Brandon Donnelly

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.

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Category: Development

  • Corktown Condos to launch sales this spring

    Earlier this week, I shared this image of Corktown Condos on my Instagram. It represents the first phase of Slate’s two-phase project in Hamilton, and I’m excited to announce that we’ll be launching sales this spring (both in Hamilton and in Toronto).

    We love Hamilton. It has walkability, transit, a wonderful stock of old buildings, and a dynamic and growing cultural scene. In other words, it has all of the characteristics that we look for when it comes to new projects. And here, our approach to city building is exactly analogous to what we did in Toronto at Yonge & St. Clair.

    Those of you who are familiar with our work will know that Slate owns 8 office buildings in midtown, including all four corners of the Yonge & St. Clair intersection. And that we have spent the last decade investing in these buildings, investing in the public realm, investing in public art, and working to support businesses in the area. Then in 2021, we launched sales on a landmark condominium tower called One Delisle that is now under construction.

    Here in Hamilton, we are similarly investing in economic development and in housing. Last year, it was announced that we acquired approximately 800 acres of industrial land and buildings on Hamilton’s waterfront. This site alone has the potential to create up to 23,000 new jobs across the region and inject up to $3.8 billion into Ontario’s economy. It will likely also take some time and be measured in decades.

    We prefer to think of ourselves as city builders. And that means taking a long-term view and thinking about the broader city — not just about our individual projects. So for us, Corktown is part of a much larger and longer-term commitment to the City of Hamilton. And we couldn’t be more excited to share it with all of you in the coming weeks.

    Stay tuned. And if you’d like to register for Corktown, you can do that over here.

  • Buildings are carbon icebergs

    Kelly Alvarez Doran shared this article with me on Twitter earlier today. It talks about some of the work that his design studios are doing at the University of Toronto around embodied carbon. More specifically though, his studios are being tasked with figuring out how to halve the carbon emissions generated by new buildings during this decade.

    And one of the big findings from his studio is exactly the title of this post: our buildings have become carbon icebergs. Here in Toronto, we tend to build a lot of below-grade parking. We recently got rid of parking minimums (which obviously needed to happen), but the market still demands it in certain areas and for certain projects. So we continue to build it.

    What the above section drawings are showing is the percentage of carbon emissions resulting from the below-grade construction component in each project. And as you can see, the numbers are significant, particularly in the case of smaller mid-rise buildings where you don’t have a lot of above-grade area to grow the denominator.

    Looking at 2803 Dundas Street West, which is just down the street from our Junction House project, the number is 50%! And sadly, I would guess that our project is probably only marginally better; we’re a bit taller up top, but we also have a raft slab foundation and a watertight below-grade.

    This is one of the reasons why I recently tried to make the case for above-grade parking. A big part of my argument was that if we want parking that can be adapted to other uses in the future, and if we want to reduce the embodied carbon in our buildings, then we should be building “unwrapped” above-grade parking. That is, parking which isn’t hidden behind other uses.

    But this is often frowned upon in planning circles and it’s not going to be feasible in smaller mid-rise buildings like the ones shown here. We’re also just talking about what is less bad. What we really ought to be doing is trying to build our cities so that people don’t need to rely so heavily on cars to get around.

    Image: Ha/f Studio

  • Dubai is now the capital of branded residences

    One way to define “brand” is that it is “the sum of how a product or business is perceived by those who experience it.” And it’s a pretty awesome construct when you stop to think about it. Because if I perceive one brand to be superior to another — which might just mean that it better matches my sense of self — then there’s a good chance I’d be willing to pay more for that brand.

    And if I happen to own a brand that people perceive to be valuable, then I can also monetize this brand by lending it out to other people for money.

    It is for this reason that in the world of real estate development there is something known as branded residences. Broadly speaking, it involves a pretty simple trade. Person 1 has a brand that lots of people perceive to be desirable. Person 2 has real estate that it is looking to sell, but it doesn’t have a brand with the same kind of cachet as person 1.

    So what happens is that person 1 offers the following trade to person 2: pay me $X (upfront and/or over time) and then I will let you use my highly coveted brand to sell your real estate. And hopefully you won’t screw it up by doing weird things with it. (But other than this, person 1 isn’t really taking on much risk with this trade.)

    Because person 2 believes that they’ll be able to sell their real estate for more money and/or faster than without the brand, it gladly accepts the trade. And as long as the benefit it gains is, in fact, greater than the cost of using the brand, it should be a good trade and both person 1 and person 2 should be happy with the outcome.

    Now here’s an actual example. Earlier this month, the proposed Baccarat Hotel and Residences in Dubai set a new pre-construction pricing record when it sold a ~14,507 square foot apartment for 203.1 million dirhams (or US$55.3 million). For those of you who are wondering, this works out to be about US$3,812 psf.

    Supposedly this is the most that anyone has ever paid for a new place in Dubai, and there’s a strong argument to be made that the developer got this pricing because it was a branded residence.

    Image: Bloomberg

  • Speed outweighs all else

    Rapid and high-volume decision making are fundamental to real estate development.

    In fact, it’s hard to think of anything being more important when it comes to executing on a project. This is not to say that being thoughtful and doing remarkable work aren’t important. You, of course, need to do those things as well. But it is to say that the benefits of moving as fast as you possibly can usually outweigh all else.

    What this means is that any decision is often far better than no decision. Because no decision can grind everything to a halt. You need to maintain momentum and the way to do that is to make a lot of high-quality decisions.

    As someone who was originally trained as an architect, this is something that I had to learn in the workplace. Because in architecture school, you’re basically taught to work on your projects for as long as humanly possible and then, when you’re done, you work on them some more. They’ll never be good enough and you certainly haven’t spent enough time “working in studio”.

    But in practice, you need to go. I would like to once again reiterate that this is not a license to do crappy work. I think the way to think about this is that speed and excellence reinforce each other. Our team always strives to do exceptional and remarkable work. And one of the ways to actually do that is by focusing on speed.

  • What would you do if you were Mayor?

    Let’s assume that you’re Mayor of your city and that, for whatever reason, you have no need to pander to voters. You’re a benevolent dictator. You can do whatever you think is best overall for the city and it will just happen. What would you do? This is more or less the question I asked on Twitter this morning, and I think it’s only fair that I answer my own question. So here is a non-exhaustive list of items that came to mind while thinking of Toronto:

    • Substantially increase the pay of public sector workers throughout the city and bonus them based on measurable outcomes. Forget things like time limits on development applications; instead align incentives. For example, if we’re trying to get more shovels in the ground on affordable housing, incentivize people based on building permits issued. I’ll never forget what Roger Martin told me while I was at Rotman. When he became Dean of the school, Rotman was a whatever business school that wasn’t faring all that competitively in the rankings. One of the problems he discovered was that the school’s professors were getting paid far less than those at Wharton, Harvard, Stanford, and so on. So if you were a star, why would you ever want to teach at Rotman? He immediately matched the salaries of those top-tier schools and then, not surprisingly, the top-tier talent arrived. You get what you pay for.
    • Immediately price roads and congestion, and direct, to the fullest extent possible, the funds toward transit and cycling infrastructure. At the same time, the planning and building of transit would be depoliticized. There would be a reccurring funding stream and a plan that we’re continually building out. Minimize protracted debates. Never stop building. There’s a lot of talk this mayor election about solving traffic congestion. I have yet to see a plan that will actually work. Accurately pricing congestion likely won’t be popular, but I can guarantee you that it will be highly effective.
    • Ensure that property taxes are sustainably covering the costs of operating the city and then, at a minimum, peg all future increases to CPI.
    • Make any new housing development less than 12 storeys as-of-right. That would mean, no rezoning process and no site plan approval; just straight to building permit.
    • Empower the private sector to build affordable housing through incentives and subsidies. Affordable housing isn’t feasible to build on its own, which is why nobody is doing it. Inclusionary zoning also won’t get us there. Make developers want to build it and they’ll do it.
    • Liberalize licensing and cut red tape to empower small entrepreneurs across the city in various industries. A perfect example in my mind is street food. Toronto is the most diverse city in the world with some of the best restaurants, and yet the only thing you can buy on the street is a stupid hot dog. If we empowered small entrepreneurs to setup shop on our streets, we would easily have the best street food scene in the world. And I am positive that there are countless other latent opportunities in this city that are being held back by dumb and archaic rules.
    • Make dramatic improvements to our public realm with an eye toward becoming the most beautiful and livable city in the world. Finally pedestrianize Kensington Market, remove the elevated Gardiner Expressway, make it so that we can swim in the Lake, build beautiful public washrooms all across the city that are actually open and aren’t gross, and the list goes on. And yes, “beauty” should be requirement so that we don’t end up with shit like this.
    • Focus on art, design, culture, and innovation as central pillars of Toronto’s brand. Miami is a good example of what this approach — along with favourable taxes and nice weather — can do for a city. I’ve said this before, but here’s just one example: Toronto is in many ways the birthplace of the cryptocurrency Ethereum. Why is nobody talking about this? Why are we not celebrating and leveraging this? It’s a missed opportunity. Broadly speaking though, I think just having and doing three things can be effective in promoting new ideas for these pillars: have reasonably affordable housing, be a city that young people want to live in, and remain open and tolerant to immigrants.
    • Stop thinking of the night-time economy as a nuisance and instead think of it as a powerful economic development tool. I recently responded to this “night economy survey” that the City of Toronto released and the obvious bias is that nighttime things are seen as a terrible nuisance. In other words, “tell us how do we make all of this less annoying for grouchy voters.” My response was to extend last call to 4am and to start thinking of it as an opportunity to draw in young people, tourists, and whoever else. This complements my previous point.

    This is, again, a completely non-exhaustive list. But if I had to summarize the overall ambition, it would be to make Toronto a truly exceptional and remarkable city. We should never be happy with mediocrity.

    What else would you do? Leave a comment below.

    Photo by Aditya Chinchure on Unsplash

  • The case for above-grade parking

    This is an oversimplification that won’t apply to all markets, but typically the decision tree for urban parking looks something like this:

    • Do I need to build parking?
    • If no, great. That’s ideal!
    • If yes, how many levels of below-grade will I need?
    • If below-grade parking doesn’t work because it’s either too expensive or because the soil is bad, try above-grade parking.
    • And if above grade, how can I “wrap it” with occupiable space or, at the very least, treat it in such a way that it doesn’t look ugly and the city doesn’t get mad at me?

    What I’m getting at with this is that above-grade parking is generally frowned upon. It is done in lots of places, like in Miami where you can’t go underground, but if you ask your average urbanist they will probably tell you that above-grade parking is ugly and that said ugliness should be mitigated to the fullest extent possible.

    But here’s a counter argument. Let’s assume that we believe any one of the following:

    • We should design new buildings to be adaptable (i.e. easily convertible to other uses in the future)
    • We should design and build in a way that reduces carbon to a minimum
    • Lower construction costs are good for end-users of space
    • In the future, people will be less, as opposed to more, reliant on privately owned cars

    In this case, the ideal solution is actually “unwrapped” above-grade parking. It’s less intensive to build, and both below-grade parking and wrapped above-grade parking result in large windowless spaces with very little utility other than for storing inanimate objects. Your options are parking, self-storage, and maybe a large gym for people who don’t like natural light.

    Judging by the above poll, which was still in progress at the time of writing this post, this is not how most people think about urban parking. But I think it’s time we start changing the discussion.

  • New rental apartments in Toronto by year of construction

    “Your local self-inflicted housing criss ouroboros” tweeted this chart out over the weekend, showing the number of new rental suites completed in Toronto since 1900. The data is from Open Data Toronto and it does not include any condominiums. It also only includes apartment buildings with 10 or more suites (which would be most of the supply anyway).

    This chart is a good example of what we spoke about yesterday: “If you want to negatively impact new supply, cap rental growth.” And that’s exactly what was done in the 1970s. But in reality, the changes were more broad than this. The 1970s saw a philosophical shift in the way Canada thought about new housing.

    Housing became rightly viewed as a basic human right. But because of this, the policy landscape shifted away from facilitating the private sector, to intervening and regulating the private sector. This included tax changes which negatively impacted new housing development and, yes, rent controls.

    Ironically, but not unexpectedly, this dramatically lowered the overall supply of new rental housing. To the point where we had effectively shut off the taps by the late 1990s. Thankfully, the condominium sector stepped in and started meaningfully delivering new housing — both for sale and for rent (via individual private investors).

    The supply of new condominiums in Toronto is not shown above, but there is no question that this (shadow rentals) has formed the vast majority of our new rental stock over the last two decades. But in my view, this shift was largely the result of policy decisions. We decided that we didn’t want the private sector building so many new purpose-built rentals, and so we told them to stop.

    It then listened remarkably well.

  • Two ideas for increasing the supply of new rental housing

    There are lots of ideas out there for how to improve the supply of new rental housing. But it is important to remember, at least here in our market, that the playing field is not level between new condominiums and new rental homes. We have spoken about this before, over here, where I compared the (per square foot) revenue generated from your average new condo against that generated by your average new rental home. Of course, since I wrote that post in 2020, we have seen upward pressure on cap rates (meaning downward pressure on values). So feasibility has gotten even more challenging.

    The important thing to remember is that developers do not have some philosophical aversion to building more rental housing; it is that the math is challenging. You generally need economies of scale (really big projects), patient long-term capital, and a belief that rents will continue to exhibit meaningful positive growth. If you want to negatively impact new supply, cap rental growth. But if you want to encourage new supply, somebody needs to pull out a development pro forma and make the call to improve the cost structure for new rental housing.

    In my opinion, two obvious line items to focus on are development charges (as well as the other government levies) and HST (our harmonized sales tax). The point of development charges, as we always talk about, is for growth to pay for growth. They are intended to pay for municipal services like roads, transit, water and sewer, and so on. In the other words, they’re supposed to capture of the cost impacts of new housing. But what about the impact of not building enough new rental housing? Are we thinking about this the right way? Especially if you consider the possibility of more new rental housing in our existing transit nodes.

    The HST charged on new rental housing is also significant. There is a new residential rental property rebate available to builders (not tax advice!), but the thresholds have not been indexed and so it’s grossly out of date compared to where values sit today. In any event, if the goal is more homes, why not make new rental homes exempt? Developers are simple. If the math works, they will build. If the math doesn’t work, they will not build. And these two line items, alone, would go a long way to helping the former.

    Photo by Pierre Châtel-Innocenti on Unsplash

  • New York’s iconic Flatiron Building just sold

    Well sort of.

    Previously leased to Macmillan Publishers for the last 60 years, the building has been sitting vacant since 2019 and supposedly needs something like $100 million in CapEx to make it leasable again. Four of the five current owners have wanted to renovate it, but the fifth kept blocking it, and so the other partners sued for a “partition auction.”

    That auction happened last week, and even though the four owners were really trying to lock down the 25% share that they didn’t own, the auction was won by an outsider at $190 million. That said, a 10% deposit was to be due the following day and, apparently, that never happened. So maybe it hasn’t sold yet. But whatever, it’s still interesting to think about its purchase price.

    According to Wikipedia, the Flatiron Building is 255,000 square feet. So at $190 million, the building was “purchased” for $745 per foot. Assuming that it needs another $100 million, that’s another $392 psf, for a total of $1,137 psf.

    What I am curious about now is how this compares to other office buildings in midtown Manhattan. Is there any sort of premium for being the Flatiron Building? And what would space in this building lease for following a renovation? i.e. What cap rate is the market demanding right now for an empty office building needing $100 million in renovations? Or, is the play to convert to residential?

    I don’t know enough about the real estate market in midtown Manhattan to answer these questions with any sort of precision, but I’m hoping some of you do and that you’ll leave a comment below.

  • One Delisle has started the big hole part

    The most boring part of constructing a high-rise, like One Delisle, has got to be installing the shoring piles. Sure there are big rigs moving about on site but, for the most part, there’s almost no visible progress. That is, until you start excavating. Then you get to see said piles and you also end up with a big hole, which is something.

    Thankfully shoring works are now complete at One Delisle and we have started on the big hole part (see above photo from our rooftop cam). The next major milestone will be our “bottoming out,” and that’s when the tower crane will go up and our massive raft slab foundation will get poured. Visible progress is certainly more fun.