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.
It has been a while since I wrote about laneway housing, so here’s a panel that I’m going to be speaking on this Thursday alongside Gregg Lintern, Mary-Margaret McMahon (former Toronto City Councillor), and Craig Race. It is being organized by Lanescape.
As most of you know, I’ve been a vocal supporter of laneway housing in Toronto. So I am, of course, thrilled that it has now become a reality. But I must confess that I am less enthusiastic about the broader “missing middle” solution that everyone in the city is enamored with right now.
The problem is that our cost structures make it exceedingly difficult to develop this scale of housing. I have friends who are trying and they can’t make the math work. Maybe this isn’t the case in all cities, but it’s certainly a challenge here.
If you’d like a free ticket to this Thursday’s panel, use the promo code: SLATE.
Sidewalk Labs just released its draft Master Innovation and Development Plan (“MIDP”) for Toronto’s eastern waterfront. It’s called Toronto Tomorrow: A New Approach for Inclusive Growth, and it’s massive. Over 1,500 pages. It consists of an overview and 3 volumes, all of which can be downloaded here.
At a high-level, the objectives of the plan are twofold. They want to revitalize the eastern waterfront (it’s currently appalling) and they want to test new urban ideas that could benefit the broader city, as well as the rest of the world. Deploying new technologies at a larger scale is one of the ways the company intends to make money.
I am still working my way through the plan (I may never finish), but here’s a breakdown of the development program for the Quayside precinct:
If you’re looking for a quick overview of the plan, here are five things to know about the Sidewalk Toronto project and here is an overview of the public-private partnership that they are proposing. Of course, there’s also no shortage of criticism on Sidewalk’s plans for the waterfront. Some links here, here, and here (paywall).
Sidewalk Labs is trying to assuage public concerns through some of its open commitments. They have said that they will not seek special tax subsidies, control urban data, sell personal info and/or use it for ads, or develop the entire eastern waterfront themselves. But the plan remains highly controversial.
I think part of the issue is that, because so much of what they are proposing hasn’t been done before, there are a lot of unanswered questions and a great deal of uncertainty around the future. Many are interpreting this as the company hiding its true intentions. Maybe it is. Or maybe it isn’t.
But let’s not forget what Waterfront Toronto requested back in 2017 for these lands. It wanted an innovation and funding partner:
Waterfront Toronto is seeking a unique partner, one with invention ingrained in its culture, which can transform conventional business practices and help to establish a benchmark climate positive approach that will lead the world in city building practices.
There’s no question that what Sidewalk Toronto has put forward is bold. As I scanned through the plans today, I found myself hard pressed to think of any “conventional” developer that would be willing to come forward with a proposal as ambitious as this one.
As you all know, Sidewalk Labs’ parent company is called Alphabet. But I think it’s worth mentioning that “alpha” is a finance term that refers to the excess return of a strategy beyond that of a benchmark index. Put differently: How much better are you than the status quo?
The whole point of Alphabet is that they’re supposed to make “alpha bets” on ambitious projects. They are given the “resources, freedom, and focus” to try new things. Sometimes those projects will fail. But in other cases they will succeed in moving the world forward.
Every city today is trying to grow a thriving technology ecosystem. We want to be innovative. We want to transform conventional businesses practices. And we want to lead the world. Unfortunately, that rise to the top is almost never a smooth and linear one. There will be mistakes along the way.
We are reasonably confident that summer will eventually arrive in Toronto this year, and so we (Junction House) have partnered with Indie Alehouse to host a public and outdoor beer garden from June through to August, right in the Junction.
We are calling it The House Beer Garden because we both have “House” in our name and that’s as clever as we get.
Here are the details:
There will be four editions of The House Beer Garden and each will host a different local food vendor. For the first one, we will be welcoming Chau Toronto and their modern Asian bites.
The timing of the first Beer Garden also happens to line up with the Annual Summer Solstice Festival in the Junction (that was deliberate). So Dundas Street West will be closed to cars and it’s going to be a lot of fun.
“Cities have become the basic platforms for global innovation and economic growth, supplanting the corporation as the fundamental organizing unit of the contemporary economy.” -Richard Florida
Richard Florida and Patrick Adler of the Martin Prosperity Institute here in Toronto have been doing some research on what they are calling “urban tech.” They define it as encompassing the following industry sectors: co-living and co-working; mobility; delivery; smart cities; construction tech; and real estate tech.
Here are the largest urban tech startups based on the amount of VC investment they have received:
Below is how the space breaks down by sector. Mobility / ride hailing is the behemoth, receiving 61% of all VC investment. Food delivery is next. And “proptech” is at the bottom.
Finally, here are the top “urban tech” cities. Beijing is right up there with San Francisco.
Today was the 2019 Land & Development Conference here in Toronto. I was on a panel in the morning about Proptech. I then sat in on a discussion about construction costs. But after that I had to get back to the office to prepare for a couple of meetings.
Here are my tweet takeaways (from the back of the room) during the construction cost session. You may need to click through to see the full thread.
18 month lag on construction costs when there’s a change in demand. What we are seeing today is a result of sales in 2017. -Niall Finnegan #land19pic.twitter.com/Q5M2Skq26I
The construction cost escalations that we have seen over the last 2-3 years have had a significant impact on new construction in this region. Niall Finnegan’s view is that we are 85% of the way through this “storm.”
From his experience, it takes 18 months or so for hard costs to respond to changes in demand. And so the storm we are currently in is a result of elevated condo sales from 2017-2018.
The general consensus from the panel was that costs should start to moderate sometime soon, though maybe not this year. Nobody really knows when that will happen. But if/when hard costs do adjust, it typically happens quickly.
One comment that didn’t make it into my tweets, but that I found interesting, was about how uncertainty and volatility in the market — like what we are seeing today with construction costs — could actually stifle innovation.
Because it creates additional project risks, it limits people’s appetite for other kinds of risks — like trying new things. I can see that.
This past weekend I toured my friend’s purpose-built rental project in Wynwood, called Midtown 29. It was completed last year and has already been stabilized.
Real estate development is very much a local business. It is that way because so much of it is driven by relationships, but also because every market has its own little idiosyncrasies.
This is always valuable to see. Sometimes we do things in our home market because it makes perfect sense to do so and sometimes we do it just because it’s, “the way we’ve always done it.”
One of the most obvious things about development in South Florida is that the parking is always above-grade. No basements. That has the result of bringing down construction costs; though I understand that, with sea level rise, insurance costs are on the rise.
If (or when) this whole autonomous vehicle thing does in fact take hold, it’s going to be a hell of lot easier to convert all of that excess parking in Miami than it will be in Toronto.
Equinox Holdings operates, among other things, 99 fitness clubs in the US, the UK, and Canada. And this June, the first Equinox Hotel will open in a 92-storey tower in New York’s Hudson Yards. It will occupy floors 24 to 38. Below it will be Equinox’s corporate headquarters. And above it will be residential condominiums.
Supposedly, the brand emerged out of a trend that the company saw over a decade ago: Its fitness club members were choosing to stay in hotels based on their proximity to an Equinox. They simply weren’t satisfied with the gym offerings at other luxury hotels.
The full back story, which can be found here in WSJ. Magazine, is a good read. I think their ambition of trying to “own sleep” is a clever one. They are pitching their rooms as dark, quiet, and cool. I am sure other hospitality brands have tried to do this, but Equinox is clearly taking this directive very seriously. They even sponsored a sleep study with UCLA.
This feels like a natural extension of their existing brand. Equinox is focused on regeneration. What better way to accomplish that than through a good night’s sleep?
As of August 2018, the City of Toronto has allowed laneway suites (accessory dwelling units) to be built as-of-right in the Toronto and East York area of the city (subject to meeting some criteria).
This was a tremendous step forward for the city. And I know a number of people who are currently taking advantage of these new planning permissions.
Toronto is now looking at expanding these permissions across the entire city and they have just started their community engagement phase. The first public meeting took place today and the next three will be taking place over the course of this month. Click here for the when and where.
This is a natural extension of the policies that have already been put in place around laneway suites and I’m excited to see this moving forward.
For those of you who already own property in Toronto & East York and are considering building a laneway suite, there are two programs that you should be aware of.
The first one allows eligible property owners to defer development charges on the new secondary dwelling unit for up to 20 years. This is meaningful. And the second is a $50k forgivable loan if you make the laneway suite an affordable rental for at least 15 years. (The cap is the City of Toronto Average Market Rent.)
I still remember what happened when I tried to build a laneway house almost 10 years ago. I was told, by the city, that a house cannot be built behind another house. I knew that would change. Now look at how far we’ve come.
What they were trying to uncover was a possible relationship between climate change and single-family home pricing in places, like Miami, that are vulnerable to sea level rise and flooding. This phenomenon is colloquially referred to as “climate gentrification.”
One of the things that they uncovered through their work was, in fact, a positive correlation between the rate of price appreciation of single-family homes in Miami-Dade County and incremental measures of higher elevation. In other words: there’s value in higher ground.
Recent reports (like this one from the WSJ) that Little Haiti in Miami is experiencing a surge in investment, seem to, at least partially, support this finding. Little Haiti sits about twice as high as Miami Beach, which is only about 4 feet above sea level.
Here is a diagram from the WSJ showing the change in home prices since 2018:
I’m not sure that this diagram necessarily reinforces the above finding. Mid-Beach in Miami Beach is shown as having an 8% gain, and yet it sits, like pretty much the rest of the Beach, within a 100-year floodplain. But already Miami is looking to manage the impacts of, “gentrification that is accelerated by climate change.”
The US Census Bureau just released its population estimates for 2018. As has been the case in previous years, the counties that added the most people (largest numeric growth) are all located in the south and west. Texas holds 4 out of the top 10 spots.
Here is a Tweetstorm by Jed Kolko, the chief economist of Indeed, with a couple of graphs summarizing the findings (click through to see the full thread):
TL:DR from today's 2018 Census local population estimates:
Suburbanization marches on.
Suburbs and mid-size metros grew fastest in 2018. Small rural uptick. Biggest metros shrank. Let's dig deeper. (thread) pic.twitter.com/d4GLPAoVfC
Despite the narrative that people are returning to cities and urban centers, the data is pretty clear: the flow of domestic migration within the US is largely from dense urban counties to more suburban — and affordable — ones. Big cities are expensive.
