main Street Pedestrian Promenade Study, click here.

  • The US is building a lot of apartments right now

    As of November 2023, it was estimated that there were 988,000 homes under construction in multi-family buildings containing 5 or more units. This is in comparison to 680,000 single-family homes, according to US Census data. (Looking at the below graph, it’s also interesting to see how the supply of single-family homes dropped off after the global financial crisis and multi-family apartments took off.)

    All of this means that in 2024, the US is on track to complete more apartments than it has in many many decades. In fact, exactly similar to what we experienced here in Toronto, if you want to find a comparable multi-family supply number, you need to go as far back as the 1970s (see below). Of course, the US had fewer people back then, and so on a per capita basis, it was building more housing.

    Still, all of this new supply is having an impact. Apartment List recently published its national rent report, over here. And overall, it found that:

    Rent increases are currently being moderated by a robust construction pipeline expected to deliver a decades-high number of new apartment units in 2024.

    More specifically, they found that the cities with the most supply are now seeing the largest rent declines:

    Many of the steepest year-over-year declines remain concentrated in Sun Belt cities that are rapidly expanding their multifamily inventory, such as Austin (-7.4 percent year-over-year), Raleigh (-4.4 percent), and Orlando (-3.9 percent).

    If you’re an apartment developer, this is not what you want to see. It means that increased competition is creating downward pressure on rents and that vacancy rates are probably rising. But if you’re someone looking to rent an apartment, this is exactly what you want to see. You want more affordable housing. And so, as a consequence, you want more homes to be built. Because when supply outstrips demand, this is what you get.

    Charts: Apartment List

  • Just give me the fastest option

    I had a dinner in the suburbs this evening. And so in the afternoon today, I opened up Google Maps to figure out how I was going to get there.

    I didn’t have my car with me — because I hate driving into the office — so in my mind, I was either going to take transit or take an Uber.

    These are the time estimates that Google gave me:

    It was going to take me over 4 hours to walk there. Over an hour to drive there. And 47 minutes to take the train there. Interestingly enough, cycling was also going to be faster than driving.

    As soon as I saw this, I shut down the app and decided I would take the train. All I was interested in was the absolute fastest option. And for me at that moment, it was the train.

    I recognize that this isn’t always the case. Sometimes driving is much faster than taking transit. It depends on a number of factors.

    But as a general rule, when it comes to big and dense cities, you really can’t beat trains and bikes for moving the greatest number of people, as quickly as possible.

  • Seoul’s infamous modernist megastructure

    Seun Sangga is Seoul’s first mixed-use complex.

    Constructed between 1967 and 1972, the elaborate structure sits atop a strip of land measuring 50 m x 1.2 km, which had been flatted during the Second World War as a way to contain the spread of fire in the event of an air raid and to act as an evacuation corridor.

    It’s a modernist development that is very much of this period. It’s massive, complicated in section and, in many ways, completely disconnected from its surrounding urban context. Flanking the various buildings are elevated and covered walkways.

    So it is perhaps not surprising that this development has followed a similar fate to many others of this era. While it was initially viewed as being quite modern and desirable — it was one of the first buildings in Seoul to have elevators — Seun Sangga was quick to start showing signs of decline.

    In fact, by as early as the 1970s, the complex became known for its porn shops and a bunch of other informal economy-type activities.

    It’s an interesting, though familiar, story.

    If you’d like to learn more, I recommend you check out this episode of the Urbanist and this article from The Architectural Review. The photos in the article are good accompaniment to the audio-only Urbanist episode, so make sure you flip through them.

  • Do great cities need tall buildings to help them thrive?

    In other words, are tall buildings a prerequisite to competing in today’s global economy? It’s an interesting question. And Jason Barr — professor of economics at Rutgers University-Newark — does think they are an important ingredient. So much so that he wrote a book on the topic called, Cities in the Sky: The Quest to Build the World’s Tallest Skyscrapers. While Jason does acknowledge that not every city needs them, he does suggest that not having them could hinder a global city:

    If you look at Paris’ global ranking in terms of its importance in the world economy, as measured by the size and number of international firms, it’s falling. Paris in 2000 was ranked fourth, and by 2020, it was down to eight, losing out to skyscraper cities such as Singapore and Dubai.

    In the last decade, Paris has shrunk by 122,000 residents. As reported by Forbes, “Many of those leaving are choosing either the suburbs or countryside around Paris, or they are relocating to France’s smaller cities such as Bordeaux, Lyon, and Toulouse.” By limiting its building stock, Paris is driving up housing prices, pushing out residents, and causing suburban sprawl.

    While I agree that tall buildings are important “geography-shrinking machines”, what we’re really talking about is using land more intensely. We’re talking about urban density. But you don’t necessarily need tall buildings to have high population densities. Consider Barcelona, which is one of the densest cities in Europe, and consider this comparison between Paris (few tall buildings) and Vancouver (more tall buildings).

    So is the argument simply that density is good for cities, and that tall buildings are one way to achieve that? Or is it that, now that cities like Paris are built out (albeit at very high densities), the only option for growth is to go up? I guess I’ll have to read his book.

  • Waymo’s robotaxis now make 50,000 paid trips every week

    A few days ago, Waymo announced (on X) that its robotaxis are now doing more than 50,000 paid trips every week across Phoenix, San Francisco, and Los Angeles.

    This means that the company is getting an average of 300 bookings every hour or five bookings every minute. And if you add in Austin, where it’s currently offering a limited number of rides, the company has completed a total of over one million rider-only trips.

    In the announcement, Waymo also went on to say that “fully autonomous ride-hailing is a reality and a preferred mobility option for people navigating their cities every day.” All of this is something.

    But perhaps the most important takeaway, right now, is that the company continues to claim — by way of a study from Swiss Re — that its robotaxis are already significantly safer than human-driven vehicles.

    I don’t personally know if this is true, but it’s not hard to believe. I mean, human drivers suck. And assuming it is true, we should all want more robotaxis on the road, because statistically, we would be significantly safer.

    The problem, though, is that autonomous vehicles suffer from a perception bias. We’re all looking for them to fail. If a robotaxi gets into an accident, it’s news. But if a human driver gets into an accident, it’s standard operating procedure. It’ll be interesting to see how and when this flips.

  • Cost-plus price floor

    Oftentimes, it feels like there is a perception that developers price new housing with the fattest of margins. Meaning, if only developers were less greedy, housing could be more affordable. But as we have spoken about many times before, real estate development is a competitive industry; therefore, projects happen on the margin.

    Ordinarily, the prices you see are the result of a cost-plus pricing strategy. Developers figure out what it will cost to build and develop, they add on a margin that they think their investors will accept, and then they determine what sticker prices they need to make the project financially feasible.

    I’ve been writing about this approach for many years, but today it’s even more obvious. According to Urbanation’s Q1-2024 condominium report, new unsold condominium inventory in the GTA is currently sitting at approximately 23,815 units. This is up 30% YoY and is equal to about 23 months of supply. Two years ago in Q1-2022, this number had reached an 18-quarter low of 8,726 units.

    Developers are highly motivated to sell and move their projects forward. Time is a killer, especially today. So the logical explanation for this rising inventory is simply that they can’t sell it. Their cost-plus pricing doesn’t overlap with what most buyers in the market are willing to pay. Like I said, development happens on the margin.

    In theory, there is always a price where buyers would be willing to transact. If I listed a beautiful condominium for $100k today, many people would want to buy it. Supply would quickly run out. The problem is that no developer can build for this. There is always a very real price floor and, right now, that floor doesn’t seem to be low enough for many buyers.