In 1960, real estate investment trusts were created in the U.S. with the goal of democratizing real estate ownership. Here’s how Yale professor Robert Schiller described it:

“REITs were created by law in 1960 to democratize the real estate market and make it possible for a broad base of investors to participate in this huge asset class. That was absolutely the right thing to do, because portfolio theory tells us people should diversify across major asset classes, and real estate is one of them.”

But a lot of things have changed since 1960. We now have the internet. 

And one of the things that the internet is very good at is creating peer-to-peer networks that connect supply and demand without the same kind of intermediaries. This could be people who have MP3s with people who want MP3s or it could be people who have real estate with people who are looking to invest in real estate.

So with the advent of crowdfunding in both the U.S. and Canada, I think we are at the dawn of another era of real estate democratization. Already we have seen the first crowdfunded real estate development project and it happened at a much smaller and local scale than is usually the case with REITs.

Similarly, we are also seeing companies emerge – such as HomeUnion in the U.S. – that allow people to build their own rental portfolios by directly investing, either fully or partially, in real estate. Again, there are differences here compared to how REITs typically operate.

When I was in grad school at Penn and Sam Zell used to come in and talk to the students, he used always mention how when he started out in real estate (1960s) the industry was disproportionately controlled by a small number of players. That’s been changing ever since and it looks like that trend will only continue.

According to a new report released by City Observatory, US cities have officially reversed a 50-year trend towards decentralization.

We know that urban living has been seeing a renaissance over the last decade or so, but as recently as 2002 - 2007 (pre-Great Recession), the suburbs and peripheral areas were still seeing significantly higher job growth: 1.2% per year in the periphery versus 0.1% in the city center. The “city center” is defined as a 3 mile radius around the center of the city in this study.

However since 2007 things have flipped:

Chart Source: City Observatory

Why is this happening? Here’s a snippet from City Observatory:

The strength of city centers appears to be driven by a combination of the growing attractiveness of urban living, and the relatively stronger performance of urban-centered industries (business and professional services, software) relative to decentralized industries (construction, manufacturing) in this economic cycle. While it remains to be seen whether these same patterns continue to hold as the recovery progresses, (the latest LEHD data on city center job growth are for calendar year 2011), there are structural forces that suggest the trend of center-led growth will continue.

In some ways, it just makes intuitive sense. People started returning to cities and so the jobs followed (although there were also structural changes to the economy). 

The big question, however, is whether this trend will continue? My bet is on yes. What do you think?

dupont survivor by Josemaria de Churtichaga on 500px

I was on CBC radio this morning talking about the revitalization of Dovercourt Village and Geary Avenue in Toronto. 

The funny thing about this topic is that it’s one I actually held off writing about. I’ve been thinking about this street and area for probably about 5 years now. However, I do have to keep some secrets to myself :)

But then I started feeling like the cat was already out of the bag. Everyone in my circle was talking about it. So I wrote a post calling Dovercourt Village the next Ossington. I had no idea it would get the traction that it has gotten, but in hindsight it makes total sense. It makes a great headline: “Toronto’s ugliest street to become the next Ossington.” Boom.

The tough question that Matt Galloway asked me this morning was: What happens to all the blue collar businesses when/if Geary Avenue and the area really takes off? My response – given that it was only a 5 minute radio piece – was that it comes down to preservation vs. progress. 

This is a topic that I’ve written about with respect to heritage buildings, but the same concept applies to communities as well. How do you allow neighborhoods to receive new investment while at the same time not erasing its past and the things that made it interesting in the first place?

It’s not easy, that’s for sure.

I absolutely believe that there are things that developers can do to respect the neighborhoods in which they build in. But at the same time there are economics at play. In business school, they teach you this:

It’s the lifecycle of businesses and industries. 

The key takeaway here is that the rise and decline of businesses is actually quite healthy for markets. History is littered with examples. The word processor replaced the typewriter. The mobile phone replaced the landline. Air travel replaced rail travel. And the list goes on.

Today, I think we’re at a moment in time where our relationship to cars is changing dramatically. How we get around and how we own and operate them is being called into question. 

So just because there’s auto shops on Geary Avenue today, doesn’t mean they’ll be there tomorrow regardless of whether the area takes off or not.

In 1960, real estate investment trusts were created in the U.S. with the goal of democratizing real estate ownership. Here’s how Yale professor Robert Schiller described it:

“REITs were created by law in 1960 to democratize the real estate market and make it possible for a broad base of investors to participate in this huge asset class. That was absolutely the right thing to do, because portfolio theory tells us people should diversify across major asset classes, and real estate is one of them.”

But a lot of things have changed since 1960. We now have the internet. 

And one of the things that the internet is very good at is creating peer-to-peer networks that connect supply and demand without the same kind of intermediaries. This could be people who have MP3s with people who want MP3s or it could be people who have real estate with people who are looking to invest in real estate.

So with the advent of crowdfunding in both the U.S. and Canada, I think we are at the dawn of another era of real estate democratization. Already we have seen the first crowdfunded real estate development project and it happened at a much smaller and local scale than is usually the case with REITs.

Similarly, we are also seeing companies emerge – such as HomeUnion in the U.S. – that allow people to build their own rental portfolios by directly investing, either fully or partially, in real estate. Again, there are differences here compared to how REITs typically operate.

When I was in grad school at Penn and Sam Zell used to come in and talk to the students, he used always mention how when he started out in real estate (1960s) the industry was disproportionately controlled by a small number of players. That’s been changing ever since and it looks like that trend will only continue.

According to a new report released by City Observatory, US cities have officially reversed a 50-year trend towards decentralization.

We know that urban living has been seeing a renaissance over the last decade or so, but as recently as 2002 - 2007 (pre-Great Recession), the suburbs and peripheral areas were still seeing significantly higher job growth: 1.2% per year in the periphery versus 0.1% in the city center. The “city center” is defined as a 3 mile radius around the center of the city in this study.

However since 2007 things have flipped:

Chart Source: City Observatory

Why is this happening? Here’s a snippet from City Observatory:

The strength of city centers appears to be driven by a combination of the growing attractiveness of urban living, and the relatively stronger performance of urban-centered industries (business and professional services, software) relative to decentralized industries (construction, manufacturing) in this economic cycle. While it remains to be seen whether these same patterns continue to hold as the recovery progresses, (the latest LEHD data on city center job growth are for calendar year 2011), there are structural forces that suggest the trend of center-led growth will continue.

In some ways, it just makes intuitive sense. People started returning to cities and so the jobs followed (although there were also structural changes to the economy). 

The big question, however, is whether this trend will continue? My bet is on yes. What do you think?

dupont survivor by Josemaria de Churtichaga on 500px

I was on CBC radio this morning talking about the revitalization of Dovercourt Village and Geary Avenue in Toronto. 

The funny thing about this topic is that it’s one I actually held off writing about. I’ve been thinking about this street and area for probably about 5 years now. However, I do have to keep some secrets to myself :)

But then I started feeling like the cat was already out of the bag. Everyone in my circle was talking about it. So I wrote a post calling Dovercourt Village the next Ossington. I had no idea it would get the traction that it has gotten, but in hindsight it makes total sense. It makes a great headline: “Toronto’s ugliest street to become the next Ossington.” Boom.

The tough question that Matt Galloway asked me this morning was: What happens to all the blue collar businesses when/if Geary Avenue and the area really takes off? My response – given that it was only a 5 minute radio piece – was that it comes down to preservation vs. progress. 

This is a topic that I’ve written about with respect to heritage buildings, but the same concept applies to communities as well. How do you allow neighborhoods to receive new investment while at the same time not erasing its past and the things that made it interesting in the first place?

It’s not easy, that’s for sure.

I absolutely believe that there are things that developers can do to respect the neighborhoods in which they build in. But at the same time there are economics at play. In business school, they teach you this:

It’s the lifecycle of businesses and industries. 

The key takeaway here is that the rise and decline of businesses is actually quite healthy for markets. History is littered with examples. The word processor replaced the typewriter. The mobile phone replaced the landline. Air travel replaced rail travel. And the list goes on.

Today, I think we’re at a moment in time where our relationship to cars is changing dramatically. How we get around and how we own and operate them is being called into question. 

So just because there’s auto shops on Geary Avenue today, doesn’t mean they’ll be there tomorrow regardless of whether the area takes off or not.