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.
This was a big week for construction progress at One Delisle. On Friday, we poured the first bit of our raft slab foundation on the west side of the site. Big concrete pours like this usually take all day and this case was no different. The team was there late into the evening. And then today, the first of our two tower cranes was erected:
The crane going up is always a big milestone because, in my mind, it signals the start of “real” construction. What I mean by this is that all of the stuff that comes before — demolition, shoring, and excavation — is really just to get the site ready for building. Well, now we’re ready, and that means we’re about to go vertical.
A big thanks to the team for working around the clock over the last few days.
This, according to a NYC government website, equals 8,660 active shed permits covering 1,959,444 linear feet. And on average, these construction sheds are erected for 493 days. If you’ve been to New York recently, this will all sound right to you.
I thought I had read somewhere that this has to do with a property tax benefit. Something about if you keep your hoarding up after construction completion, you can avoid immediate reassessment.
But according to some sources, the proliferation of sheds is mostly driven by the city’s Facade Inspection & Safety Program, which requires that all buildings taller than 6 floors have their facades closely inspected every 5 five years.
So presumably, keeping these up for an extended period of time is the less costly and less risky option.
This past week we poured the first bit of concrete in the giant rat slab foundation (or mat foundation) that sits, or will sit, at the bottom of One Delisle. At its deepest point, below the building’s core, it will be over 4m tall. Meaning, the area occupied by the gentlemen in the above photo will be fully covered in concrete when it’s complete. Note the height of the rebar in the middle of the photo. This picture doesn’t even do it justice, though. You need to be on site and down in the bottom of the hole to really feel it. There’s a lot of bar, and it’s going to be very deep.
In our case, this raft slab foundation will, as it sounds, serve as the building’s foundation. This is what the tower will rest on. However, raft slabs can also serve the function of withstanding hydrostatic pressures from below (groundwater). That is the case with the raft slab foundation at Junction House given that we have a watertight “bathtub” design for the underground. However, that’s not the case here at One Delisle, as the groundwater levels aren’t as high and this will not be a “bathtubbed” underground. So the job of this giant slab is as a mat foundation.
Disclaimer: I am not a structural engineer or a hydrogeological engineer. What do I know?
I’m not an economist, nor am I an expert on China, but according to this recent FT article, more than half of the country’s largest developers (based on 2020 sales) are now in default:
On top of this, there’s a lot currently in the pipeline:
The National Bureau of Statistics of China is saying that, as of last August, there was about 8 billion square meters of real estate under construction in the country. That’s very roughly about 80 billion square feet of space, which I’m assuming covers all asset classes.
This is such a big number that I really have no idea if it’s excessive or not for a country that is rapidly urbanizing and has some 1.4 billion people. So let’s compare it to the US.
Back in 2020, Brian Potter came up with estimates for the entire US building stock. Interestingly enough, he determined that about 90% of buildings in the US are single-family homes. This is what the US builds and continues to build, by a long shot.
However, single-family homes do tend to be smaller than, say, office buildings. So if you instead look at square footage (and not the number of buildings), this percentage drops to about 60% of all buildings in the US.
On a square footage basis, single-family homes are estimated to represent about 200 billion square feet. And in total, Brian estimated the entire US building stock to be around 340 billion square feet (again as of 2020).
This means that, right now, China could have nearly 25% of the entire US building stock under construction. I think that seems like a lot.
My construction partner sent me an email last week that said: “Check out Kongo Gumi. Search them. Pretty cool history.” So I flagged the email and made a mental note to come back to it over the weekend when I had more time. I finally looked them up this morning and, he was right, it is a pretty cool history.
It turns out that they are/were the oldest continuously operated company in the world. Founded in 578 to build Japan’s first Buddhist temple, the construction company was active for over 1,400 years. They eventually became insolvent in the mid-2000s and the company was then purchased by Takamatsu Construction Group; but before that they had successfully operated across 40 generations.
That is something that doesn’t happen very often.
Supposedly, there were two important ingredients contributing to this long run: (1) They forced sons-in-law to take the family name. This ensured that the line continued even when there were generations of only daughters. And (2), they were in the business of building Buddhist temples. So as long as there were millions of Buddhist followers in the world, they were ensured work.
I’m not sure what happened to make the company insolvent in 2005-2006, but imagine the pressure facing each subsequent generation. I know I wouldn’t want to be the generation that ultimately took down the 1,400+ year old family business.
For more on the history of the company, click here.
Well, that project is now complete and stabilized, and it turns out that it was the first CLT apartment building ever built in NYC, which is quite an accomplishment.
On her blog, Joanne describes the project as being a “labor of love”, and that certainly sounds right. But they are now also onto their next CLT apartment building at 122 Waverly Avenue (called Frame 122).
This would suggest that whatever their development model is, it is working for them. My assumption is that they want to both make our cities more sustainable and own high-quality rental assets for the long-term (possibly forever).
If you’d like to see how 122 Waverly was assembled, here’s a short video that Joanne recently posted on her blog:
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.
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 friend of mine just sent me this blog post from the venture capital firm, Shadow Ventures. They specialize in the built environment (i.e. real estate and construction) and the post is called, “What McKinsey gets wrong about the built environment.” Here’s one of the points that they make:
We are project based. While we are much larger, the most similar business is the movie industry. Project based, different source of funding/budget every time, the team changes (but we have our faves).
This is very true. Oftentimes what happens in real estate is that you start with an opportunity. Something like, “buy this building, fix it up, and then sell it for more.” If the opportunity sounds compelling, a common approach is to then “get control of the asset and figure out how to capitalize it.”
What this means is a conditional deal so that you can (1) do your due diligence and (2) figure out how to pay for it. This gets back to the three-legged stool that we’ve spoken about before. To do real estate stuff you basically need 3 things: a piece of real estate, relevant experience, and, of course, some money.
This speaks to the entrepreneurial nature of real estate. But it also speaks to why it is maybe unfair to evaluate the architecture, engineering, and construction (AEC) industry as you might the automotive industry. The auto industry doesn’t capitalize and make each car slightly differently.
This is one of the many things that makes real estate unique. And it’s why we have seen an enduring effort to figure out the “productization” of housing. It’s about being less project based.
We poured the concrete footings/foundations for Parkview Mountain House this week. Above is a photo of the pour. We’re about two weeks behind schedule because of delays related to site works and excavation. (We’re building into the side of a mountain.) But I’m hopeful we can make it up once we finish concrete work and move on to wood framing next month.
For those of you who like details, here’s a section showing the footing and retaining wall on the back of the property facing the slope of the mountain:
Our tallest retaining wall is going to be 15 feet high, which, as I understand it, is more or less the maximum we could have done here without getting into more elaborate structural solutions (such as tiebacks). So the team spent a lot of time solving a design puzzle that involved the height of this retaining wall, the maximum allowable zoning height for the site, and our choice of established grade.
Onward. More concrete to come and then we move to wood. It’s a race to get “closed in” before the snow starts up again.
