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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Author: Brandon Donnelly

  • A subway network at the scale of a country

    The Hyperloop space has a number of competing companies that are all trying to figure out how to move people (between cities) in low-pressure tubes at nearly the speed of sound (1,234.8 km/h). For what it’s worth, Virgin Hyperloop One, which was founded in 2014, has supposedly completed the most testing and raised the most money ($295 million as of December 2017).

    This morning I was reading up on the Toronto-based TransPod, which was founded in 2015 by Sebastien Gendron and Dr. Ryan Janzen. They raised a $15 million seed round from an Italian tech group in 2016 and are close on another $50 million round right now. Following this, they’ll look be looking for a few hundred million. They seem encouraged by where Canada’s Strategic Innovation Fund has been placing money.

    Supposedly, their biggest competitive advantage is cost. The company estimates their cost per kilometer to be about $25 million, which would put the cost of a Toronto-Montreal link at around $15 billion. This is not cheap, but it is allegedly cheaper. The travel time between these two cities could then be as short as 40 minutes.

    Virgin Hyperloop One has been similarly looking at a Toronto-Ottawa-Montreal line, as it would stitch together about 25% of Canada’s population. But apparently the federal government recommended that TransPod instead look at a line that sits entirely within one province — at least at the start.

    So the company has gone ahead and secured a 10-kilometer parcel of land in Alberta that will eventually form part of a future connection between Calgary and Edmonton. TransPod hopes to have this test track operational by 2022.

    However, their focus right now is on France. (Being in Europe is another differentiator for the company. Europe gets transport.) With the help of a few partners, the company has started work on a 3-kilometer test track in Limoges, France. Permits were received at the end of last year and they hope to begin testing by the end of this year.

    There’s no question that this technology has the potential to be transformational, which is why so many companies are competing in the space right now. But it’s obviously going to take a whole lot of moxie. Gendron is on the record talking about the risk-adverse nature of both Canadian regulators and investors when it comes to these sorts of large-scale innovations. That’s a problem that we need to address.

    The title of this post is a quote by Gendron taken from this TechVibes article.

    Image: TransPod

  • The work of centuries

    Witold Rybczynski’s recent post about the tragic fire at Notre-Dame de Paris provides an interesting summary of cathedral construction techniques over the years:

    The Paris fire is also a reminder of what a weird hybrid structure Gothic cathedrals really are. The ancient Romans roofed their basilicas and baths with concrete vaults (the Pantheon with a dome), and the Byzantines used thin domes and vaults of brick. Over time, builders lost these skills and Romanesque cathedrals were roofed with exposed timber rafters like big barns. This made the buildings highly susceptible to fire, often caused by lightning strikes. The solution, pioneered at Durham Cathedral in the 11th century, was to build a lightweight ribbed stone vault over the nave. The timber roof remained, so the vault had no structural function (except to support itself) but it separated the interior from the flammable roof above. This was largely effective as the April 15 fire shows.

    Below is an image from the WSJ depicting Notre-Dame’s timber rafters and showing the extent of the area consumed by the fire. Fortunately, relatively little of the cathedral was actually destroyed.

    Going forward, there will almost certainly be a debate about how the roof and spire should be rebuilt. What materials and construction methods are appropriate for this emblem of Christianity and French culture?

    But I agree with Witold in that “there is nothing inauthentic about rebuilding.”

    It is common to lament that buildings simply aren’t built like they used to be. But this is not a new phenomenon. Construction methods change, as do the skills of builders.

    There may have been critics in the 1220’s complaining about how the cathedral’s roof was built using wood, instead of concrete or brick vaulting. But that’s what was relevant at the time.

    We also know that there have been periods of time since its construction where Notre-Dame simply languished. In fact, some have argued that this week’s fire was the result of decades of neglect.

    But Victor Hugo once wrote that, “great buildings, like great mountains, are the work of centuries.” Despite what unfortunately happened this week, that remains true of Notre-Dame de Paris.

  • Architect Jeanne Gang named to the TIME 100 list

    Architect Jeanne Gang (of Studio Gang) has just been named to the TIME 100, which is Time magazine’s annual list of the world’s most influential people. Jeanne is the only architect to be included in the 2019 list.

    Jeanne was named to the “Titans” category, which typically honors those who are at the top of their respective field. She sits alongside Mark Zuckerberg, Tiger Woods, and LeBron James in this year’s TIME 100.

    Past honorees within the architecture profession include Elizabeth Diller, David Adjaye, and Bjarke Ingels. All, stars.

    The list is in its 16th year. But it’ll be the first year where there will also be a day-long conference. (Lynne and Marc Benioff, of Salesforce, acquired the magazine in 2018 for $190 million in cash and are making some changes.)

    Congratulations Jeanne.

    Full disclosure: Studio Gang is the design architect for our One Delisle project in midtown Toronto.

  • Scooter trips surpassed bike share last year

    According to the National Association of City Transportation Officials (NACTO), scooter trips in the US surpassed station-based bike share trips for the first time in 2018. Here is a chart taken from Streetsblog:

    Dockless electric scooters have created a public nuisance in many of our cities, but what is clear is that the demand is there. Which perhaps isn’t all that surprising given that they require less effort than traditional cycling.

    The other interesting takeaway from NACTO’s analysis, which is likely also not that surprising, is that bike share trips are heavily concentrated in a select few cities.

    In 2018, there were about 36.5 million bike share trips across the US. And about 84% of them took place in just 6 cities: New York, Boston, Chicago, DC, Honolulu, and San Francisco.

    Almost half of the 36.5 million trips were on NYC’s Citi Bike network.

  • Bertram’s Motor Service

    One of the best things about writing a public blog is that I get to connect with new people on a regular basis. I just received the following picture from a lovely lady named Sandra who lives in Elora, Ontario:

    It is a picture of 2730 Dundas Street West from the 1940s. Quite a handsome service station if you ask me. And look at that typography.

    She sent me the photo because she saw Junction House in the paper and came to the realization that this property forms part of the project.

    Before we demolished the building last year, it looked like this (image from Google Street View):

    The best part of this story is that her father built the building and he operated the business that it housed for over 50 years.

    The only hiatus was when he went to serve in the Canadian Navy during World War II. During this period her mother operated Bertram’s Motor Service.

    Thankfully, Sandra was appreciative of our plans: “Thank you for taking these properties and making something so beautiful for the future.”

    We’re trying our best, Sandra.

  • And that’s a wrap

    Mark Garner (Downtown Yonge BIA), Jon Simo (Neon Demon Studio), Rebecca Stubbs (Downtown Yonge BIA), Brandon Donnelly (Slate Asset Management), Rick Sole (Globizen Developments)

    What a weekend.

    Almost 4,000 people came through the Junction House sales office for our neon popup gallery. At one point throughout the day on Saturday, there was an over 1 hour wait to get in. The team had to implement a viewing time limit in order to keep the line moving.

    The event surpassed all of our expectations in terms of visitors and buzz. Many of the local businesses in the area also experienced a pop in foot traffic as a result.

    The Downtown Yonge BIA and Neon Demon Studio (as well as many others) did an incredible job coordinating and curating the exhibit. And we are thrilled to have played a small role in bringing it to life.

    What is clear to me after this weekend is that people really love neon (and, of course, Instagramming said neon) and that there’s a market here in Toronto for a permanent museum. It’s going to happen.

    For those of you who missed the exhibit, there’s no shortage of photos online. Check out #JunctionHouse and #NeonMuseumTO to get started. A big thank you to the entire team for making this happen.

    For more information on our Junction House condominium project, click here.

  • Liquidity network effect

    Uber filed its S-1 last week in anticipation of going public in May. The WSJ reported on it, here. These are always interesting documents because you get access to previously private information. Here we can see that Uber’s ride-hailing market share in the US is down to 67% (as of February 2019) from 78% two years earlier. Revenue from this business line — which is the company’s biggest — also seems to have levelled off (chart from the WSJ):

    The ride-hailing business today has become a commodity. A lot of people, myself included, simply check to see which service is the cheapest (usually it’s Uber vs. Lyft). So this space feels to me like a giant race to build the biggest network and get to something new, whether that be autonomous vehicles or delivery drones. Uber calls this creating a “liquidity network effect.” Here’s an excerpt from the S-1:

    We have a massive, efficient, and intelligent network consisting of tens of millions of Drivers, consumers, restaurants, shippers, carriers, and dockless e-bikes and e-scooters, as well as underlying data, technology, and shared infrastructure. Our network becomes smarter with every trip. In over 700 cities around the world, our network powers movement at the touch of a button for millions, and we hope eventually billions, of people. We have massive network scale and liquidity, with 1.5 billion Trips and an average wait time of five minutes for a rider to be picked up by a Driver in the quarter ended December 31, 2018. Every node we add to our network increases liquidity, and we intend to continue to add more Drivers, consumers, restaurants, shippers, carriers, and dockless e-bikes and e-scooters. We also hope to add autonomous vehicles, delivery drones, and vertical takeoff and landing vehicles to our network, along with other future innovations. Our strategy is to create the largest network in each market so that we can have the greatest liquidity network effect, which we believe leads to a margin advantage.

    If you’d like to download a full copy of their filing, click here.

  • How are condos in Canada used?

    Jens von Bergmann (data analyst and mathematician); Nathanael Lauster (sociologist); and Douglas Harris (law professor) have been working since 2018 on a study of how condominiums are used and occupied across Canada. The goal is to use the results to better inform public and academic debate.

    They recently presented some of their early findings at the National Housing Conference in Ottawa and have since made that information public. It is still a work in progress, but already there are some interesting takeaways. To start, here is a chart showing occupied housing units in Canada and in select CMAs:

    Not surprisingly, Canada is broadly speaking a nation of single-detached houses. But in our three largest cities — Toronto, Montreal, and Vancouver — apartments/condominiums are doing a lot of the heavy lifting.

    Vancouver has the highest proportion of condominiums. It is a geographically constrained metro area and it is one of the first cities in the country to adopt condominiums as a housing tenure. And in Montreal, there are more apartments under 5 storeys than there are single-detached houses. Not surprising. There’s no “missing middle” in this city.

    But the really interesting question is, how are these condominiums being used and occupied? It’s a challenging question to answer, which is why it’s so often debated, but here’s what the researchers have found so far:

    The owner and renter categories are self-explanatory. Temporary, which is the least common type of tenure, is where the owner has declared their principal residence as being somewhere else. In other words, the condominium is a second home.

    The vacant category is effectively that city’s condominium rental vacancy rate. These are condominium units which are empty, but that are at the same time listed for rent. There are relatively few of these. In Toronto and Vancouver they’re virtually non-existent in this dataset (2016).

    Finally, we get to unoccupied units. This one is tricky and the researchers aren’t exactly clear on what is driving this number. They chalk it up, at least partially, to the flexible nature of condominiums. For example, it could be empty because the unit is switching from owner-occupied to rental, or vice versa.

    That said, it is very interesting to note that Toronto and Vancouver actually have the lowest percentage of unoccupied condominium units. This may be surprising to some of you given the public discourse around investor units in these two cities.

    Generally, they found that in Canada’s three largest metro areas, the following rule of thumb seems to apply: For every 10 condominium units built, 6 will become owner-occupied, 3 will enter the rental stock, and 1 will go unoccupied. Does that seem right to you?

    If you’d like to dig into the methodology that the researchers used, you can do that over here at Mountain Doodles. All of the charts and data used in this post were taken from there.

  • Experimenting at the right scale

    Jeff Bezos published his annual letter to shareowners this week. You can find it here. And as is his usual practice, he has attached his 1997 letter to shareholders at the bottom of it. This is his “Day 1” and he clearly likes the reminder.

    I was somewhat surprised to learn that 58% of physical gross merchandise sales on Amazon are now by independent third-party sellers. This number has been steadily increasing almost every year since 1999.

    And this is despite the fact that first party sales — products sold by Amazon — have grown at a compound annual growth rate (CAGR) of 25% during this same time period. Amazon excels at the fulfillment component and you can have them do that for you as a third-party seller.

    There are a number of other interesting facts sprinkled throughout the letter, but I particularly liked the bits on “intuition, curiosity, and the power of wandering.” Here is an excerpt on how Amazon is working to scale the size of its failures:

    As a company grows, everything needs to scale, including the size of your failed experiments. If the size of your failures isn’t growing, you’re not going to be inventing at a size that can actually move the needle. Amazon will be experimenting at the right scale for a company of our size if we occasionally have multibillion-dollar failures. Of course, we won’t undertake such experiments cavalierly. We will work hard to make them good bets, but not all good bets will ultimately pay out. This kind of large-scale risk taking is part of the service we as a large company can provide to our customers and to society. The good news for shareowners is that a single big winning bet can more than cover the cost of many losers.

    A lot has already been said and written about accepting failure in life and business. Nobody wants to fail, but it can happen when you’re trying to “imagine the impossible.”

    The two nuances here are that failures should scale along with the company. And that “large-scale risk taking” can actually be construed as a service. It might mean that the impossible becomes possible.

  • The post-combustion era

    Over the winter I visited BMW World, and its neighboring museum, in Munich, Germany.

    I loved seeing how the company got its start and how far it has come since it helped to invent the automobile at the beginning of the 20th century. I think their first product was actually an airplane engine.

    But you and I both know that the paradigm is changing. The internal combustion engine (ICE) is going away and pretty soon we won’t be driving, so much as being driven around by our cars.

    Bloomberg recently published an interesting article about this shift and about BMW. Here is an excerpt:

    The fact that both combustion engines and electric motors find themselves inside the same 18,000-person complex in Dingolfing, BMW’s largest in Europe, makes it a microcosm of a shift overtaking automakers the world over. A visitor can see that 625-horsepower engine—more than twice as powerful as the original from 1985, a luxury product relentlessly branded as “the ultimate driving machine”—then walk around the corner and see its puny electric replacement. You start thinking the better slogan might be “the ultimate combustion engine.” As in: last of its kind.

    Electric motors are a hell of a lot simpler to manufacture (and service) than gasoline engines. BMW estimates that they take about 30% less time to make. So the impacts of this transformation span everything from supply chain to human capital.

    Today, about 10% of the work that goes on in Dingolfing is related to electric vehicles.