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: Economics

  • Billionaire wealth in China grew by 1146% over the last decade

    UBS and PwC’s recent report on billionaire wealth highlights some interesting trends about the global economy and global wealth.

    • Billionaire wealth in mainland China is now second to only the United States, having grown by about 1146% from 2009 to 2020, compared to 170% in the US. As of the middle of this year, it was sitting at about USD 1.7 trillion in China, compared to USD 3.6 trillion in the US.
    • Hong Kong remains a force with only 1,105 square kilometers of land (not all of which is developable). Billionaire wealth grew by about 208% to USD 356 billion over the same time period as above. That puts it ahead of the United Kingdom, Canada, and Brazil in total dollars.
    • About half of all billionaires seem to have a significant amount of their wealth invested in real estate. Somewhere between 21-40% of their net worth.
    • At the same time, the report identifies the real estate industry as having the fewest number of “innovators & disruptors.” Only 17% of billionaires (whose wealth is primarily derived from real estate) are classified in this way. The report calls out the sector as being “especially slow to embrace technology to boost efficiency.”
    • Perhaps the most interesting takeaway is that, even within the rarified billionaire community, tech is driving polarization. For most of the last decade, the sector didn’t matter all that much. The rich were getting richer. Now it’s more so the tech rich. And COVID-19 seems to be accelerating this trend.

    This is not to say that I think people are particularly worried about billionaires who maybe aren’t getting as rich as they used to. That’s like complaining about being too good looking. But it is clear that tech is driving a bunch of macro shifts in the global economy and this is just another example of that playing out.

    Image: UBS and PwC

  • Percentage of young Americans now living with a parent

    Here’s some data from the Pew Research Center looking at the percentage of young people (18- to 29-year olds) in the US that live with at least one parent. It it based on an analysis of monthly Census Bureau data and is obviously interesting/relevant given that this pandemic seems to have precipitated a number of people moving back home. As of July of this year, 52% of young adults were thought to be living with at least one parent, which is up from 47% back in February.

    At first I was surprised to see these numbers as high as they are. But it’s really the 18-24 age bracket that is driving this number up, which makes sense given that a chunk of this demographic is probably in school, not working, and now unable to do much on a campus. Among 25- to 29-year olds, the range is significantly lower, with just over a quarter (26% -> 28%) living with their parent(s).

    What I’m curious about now, after seeing this chart, is what is driving some of these regional, ethnic, and gender differences? Why are young midwesterners seemingly less likely to live with a parent compared to those in the northeast? Is it cultural? Economic? Or something else? And is the above an indication that maybe women are more independent than men?

  • Canadian immigration rebounds

    Population growth — so, immigration — is a crucial demand driver for the real estate industry, and for the growth of the overall Canadian economy. Last year, Canadian immigration averaged about 28,400 people per month, according to a recent equity research report (on the apartment sector) by TD Bank. The total number for 2019 was 341,175 people.

    Not surprisingly, this number fell off in March of this year with the closing of our borders. In March, immigration declined to 18,560 per month and bottomed out in April with only 4,135 immigrants being admitted to the country. This has no doubt been a factor in some of the rent softening that we have seen in the multi-family space.

    While it’s unlikely that Canada will meet its 2020 target of 320,000 to 370,000 new immigrants, it’s important to note that we have seen a fairly swift recovery (see above). In June of this year, the number rebounded to 19,175 new immigrants. And I’m certain that most of this cohort still went straight toward our biggest cities.

    It’s also important to keep in mind that Canada’s three-year goal (2020-2022) remains 1 million new immigrants. TD is of the opinion that this target is still attainable, as this “short-term immigration headwind” is likely to flip into a tailwind once our borders become more porous and we get to the other side of this pandemic.

    Looking back on this post from earlier in the week, I think it’s pretty safe to say that you could bucket this immigration blip into (1) short-term dislocation. It is not a (3) long-term structural change. Canada remains one of the greatest countries in the world. We will continue to attract smart and ambitious people from all around the world, and most will want to settle in our urban centers.

    All of this, of course, will be good for the real estate industry and will be vital to the strength of the Canadian economy as a whole.

    Chart: TD Securities

  • The Canadian Dream

    This has become a frequently reported topic, but here’s a recent article from Wired talking about tech workers living out the American Dream — in Canada. The story is pretty simple. Immigrants are smart and work hard. Canada has a system in place that privileges newcomers who are young and smart. And this has become a boon for our largest city and for the country. Here are two excerpts from the article:

    But there’s a new global winner: Canada, and particularly Toronto. Since 2013, the tech scene there has grown faster than in any other North American city. In 2017, Toronto added more tech jobs than Seattle, the San Francisco Bay Area, and Washington, DC, combined; in 2018 (the most recent year for which numbers are available), the city was second only to the Bay Area in new tech jobs. Toronto is so crammed with immigrants that nearly 50 percent of all residents were born outside the country.

    Canada’s immigration policy is hardly warm and fuzzy. On the contrary, it’s icily calculating. The government loves educated, elite newcomers, because they help propel the economy, says immigration lawyer Peter Rekai, but it wants them young, so they won’t drain the public health care system. Their parents are much less welcome.

    In the first quarter of this year, international migration accounted for 82.3% of Canada’s population growth. And at the beginning of this year, Ottawa was planning for up to 370,000 new permanent residents. It is highly unlikely that we hit that number given our current health crisis, but I have no doubts in my mind that we will hit it in the very near term. And when we do, it will be a good thing for Toronto.

  • Job mixes and job losses

    Recent job posting data from Indeed has revealed a bit of a paradox. The metro areas where more people are able to work from home — i.e. tech hubs and finance centers — have experienced larger job posting declines compared to all other US metros, as well as to tourism destinations such as Las Vegas and Orlando.

    We know that the hospitality and tourism sector has been the hardest hit by the current environment. But that doesn’t appear to be the biggest driver for overall job losses. In fact, one of the key takeaways is that job losses between February and June 2020 look to be correlated with metro size. That is, the bigger the city, the greater the job losses (% change).

    So what’s going on?

    Well, according to Indeed, it’s important to look at the local job mix. In “work-from-home metros” like Seattle, San Francisco, and Boston, there has been a relatively high percentage of people who were able to quickly transition to working from home. This is reflected in the anonymized mobile-device data for these cities. More people at home. Less mobility. And a seemingly stronger adherence to social-distancing protocols.

    The problem with this outcome is that it crushes most of the in-person sectors and businesses that relied on this workforce moving about the city — things like food prep and beauty & wellness. I mean, just think about all of the food businesses that survive off lunches in a CBD. According to Indeed, it is these sorts of local economic connections that have really been driving the declines in job postings and overall payroll employment during lockdown.

  • Grocery and home & garden

    It’s interesting to think about the psychology behind this FT chart outlining consumer spending in the United Kingdom from March to early July. You can see the initial panic buying of groceries in late March (well, food and toilet paper). And you can more or less see the moment where people suddenly realized — after working at home for a few weeks — that their home was in desperate need of a refresh and that planting tomatoes might be a good hobby to take up given that there isn’t much else to do. In case any of you are wondering, I remain well-stocked on the toilet paper front and my tomatoes are doing just fine.

    Image: Financial Times

  • The new normal, whatever that is

    Back in February, I shared a presentation by Benedict Evans about the macro and strategic trends that have been playing out in the tech industry. (Of course, the potential impacts go well beyond tech.) Well that was February and lot has happened since then. So he has updated a bunch of his slides and it is now called, “Tech and the new normal.” We know that things have changed, but we don’t know what things will really look like when this is all over — and which changes will have durability. Benedict doesn’t necessarily prognosticate in his presentation, but he does provide valuable historical context and some great data. So there are a lot of conclusions that you might be able to draw from it on your own. It’s also my kind of slide deck. Not a lot of text. Lots of graphics/diagrams. And really only one key takeaway per slide. Here you are.

  • Making giant ships

    This is an interesting New York Times photo essay about “how giant ships are built.” I wasn’t aware of some of these statistics, and maybe the same goes for you:

    • 90% of all traded goods are carried on ships
    • 90% of global shipbuilding happens in just three countries: China, South Korea, and Japan
    • There are 124 remaining and active shipyards in the United States, all supported by federal government contracts and the Jones Act, which requires that people and goods moving between American ports is done on ships that are owned/operated by US citizens and that were built domestically
    • US shipyards are believed to contribute about $37 billion in annual economic output and to support about 400,000 jobs
    • 88% of all food in the state of Hawaii is shipped in by boat — it is disproportionately reliant on trade (makes sense)

  • Amazon’s delivery network is now the 4th largest in the US

    This is an interesting article about Amazon’s delivery network, which is now the 4th largest in the United States. Here are the numbers (most of which are as of 2019):

    • Since 2014, Amazon has spent $39 billion building out its delivery network. When you add in warehouses and airplanes, this number increases to about $60 billion. As of 2019, Amazon leased 97% of its fulfillment and data center spaces.
    • Amazon is becoming increasingly vertically integrated. Last year, Amazon delivered about 58% of the 4.5 billion parcels that it shipped to US consumers. This represents about 22% of all online retail deliveries.
    • Outside of the US, Amazon still handles close to 50% of its own order deliveries. By 2025, Bank of America Global Research is predicting that Amazon could grow to handle somewhere between 38% and 49% of all online order deliveries in the US.
    • Amazon is the 4th largest in terms of US package deliveries (2019), behind FedEx, UPS, and USPS (in that order).
    • Amazon’s fulfillment network roughly entails: receiving centers -> fulfillment centers -> sortation centers -> last-mile delivery stations. It’s a hub and spoke system with the physical real estate naturally getting smaller as you get closer to the end destination. For a lot more information on their network, click here.

  • Bill Gates on the first modern pandemic

    After watching the docuseries, Inside Bill’s Brain, I couldn’t help but think that the work he and Melinda are doing isn’t getting nearly enough exposure. Here they are working tirelessly to eradicate global diseases, like polio, and find new ways to combat climate change. And yet relatively little was done after Bill went on stage five years ago and warned us that a global pandemic could strike at any time. Why? Probably because most of us thought it wouldn’t happen to us in the developed world.

    But obviously it did happen and along with that Bill has emerged as a level-headed voice of reason. He is calm, serious, and matter of fact about what we know, what we don’t know, and what is going to need to happen for us to make it to the other side of this. In his latest long-form blog post (which is also available for download as a PDF), he calls our current situation “the first modern pandemic”, as well as Pandemic I. That should signal to you that he continues to believe there will be others.

    In it, he summarizes the innovation that will need to happen into five categories: treatments, vaccines, testing, contact tracing, and policies for opening up. Among many other things, he gets into the realities (and timelines) of developing an effective vaccine for the world, as well as the shortcomings of the contact tracing tech that many companies, including Apple and Google, are currently building. I would encourage all of you to have a read.