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

  • Thinking differently and what courses to take in school

    When I was in grad school studying architecture and real estate, the Zell/Lurie Real Estate Center used to run a regular lunch series with real estate executives. The way it worked is that executives would come in to the school and 15 or so students — all of whom were studying real estate — could sign up to have lunch with them in a boardroom. I can’t remember if the school provided us lunch or we had to bring our own, but either way, you had an hour to hear them talk about the industry and ask them whatever you wanted to know.

    One time somebody asked a question about what courses they should take outside of their business and real estate classes. And I’ll never forget what the executive said. His recommendation was to take courses that were as far away from business, finance, and real estate as possible. He said take fine art history classes, learn about ancient civilizations, or whatever. Just take classes that force you to think a little differently than everybody else.

    The reason, I think, this resonated with me so much was because I had a certain amount of academic insecurity at that moment in time. I was coming from an architecture and design background and my classmates were former investment bankers and management consultants, all of whom had a far better grasp of “the numbers” than I did. It meant that real estate recruiters didn’t want to talk to me because I was the square peg for their round hole.

    But being a square peg really motivated me.

    I remember walking into the program director’s office at that time and requesting that I be put into what was considered to be the more difficult real estate finance class offered at Wharton. He said that he didn’t recommend it. Non-MBAs (which I was at the time) can’t typically handle it. And if he put me into it, I would likely come back to him crying about how hard it was. I asked him to put me in it and said that I would come back to show him my “A.” He put me in it and, yes, I got an “A.”

    But at the end of the day, the point that this executive was making at the lunch was that the math and mechanics behind things like cap rates, IRRs, and DCFs is not rocket science. Real estate is not rocket science. You of course need to know how this stuff all works, but it is not the be-all and end-all. The other critical parts of this are more art than science. What are the assumptions that I am making as part of my analysis? What do I believe about the future of the world? To answer these questions, you need think critically and laterally. And having a different perspective can help you do exactly that.

    This was true back in 2008 and it’s still true today.

  • More on Enhancement Zones — a follow-up to density transition zones

    Architect Michael Spaziani left a great comment on yesterday’s post about density transition zones and the Enhancement Zone concept that was first proposed as part of the St. Clair West Avenue Study. You can read it by clicking here. Michael was part of the consultant team that worked on this study and so they are the ones that came up with the idea. As we talked about yesterday, Enhancement Zones were ultimately struck from the study. The idea of applying a 60 degree angular plane to certain avenue mid-rise sites also didn’t make it through. This guideline was intended to be used on sites where the impacts to adjacent neighborhoods weren’t as great. For example, a site on the south side of St. Clair Avenue that wouldn’t be producing any shadow impacts on people’s backyards. These concepts and discussions are all over a decade old at this point. But it feels like it’s time to revisit them in a serious way. If you take a look at the Mid-Rise Buildings Performance Standards (available over here), you’ll find some “considerations for enhancement zones.” They’re all crossed out though.

    Image: Mid-Rise Building Performance Standards

  • The case for density transition zones (and why people will probably hate them)

    Toronto is known for its tall buildings and its contrasting low-rise neighborhoods. More recently, we have seen a proliferation of mid-rise buildings along the city’s “Avenues.” This is despite the many challenges and costs associated with this building typology.

    But I think it’s pretty clear that a further evolution is also underway. Laneway housing, which is now permitted “as-of-right,” is in the early stages of being adopted and built out all across the city. And eventually I think we’ll see many of Toronto’s laneways evolve into fully fledged residential streets; perhaps not all that dissimilar from what you might find in compact cities like Tokyo.

    This is very exciting to me and I think of it as the city gaining a third hierarchy of residential streets. We’d have our major arteries and avenues. We’d have our residential side streets. And then we’d have our compact laneways. Dare I say that maybe some of these laneways could even house non-residential uses such as small-scale offices.

    But along with this shift, I think it’s time we look at another infill opportunity — something that planners Blair Scorgie and Sean Hertel are calling “density transition zones.” What these zones hope to be is a new middle transition zone between low-rise neighborhoods (where laneway suites are already permitted) and mid-rise avenues. A place where “missing middle” type housing might be built in close proximity to major streets and existing transit. Let’s call it a 100-200m zone that sits right behind our avenues.

    In my mind this is immediately beneficial for two reasons. The first is obvious. It could be a place for frictionless missing middle housing. Housing that’s more dense than a single family home + laneway suite, but less dense than a typical mid-rise building.

    The second immediate benefit is that this transition zone could be used to help improve the overall feasibility of mid-rise avenue development. The reality is that there are many blocks along Toronto’s avenues where the lot depths are simply too shallow for proper mid-rise buildings. Density transition zones could help with this, which would be not that dissimilar from how “Enhancement Zones” were intended to work (they were never approved).

    If this were to happen, I think there would also be a strong case for softening some of the “requirements” in the mid-rise design guidelines. Requirements like the 45 degree angular plane that new buildings generally need to conform to. All of this would only help the overall feasibility of more European-scaled developments along Toronto’s avenues and, in my opinion, that would be a great thing.

    But for the same reasons that Enhancement Zones were highly contentious, I would expect a lot of grouchy people and a lot of pushback on this idea. There will be concerns about encroaching on our single-family neighborhoods, and there will be the usual objections that come up with any new development (density, traffic, dog poo, etc.) But if we’re serious about building more missing middle housing, we are going to need to find ways to remove the barriers to entry. This scale of housing is simply too small to support a great deal of friction.

    To learn more about how density transition zones might work, I would encourage you to check out the great site that Blair and Sean have put together, over here.

    Image: Density Transition Zones

  • European Alps are home to a third of the world’s ski resorts — but they’re mostly closed

    This winter was supposed to be the 12th edition of a ski and snowboard trip that I do every year with a group of friends from both Canada and the US. Last winter we were in Fernie, British Columbia and this winter we were planning to go to Europe. But for obvious reasons, the trip has been cancelled. It’s going to be a tough season for the ski industry.

    According to this recent FT article, the European Alps are home to more than a third of the world’s 2,084 ski resorts. Typically, these resorts bring in about €28 billion in revenues over the course of a season, which is similarly about a third of the global total and almost 7% of the value of the European Union’s overall tourism market.

    But many/most resorts are closed right now. France has shuttered all ski resorts until at least January 7, 2021. And Switzerland, while “cautiously open,” is apparently getting pressure from its neighbors to close down again as further quarantine restrictions are put in place.

    Interestingly enough, some resorts are already reporting higher than normal early bookings for the 2021-2022 season. This is according to the same FT article. Instead of several hundred early bookings, which would be typical, they’re reporting several thousand. And many of the bookings have moved upmarket compared to prior years.

    What this starts to indicate is that we are likely to see an explosion in travel and leisure spending as soon as people feel safe and as soon as these restrictions are lifted. Demand is getting pent-up right now and that can mean only one thing: the 12th annual ski and snowboard trip needs to be a banger.

    Charts: Financial Times

  • Inaugural consumer trends report — what changed and what might stick

    The New Consumer and Coefficient Capital recently teamed up to publish their inaugural consumer trends report. It is a look at what changed this year and what might actually endure as we get past all of this.

    Some of it is perhaps intuitive once you see it. Makeup consumption is, for example, way down and home scent sales are way up. See above chart.

    And some of it I disagree with. Their survey results suggest that 81% of Millennials (and 66% of all consumers) are now perfectly content working out at home, as opposed to going to a gym. I am firmly in the 19% here. Get me back to the gym.

    But what is clear is that this year has accelerated a number of consumer trends that were already underway and so there are likely to be some structural changes as we move forward.

    To read the entire report, click here.

    Chart: Consumer Trends 2021

  • Swiss running brand On opens NYC flagship

    Swiss running brand On recently opened up a new flagship store in NYC’s NoHo district. It was designed by the Swedish architect and designer Andreas Bozarth Fornell (whose firm is called Specific Generic), and I think it’s a good example of the whole push toward “experiential retail.” Before Zappos there was a belief that nobody was prepared to buy shoes online. Surely shoes are something that you need to try on to make sure that they fit properly. But then Zappos and Tony Hsieh came along and decided to offer free returns so that you could just order a few different sizes to try on at home and return the ones that don’t fit. And then just like magic, we’re now living in a world where I myself couldn’t tell you the last time I bought a pair of shoes offline.

    What is obvious at this point is that people will buy pretty much anything online — everything from boats and real estate to shoes and tires — and so, in many cases, the physical retail experience needs to be exactly that — an experience. Something special. What On has done with their flagship store in NYC is try and create a space that, among other things, tells their brand story, acts as a hub for the local running community, and offers up a unique technological experience that is likely pretty difficult to replicate online. One of the key features is a “magic wall” that analyses your technique and scans your feet as you run past it (pictured below). The invisible foot scanner is supposed to help you find the perfect shoe size, accurate to within 1.25mm.

    If you’re a serious runner, I could imagine this being a pretty appealing in-store experience. (And if you’re not a runner, I guess you could just take a selfie in front of the magic wall. People seem to like pink walls). Whatever the case may be, I think On has done a great job trying to rethink the retail experience around its brand story and philosophy. But it leads me to a bunch of questions. Which brands and/or products are suitable for a new retail experience? (Does toilet paper, for example, want a new high-tech warehouse space in NoHo?) Assuming we continue down this path toward experiences, does this ultimately lead to less retail space per capita? Probably. And if we’re destined for less space, what does that ultimately mean for the ground floor experience of our cities? What should these spaces become? How does street life evolve?

    Cities aren’t going anywhere. But change is inevitable.

    Images: On

  • Economies of agglomeration in London

    The Financial Times is running a series right now on the future of the City of London. In their latest article, they looked at “How London grew into a financial powerhouse,” while at the same time comparing it to other global financial centers. It’s interesting to see how much of a banner year this was for companies going public. Companies listing on the Nasdaq and the NYSE raised a record $150 billion in 2020. This is compared to about $6 billion raised in London (both the London Stock Exchange and AIM). But what I really want to draw your attention to are the below maps from FT showing the clustering of banks, hedge funds, asset managers, insurers, and professional services firms in London. This is what urban agglomeration economies look like.

  • The history of humankind’s greatest invention

    A number of people emailed me this past weekend saying that they appreciated the recent book recommendation — something to read over the holidays. So here’s another one: Metropolis — A History of the City, Humankind’s Greatest Invention.

    Right now is probably the ideal time to read a book about the history of cities because it’s a reminder of just how resilient cities are in the face of adversity. Even ones that have been utterly wiped out because of war or some other catastrophe have managed to successfully rebuild.

    If you’d like to buy a copy, you can do that over here. This book was also featured in part two of a “book club” that The Urbanist is running on its radio show right now. So if you’d like to take it for a 30-minute spin instead, click here.

  • Building cool things is not as easy as it may seem

    There was a good discussion on Twitter this morning about small-scale commercial uses in residential neighborhoods, like the coffee shop shown above on Shaw Street. In most residential neighborhoods in Toronto, this kind of commercial activity is not permitted if you were to try and initiate it today. The small convenience stores and bodegas that remain are often legal non-conforming uses. And while generally considered desirable in their current confirm, if you were to try and make a change, you could get caught in some municipal red tape where your grandfathered status suddenly no longer applies.

    That is exactly what happened in the case of the above coffee shop and, from the discussions that happened on Twitter this morning, it is a problem that is not unique to Toronto. Alex Bozikovic wrote about this coffee shop and this project in the Globe and Mail over seven years ago. Getting it approved and built was no easy task. And my friend Jeremiah Shamess — who renovated a similar and formerly commercial corner building in the area — ran into the exact same challenges.

    But let’s consider the other side of this argument for a minute. It’s easy to look at a great and well-designed neighborhood coffee shop like this one and say to yourself that it is obviously a desirable use and that we should be encouraging more of them in our residential neighborhoods. But what if it was a noisy late-night bar, a nail salon, or a massage parlor? Would your opinion change? Would it change if you were an immediate neighbor? It is perhaps easy to see why the fear of the things we don’t want has led us to sterilize our neighborhoods to the point where we no longer allow the things that we may in fact want.

    And herein lies the immense frustration that many of us have with our land use policies. There are countless examples of obviously desirable uses and built forms that are exceedingly difficult to execute on because of the barriers that we ourselves have put in place. Whether it’s a cool neighborhood coffee shop or new affordable housing, there are far too many examples of these sorts of projects being stuck in some kind of planning ether — sometimes for decades. We say and know that we want these things, but then it is frequently the case that we can’t get out of the way so that they can actually happen.

  • Where people are moving in the US

    Another day, another set of announcements about large companies and rich people moving to lower cost US states. Yesterday it was announced that Oracle will move its corporate headquarters from Silicon Valley to Austin, Texas. (If you remember, Elon Musk also recently announced that he had moved himself to Austin from California.) The company has said that the move puts Oracle in the best position to grow and to give its employees greater flexibility about where and how they work.

    While these sorts of moves are making headlines right now, it’s important to keep in mind that this is not necessarily a new phenomenon. In fact, depending on how you look at it, you could argue that these headlines are a lagging indicator for trends that have been underway for some time. Below is a chart from New Geography showing the top 50 state-to-state moves last year. Number one is the move from California to Texas with 45,172 net movers. And number two is the move from New York to Florida with 38,512 net movers.

    According to New Geography, California saw a net domestic migration loss of 912,000 people from 2010 to 2019. And the most popular receiving states are what you would expect: Florida (1,230,000 people) and Texas (1,146,000 people). A big part of this story obviously has to do with housing affordability and the search for an overall lower cost of living. As well, since companies are always in need of young and smart talent, it makes since for them to locate in places where young and smart people want to live.

    But urbanists like Richard Florida have also pointed out at this relocation of companies could be a leading indicator for something else: the decline of innovation in America. Here, he argues that in the nascent stages of a new invention, there tends to be a tight clustering phenomenon. Think steel in Pittsburgh, cars in Detroit, and computing in Silicon Valley. However, as the industry matures, the tendency to centralize seems to decline and companies then start moving around.

    I’m not yet convinced that this is what’s happening. Because there seems to be a pile on happening in specific cities like Austin (which, by the way, I hear is terrific). Even before this pandemic, there was a growing sense (from the outside, mind you) that the Bay Area had simply gotten too expensive, both for individuals and for companies. It would seem that when you greatly restrict the supply of new housing and make it unattainable for many, people go find housing somewhere else. Sometimes in other states.

    Photo by Tomek Baginski on Unsplash