Author: Brandon Graham Donnelly

• The productization of housing is set to start in San Jose

  

  Nabr, which I wrote about last year over here, recently announced its first residential project in San Jose’s SoFA district. Named SoFA One, the project is expected to have 125 apartments that will be offered up on a hybrid lease, own, and lease-to-own model. In this latter scenario, the company is saying that people will be able to buy with as little as 1% down. Construction isn’t scheduled to start until later this year, but if you’d like to get early access, you can add yourself to their waitlist, here.

  As a reminder, Nabr is touting itself as a direct-to-consumer real estate company that aims to bring the same manufacturing and supply chain efficiencies that we have seen in virtually all other industries to the production of housing. This, of course, is not a new ambition. The flatlining of construction productivity is well documented, and lots of architects, builders, and entrepreneurs have tried to innovate in this space over the years. But it’s clearly a notoriously difficult problem to solve. So the obvious question here is: What is going to make Nabr any different?

  Nabr is trying to productize housing. To do this, they’re building a vertically integrated process, going deep into supply chains, and trying to standardize their product offering as much possible. In the case of SoFA One, the base building is expected to consist of a CLT loft-style frame that can then be fitted out with various interior offerings. The idea here is that 90% of the build will be a repeatable system but that the remaining 10% is something that their customers will be able to customize — similar to when you’re buying a new car. The car is the same, but would you like black leather or brown leather?

  Continuing with the car analogy, the company is also taking a move out of Tesla’s playbook for how they plan to roll out their products. The plan is to start at the top of the market (like what Tesla did with its expensive roadster) and then move downmarket as they drive efficiencies and cost savings in their delivery process. What they are trying to do is find the compounding innovation that has been present in most industries but that has been noticeably lacking from construction.

  This all sounds great, but we know that buildings have a myriad of unique challenges compared to other products like cars and smartphones. My iPhone is the same as your iPhone, except for maybe the color and the case I put on it. But each development site is unique. Some have a high water table below it and some don’t. Some have adjacencies that will impact how you need to build and some don’t.

  Each jurisdiction also has unique codes and regulations — everything from urban design guidelines to more or less stringent seismic requirements. Some cities have snow and some cities don’t. The list goes on. So what Nabr is going to have to do is create regionalized products with as much repetition as possible. And if they can generally lock the ~90% base building systems and just adjust the balance as needed, maybe that’s enough to do it.

  At the end of the day, our industry is not completely void of innovation. It’s just a bit slow to change. We never used to build skyscrapers, but now we do. So I’ve decided to cast my developer cynicism aside. Today, we don’t have truly productized housing, but maybe we will.

  As an aside, Nabr also recently shared their leaderboard of cities where people want to see a future Nabr building. Those cities are New York, London, Los Angeles, Toronto, and San Francisco.

  Image: Nabr

  2022.02.05

• Case studies on inclusionary zoning

  Back in 2017, Portland, Oregon enacted new inclusionary zoning policies mandating that all new residential projects with 20 or more units must deliver a specified amount of affordable housing. Early accounts, by people like Joe Cortright of City Observatory, suggested that the market was reacting to this new requirement as you might expect. Developers rushed to get new applications onto the books and then there was a drop off in new housing supply.

  Now that it’s been a couple more years, it is perhaps worth checking in on Portland. Cortright did that in the fall of last year and the housing numbers are continuing to fall. From 2019 to 2020, new multi-unit housing permits in Portland fell by more than 60%. I really don’t know the Portland market and so it’s hard for me to comment on whether it is solely the fault of IZ, but there was a peak in 2017 and now housing permits are down significantly. However, they were also down significantly during the financial crisis. It’ll of course be interesting to see how this plays out over a longer time horizon.

  That said, a similar market response was recently reported in another Portland — Portland, Maine. In 2020, the city implemented a “Green New Deal” that stipulated, among other things, that all new residential developments with 10+ units would be subject to their new IZ policies. It has only been just over a year, but according to the city’s planning department, there were 756 new housing units on the books in 2020 prior to the new IZ policies. And since then, that figure has dropped to 139 new housing units. This is admittedly a small market and a relatively short time horizon, but it is still a data point.

  As many of you know, I struggle with inclusionary zoning. Maybe it’s confirmation bias, but I just haven’t been able to find much data suggesting that it can meaningfully increase overall housing supply and the supply of new affordable units. So if any of you are aware of some good case studies outlining successful examples, please share them in the comment section below.

  2022.02.04

• A world with less concrete

  Some people like to refer to concrete as cement. But that is technically incorrect. Cement is just one of the main ingredients in concrete, along with water and aggregates. So it’s a bit like referring to a beer as a bottle of yeast.

  That said, cement is pretty integral to concrete and it’s largely the reason why the embodied carbon is so high in this widely-used building material. According to Brian Potter, cement production is responsible for somewhere between 5-10% of global CO2 emissions.

  This is coming from the roughly 4.25 billion metric tons of cement that is produced annually and the 30 billion tons of concrete that it ends up in. The world likes concrete. And in particular, China likes concrete.

  China alone is now producing about half of the world’s cement. And since consumption generally tracks production, and the consumption of cement generally translates into concrete, China is using, by far, the most concrete.

  I don’t know what the right answer is to this particular carbon problem, but Brian Potter’s latest construction physics post is perhaps a good place to start thinking about it. In it, he covers who is producing it, where it is being used, and how we might get to a world with less concrete.

  2022.02.03

• Garden suite policies approved at council

  

  Earlier today, Toronto City Council voted 19-5 in favor of the new garden suite policies. This is great news, and something that I have been writing about since our laneway suite policies were first introduced and later expanded across the city in 2018-2019.

  The simplest way of thinking about this new housing type is that they’re like laneway suites, except now the permissions have been expanded to include all of the properties that don’t have access to a lane. In other words, they are backyard cottages (also known as accessory dwelling units).

  Not every property is going to be suitable for a garden suite, but these new policies do apply to all low-rise “Neighbourhoods” of Toronto. So this is yet another important milestone for what is ultimately a broader look at housing supply in our low-rise communities. Next on deck is likely to be more multi-unit dwellings.

  If you’re interested in building a garden suite and would like to connect with an accomplished architect, I am most certainly not your best resource. I would recommend Gabriel Fain (the architect behind Mackay Laneway House) or Craig Race (an important pioneer/entrepreneur in this space).

  2022.02.02

• Buying condos with crypto

  If you happen to have made boatloads of money in crypto (which sadly isn’t me), one sensible thing you could do is put some of that money into luxury residential real estate. You know, to diversify your portfolio.

  According to this recent WSJ article, it is already happening, with some developers and some homeowners now accepting cryptocurrencies in lieu of US dollars and other fiat currencies. This is helpful if you’ve managed to accumulate a bunch of crypto and don’t want to convert it. It can also be easier when it comes to moving the funds around:

  Avi Dabir, vice president of business development at FTX US, said he sees real estate as a growing sector for the company because crypto transactions are faster and more efficient than traditional deals, which rely on an often-cumbersome banking system.“If I want to send a wire transfer today using my traditional bank account, it’s got to be banking hours, I need to make sure I hit that wire cutoff time and I can’t do it on the weekends,” he said. “That’s not a problem with cryptocurrency. It’s open 24/7.”

  But of course it is still early days for crypto. The article suggests that most developers and owners are arranging for any crypto received to be immediately converted into US dollars at closing. This is presumably because of how volatile cryptocurrencies tend to be — at least right now.

  To accept crypto, PMG had to partner with a regulated exchange that could quickly convert crypto to U.S. dollars, then convince an escrow agent to accept down payments from the exchange, rather than directly from the developer. Mr. Shear said most escrow agents looked at him like he was crazy, but “20 lawyers, one year later, and a lot of brain damage, everybody got comfortable.”

  There are also tax considerations (that I am really not an expert on). If you bought $100 worth of Ethereum and it is now worth $10 million, you are responsible for paying tax on this gain if/when you sell, trade, or otherwise dispose of the crypto. And it is my understanding that if you were to use this $10 million in Ethereum to buy something like a condo in Miami, it would also be considered a taxable event.

  Maybe all of this becomes commonplace or maybe it doesn’t. But it sure is interesting to see crypto already starting to flow into hard assets like real estate.

  2022.02.01

• Some 60,000 condominium units were purchased last year in Toronto

  So 2021 was a pretty good year for condominiums here in the Greater Toronto Area. According to the latest data (Q4-2021) from Urbanation, this is what happened last year:

  • 30,844 new condominium sales. This is a 69% increase compared to 2020, which saw 18,282 new unit sales.
  • Fourth quarter alone saw 8,361 unit sales, which is the best quarter on record according to Urbanation.
  • Unsold inventory dropped 26% year-over-year because sales exceeded the number of new project launches by over 4,000 units.
  • Average price for an unsold condominium unit in Q4-2021 reached $1,322 psf, which is an 18% increase compared to the year before.
  • Resale condominiums also did exceptionally well with 29,880 unit sales — a 49% annual increase.
  • All in all, some 60,000 condominium units were purchased last year in the GTA. Of course, some were ready to be lived in and some were future homes.

  2022.01.31

• Immersive digital experiences at Superblue Miami

  If you happen to find yourself in Miami or London in the near future, I would highly recommend that you check out Superblue. Neat B and I visited Superblue Miami this past weekend and it was an incredible experience.

  Above is a short video of one of the immersive installations (click here if you can’t see it embedded above). This one is by the Japanese art collective teamLab and what you’re seeing is a whole year’s worth of seasonal flowers coming to life and then dying off.

  It’s meant to show you the continuous change and cycle of life and death that we all live through every day, and you certainly feel that as you go through the space. The installation itself also responds to how you move and interact with it, with some actions encouraging more blossoms.

  It’s, of course, all very Instagrammable.

  But I think this descriptor is old news and doesn’t do the work justice. Superblue is a serious cultural experience. One of the other works on display right now is a piece by light and space artist James Turrell. And for this one, there were no photos and talking allowed. The timed experience was meant to be more meditative.

  It was the first time that I had seen something by James Turrell in real life and it didn’t disappoint. It made me feel things, as did the entire Superblue experience. So again, a top experience that I would highly recommend.

  On a related real estate note, the 50,000 sf Superblue space is located in an area of Miami called Allapattah (which is west of Wynwood and 5 miles east of MIA). I’m an outsider to the city building undercurrents of this city, but I keep hearing people talk about the area as the next Wynwood.

  The other cultural institution in Allapattah is the Rubell Museum, which I wrote about in 2019 as it was moving over from its original home in Wynwood. Supposedly the family now has the largest private collection of contemporary art in North America. So that’s something.

  Maybe these two anchors will be what does it for Allapattah. When we walked around the area there didn’t seem to be much else going on. But we all know how quickly that can change.

  2022.01.30

• Brand-specific vs. property-specific signage

  

  Here is an example of retail signage on Lincoln Road in Miami Beach. The interior signage (behind the glass above the doors) is specific to the brand Osklen (which is a great sustainable fashion company from Brazil). And the exterior soffit signage is specific to the property in that the same design and typeface is used for all of the retail tenants.

  I think that this consistency creates a more elevated feel for the overall property, but the obvious downside is that the retailers don’t get to express their unique brands and identities in quite the same way. Still, I think the above approach is a pretty good compromise. What do you think?

  2022.01.29

• Good design is about caring

  I was in a “design charrette” meeting earlier today where the topic of good architecture and why some cities do better than others came up. It got me thinking about my recent post about the quality of Canadian architecture and so I’d like to revisit that discussion today. The Walrus article that I previously cited focused a lot on uninspiring public architecture and the procurement processes that generate them behind the scenes. But here are a few other things to consider.

  1/ Design guidelines and planning policies have an impact on our built environment in more ways than most people probably appreciate. For example, there are design moves in some of our projects that I really dislike. But we were given no choice. In fact, in one instance I remember us advocating for less area/density (shocking for a developer) because we thought it made for better architecture. We ultimately capitulated, and the additional area was certainly a nice to have, but it wasn’t our opening position.

  2/ Nice stuff does often cost more money. There is no question that a project like One Delisle is more expensive to construct compared to a “typical” building. However, we made the decision to invest in high quality architecture and we built our pro forma around this approach. In this regard, it is helpful to be in bigger and more expensive cities/submarkets so that you can generate the kind of revenues that will support high-quality architecture.

  3/ At the same time, there is no reason that thoughtful design needs to cost more. Good design is simply about being creative, responding to constraints, and, frankly, just giving a shit about what you’re doing. You want to see that somebody cared. So while nice things and elegant details do often cost more money, we shouldn’t use this as a crutch. The same is true for climate. Colder climates shouldn’t be considered handicapped. Creativity and thoughtfulness can thrive anywhere. We just have to give them the opportunity.

  2022.01.28

• Lobby / co-working space at Junction House

  

  

  

  It has been cold and snowy in Toronto lately, which is great if you’re looking to shred pow on a snowboard, but suboptimal if you’re trying to construct buildings. It pains me deep inside my bone marrow when we lose productive days to weather. But what can you do?

  I was, however, thrilled to see this first glimpse (pictured above) of the lobby / co-working space at Junction House this morning. The slightly elevated section (which is the point of view of the above rendering) is the co-working area.

  The reason it’s elevated is that we needed the clearance below for our parking ramp. We thought about trying to make it retail, but a place for residents to hang out and work seemed like a pretty good idea.

  A lot of us on the team are big fans of a great hotel lobby bar, but that’s kind of challenging to do in a residential condominium. This is maybe the next best thing. It’s been very popular with purchasers so far, but I’m looking forward to seeing how it performs in real life.

  2022.01.27