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

  • Adam Neumann raises $350 million to revolutionize the apartment market

    Today it was announced that venture firm a16z has made a $350 million investment in Adam Neumann’s new residential rental company called Flow (which is kind of ironic).

    The company is set to launch in 2023 and nobody on the outside seems to be entirely clear on how it plans to revolutionize the multi-family rental market, but supposedly this funding round values Flow at more than $1 billion and supposedly Neumann will be rolling in the 4,000 or so apartments that he has been buying up.

    In any event, here’s how a16z described the opportunity (I think the key sentence is probably the one about creating a system where renters become like owners):

    Only through a seismic shift in the way industry relationships are structured and the mechanisms through which value is delivered can we hope to address the underlying problems of the current system and build the solution. Doing this requires combining community-driven, experience-centric service with the latest technology in a way that has never been done before to create a system where renters receive the benefits of owners. This means rethinking the entire value chain, from the way buildings are purchased and owned to the way residents interact with their buildings to the way value is distributed among stakeholders. And given the fragmented nature of the ecosystem today, we can only hope to accomplish any of this by bringing every aspect of the living experience together.

    What I will say is that I think it’s great to see this amount of innovation-focused money flowing into the residential real estate space, which is, after all, the biggest asset class in the world and one that could certainly use some fresh ideas. Apparently it’s also the biggest funding round that a16z has ever done.

    But I also find a16z’s characterization of the problems a bit odd. Renting an apartment is described as this soulless and profoundly lonely experience where you’re so ashamed of where you live that you’re even hesitant to invite friends over. They also conflate house with home, as if to say that you can’t have the latter without the former.

    On second thought, maybe these are exactly the right problems to be solving. It is our biases that we need to do something about.

  • Income vs. wealth in California’s housing market

    Here is a chart from MetroSight that compares housing tenure in California in 2000 and then between 2015-2019:

    Two things you might notice immediately are that the number of renter-occupied households has generally increased and that the number of owner-occupied households without a mortgage (i.e. they own their home free and clear) has also increased for every age category except for those 65 or older.

    MetroSight uses this data to argue that a new “wealth-related phenomenon is emerging” in California. Instead of the housing market being largely driven by income (that is, I make this much per year and I can afford this much house), it is being driven by accumulated wealth.

    The possible explanations for this are as follows:

    • The share of renter-occupied households is increasing because people increasingly can’t afford to buy
    • The share of owner-occupied houses with a mortgage is decreasing because less people can afford to buy given California’s price-to-income ratios
    • The share of owner-occupied houses without a mortgage is increasing because people are increasingly inheriting homes or getting gifted cash from their families

    Consider that the share of owner-occupied houses without a mortgage even increased for the 18-24 age category. Unless you’re the next Zuckerberg (who was a billionaire at age 23), this is pretty challenging to do without some kind of assistance, especially in a place like California.

    This outcome also provides a possible explanation for why the over 65 age category is the only segment that has seen a reduction in free and clear ownership. It is because they are transferring their wealth to the next generation so that they too can obtain homeownership.

    Chart: MetroSight

  • Turns out, pedestrianization actually increases retail sales volumes

    As many of you know, I have been keeping a close eye on the pedestrian-only pilot that is currently underway on Market Street. And judging from all the engagement that my tweets usually get, a lot of you would love to see a lot more of this kind of urbanism both here in Toronto and elsewhere. (When Kensington Market?) The below photo was taken on Friday evening and Cirillo’s Academy, which is a culinary event space at the foot of the pedestrian-only stretch, was running some sort of event. All of the tables were filled with diners and it was basically a full fledged restaurant in the middle of the street. It was great to see.

    But the question that always comes up with these sort of initiatives, particularly here in North America, is: Will it hurt the businesses? To answer that, here’s a study that @economistcarson shared with me on Twitter that looks at the economic impact of street pedestrianization in Spanish cities. What the researchers did was essentially look at card transaction data from a major Spanish bank and then overlay it on top of land-use changes from an Open Street Map dataset. In doing so, they discovered some pretty important takeaways.

    Here’s what they found:

    • Pedestrianization actually increases retail sales volumes
    • Geographic location within a city tends to be insignificant
    • The two key factors for driving revenue are: (1) store density and (2) store category
    • For store category, the largest positive effect was observed for cafes, restaurants, bars, and other non-tradeable, local consumption activities

    What this last point is saying is that people, at least in Spanish cities, tend to prefer pedestrian-friendly environments when it comes to experience-based activities. And that makes complete sense. On the other hand, if you’re just running out for a little toilet paper and hemorrhoid cream, having a nice pedestrian-first experience is less critical. And this also makes sense.

    Some of you, I’m sure, will correctly point out that Spain has, on average, better weather compared to a place like Canada. And that their store densities and overall densities are likely higher, and that they have deep historic urban fabrics to rely on. All of these things are certainly factors. But I don’t think any of this should stop us from working to better optimize our cities for pedestrians. There are lots of successful examples all across Canada. It can work. Just look at Market Street.

  • Casey Neistat needs to make a YouTube video about cycling in High Park

    I love High Park. It’s the second largest green space in the City of Toronto and right beside the Junction neighborhood. But there are some problems. Despite having a subway line on its northern boundary, we’ve gotten the built form along its edges all wrong.

    There’s very little functioning retail. The densities and heights are not nearly high enough. The streets aren’t great walking streets. And we’ve even gone and created undignified bus stops like this one here.

    On top of all this, we’re now doing this silly thing where police are ticketing cyclists for riding around the park with too much vigor and enthusiasm. I’m sure somebody called to complain and this is all reactionary politics, but an even bigger reaction has now been set off.

    For those of you who haven’t been following or aren’t from Toronto, hundreds of cyclists took to the streets this week to peacefully protest what has been going on in High Park.

    The Globe & Mail then followed it up with this important piece calling for an end to cars inside the park. The boundaries currently house about 5 km of roads and almost 600 parking spots.

    Given all this, I figured now is probably a good time to revive one of Casey Neistat’s original YouTube videos called “bike lanes.” The story is that he gets a ticket for not riding in a bike lane. And so he films a video of himself only riding in bike lanes — even if there are obstacles in his way.

    It’s an awesome video with nearly 30 million views. And I’m sure that many of you have felt like doing exactly what he does when faced with this same situation. I know I have.

  • Manhattan is still looking at a congestion charge for south of 60th Street

    We talk a lot about congestion charges and road pricing on this blog. Here’s a list of some of those posts. I found 46 that were tagged with “road pricing.”

    I continue to believe that it’s the only way that big cities can effectively solve the problem of traffic congestion. It’s not being caused by the bicycle lanes that were just added to your street. It’s not the new COVID street patios. And it’s not the new apartment that was just built with too many parking spots.

    The problem is mispricing.

    If you want free roads, then you don’t get free-flowing traffic. That’s how this equation works, which is why I have always thought it a good idea to dynamically price roads based on demand, and then to direct those funds toward more efficient forms of mobility — such as transit.

    Despite all this, it’s not a very popular approach in this part of the world. Toronto looked at road pricing back in 2016, but we got nervous and backed away from it. New York City has also been looking at a congestion charge for Manhattan south of 60th Street for at least 4-5 years. But this one appears to still be on the table.

    According to this recent CityLab article, New York’s congestion prices could look something like this (note that this chart includes other pre-existing tolls):

    But with some exceptions (I think this is an interesting approach):

    Primary residents of the Manhattan central business district, which is south of 60th Street, and New York State residents with adjusted gross income of less than $60,000 would be eligible for a state tax credit equal to the amount of the new tolls, paid during the taxable year.

    In total, this current pricing scheme is expected to generate an additional $1 billion in annual revenue for the city’s transportation authority. The MTA also plans to bond against this revenue and raise an additional $15 billion for new transit projects.

    This sounds like a reasonable approach to me.

  • New Taipei Performing Arts Center by OMA

    The new OMA-designed Taipei Performing Arts Center opened up last Sunday and so you’ll now find lots of articles, photos, and drone videos circulating around online. The two partners-in-charge, Rem Koolhaas and David Gianotten, were also on this Monocle on Design episode talking about the genesis of the project and how they worked to optimize the various theater spaces.

    My favorite part of the whole story is how they actually won the design competition. The site is located next to Taipei’s renowned Shilin Night Market. And I can attest to this fame because I spent a summer living in Taipei while I was in university. This night market was the thing I was immediately told I needed to visit as soon as I stepped off the plane. And they weren’t wrong. I spent many a nights with those stinky tofu dishes that smell like feet but actually taste pretty good.

    But for whatever reason, the competition brief stipulated that the night market was to be torn down in order to make way for this new performing arts center. And since it was in the brief, almost everyone took it as a non-negotiable given. The only firm that didn’t — out of 140 bidders — was OMA. They questioned why the city couldn’t have both: a new performing arts center and their wildly successful night market.

    So that’s how OMA — at least partially — won the competition. And I’m certain that Taipei is better for it.

  • How Toronto landed its first Michelin Guide

    Back in May, I happen to come across a 1912 copy of Michelin’s Guide to France. It was exceedingly cool to see and I’d love to find a copy for my own library. (For those of you looking for a reminder on how the Michelin Guide works, click here.)

    After returning to Toronto, I then serendipitously learned that our city would be getting its own guidebook this fall, which will be a first for both Toronto and for Canada as a whole. A Michelin-starred restaurant means something to some people, and has generally been proven to drive tourism dollars — so this is perhaps a big deal.

    But there’s a lot of opacity around how these guides work and how a restaurant gets awarded one, two, or three stars. Who are these secretive reviewers? And is it really worth the money that governments need to pay to the French tire company? South Korea allegedly spent US$1.8 million back in 2016 to get its guide.

    Andrew Weir, who is the executive vice president of Toronto’s tourism marketing group, was recently interviewed about all of the behind-the-scene efforts that took place in order to make this upcoming guide happen. If you’d like to have a read, click here.

    In my view, all of this is very much an act of city building.

  • Lobbies as pseudo-public spaces

    This is a good idea (taken from a recent FT article by Edwin Heathcote):

    The hotel lobby is already understood as a kind of public space, the corporate lobby should belong to that same world, a place open to the functions of the city, porous and welcoming. It is no accident that the vast lobbying industry has that name, lobbies are where encounters occur.

    Sometimes we do this. Maybe there’s a coffee shop or some other activations in your lobby. But more often than not, a “good” corporate lobby is about grandeur and security, which means that they do very little to animate the street.

    In the above article, Edwin reminds us that before the invention of the modern office building, the entire city functioned as a kind of dispersed workplace. Places like coffee shops and pubs were, of course, central to this.

    While this is still partially the case today — people continue to like coffee and beer — it is interesting to think about what more we could be asking of our office lobbies. And I do think it is more.

  • Weekend walking tour

    I had a friend — who I know from architecture school — visiting from Detroit for the weekend, so we did a little building tour on Sunday morning.

    This is the elevated (and half-finished) CIBC Square Park that spans over the rail lines leading into Union Station. The benches are beautiful. On the right side of the second photo are also fire pits that are in the process of being setup.

    This is us nerding out (photo credit to Neat B).

    And this is the view looking down Bay Street from the stairs that lead up to the park. We tried to snoop around inside a little but a security guard asked us to leave.

    This is T3 Bayside — a new timber office building going up on the waterfront. Apparently it is the tallest of its kind in North America at the moment. I am also embarrassed to say that I just learned that T3 stands for timber, transit, and technology, and that it is part of a broader office development strategy that Hines is rolling out.

    This is Tridel’s Aquavista. I’m looking forward to the ground floor spaces getting leased up in this area. All of the ingredients seem to be here for a vibrant waterfront community.

    This is the next Aqua-something project. We all assumed that there must be strict umbrella rules in place.

    This is Monde by Moshe Safdie & BDP Quadrangle (architects) and Great Gulf (developer). It kind of reminds me of 56 Leonard Street (New York) from this elevation. I guess I’m not used to seeing it from the south side.

    Finally, this is Sherbourne Common, which is both a park and an important piece of stormwater infrastructure. It treats stormwater before it gets discharged into Lake Ontario and it also helps to reduce poop from flowing into Lake Ontario as a result of combined sewer overflows.

    It’s fun being a tourist in your own city. We should all do it more often. It makes you appreciate what you have.

  • The story of Los Angeles’ last Japanese boarding house

    Rooming houses or boarding houses are a divisive topic. Here in Toronto, they are permitted in the older parts of the city, but illegal everywhere else. Since 2021, we have been talking about changing that in attempt to increase the supply of what is typically the most affordable kind of housing. But there are lots of people who want to “protect the integrity of single-family communities”, and so a decision on this issue has been, as I understand it, punted until sometime next year. At some point, I suspect a decision will be made (though deferring is also a decision).

    While we wait, this recent piece by journalist and photographer Samanta Helou Hernandez tells an interesting story of Los Angeles’ last Japanese boarding house. But as you’ll see from her article, it’s labeled as a boarding house, but it really acted as a kind of community center. Boarding houses in this community have, over the years, served as a place for people to get back on their feet (after returning from internment camps following WWII) and as a place where they could speak their own language and build community.

    Looking back on the history of the area, it’s hard to fathom being comfortable with some of the exclusionary policies that were in place at that time, which effectively blocked immigrants and people of color from moving to certain areas. Then again, I’m sure posterity will look back on some of decisions being made today and wonder what we were thinking.