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

  • Toronto’s tech cluster(s)

    A recent study by the City of Toronto has looked at why tech firms cluster (agglomeration economies) and where they cluster in the city. Here are maps of what they found:

    Downtown captured almost half (49.2%) of all tech employment in the city with some 29,701 jobs. The South Employment Monitoring Area, which is the area outlined above in blue, captured 63.4% of the city’s tech base.

    I usually shy away from headlines touting some total number of tech jobs because I feel that it can become a bit of a vanity metric. What about the quality of those jobs? How much venture capital have the companies raised?

    But this report is different and it is interesting to see the extent in which tech has concentrated itself in the core of the city. As of 2019, jobs in tech establishments represented about 4% of all jobs in Toronto.

    To download a copy of the report, click here.

  • Hotels are here to stay

    I have a copy of Monocle’s Guide to Hotels, Inns and Hideaways sitting on my desk and I love flipping through it. There’s something magical about a great hotel. Part of that magic is intrinsic — it’s just a good hotel. And part of it is the fact that we’re probably all a bit more open to new experiences when we travel. Our mindset changes.

    On the first of January, I wrote (briefly) about two recent experiences where I was no longer required to interact with a person in order to check into a hotel. It was all done electronically. Some of you followed up and asked: “Do you think this is a good thing? Don’t you miss the human connection?”

    My response was that I think it is inevitable. There is a long history of technology/automation replacing human jobs. We used to have elevator operators. Now we don’t. We used to have people shoveling coal into furnaces. Now we don’t. And I think that’s okay. We created different jobs. The same is likely to happen with Uber/Lyft drivers.

    At the same time, our need for human connections isn’t going away. One of the best features of a great hotel is the bar. Whether it’s sitting at the bar and talking with the bartender or meeting someone new, those moments of interaction will always remain precious.

    And it’s one of the reasons why, I think, platforms such as Airbnb haven’t meant the demise of hotels. Part of it has to do with the service offerings and consistency of a good hotel. But part of it also has to do with our desire to be around other humans. In the words of Monocle: “There’s something about a hotel bar that captures our collective imagination.”

  • A transactional real estate marketplace

    I would like to revisit the post that I wrote last week about the Brazil-based real estate startup, Loft. In it, I said that they are doing in Brazil what Opendoor, and others, are doing in the US. They are buying and flipping homes using algorithms. This has become known as “iBuying” and we’ve talked about it a lot here on the blog.

    But we have also talked about how this is probably not the end game. These companies are seeding a marketplace, because in every new two-sided marketplace you are always faced with a chicken-and-egg problem. You can’t attract supply if you don’t have demand. And you can’t attract demand if you don’t have supply.

    In reading the investment announcement by a16z, this larger vision is pretty clear:

    They [Loft] are building a transactional marketplace for the biggest asset class in the world, starting in the biggest market in Latin America, on a time horizon that makes it hard to believe it’s been less than a year since the PowerPoint. They buy homes, fix them (often according to formulaic specifications provided by active buyers), and sell them — what is now known as “i-buying,” with the vision of turning this into a transactional marketplace.

    If successful, these companies will transform from just “iBuyers” to fully fledged marketplaces for the buying and selling of homes. And when that happens (I believe it’s a when), it is likely to mean dramatic changes to the commissions landscape. Today, over $100 billion in residential real estate commissions are paid out across the United States each year.

  • Superkül wins Designer of the Year for 2020

    Designlines Magazine is out with its annual “Designer of the Year” issue and this year’s winner for best overall designer is Superkül — the award-winning architecture firm behind Junction House. Pictured above are Andrea D’Elia, Meg Graham and the team. (The JH project team spends a lot of time in the boardroom that you see in this picture.)

    Other winners for this year include Omar Gandhi, Paolo Ferrari, and LGA Architectural Partners. They were awarded best restaurant, best product, and best public space, respectively. If you aren’t familiar with the work of these four firms, I would encourage you to check them all out. They are truly some of the best in the city. Congrats everyone.

    If you’d like to buy a copy of Designlines, you can do that here. We will also make copies available at our temporary Junction House showroom, which is located at 2843 Dundas St W.

  • The Attention Diet

    I read the first few sentences of this article and immediately thought to myself, “Yup, this is the world we now live in. Attention spans are dwindling.” And since Monday was back to work for many of us, I figured it was timely.

    The piece is about Mark Manson’s new book called, Everything is Fucked: A Book About Hope. In it, he talks about anxiety, depression, intolerance, and the attentional challenges that are, arguably, a result of today’s modern economy.

    His proposed solution is something he calls the Attention Diet. Similar to how it’s important not to eat bad things, it’s important, in today’s information economy, not to consume bad things. And like junk food, there’s a lot of junk information fighting for our attention. I like the parallel.

    Here are the 3 steps to the Attention Diet:

    1. Correctly identify nutritious information and relationships.
    2. Cut out the junk information and relationships.
    3. Cultivate habits of deeper focus and a longer attention span.

    Put even more succinctly, it’s about filtering for quality in a world of endless information. Here’s an interesting line from Mark: “Because in a world with infinite information and opportunity, you don’t grow by knowing or doing more, you grow by the ability to correctly focus on less.“

    Related post: The value of saying no.

  • The Florida homestead exemption

    I was at a family dinner over the weekend and the topic of the Florida homestead exemption came up. The Florida Constitution bestows a number of advantages upon homeowners (provided the home is that person’s primary residence). And like all rules, it impacts behaviors.

    For one, your primary residence is largely protected from creditors, meaning a sale generally can’t be forced in order to pay back what you might owe. If you’re out there in the world “betting the farm,” this might be a way to protect yourself.

    There are also a number of property tax benefits. You can reduce your assessed value by certain specified amounts, and any increases are (I think) capped at the lesser of 3% or the rate of inflation. (Related post: California’s Proposition 13.)

    As we’ve talked about before on the blog, this second exemption likely creates a disincentive for longtime homeowners to sell/move, as even a lateral move would result in possibly much higher taxes. So why move unless you really have to?

    The counter argument is that it helps fixed income retirees not get squeezed by rising taxes (and that’s an important consideration in Florida). But it also means that first-time/younger buyers end up shouldering more of the property tax burden — at least initially.

    If any of you have strong opinions about the Florida homestead exemption, I would be interested in hearing from you in the comment section below. I am not a lawyer or a tax expert. So please don’t consider this post as any sort of advice.

  • Software eats real estate

    At the beginning of this year, a16z announced that they co-led a $175 million investment in the real estate company Loft. Based in São Paulo, Loft is doing in Brazil what Opendoor is doing in the US. They are bringing more liquidity to the residential real estate marketplace, and it turns out that the need for this is even greater in Brazil. That has apparently made Loft one of the fastest growing real estate companies in the world today. Here are some interesting facts about residential real estate in São Paulo. And here is a talk by Alex Rampell (general partner at a16z) on how software is going to eat the real estate world.

  • Market power in tech

    Benedict Evan’s latest post on Microsoft, IBM, and anti-trust is excellent. In it he argues (reminds us) that market power during one generation of tech, doesn’t necessarily guarantee market power in the next. And that anti-trust intervention isn’t actually responsible for Microsoft missing out on, among other things, mobile. The rules of engagement simply changed. The PC is now a smartphone accessory.

    Here is an excerpt:

    The tech industry loves to talk about ‘moats’ around a business – some mechanic of the product or market that forms a fundamental structural barrier to competition, so that just having a better product isn‘t enough to break in. But there are several ways that a moat can stop working. Sometimes the King orders you to fill in the moat and knock down the walls. This is the deus ex machina of state intervention – of anti-trust investigations and trials. But sometimes the river changes course, or the harbour silts up, or someone opens a new pass over the mountains, or the trade routes move, and the castle is still there and still impregnable but slowly stops being important. This is what happened to IBM and Microsoft. The competition isn’t another mainframe company or another PC operating system – it’s something that solves the same underlying user needs in very different ways, or creates new ones that matter more. The web didn’t bridge Microsoft’s moat – it went around, and made it irrelevant. Of course, this isn’t limited to tech – railway and ocean liner companies didn’t make the jump into airlines either. But those companies had a run of a century – IBM and Microsoft each only got 20 years.

    For the full post, click here.

  • The re-allocation of capital (and predictions for this decade)

    I have stayed at two hotels over the last month where I did not need to interact with a human as part of the check in process. And in one of those two instances I didn’t even need to interact with a computer at the hotel.

    My room key was issued to me through an app and I used that (and Bluetooth) to open my hotel room door (after the app, of course, notified me that my room was ready).

    This is prediction #2 in Fred Wilson’s annual roundup of what is going to happen next in the world. Automation is reducing the costs associated with operating many businesses. Who is going to be the beneficiary of this consumer surplus?

    The other prediction that should interest most of you — because the impacts would be widespread — is this one here regarding climate change:

    The looming climate crisis will be to this century what the two world wars were to the previous one. It will require countries and institutions to re-allocate capital from other endeavors to fight against a warming planet. This is the decade we will begin to see this re-allocation of capital. We will see carbon taxed like the vice that it is in most countries around the world this decade, including in the US. We will see real estate values collapse in some of the most affected regions and we will see real estate values increase in regions that benefit from the warming climate. We will see massive capital investments made in protecting critical regions and infrastructure. We will see nuclear power make a resurgence around the world, particularly smaller reactors that are easier to build and safer to operate. We will see installed solar power worldwide go from ~650GW currently to over 20,000GW by the end of this decade. All of these things and many more will cause the capital markets to focus on and fund the climate issue to the detriment of many other sectors.

    For the rest of Fred’s predictions, click here. These are always great reads.