Today was the 2019 Land & Development Conference here in Toronto. I was on a panel in the morning about Proptech. I then sat in on a discussion about construction costs. But after that I had to get back to the office to prepare for a couple of meetings.
Here are my tweet takeaways (from the back of the room) during the construction cost session. You may need to click through to see the full thread.
The construction cost escalations that we have seen over the last 2-3 years have had a significant impact on new construction in this region. Niall Finnegan's view is that we are 85% of the way through this "storm."
From his experience, it takes 18 months or so for hard costs to respond to changes in demand. And so the storm we are currently in is a result of elevated condo sales from 2017-2018.
The general consensus from the panel was that costs should start to moderate sometime soon, though maybe not this year. Nobody really knows when that will happen. But if/when hard costs do adjust, it typically happens quickly.
Today was the 2019 Land & Development Conference here in Toronto. I was on a panel in the morning about Proptech. I then sat in on a discussion about construction costs. But after that I had to get back to the office to prepare for a couple of meetings.
Here are my tweet takeaways (from the back of the room) during the construction cost session. You may need to click through to see the full thread.
The construction cost escalations that we have seen over the last 2-3 years have had a significant impact on new construction in this region. Niall Finnegan's view is that we are 85% of the way through this "storm."
From his experience, it takes 18 months or so for hard costs to respond to changes in demand. And so the storm we are currently in is a result of elevated condo sales from 2017-2018.
The general consensus from the panel was that costs should start to moderate sometime soon, though maybe not this year. Nobody really knows when that will happen. But if/when hard costs do adjust, it typically happens quickly.
One comment that didn't make it into my tweets, but that I found interesting, was about how uncertainty and volatility in the market -- like what we are seeing today with construction costs -- could actually stifle innovation.
Because it creates additional project risks, it limits people's appetite for other kinds of risks -- like trying new things. I can see that.
Witold Rybczynski's recent post about the tragic fire at Notre-Dame de Paris provides an interesting summary of cathedral construction techniques over the years:
The Paris fire is also a reminder of what a weird hybrid structure Gothic cathedrals really are. The ancient Romans roofed their basilicas and baths with concrete vaults (the Pantheon with a dome), and the Byzantines used thin domes and vaults of brick. Over time, builders lost these skills and Romanesque cathedrals were roofed with exposed timber rafters like big barns. This made the buildings highly susceptible to fire, often caused by lightning strikes. The solution, pioneered at Durham Cathedral in the 11th century, was to build a lightweight ribbed stone vault over the nave. The timber roof remained, so the vault had no structural function (except to support itself) but it separated the interior from the flammable roof above. This was largely effective as the April 15 fire shows.
Below is an image from the WSJ depicting Notre-Dame's timber rafters and showing the extent of the area consumed by the fire. Fortunately, relatively little of the cathedral was actually destroyed.
One comment that didn't make it into my tweets, but that I found interesting, was about how uncertainty and volatility in the market -- like what we are seeing today with construction costs -- could actually stifle innovation.
Because it creates additional project risks, it limits people's appetite for other kinds of risks -- like trying new things. I can see that.
Witold Rybczynski's recent post about the tragic fire at Notre-Dame de Paris provides an interesting summary of cathedral construction techniques over the years:
The Paris fire is also a reminder of what a weird hybrid structure Gothic cathedrals really are. The ancient Romans roofed their basilicas and baths with concrete vaults (the Pantheon with a dome), and the Byzantines used thin domes and vaults of brick. Over time, builders lost these skills and Romanesque cathedrals were roofed with exposed timber rafters like big barns. This made the buildings highly susceptible to fire, often caused by lightning strikes. The solution, pioneered at Durham Cathedral in the 11th century, was to build a lightweight ribbed stone vault over the nave. The timber roof remained, so the vault had no structural function (except to support itself) but it separated the interior from the flammable roof above. This was largely effective as the April 15 fire shows.
Below is an image from the WSJ depicting Notre-Dame's timber rafters and showing the extent of the area consumed by the fire. Fortunately, relatively little of the cathedral was actually destroyed.
This past weekend I toured my friend's purpose-built rental project in Wynwood, called Midtown 29. It was completed last year and has already been stabilized.
Real estate development is very much a local business. It is that way because so much of it is driven by relationships, but also because every market has its own little idiosyncrasies.
This is always valuable to see. Sometimes we do things in our home market because it makes perfect sense to do so and sometimes we do it just because it's, "the way we've always done it."
One of the most obvious things about development in South Florida is that the parking is always above-grade. No basements. That has the result of bringing down construction costs; though I understand that, with sea level rise, insurance costs are on the rise.
If (or when) this whole autonomous vehicle thing does in fact take hold, it's going to be a hell of lot easier to convert all of that excess parking in Miami than it will be in Toronto.
Going forward, there will almost certainly be a debate about how the roof and spire should be rebuilt. What materials and construction methods are appropriate for this emblem of Christianity and French culture?
But I agree with Witold in that "there is nothing inauthentic about rebuilding."
It is common to lament that buildings simply aren't built like they used to be. But this is not a new phenomenon. Construction methods change, as do the skills of builders.
There may have been critics in the 1220's complaining about how the cathedral's roof was built using wood, instead of concrete or brick vaulting. But that's what was relevant at the time.
But Victor Hugo once wrote that, “great buildings, like great mountains, are the work of centuries." Despite what unfortunately happened this week, that remains true of Notre-Dame de Paris.
This past weekend I toured my friend's purpose-built rental project in Wynwood, called Midtown 29. It was completed last year and has already been stabilized.
Real estate development is very much a local business. It is that way because so much of it is driven by relationships, but also because every market has its own little idiosyncrasies.
This is always valuable to see. Sometimes we do things in our home market because it makes perfect sense to do so and sometimes we do it just because it's, "the way we've always done it."
One of the most obvious things about development in South Florida is that the parking is always above-grade. No basements. That has the result of bringing down construction costs; though I understand that, with sea level rise, insurance costs are on the rise.
If (or when) this whole autonomous vehicle thing does in fact take hold, it's going to be a hell of lot easier to convert all of that excess parking in Miami than it will be in Toronto.
Going forward, there will almost certainly be a debate about how the roof and spire should be rebuilt. What materials and construction methods are appropriate for this emblem of Christianity and French culture?
But I agree with Witold in that "there is nothing inauthentic about rebuilding."
It is common to lament that buildings simply aren't built like they used to be. But this is not a new phenomenon. Construction methods change, as do the skills of builders.
There may have been critics in the 1220's complaining about how the cathedral's roof was built using wood, instead of concrete or brick vaulting. But that's what was relevant at the time.
But Victor Hugo once wrote that, “great buildings, like great mountains, are the work of centuries." Despite what unfortunately happened this week, that remains true of Notre-Dame de Paris.
