After seeing this beautiful 6-storey and 21-unit social housing project in Lyon, I decided to retweet it and share the fact that we recently had a site under contract in Toronto with the intention of doing a very similar build. We wouldn't have been able to do the same outdoor spaces at the corner, but it was going to be 6 storeys and without any setbacks. The overall dimensions appear to be similar.
However, in the end, we had to drop the site because the margins were simply too thin. I was disappointed. Of course, some people responded to my quote retweet by calling this an example of developer greed. But once again, I don't think most people understand how development economics work. If the margins are too thin it, among other things, means:
It's going to be hard/impossible to raise capital and finance the project
You might be better off buying a "risk-free" government bond instead
That unexpected situations could sink the project (i.e. you lose money)
To give a specific example, let's assume that your expected base case rent at the time of occupancy is $4.75 psf. This would mean that if your average suite size is around 600 sf (which ours was), you would need a face rent of about $2,850 per month.
But what happens if you're off by only $0.25 and your face rent for this same 600 sf apartment is now $2,700 per month at initial lease up? $150 per month may not seem like a big deal, but it is. If you capitalize this income at something like a 4% rate, you will find that it becomes material.
This is what I mean by "the margins are too thin." And it's similar to any other professional not wanting to take on a job because they might lose money or because it's "not worth their time." It's about managing risk and understanding the opportunity cost of taking on such a project.

The Monte Palace Hotel on São Miguel Island opened in 1989.
Perched up 500 or so meters above sea level, the hotel offered panoramic views of Lagoa das Sete Cidades. It had 88 rooms, two restaurants, a bar/nightclub, and a total construction area of approximately 13,104 m². Notably, it was the first luxury five-star hotel in the Azores. And in 1990 it was even awarded "Hotel of the Year" in Portugal.
Then, the place closed — just 18 months after its opening.
Today, it looks like this:



Supposedly the hotel failed for a number reasons. It was hard to get to. It lacked on-site amenities. It didn't, for example, have a pool. And the unpredictable (and often foggy) weather of the Azores made it so that a lot of the time you couldn't even see the main attraction, which was the view. The sponsors may have also overshot the market at the time.
In 2017, the abandoned property was finally listed for sale at €1.5 million. Level Constellation ended up buying it for an undisclosed amount at the end of the year. They are a Lisbon-based developer founded by Chinese entrepreneurs. The plan was/is to reopen another 5-star hotel, but that hasn't happened yet. Though there's certainly no lack of visitors to the property today!
I don't know how you address the weather thing, but nowadays there are many other 5-star hotels on the archipelago. Regardless, my bet is that the existing structure will end up being demolished. I mean, it's been abandoned and unmaintained for about 35 years.

The Frank Gehry-designed Grand LA is a prominent mixed-use development in downtown Los Angeles that sits across from the celebrated Walt Disney Concert Hall (which was also designed by Gehry). Developed by Related, the project occupies an entire city block and contains a 305-room hotel by Hilton, 347 luxury rental apartments, 89 affordable apartments, and over 164,000 sf of retail space.
According to Bloomberg, most of the project is doing quite well. The hotel occupancy rate is at 69%, the hotel restaurant is busy, and the residential is more than 95% leased. The problem is the retail.
Since the project opened in 2022, most of it has gone unleased. Though two new anchors were just announced: an AI museum called Dataland and a permanent home for the University of Michigan's Ross School of Business, which runs an executive MBA program in LA.
But these aren't traditional retail tenants. And it's almost certainly not what was being modeled when the project broke ground in 2019. Back then, everyone was still going into the nearby offices. And those humans would have brought foot traffic. This is one of the tricky things about development — you end up building through different macro environments.
But even in the best of times, it's generally hard to say with exact precision what will be successful. That's development. If there's comparable product, then you can comp against that (less risk). But if there isn't (more risk), you're faced with the question: Does comparable product not exist because there's no market for it, or does it not exist simply because nobody has done it yet?
If you're developing, it's because you believe the latter.