The most popular post on this blog is this one here called, "What real estate developers do and why I became one." This post alone has been responsible for a good chunk of the organic traffic that this site receives since I wrote it back in 2014. If you search for "real estate developer" in Google it usually comes up on the first page.
Probably because of this post, the number one question I receive in my inbox is about how to become a developer or how to transition into development from some other discipline. Usually this comes from someone who is early on in their career and/or is in architecture (which is not surprising given my background as a fake architect).
I have tried to respond to this question publicly and at scale with a number of different posts. But many of you probably haven't seen them before, and so I figured it would be a good idea to summarize some of them here (they're usually tagged with "developer dirt"):
Studying to become a real estate developer (book recommendation)
Three-legged stool (the three things that every project needs)
Planning staff reports (why they're worth reading)
If you're looking for a more succinct summary of what to do, here is what I would suggest to you. You basically have three options.
1) You can convince someone to take a chance and hire you, even though you likely don't have any development experience. Maybe you have a background in something relevant such as real estate law, architecture, or politics (good). Or maybe you don't (less good). Either way, the best way to position yourself is to understand what it is that developers do and figure out a way to create value for them from day one. You want to be in a position to say, "Yeah, I know I don't have any direct development experience, but I can do X, Y, and Z for you starting today and I think that would be helpful to you for the following reasons."
2) Get a relevant degree. I'm thinking an MBA in real estate or some sort of master's in real estate development. The reality is that the development business has, in many ways, become more institutionalized. It has gone, though obviously not entirely, from rich private families developing with their own balance sheets to more institutional capital sources, such as pension funds. Because of this, there are going to be hiring managers out there who need to check off certain boxes. For example, does this person have a real estate degree? This may make it harder for someone to take a chance on you if you don't have the right experience and/or credentials.
3) Just go out and do it. Despite becoming more institutional, the development business remains, in my view, a deeply entrepreneurial endeavor. You have to be able to problem solve and you have to be creative. The best developers I know don't focus on can't, they focus on how. Because there are too many obstacles in this business. A can't mentality wouldn't get you very far. So consider renovating a triplex, building a laneway suite, or doing something else that allows you to take a piece of real estate and create some additional value. Because that's all that development really is at the end of the day.
If you found this post useful, please consider sharing it with someone that you think would benefit from it. And if there are other topics that you would like me to cover (or cover in more detail), please feel free to leave a comment below or to at me on Twitter. I prefer Twitter over email because it forces brevity. Happy Canadian Thanksgiving, all.
Photo by Bernard Hermant on Unsplash
Alex Bozikovic is right to praise Gairloch's upcoming development in the Junction. It's a beautiful project and it's exciting to see so many architecturally significant projects in one neighborhood -- either completed or to be completed. I'm thinking specifically of DUKE Condos (TAS and Quadrangle), our Junction House project (currently under construction), and now Gairloch's.
But Alex (as well as Jeremiah Shamess) is also right to point out some of the tensions and contradictions that are inherent to building at this scale. We want European-type mid-rise buildings all along our avenues, but we also want our housing to be more affordable. Problem is, mid-rise buildings are the most expensive way to build.
The approvals process also tends to privilege urban design considerations over things like livability and construction costs. We talk about the shadow impacts that the project might have on the surrounding community, but not about how well the suites will layout when it's all said and done -- not to mention how expensive they will be to build.
The cynics will tell you that it doesn't matter what it costs to build because developers will always profit maximize (as is the case with every other for-profit business). But that's an oversimplification that ignores a bunch of factors.
One, it's not as simple as just price. You also have to consider sales velocity. Price and sales velocity tend to be inversely correlated. In other words, as prices increase, sales velocity tends to naturally slow. You then begin to trade-off higher prices for increased time (which has a cost) and more market risk.
As I've said many times before on the blog, development happens on the margin. Usually the way this plays out is that you create a development pro forma, you look at all of your project costs, and then you say, "oh shit." You're then stretching to figure out how you're going to make the math work.
Two, there are usually always parts of a city where development isn't feasible (in some unfortunate cases, it might be the entire city). The potential revenues simply don't support the costs. And as costs continue the rise, any areas that have not seen a corresponding increase in prices and/or rents will also become undevelopable.
So there's price, and there's also a question of where great buildings are even possible. As many have already pointed out, it's certainly not everywhere.
The most popular post on this blog is this one here called, "What real estate developers do and why I became one." This post alone has been responsible for a good chunk of the organic traffic that this site receives since I wrote it back in 2014. If you search for "real estate developer" in Google it usually comes up on the first page.
Probably because of this post, the number one question I receive in my inbox is about how to become a developer or how to transition into development from some other discipline. Usually this comes from someone who is early on in their career and/or is in architecture (which is not surprising given my background as a fake architect).
I have tried to respond to this question publicly and at scale with a number of different posts. But many of you probably haven't seen them before, and so I figured it would be a good idea to summarize some of them here (they're usually tagged with "developer dirt"):
Studying to become a real estate developer (book recommendation)
Three-legged stool (the three things that every project needs)
Planning staff reports (why they're worth reading)
If you're looking for a more succinct summary of what to do, here is what I would suggest to you. You basically have three options.
1) You can convince someone to take a chance and hire you, even though you likely don't have any development experience. Maybe you have a background in something relevant such as real estate law, architecture, or politics (good). Or maybe you don't (less good). Either way, the best way to position yourself is to understand what it is that developers do and figure out a way to create value for them from day one. You want to be in a position to say, "Yeah, I know I don't have any direct development experience, but I can do X, Y, and Z for you starting today and I think that would be helpful to you for the following reasons."
2) Get a relevant degree. I'm thinking an MBA in real estate or some sort of master's in real estate development. The reality is that the development business has, in many ways, become more institutionalized. It has gone, though obviously not entirely, from rich private families developing with their own balance sheets to more institutional capital sources, such as pension funds. Because of this, there are going to be hiring managers out there who need to check off certain boxes. For example, does this person have a real estate degree? This may make it harder for someone to take a chance on you if you don't have the right experience and/or credentials.
3) Just go out and do it. Despite becoming more institutional, the development business remains, in my view, a deeply entrepreneurial endeavor. You have to be able to problem solve and you have to be creative. The best developers I know don't focus on can't, they focus on how. Because there are too many obstacles in this business. A can't mentality wouldn't get you very far. So consider renovating a triplex, building a laneway suite, or doing something else that allows you to take a piece of real estate and create some additional value. Because that's all that development really is at the end of the day.
If you found this post useful, please consider sharing it with someone that you think would benefit from it. And if there are other topics that you would like me to cover (or cover in more detail), please feel free to leave a comment below or to at me on Twitter. I prefer Twitter over email because it forces brevity. Happy Canadian Thanksgiving, all.
Photo by Bernard Hermant on Unsplash
Alex Bozikovic is right to praise Gairloch's upcoming development in the Junction. It's a beautiful project and it's exciting to see so many architecturally significant projects in one neighborhood -- either completed or to be completed. I'm thinking specifically of DUKE Condos (TAS and Quadrangle), our Junction House project (currently under construction), and now Gairloch's.
But Alex (as well as Jeremiah Shamess) is also right to point out some of the tensions and contradictions that are inherent to building at this scale. We want European-type mid-rise buildings all along our avenues, but we also want our housing to be more affordable. Problem is, mid-rise buildings are the most expensive way to build.
The approvals process also tends to privilege urban design considerations over things like livability and construction costs. We talk about the shadow impacts that the project might have on the surrounding community, but not about how well the suites will layout when it's all said and done -- not to mention how expensive they will be to build.
The cynics will tell you that it doesn't matter what it costs to build because developers will always profit maximize (as is the case with every other for-profit business). But that's an oversimplification that ignores a bunch of factors.
One, it's not as simple as just price. You also have to consider sales velocity. Price and sales velocity tend to be inversely correlated. In other words, as prices increase, sales velocity tends to naturally slow. You then begin to trade-off higher prices for increased time (which has a cost) and more market risk.
As I've said many times before on the blog, development happens on the margin. Usually the way this plays out is that you create a development pro forma, you look at all of your project costs, and then you say, "oh shit." You're then stretching to figure out how you're going to make the math work.
Two, there are usually always parts of a city where development isn't feasible (in some unfortunate cases, it might be the entire city). The potential revenues simply don't support the costs. And as costs continue the rise, any areas that have not seen a corresponding increase in prices and/or rents will also become undevelopable.
So there's price, and there's also a question of where great buildings are even possible. As many have already pointed out, it's certainly not everywhere.
That is the argument that Joshua Gordon, who is an assistant professor in the Simon Fraser University School of Public Policy, recently made in this opinion piece in the Globe and Mail. In his view, there's no evidence to suggest that housing supply can actually help housing affordability. It's just something that developers throw around to "stymie action on the demand-side" and to help with their rezoning efforts. Really, the housing problem is due to intense demand from foreign buyers, investors, and from "high rental demand."
Now, as many of you know, I am a developer, and not a professor. So you can take this post however you would like. But I do have a few thoughts.
One, I think it's an oversimplification to argue that there have been no regulatory changes over the last decade that have meaningfully and negatively impacted the supply of new housing. To give you one example, this fall, development levies in Toronto will complete a phase-in that has seen them double over the last couple of years. Almost a quarter of the price of a new residential condominium now goes to pay government fees and taxes. This has an impact on supply, even if the "regulatory environment" hasn't necessarily changed.
Two, I don't buy the argument that, "surrounding cities have also seen rapid price appreciation and it's easier to build there, so housing supply mustn't be the problem." Building outside of cities like Toronto and Vancouver isn't necessarily easier. In fact, in some cases it can be more difficult if they're not accustomed to more progressive urban infill-type developments.
Three, it's important to keep in mind that we have a financing structure in place that biases the types of homes (specifically residential condominiums) that get built. This approach is designed to mitigate financial risk, but it also means that investors serve an important function in the delivery of new housing. I'm not saying that the system is perfect; but I am saying that things are maybe not as simple as they may seem.
Four, just because there are cities with lots of single-detached homes and relatively affordable housing, I don't think we can safely assume that single-family land use policies have no impact on supply and pricing in cities like Toronto and Vancouver. In fact, I would argue the opposite. This probably goes to show you the importance of an elastic housing supply. Indeed, some of the most affordable housing markets are dominated by low-rise houses precisely because it is a typology that is quicker and cheaper to build than most urban infill housing.
Finally, I'm not sure why anyone would consider high rental demand and a strong labor market to be symptomatic of a problem. Isn't that what you usually want out of cities? You want there to be an abundance of good jobs that pay people money so that they can, you know, have a life and consume things like housing. But maybe that's just the way that I look at things. I am a developer after all.
Photo by Wiktor Karkocha on Unsplash
That is the argument that Joshua Gordon, who is an assistant professor in the Simon Fraser University School of Public Policy, recently made in this opinion piece in the Globe and Mail. In his view, there's no evidence to suggest that housing supply can actually help housing affordability. It's just something that developers throw around to "stymie action on the demand-side" and to help with their rezoning efforts. Really, the housing problem is due to intense demand from foreign buyers, investors, and from "high rental demand."
Now, as many of you know, I am a developer, and not a professor. So you can take this post however you would like. But I do have a few thoughts.
One, I think it's an oversimplification to argue that there have been no regulatory changes over the last decade that have meaningfully and negatively impacted the supply of new housing. To give you one example, this fall, development levies in Toronto will complete a phase-in that has seen them double over the last couple of years. Almost a quarter of the price of a new residential condominium now goes to pay government fees and taxes. This has an impact on supply, even if the "regulatory environment" hasn't necessarily changed.
Two, I don't buy the argument that, "surrounding cities have also seen rapid price appreciation and it's easier to build there, so housing supply mustn't be the problem." Building outside of cities like Toronto and Vancouver isn't necessarily easier. In fact, in some cases it can be more difficult if they're not accustomed to more progressive urban infill-type developments.
Three, it's important to keep in mind that we have a financing structure in place that biases the types of homes (specifically residential condominiums) that get built. This approach is designed to mitigate financial risk, but it also means that investors serve an important function in the delivery of new housing. I'm not saying that the system is perfect; but I am saying that things are maybe not as simple as they may seem.
Four, just because there are cities with lots of single-detached homes and relatively affordable housing, I don't think we can safely assume that single-family land use policies have no impact on supply and pricing in cities like Toronto and Vancouver. In fact, I would argue the opposite. This probably goes to show you the importance of an elastic housing supply. Indeed, some of the most affordable housing markets are dominated by low-rise houses precisely because it is a typology that is quicker and cheaper to build than most urban infill housing.
Finally, I'm not sure why anyone would consider high rental demand and a strong labor market to be symptomatic of a problem. Isn't that what you usually want out of cities? You want there to be an abundance of good jobs that pay people money so that they can, you know, have a life and consume things like housing. But maybe that's just the way that I look at things. I am a developer after all.
Photo by Wiktor Karkocha on Unsplash
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