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.

Subscribe

Author: Brandon Graham Donnelly

  • One Delisle has started the big hole part

    The most boring part of constructing a high-rise, like One Delisle, has got to be installing the shoring piles. Sure there are big rigs moving about on site but, for the most part, there’s almost no visible progress. That is, until you start excavating. Then you get to see said piles and you also end up with a big hole, which is something.

    Thankfully shoring works are now complete at One Delisle and we have started on the big hole part (see above photo from our rooftop cam). The next major milestone will be our “bottoming out,” and that’s when the tower crane will go up and our massive raft slab foundation will get poured. Visible progress is certainly more fun.

  • Thoughts on Opendoor Exclusives

    My most recent post about Opendoor, the so-called iBuying company, is about how it wants to become the “transaction layer for homes.” What that means is they would like to start facilitating third-party transactions between buyers and sellers, and move away (either partially or completely) from actually owning homes for a period of time.

    The company is still trying to sell homes that it purchased in Q2-2022, which, as we all know, was a very different kind of housing market. So by doing this, Opendoor would be both reducing the market risk that it takes on and making its business model less capital intensive.

    Knowing this, I actually think that “iBuyer” is the wrong moniker for their business. As I see it, the long-term objective is not to just be an iBuyer of homes. The objective is to ultimately facilitate transactions in a capital efficient kind of way. The point of iBuying is/was to seed their two-sided marketplace with sellers.

    As we have discussed before, two-sided marketplaces usually always have a chicken-and-egg problem. No sellers equals no buyers, and vice versa. So you have to figure out a clever way to attract one side. Of course, now that Opendoor has sellers, the company can start to aggregate the demand side (i.e. buyers). And that is exactly what it is doing with Opendoor Exclusives.

    Exclusives works like this:

    • The inventory consists of “off-market” homes that have yet to be listed on MLS
    • The homes are discounted about 2-4%
    • They are available for 14 days
    • You can’t negotiate the price — it’s first come, first served
    • If your appraisal comes in lower, Opendoor will price match
    • And finally, Opendoor will not pay any buyer commissions (which is reflected in the above discount)

    As I understand it, if the home doesn’t sell, it then gets listed on MLS and all of the normal terms and practices would apply. But before that happens, the key objective is to facilitate a quick transaction in one of two ways.

    The first way is for the seller to request an offer from Opendoor’s network of buyers. In this scenario, Opendoor never needs to own the home or perform any improvements (which is usually what it does when it iBuys). It is an intermediary earning some sort of take.

    The second way is for Opendoor to do its usual thing and make an instant offer to buy the home. But here’s the thing. With enough buyers on its platform and by creating a sense of urgency (hey, here’s a lower price!), presumably the idea is that it may never need to close on a number of these homes. It just needs to find another buyer within 14 days.

    If it works, this could be an interesting business.

  • Royal Bank of Canada to employees: “Get back in the office”

    Royal Bank of Canada, which is one of the largest employers in the country, sent an internal memo to employees this week with statements like these:

    “When our teams come together on-site more frequently, we are solving complex problems faster, learning and growing more effectively, and ultimately building deeper connections with one another.”

    “Without frequent in-person engagement our long-term competitiveness is at risk.”

    I feel strongly that we are going to continue to see more of this. Current work-from-home arrangements are not at all static. We have not yet reached a post-pandemic equilibrium. That will likely take a few more years.

    More flexibility, rather than less, is something we all want, and I don’t believe that’s going away. But I do believe that for the most productive and congealed teams, the default workplace will remain the office.

    P.S. Office Space (embedded video above) is a great movie.

  • Population density map of the world

    I came across this interactive world population density map over the weekend and I immediately thought to myself, “this is going on the blog.” It uses data from the Global Human Settlement Layer (GHSL) produced by the European Commission and by CIESIN (super long name) at Columbia University. And it’s a fascinating way to explore how our world is urbanizing.

    What you will want to do is make sure that you head over to China and check out regions like the Yangtze River Delta (shown above). If you hover over a location, it will also bring up a graph and table showing you how that place has evolved from 1975 to 2015. Note: Shanghai’s peak population density in 2015 was 104,400 people per square kilometer!

  • No sidewalks — feature or bug?

    I tweeted the above photo on Saturday morning with the following text: “No sidewalks. Towers in the distance. Welcome to the inner suburbs of Toronto.” What I, of course, wanted to highlight is the contrast between the rural-like street with no sidewalks in the foreground, and the high-density towers built on top of Kipling subway station in the background. It is a perfect example of the kind of Toronto we are building, by design, all across the city. And it also exemplifies one of our great philosophical divides.

    If you look at the responses on Twitter, you’ll see that there are a few opinions. Generally speaking, though, there are probably two main ways to think about this scene. One way is to look at the transit-oriented housing and think of it as urban progress. We are adding new housing and we are doing it in a way that hopefully results in more walkable communities. With this in mind, you might now see the three humans on the street (one of which is in a stroller) and think it’s a shame that they have been forced to walk on the road.

    The other main way to look at this is that not having sidewalks is actually a feature and not a bug (indeed, a lack of sidewalks can be a pretty good indicator for rich people/wealthy households). From this lens, not having sidewalks means uninterrupted driveways (more parking), less through foot traffic, and a more quaint small-town feel. Also with this lens might be a view that the rural-like street was there first, before the transit-oriented towers. And it was doing just fine before people like me drove through their neighborhood and pointed out the lack of sidewalks.

    How do you see this scene?

  • Walkable archipelagos are emerging across the US

    We have spoken before about how walkable urban communities punch above their weight. In the US, only about 1.2% of land is, on average, designed and built for walkability. And yet, walkable neighborhoods in the top 35 metro areas account for about 19.1% of total US real GDP.

    At the same time, because walkable communities are a rarified commodity, they usually come at a premium. According to some sources, it’s to the tune of 30-40% when you look at home prices and rental rates. This again suggests that humans actually like and want this type of urbanism.

    Which is probably why there’s a growing interest in building more of it. Here’s a recent article from Bloomberg CityLab and here’s a photo of Culdesac’s new completely car-free community under construction in Tempe, Arizona (this doesn’t look like the Arizona I know):

    But in addition to just giving people more of what they want, there are also real economic benefits to stripping out parking and to overall more compact development. Charlotte-based Space Craft is another developer focused on car-light and transit-oriented apartments, and they have seemingly managed to make their projects more affordable as a result:

    “Our product offered lower rents to residents, $100 to $200 below our competitors, and was the best product in the market because we were able to reinvest some of the savings from parking,” said [Harrison] Tucker, who sees walkable urban neighborhoods becoming their own real estate investment class. “The economic case was just very strong.”

    This also flies in the face of the common argument that developers will always profit maximize and charge whatever the market will bear for their spaces. So why even bother trying to make it easier and cheaper to build? But this is not true! Lower development costs, as we see here, can and will translate into lower rents and higher quality buildings.

    I also agree with Tucker that we will see walkable urban neighborhoods, and their associated building typologies, become an important real estate asset class. For all of the reasons that we talk about on this blog, this is where our cities are headed.

    However, it’s going to take some time. I like the metaphor (mentioned in the above article) that, right now, we are creating “walkable archipelagos” or walkable islands in seas of cars. With the right connectivity (transit, micromobility, and so on), these islands can do just fine. But over time, I suspect we’ll see a lot more land reclamation. Good.

  • English-speaking countries don’t like apartments

    A lack of affordable housing certainly feels like a global phenomenon. Companies are trying to 3D-print homes for under $100k. Berlin froze apartment rents back in 2019 because things were getting too expensive. And today, Hong Kong is working on building some sort of “light public housing” in an effort to reduce its massive wait times for new homes.

    But depending on where you are in the world, it might be somewhat comforting to remember that this problem seems to be particularly pronounced, here, in English-speaking countries. Whether it’s restrictive zoning rules or a general distaste for apartments and urban density, the English-speaking world has fallen behind on housing supply compared to places like continental Europe.

    Here’s an excerpt from a recent FT article:

    Forty years ago, the UK, US, Canada, Australia, New Zealand and Ireland had roughly 400 homes per 1,000 residents, level with developed continental European countries. Since then the two groups have diverged, the Anglosphere standing still while western Europe has pulled clear to 560 per 1,000.

    And this shows in our home prices:

    One argument is that continental Europe is simply more culturally accepting of apartment buildings, and that allows more new homes to be built. Seems right:

    According to this chart, the average person from the UK or the US would not be happy unless they were living in a detached house. When you get to the continent, people start to become increasingly more positive around missing middle-type housing (something in the 3-4 storey range). Though, anything more than that and things get divided.

    All in all, it doesn’t seem to really matter where you’re from, there’s a clear preference for detached housing. But maybe liking apartments even a little bit is all you need to help with overall housing supply.

  • 3D-printed homes for under $99,000

    ICON, the 3D-printing home company that I wrote about a few months ago, has just launched a new global architecture competition called Initiative 99. As the name starts to suggest, the goal is to generate new ideas for “accessible, beautiful, and dignified 3D-printed homes that can be built for under US$99,000.”

    The competition is open to all: architects, designers, builders, students, and/or people who are just interested in finding new ways to deliver affordable housing. However, the current website does ask for a zip code. So maybe you need to live in the US.

    In any event, if you’re selected, you might get money and you might get to see your design built. The total prize fund for the competition is US$1 million and ICON has also committed to building a selection of the winning designs. Registration begins May 23, 2023, but if you’d like to enter your zip code now and “stay informed,” you can do that here.

  • Lufthansa unveils new multi-seat layout in business class

    Maybe it’s my design background or maybe it’s the extreme discomfort in my legs, but usually when I’m on a plane I can’t help but think about redesigning the cabin interior. Of course, there are only so many options in economy when your femur doesn’t fit between the seats. However, in business class, where airlines actually make their money, the options are endless.

    Below is a redesign that Lufthansa just launched this spring. Co-created with Pearson Lloyd, the concept is based on three distinct travel experiences: calm, focus, and share. The idea here is that maybe you just want to sleep (calm). Maybe you just want to work (focus). Or maybe you want to work and/or hang out with someone beside you (share). And depending on what you’re looking for, your seat should reflect that.

    The result is 7 different seat types that are bookable depending on what “job you’re looking to hire it for.”

    It is about consumer choice instead of one size fits all. But I’m curious:

    • Were they able to maintain the same number of overall seats in business class, or are they betting on higher revenue per passenger because the seats are now better?
    • How does booking work? What happens if I really want “calm,” but the only available seat is “share”? And then what happens if my “share” neighbor is really talkative?
    • Has anyone looked at multi-seat arrangements in economy? Or is it a non-starter because you really need to squeeze femurs in order to make the math work?

    Lufthansa, if you’re reading this and you’d like me to do a thorough review of your new Allegris Business Class seating, I would be happy to accept a flight to Paris sometime this summer. Until then, you can all find more information about this new seating layout and the design process, here.

    Images: Pearson Lloyd

  • The end of free money

    Tech analyst Benedict Evans — who has 175,000 subscribers to his weekly newsletter — has just published his big annual presentation about “what matters in tech?” This year’s is called “The New Gatekeepers.” And as is normally the case, he explores a number of macro trends that I think will interest many of you, even if you aren’t in or interested in the tech industry. To check it out, click here.