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 Graham Donnelly

  • Eliminating poopy water

    Lots of cities around the world, including Toronto, have (at least partially) what is called a combined sewer system. If the sewer system was built prior to the 1940s and it hasn’t been replaced, there’s a good chance that it could be a combined system. About a quarter of Toronto and about 60% of New York City still run on combined systems.

    What this means is that both stormwater and sewage run in the same pipes. Most of the time this is fine, but if there’s a heavy precipitation event and the system backs up, then you have poop getting diverted into rivers, lakes, and other bodies of water. In Toronto, this happens in places like the Don River and the inner harbor, and in Paris it happens in places like the Seine.

    I was recently reading something suggesting that sewage generally gets dumped into the Seine about 12x per year as result of major rain events. This is why it’s such a difficult and expensive task to make these bodies of water swimmable, which is something that Paris wants to do before it hosts the Olympics next year.

    Thankfully, Toronto also wants to do the same. And in 2018, it started construction on the largest stormwater management program in the city’s history. The overall budget is about $3 billion. Once complete, it should more or less eliminate combined sewer overflows, meaning our waters will become a lot cleaner and more swimmable.

    This certainly isn’t the sexiest capital project to announce and talk about. It largely happens behind the scenes. But it is going to lead to a significant quality of life upgrade for the cities willing to take it on — one that will pay dividends well into the future.

    Photo by Andre Gaulin on Unsplash

  • New York City enacts strict short-term rental law

    This past week, New York City enacted a new short-term rental registration law that is not very friendly toward platforms like Airbnb and VRBO. Here are some of the new rules:

    • All hosts must register with the city
    • No more than 2 paying guests can stay in a short-term rental at one time, regardless of the size of the home (does this mean families are excluded?)
    • Hosts and visitors must leave all doors inside the dwelling unlocked (presumably this is to stop people from creating self-contained suites within a larger home)
    • And the host must be physically present while the dwelling is being rented

    So in a way, this takes us back to the original use case of Airbnb: “Hey, I have extra space in my home. Would you like to rent this mostly clean air mattress in my living room and be my roommate for a bit?” Of course, this is not how most people like to Airbnb today. And so this is also a kind of ban on short-term rentals in New York City.

    It’s certainly stricter than the regulations we have in Toronto. Here, it must be your principal residence. Meaning you’re only legally allowed to operate one short-term rental at a time. But you don’t need to be physically present while the home is being rented. If you want to earn some extra cash while you’re away in Rio de Janeiro for New Year’s Eve, you can do that.

    However, the rules are still fairly strict. For instance, if you have a basement apartment or a laneway suite on your property, you are not technically permitted to short-term rent these dwellings, even if you live in the main portion of the home. It has to be your exact principal residence.

    Presumably the intent behind this is to not remove any housing from the long-term rental market. And if it’s your principal residence, then yeah, there’s no net loss. Though this feels like an overreach to me. It’s the same property and a homeowner could very easily decide to not even do a long-term rental in these secondary suites.

    But overall, I guess it’s still slightly more flexible than forcing hostel-like short-term rentals. Long live the hotel?

  • Nobody wants to collect NFTs anymore

    Back when everyone wanted to buy and trade crypto, my friend Evgeny started a marketplace for NFT photography called Sloika. This, to me, felt like an obviously good idea, both in general and for him specifically. Evgeny had previously cofounded the photo company 500px, and so Sloika was initially conceived of as 500px, but for web3. This is a good story.

    I have collected a number of photos via Sloika and, in general, I continue to regularly collect NFTs. Of course today, relatively few people want to trade and collect NFTs. The market is largely dead. What is obvious is that there was a giant NFT bubble and it popped in 2022, along with some other asset bubbles.

    But does this necessarily mean that NFTs and NFT art are bad ideas?

    When I think of bubbles I often think of something that Fred Wilson wrote on his blog. His argument was that bubbles tend to be directionally right; it’s the magnitude that we get wrong. A good example of this is the dot com bubble. Yes, it was a massive bubble. But it was directionally right. The internet was going to matter — a lot it turns out.

    Even if we go back to “tulip mania” during the Dutch Golden Age — which is often brought up as the pinnacle of dumb bubbles — one could argue that it was still directionally right. Today, tulips remain the most sold flower in the US. So we still love them; we just got a little too excited back in the 17the century.

    When it comes to NFT art, I like to think in terms of these questions:

    • Will humans continue to appreciate art? (Seems obvious.)
    • Will humans continue to want to collect things? (This is arguably a fundamental human instinct.)
    • Will provenance and authenticity continue to matter in art? (Blockchain technologies are really good at this.)

    Perhaps the only question that remains is whether people will want to collect digital art. But even this feels fairly obvious to me. The challenge, I think, is that the display side of the market needs to be more built out. Because alongside the instinct to collect things is the instinct to display them. That’s why NFTs initially took off as profile pics on social media.

    So as a start, I think more, better, and cheaper displays would be a big help. There’s something very different about projecting an NFT in your living room versus having it live in a crypto wallet on your phone or computer. You need to really experience it, just as you would a conventional piece of art. And like all art, context matters.

    I haven’t yet invested in a dedicated NFT display, but I plan to do that in the near future. And I’m looking forward to displaying my collection of NFTs, including the one at the top of this post. It’s a drone shot of the west side of Toronto in the middle of winter, and it was gifted to me by Evgeny. Thank you for that. It’s an honor to have it as part of my art collection.

    Photo: Six Bling (via SuperRare)

  • Are we really back to talking about “use-it-or-lose-it” zoning?

    It is very disappointing to hear that Paul Calandra — Ontario’s new Minister of Municipal Affairs and Housing — is talking about “use-it-or-lose-it” zoning policies and that mayors are coming out in support of it. This is a terrible idea.

    On the surface, it may seem like this would force/incentivize developers to build more housing sooner. But what it fails to recognize is this: just because a developer wants to build, it doesn’t mean that they are able to build.

    This current market environment is a perfect example. It is likely that the Greater Toronto Area will see dozens of new condominium launches this fall. These are developers who will be spending millions of at-risk dollars to bring their projects to the market in the hopes of pre-selling homes and then obtaining construction financing.

    However, it is highly probable that not all of these projects will actually start construction in the short-term. And if/when that happens, it will not be because these developers are just squatting on entitled land; it will be because they can’t get financing. In other words, the market isn’t there.

    This will not be a good day for anybody. So I fail to see how it makes sense to penalize developers who happen to find themselves in this unfortunate situation. It’s as if our only solution to the current housing crisis is to make it more expensive to build new housing.

    For another post that I wrote on this topic, click here.

  • People prefer IKEA’s maze-like design

    IKEA opened its first permanent showroom in 1953. And by 1965, it had opened a 500,000 sf flagship store on the outskirts of Stockholm.

    Supposedly, the inspiration for this new store was Frank Lloyd Wright’s Guggenheim Museum in New York. Inspired by its continuous looping design, IKEA wanted to create a real-life version of its well-known catalog. This led to the current maze-like design where you wander through staged living spaces and get excited to buy lots of things.

    However, as IKEA began to open in more urban locations it actually started doing away with this prototypical design. The thinking, which seems perfectly reasonable, was that mazes weren’t appropriate for smaller and more urban locations. These customers would want to pop in, quickly get what they need, and then leave.

    But it turns out they were wrong. Their customers are telling them the opposite: they still want mazes. In other words, they want a curated experience that helps them figure out what to buy. According to IKEA: “People buy more when they are shown more.” Sounds right. And so IKEA is now working to make its urban stores more, you know, maze-like.

    The company has already done this in cities like Vienna and Paris, and apparently it consistently leads to higher sales. It’s a good reminder that (1) humans are still humans regardless of where they live and (2) if you want people to visit and linger in your physical store, it’s good practice to curate experiences.

    P.S. I love IKEA.

  • La tour Montparnasse at ground level

    The Tour Montparnasse in Paris recently turned 50. We spoke about that over here. But having visited the tower last week, including its top observation deck, I can now confidently say that I understand why many/most Parisians dislike it so much.

    It is a complex that could be in any city in the world and it is clear that it has been seeing disinvestment for quite some time (presumably due to its upcoming renovation). 

    However, a lot of the discussion seems to be focused on how its built form is a towering contrast to the rest of Paris. This is, of course, correct. But the same is true of the Eiffel Tower. One big and important difference is how these two towers meet the ground.

    La Tour Eiffel sits in a beautiful landscaped park where people sit and hang out (photo by me):

    Whereas the Tour Montparnasse is disconnected from its surrounding context. It feels like that train station on the wrong side of town (photos from Google Streetview):

    So it’s no wonder that its height gets picked on. What is implicit in this treatment of the ground plane is a belief that this tower is not worthy of celebrating. It does not deserve a beautiful park. And it does not deserve to be a ceremonial view terminus like every other icon in Paris.

    Thankfully, the current design for its renovation appears to address this (rendering via Nouvelle AOM):

    And this is arguably the most important design move. Ironically, what happens at the ground level could be what makes people finally appreciate what happens up top.

  • The accents of North America

    Yesterday I watched this three-part series on the accents of English-speaking North America:

    The videos are by dialect coach Erik Singer and, I must say, his ability to fluidly move through all of North America’s accents is incredibly impressive. As I was watching the videos, I kept thinking to myself, “I don’t know what this guy actually sounds like when he’s not putting on an accent.”

    The interesting thing about accents is that they really speak to settlement and migration patterns. In other words, who came in contact with who, and who didn’t come in contact with others? Geographic isolation also leads to unique accents.

    The other ingredient is time. The reason the UK, for example, has so any regional accents is that it had the time for them to develop. On the other hand, if you look to most of the southwestern United States, there is broadly a kind of generic American accent (with the exception of some California and Utah nuances according to Erik). This is because these settlements are relatively young compared to say the northeastern US.

    For Canada, the defining feature is “Canadian raising“. It is what leads to the stereotype of us saying things like “aboot” and “hoose”. It doesn’t sound exactly like this, but there is a way in which we tend to pronounce diphthongs (two adjacent vowel sounds) with open-vowel starting points.

    Open-vowels are sounds where our tongue is positioned as far as possible from the roof of our mouth. If you try saying “about” to yourself out loud right now you’ll notice that this is what happens. Your tongue drops. And it is these instances that lead to “Canadian raising”.

    The other thing that I find fascinating is how quickly language convergence can happen. I lived in Philadelphia for 3 years (for grad school) and when I would come home my parents used to tell me that I sounded fully American. I guess subconsciously we feel a need to assimilate.

    If you’re also fascinated by accents, I highly recommend you check out Erik’s videos.

  • The Citadel effect

    Last year, the formerly Chicago-based hedge fund Citadel announced that it would be moving its global headquarters to Miami. (Though to be clear, the company still has an office in Chicago.) Today, the Miami housing market is feeling the effects:

    “They’ve been buying here aggressively,” said Michael Martinez, a real estate agent with Sotheby’s in Miami, who recently brokered the sale of a $5mn home in Coconut Grove, a quiet salubrious suburb, to a Citadel employee. Most of the luxury homes he has sold in recent months have been to hedge fund buyers, half of them from Griffin’s firm, he estimates. “The Citadel migration is definitely occurring.”

    But it’s not just Citadel.

    According to another agent quoted in the article, there are many other “hedge fund buyers” active in the market, and many/most of them are buying all cash. In desirable suburbs like Coral Gables and Coconut Grove, homes between $3-7mm now account for about 40% of all listings.

    I remember visiting family in Miami in and around the GFC of 2007-2008. It was at this time that I really fell in love with the place. You could see how it was using art and culture to carve its identify. It was (and still is) this really exciting and sexy place.

    But it was also reeling from the GFC. I remember seeing listings for large and newish 2-bedroom waterfront condos for ~US$150k in some areas. If I had any money, this likely would have been a smart move given how Miami has grown since then.

    So I think this story is less about the Citadel effect and more about Miami’s continued rise as a global city and global financial center. Notwithstanding the whole climate risk thing, this city region has some pretty powerful tailwinds.

    Photo by Ryan Parker on Unsplash

  • Climate-friendly apparel

    Bloomberg published an article today talking about “climate-friendly apparel startups.” One of the companies is a British one called Techniche International. Their main target market seems to be construction workers and supposedly their clothes can lower skin temperatures by as much as 8C.

    The way they work is through evaporative cooling. Workers start their day by soaking their “StayQool” suits. Once activated, the uniforms will then consistently remove heat from the body for up to 7 hours. (I am curious if it’s akin to putting on somebody else’s wet life jacket.)

    This is an obviously useful thing in a place like Qatar — the example that Bloomberg gives and where summer temperatures can hit 50C. But the overall trendline suggests this is going to be a growing market. Especially if the tech works really well, it doesn’t feel like you’re putting on a wet life jacket, and if there are demonstrable productivity improvements.

    According to Bloomberg, the company did £150,000 of revenue in 2014 and £7 million last year.

  • A few charts on working from home…

    Here’s an interesting paper from WFH Research that looks at, “the evolution of working from home.” Not surprisingly, remote work tends to vary by industry, with tech being the most likely to work from home and with hospitality & food services the least likely.

    By extension, WFH prevalence also appears to correlate with population density. This largely has to do with the kinds of jobs that center themselves in big and dense cities. This is interesting because one conventional way to think about cities is that they are places where businesses and people cluster to accumulate wealth. That clustering is still happening, but work is evolving.

    And that is always the case.

    Overall, the authors conclude that about 40% of US employees are now working at least one day a week at home, and that just over 11% are fully remote. They also argue that fully remote work lowers average productivity by about 10-20%, but that hybrid work is closer to flat. Interestingly enough, opinions on productivity differ whether you ask employees or managers.

    If you’d like to read the full paper, click here.

    Figures: WFH Research