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.

Category: Development

  • Cruise ships of urbanity

    There are many ways to describe one of the prevailing urban forms emerging across the Greater Toronto Area. You could call it spiky urbanism. You could call it a collection of peaks and plains. Or — as it is referred to in this recent article by Alex Bozikovic about “turning the suburb into the city” — you could call it cruise ship urbanity:

    These megaprojects are where Toronto has chosen to cram much of its new growth – “cruise ships of urbanity,” as Mr. Giannone told me, in a sea of houses. As such they provide an opportunity to create citylike density and activity.

    What we are talking about is a dichotomous form of urbanism: high-density mixed-use nodes surrounded by low-rise car-oriented communities. And on many levels, this makes a lot of sense, especially if the cruise ship happens to be docked on top of a transit station. This is where density needs to go. If you have a transit station without much density, that should be addressed immediately.

    But it also presents a great challenge. If transportation planning is necessarily land use planning, then we are dealing with two very different kinds of land use patterns and, therefore, two very different kinds of mobility demands. You can address this by making the cruise ship as self-sufficient and pleasant as possible, but eventually someone will want or need to get off the ship.

    Does that mean they will then need a car?

    You don’t have this same problem with more consistent forms of urbanism. Consider, for example, cities like Paris and Barcelona. These are dense cities, but more importantly they are, for the most part, uniformly dense. Or at least, uniformly dense enough. Meaning that you can probably apply a more uniform transportation strategy. What works in one part of the city is likely to work in other parts too.

    Of course, we could also apply a uniform transportation strategy to our urban cruise ships. Given that they exist in a sea of low-rise houses, we could simply say that each urban cruise ship resident should also have their own parking space (1:1 ratio). The solution: everyone drives! But this, to me, seems like an insane long-term solution.

    In my view, the most impactful solution lies not in the ships themselves, but in the seas surrounding them. We need to look holistically at our entire city region and determine what it will take to turn suburb into city. And that likely means a whole host of things, ranging from leveraging the infrastructure we already have (i.e. upzoning around transit stations) to embracing autonomous vehicles.

    In the end, I don’t think we want cruise ships of urbanity. We need more density, everywhere.

    Photo by mkdrone_ on Unsplash

  • Adaptive reuse in Hamilton, Ontario

    I was recently on Monocle Radio (The Urbanist) talking with Andrew Tuck about our Steelport project in Hamilton, Ontario. For those of you who aren’t familiar, Steelport is a new 800-acre industrial development on the city’s waterfront (almost the size of Central Park in Manhattan). Slate acquired the site in 2022 and, when fully built out, it is expected to create up to 23,000 new jobs and nearly $4 billion in economic activity for the Ontario economy. To have a listen to the interview, click here. It’s only about 8 minutes.

    Thanks for having me on the episode, Monocle. But more importantly, a shout-out to my colleague Steven Dejonckheere. He lives and breathes this project every day, and is the real mind behind it.

  • The Housing Supply Challenge

    Back in 2019, Canada’s federal budget allocated $300 million toward something known as The Housing Supply Challenge. The overarching objective was, and still is, to reduce the barriers to housing supply and affordability, and the approach has been to find solutions through a series of “challenges”. So far, they — they being the CMHC Housing Supply Team — have completed four rounds. And right now, they are on round five. This is the challenge:

    Increase the adoption of system-level solutions that transform Canada’s ability to produce more community and market housing.

    This fifth round represents $65 million of the $300 million total budget. Meaning that $65 million will be awarded to groups and solutions that have the potential to accomplish the above. The funding will be distributed in three stages. First to 20 foundational solutions ($1 million per solution), then to 10 next-level solutions ($3 million per solution), and finally to 3 game-changing solutions ($5 million per solution).

    If you have a solution (i.e. something that can be executed on), I would encourage you to check out their site. And if you’d like to apply, you have until December 18, 2023.

  • Can’t, not won’t

    We have spoken before, here and here, about so-called “use-it-or-lose-it entitlements”.

    The catalyst behind this idea — and it is just an idea at this stage, at least here — is the belief that too many developers are sitting idle on zoned land. And they’re allegedly doing this because they believe it will be worth more tomorrow.

    Why bother building anything when you can instead just wait and make money that way?

    To counteract this speculative force, some believe that one answer is to just strip land of its zoning entitlements if it’s not used within a certain period of time (right now it lasts forever). I get why this is sometimes proposed, but my response to this has consistently been: it’s a terrible idea.

    It is a terrible idea because developers are generally always incentivized to move as quickly as possible. And it is a terrible idea because every now and then a period in the cycle will arrive where, it’s not that developers don’t want to build, it’s that many/most can’t.

    And guess what? Right now is one of those times.

  • First concrete poured for One Delisle’s raft foundation

    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?

  • A lot less new housing

    During COVID, every developer was terrified that their costs were going to run way from them. According to this recent Globe and Mail article, residential building costs increased 55% since 2020. At the same time, city fees were being increased and some people, for whatever reason, believed this would not have an impact on home prices. Developers will always seek to profit maximize and charge whatever the market will bear, so why bother trying to reduce costs? This is/was one school of thought.

    Despite this cost fear, the market managed to keep up for a period of time. Capital was cheap, as we all know. And that kept things going, until it was no longer the case. According to the same Globe article, there are 83 residential projects and 28,428 homes that have not launched (sales) over the last two years in the Greater Toronto Area because of market conditions. This year alone, the number is estimated at 14,000 homes. So supply has fallen off, and that’s because demand and buying power have fallen off.

    But let’s think of this in economics terms. Price and quantity demanded are usually inversely correlated. Meaning, if the price of something goes up, demand will go down. And if the price of something goes down, demand will go up. So in theory, there are still prices that will get 28,428 people excited to buy a new home. I mean, if I were to list a condo in downtown Toronto for $500 psf right now, I’m pretty sure that most with the means would jump at the opportunity.

    The problem is that whatever these prices are, they are largely beneath the floor price of where most developers can build to today. Developers weren’t bluffing, costs really are too high now. And when this happens, the answer is simple: you can’t build. A new equilibrium will eventually be found. But in the short-term, we should all expect new housing supply to remain limited. And because there’s always a lag with real estate, the effects of this shortage will be felt in the years to come.

  • Creating homes for people

    Bill Gairdner of Gairloch Developments sent me this message the other morning:

    He is talking about Junction House and he is, of course, right. It is a very cool feeling to create homes for people.

    It’s not easy building buildings. People get upset at you. They tell you that you’re ruining their community. And broadly speaking, it can feel like every imaginable obstacle has been placed in front of you to make things more difficult.

    But at the end of the day, once the dust settles, there will be places to live where places did not exist before. And then people will move into these places and transform them into homes.

    They’ll make them their own, create new memories, and, in the case of the people that Bill was referring to, they’ll raise a family.

    I’m not trying to make this sound more grandiose than it deserves to be. But I am being honest when I say that I know the team feels both a sense of honor and a great sense of responsibility because of the work we do.

    You want people to be happy and you want the city to be a better place. So it’s hard not to feel a little emotional when you see people moving into a place that you’ve worked tirelessly on for several years.

    Yeah, it is a cool feeling, Bill.

  • Higher development charges, less federal money

    Metro Vancouver, which includes the City of Vancouver and 20 other municipalities, is proposing to increase its development cost charges (DCC):

    Metro Vancouver is proposing to increase DCCs by roughly $23,000 per new single-family home; $21,000 per new townhome; and $14,000 per new apartment. For example, fees for a townhouse in Vancouver will rise from $10,027 today to $30,861 by 2027.

    In response to this, federal housing minister, Sean Fraser, has just pulled $138 million in funding that was intended to accelerate housing permits and new affordable housing projects in Surrey and Burnaby.

    This makes some sense. Because it is pretty weird to say, “Hey, we need more affordable housing. Give us some money for this and, while you do that, we’re also going increase the cost of building new housing.”

    Of course, this is the whole growth-should-pay-for-growth mantra. And supposedly, there’s growth-related infrastructure that needs to be built.

    To be fair, Metro Vancouver is also proposing to increase its property taxes: 12% in the first year, 11% for the next two years, and then 5% for the next three years. So this is not all going onto new supply.

    I don’t know enough about the finances of Metro Vancouver to comment on these numbers specifically, but I do think it’s important that policy makers understand what the current market environment means for new housing.

    It is difficult, and in many cases impossible, to underwrite new housing projects today. Which means that even if all fees and charges were to remain unchanged, we are going to see a decrease in new housing supply.

    Photo by Matt Wang on Unsplash

  • Family-sized apartments are a luxury good

    My friend Alex Feldman sent me an article from the Philadelphia Inquirer this week called: Why is it so hard to build family-sized apartments in Philadelphia? As is the case in many/most North American cities, the article talks about how the majority of new multifamily builds are filled with studios and one bedrooms.

    It then goes on to suggest that some of the reasons for this include: cultural biases in favor of suburban living, antiquated building codes (such as the requirement for two means of egress), exclusionary zoning ordinances, bad urban schools, financing availability, and so on.

    This is something that we have talked about many times before on the blog and, while I do agree that it’s complicated and that there are many variables to consider, I think the key factor remains price. As I said before: “Everybody wants a 3 bedroom condo until they see what they cost.”

    So I think this is probably the most important point in the article:

    Partly that’s because Philadelphia, unlike Boston, New York, and Washington, has a vast supply of rowhouses that are still affordable to people in a position to buy. For those who prefer new construction, the past couple decades have seen a burst of modern rowhouse building.

    If large multi-family apartments were more cost effective than Philadelphia’s vast supply of rowhouses, I am certain that demand would increase markedly. But that is not the case. So I think a more accurate way to view large apartments is as a luxury good. They’re a terrific way to live, if you can afford it.

  • China is estimated to have nearly 25% of the entire US building stock under construction right now

    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.

    Images: FT