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.
The prevailing view on short-term rentals right now seems to be this:
That is, it’s viewed as a zero-sum game between residents and tourists. There are only so many homes within a city, and so if any of them are to turn into short-term rentals, then it is a direct reduction in the supply of available long-term homes. This can also happen very quickly given the asset-light nature of Airbnb and the fact that these spaces aren’t usually purpose-built.
It is for this reason that many cities have enacted strict short-term rental laws that basically only allow you to rent out your principal residence when you’re not around or if you happen to have extra space. In the case of New York, you have to be physically present when the dwelling is being rented, and so the use case is exclusively “I have extra space for you.”
Either way, the basic idea is to stop people from removing homes from the long-term market. I do, however, find it curious that reductions in housing supply seem to be generally viewed as bad, but that increases in housing supply are often met with skepticism. Doesn’t housing supply work in both directions? Why aren’t more people clamouring for new homes to be built?
Where my head is at on this issue is that I don’t see it as a zero-sum game. I believe that there should be rules and regulations around short-term rentals, but that they shouldn’t stamp out all use cases other than “here’s an air mattress in my living room.” At the same time, I think we should be viewing this as an opportunity. Clearly we need more homes, more hotels, and more short-term rentals.
Winemakers in Niagara will tell you that southern Ontario isn’t the easiest of places to grow and make wine. But whatever, I think that Niagara is highly underrated. Niagara has some exceptional wineries that you really should explore if you aren’t familiar. Ontario is also the largest ice wine producer in the world, by a long shot. We produce something like 90% of the world’s supply. Ice wine can be a bit of an acquired taste — they’re sweet. But if you get a chance, try one from Stratus. They are supposedly the driest in the world.
I don’t know how the wine demographics have shifted in other regions, but we were told over the weekend that 10 years ago it was mostly gray hairs who were out at wineries buying wine. Today, there are tons of young people in their 20s, 30s, and 40s. And we certainly saw that over the weekend. This shift has winemakers now adjusting their wines. I couldn’t tell you what a younger wine palate wants, but apparently it’s something.
Lastly, there is a complete lack of cool and modern boutique hotels in the area. I would imagine that part of this is because the Niagara wine region is still emerging. But I think the other reason has to do with my previous point: younger people now want to go to wineries and the hospitality sector hasn’t yet caught up. This strikes me as a massive opportunity.
People in SLC are really nice. Strangers greet you on the street. Motorists are also more polite and patient. I had no idea how to respond. I suspect it might have something to do with there being less traffic and, in turn, less frustration. But again, even if you ignore what happens on the road, people are nice.
You will need a serious utility vehicle to navigate the topography of this region. Venturing into the surrounding canyons requires 4-wheel drive or chains during snowstorms. I was only there for a week and already I have visions of a classic Defender in my mind. Do they come in electric versions?
The streets are too wide for proper enjoyment as a pedestrian. This is a challenging problem to fix, as I have mentioned before. That said — and this is going to be an unpopular opinion — the city felt void of any sort of real traffic. The distances travelled are great, but the highways actually flow freely. You also never really need to worry about parking.
Electric scooters are popular in SLC. As is cycling — both for getting around and as a reason to wear tight-fitting bright clothes.
SLC feels as if it is both under the radar and also rapidly emerging. My new favorite restaurant in SLC is a place called Post Office Place. We walked in without a reservation on a Friday night and they gladly took us. I couldn’t understand why the place wasn’t rammed. I mean, they have Marseille-style panisse on the menu!
The Granary District is an area to watch. It is a former industrial area to the southwest of downtown. It is already home to breweries, food halls, and creative offices. But it needs some more time to properly fill in. We stayed at the Evo Hotel in Granary (highly recommend). The campus amenities include a rock climbing facility, an indoor skatepark, and plenty of places to work and Zoom.
Most of the new infill housing appears to be mid-rise in scale and most of it is wood-frame construction on top of concrete.
By my estimation (and by estimation I mean that I have a spreadsheet for this), the ski and snowboard communities surrounding SLC are some of the most accessible in North America. Land at SLC airport and you’re in the mountains in 20-30 minutes.
Park City-Canyons is the most well-known ski destination. But if you’re a more aggressive skier — the kind that keeps your gloves together with duct tape and counts the number of ski days per season — you’ll want to head over to the Cottonwood canyons and places like Snowbird and Brighton.
Snowbird remains one of my all-time favorite ski destinations for two reasons: the mountain itself and the brutalist architecture at the bottom of it. There’s none of that faux alpine crap over here — just exposed and unabashed concrete and wood. And who doesn’t love brutalism, right? (I haven’t been to Brighton yet but one of my local friends told me that it’s a great snowboarders mountain.)
The Canyons Village at Park City is developing really nicely. As I understand it, it’s only about 30-40% built out at this stage. The Pendry Hotel just recently opened (announcement here) and I can tell you that the restaurants were generally busy every night of the week (summer experience). The project team did a wonderful job creating a place and a new anchor in the village.
Today’s post is a question for all of you: What would you say are the coolest and most remarkable boutique hotels in the world right now?
What is clear to me is that travel (and flexible work) will continue to be a growing market and that there is demand for a variety of different hospitality offerings.
Sometimes people might want to stay in an Airbnb (which is usually a property owned by an individual or individuals).
Sometimes people might want to stay in a branded and/or membership-based rental such as a Sonder or a Wander (which, in the case of Wander, is a collection of properties owned by the same company).
And sometimes people might want to stay in a tried-and-true hotel.
I think that all of these offerings serve different needs. And at the end of the day, I don’t believe that Airbnbs, or whatever permutation they take, will ever replace the best hotels. There are things you can get in a hotel that you can’t get elsewhere.
So today I am hoping to crowdsource some of the best examples from all of you. Thanks in advance for any ideas you might send over.
On January 1st of this year, I wrote a post called, “My 2021 predictions.” It was part of a new practice that I have adopted where I try to forecast the year (I will be wrong) and then evaluate how I did at the end of it (the focus of today’s post). This year was, of course, a tricky year with lots of uncertainty. But here’s where my head was at in January and here’s what ultimately happened.
Life will feel a lot more normal by spring/summer.
This more or less happened. Cases, at least here in Ontario, were way down by the summer. Those who wanted to be fully vaccinated had the option to be. Cities reopened and summer felt pretty good after a long winter of lockdowns. As soon as it was possible to do so, we reopened our office and many/most people came back. I ended up being in the office this year more than I wasn’t. Of course, I had no idea that Omicron was going to be a thing back in January.
Working from home/the office.
I think the jury remains out on this one. It’s still too early to draw conclusions. I have been in the office full-time for most of this year, but I recognize that that hasn’t been the case for everyone. I know from the super scientific “Jimmy the Greek Reopening Index” that I developed that office utilization rates are not yet back. When I wrote about this topic back in October, the US average was thought to be just below 40%. Still, I remain bullish on office.
An explosion of global travel.
Well, Airbnb’s stock isn’t maybe as sky high as I suggested in my predictions post. But it is still up over 19% YTD:
Marriott is also up nearly 27% YTD:
The reality is that travel was/is rebounding. I managed to take two weeks off at the end of the summer, which is something I hadn’t done in at least several years. But Omicron has certainly impacted the recovery:
Urban/downtown real estate will strongly rebound.
I would argue that we saw this play out in the residential sector. Here in Toronto, Q3-2021 saw condo rents in the core increase 11.4% quarter-over-quarter. This was a fairly significant snapback. It was the largest increase in the region, outpacing both the inner suburbs and the outer suburbs. On the for-sale side, we saw evidence of the condo market returning as early as Q1. We were also able to successfully launch One Delisle and are now preparing to start construction.
Trends accelerating.
In some cases, what we saw was a reaction to short-term dislocation. Peloton’s stock is down about 73% YTD at the time of writing this. In other cases, what we saw was just a “pulling forward.” (Link to post by Fred Wilson.) The pandemic led to greater consumption of certain products and services, but now those companies could be headed for a period of slower growth. At the same time, there’s evidence that certain things, like buying more groceries online, may actually be sticking.
Return of restaurants.
What seems pretty clear is that people are quicker to return to bars & restaurants than they are to return to the office. As we know, getting together in person is fundamental to urban life. Here’s a chart from OpenTable:
However, this is not to say that many restaurants didn’t have a tough go during this uncertain time.
Public transit ridership will return to pre-pandemic levels by the fall.
I was dead wrong and way too optimistic about this one. Office utilization rates remain lower than expected and so people aren’t commuting in nearly the same way. Those who are, seem to be driving more. As of August, Canada’s urban transit networks were operating, on average, at just over 40% of where they were pre-pandemic (August 2019). This is obviously a serious problem for operating shortfalls.
Migration from high tax states to (warmer) low tax states.
This is an established trend in the US and so it was certainly not a bold prediction. There are many other factors at play here beyond simply the pandemic. However, as I mentioned in my original post, what is perhaps more interesting right now is the heightened tension between centralization (urbanity) and decentralization. I’ll see what data I can uncover in the coming weeks, but we likely need to get to the other side of this pandemic before drawing any firm conclusions.
In reviewing this year’s predictions it is clear that I was perhaps overly optimistic (which is far better than being overly pessimistic) and that missed a lot of important stuff. Some of it was unknowable, such as a new variant, and some of it I just missed, which is bound to happen. I could also be more precise and bolder in my predictions, and so I will endeavor to do that in my upcoming predictions for 2022. Stay tuned.
If you’re not already an email subscriber to this blog, consider making that happen over here. And for those of you who have been reading all year, thank you. I truly appreciate it.
So Soho House went public this week. It is now trading on the NYSE under the ticker $MCG. It renamed itself the Membership Collective Group Inc. for the IPO given the myriad of brands that the company now operates. The company went public at $14 a share and with a $2.8 billion valuation. It raised $420 million through the offering.
My first reaction when I heard the news was that going public is maybe at odds with being a cool, urban, and exclusive membership club. We’re all about creatives; also, buy our stock. But maybe I’m wrong. This is just the company maturing. At 26 years old, the company now has some 119,000 members and has 30 Soho Houses around the world in 12 different countries.
Full disclosure: I am a member and a big fan of Soho House.
But now that the company is public, we also know that it has never turneda profit. And it hopes to do that by next year, as well as open some five to seven new Soho Houses each year while trying to remain “asset light”. As the company does this and pushes toward profitability, there is, of course, a very natural question about what that does to the experience and the overall brand.
Does it get diluted at all?
I don’t think that necessarily needs to be the case. But of course the company will end up evolving. On a related note, if anyone from Soho House / MCG is reading this post (unlikely), I would love to connect about an opportunity here in the Toronto area. I think it has the potential to become something truly remarkable — not to mention, much needed. I can be reached, here.
Surface Magazine just republished this 2016 interview with Arne Sorenson. Sorenson was CEO of Marriott, but sadly passed away this week after a battle with pancreatic cancer.
One of the questions he was asked in the interview was about the rise of Airbnb. This is how he responded:
“It’s fascinating. I hope we’re not as exposed to this as the taxi industry is right now. Taxis in many cities are awful and hard to find. So here comes Uber with a better product. In the hotel business, I still think we can deliver better service, so we don’t have quite the same risk. Airbnb is fascinating. Increasingly, it’s less personal, and there are more dedicated units. The more they get into that space, they become a competitor. The story isn’t over, but we’re set up to compete well.“
Taxis were awful and that business model is done for good. But how do Sorenson’s comments about Airbnb hold up today?
Marriott ended up launching its own home sharing platform in 2019, but it’s comparatively small as I understand it. There are also no shortage of bull cases for Airbnb (and just look at its market cap).
But there are also headwinds. Barcelona, for example, is looking to permanently ban people from renting out private rooms on a short-term basis (< 30 days). This is even if the rest of the home remains owner occupied.
So what use cases remain? Only extended stays?
If I look at my own pre-pandemic travel record, I am largely in the hotel camp. I like the consistency and I like certain brands. But maybe that’s just me getting older. What do you all think? Leave a comment below.
I am sure that many of you have been eagerly waiting for an old Brutalist wine warehouse to come on the market near Bordeaux, and so here is a listing from Espaces Atypiques. The site is over 1 hectare. The ground floor is about 2,000 square meters. And the central atrium space is some 25m tall. It’s listed for €550,000 and I reckon it needs a bit of work.
I don’t know where exactly it’s located in Saint-Émilion, France (nor have I ever been) and I can’t vouch for the condition of the existing building in any way shape or form, but I do think it would be a lot of fun to turn a Brutalist structure like this into a hotel, restaurant, and creative event space. Public gathering space(s) in the atrium; private rooms along the perimeter.
