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 turns out that the injury and fatality rates on the Autobahn — measured per billion vehicle kilometers traveled — are actually relatively low compared to urban and rural road classes.
It is also relatively low compared to international standards. Here is a 2012 comparison, also via Wikipedia:
Europe as a whole does very well in this regard (not that this specifically addresses Autobahn safety). Generally, fatalities have declined significantly over the last few decades.
Last summer Bloomberg ran a visual essay on how America uses its land. In case some of you missed it, I thought I would share it here today.
They started by breaking the country down into 6 main land uses. Each square represents about 250,000 acres.
What likely won’t surprise any of you is that urban areas punch well above their weight:
Even though urban areas make up just 3.6 percent of the total size of the 48 contiguous states, four in five Americans live, work and play there. With so much of the U.S. population in urban areas, it’s little surprise that these areas contribute an outsize amount to the economy. The 10 most productive metropolitan areas alone contributed to about 40 percent of U.S. GDP in 2016.
Here’s a further breakdown of the map:
There is a lot that is interesting here. Note that golf courses made the cut.
As I am sure you have all heard, there’s a lot of debate in New York right now (city and state) about whether they should reject Amazon’s decision to open up a new headquarters in Queens.
Urbanist Richard Florida has been arguing that one of the richest companies in the world shouldn’t be receiving taxpayer subsidies and that Amazon should do the right thing here. They should open up in New York but without any inducements.
As a counter argument, Kenneth Jackson, professor of history at Columbia University, recently opined that this is actually business as usual. American cities have a long history of competing for companies because the benefits outweigh the costs over the longer term.
Here is an excerpt from his op-ed in the New York Times:
They are right about one thing. It is absurd that any city would agree to such a deal. But this is how the game is played. Paying companies to relocate has been the American way since 1936, when Mississippi established the nation’s first state-sponsored economic development plan. Under that plan, since followed by many other jurisdictions, cities and states agreed to pay companies to relocate by promising them new factories and low or nonexistent taxes. With those inducements, numerous businesses relocated in the decades after World War II, usually from the union-dominated Northeast and Midwest to the business-friendly South.
According to Amazon’s recent annual 10-K filing, the company leased and owned (most of their space is leased) about 288,419,000 square feet of space around the world at the end of 2018. Of this number, about 80% is used for “fulfillment, data centers, and other.” Amazon doesn’t break out this line item any further, but GeekWire reckons that a good 3/4 of their real estate is dedicated to their fulfillment warehouses.
Here’s the full summary of their facilities (from the 10-K filing):
Given that fulfillment is such a large share of their properties, I am most interested in understanding the geography of their warehouses and how that impacts their core value proposition, which is largely all about convenience.
In the early days of online retail, the decision of where to warehouse had meaningful tax implications. Because (in most cases in the US?) you only had to collect sales tax if you had a physical presence in the same location as your purchasers.
As that changed, it then made more sense to create a broader distribution network and minimize the distance between fulfillment center and purchaser. By 2016, Bloomberg estimated that nearly 78 million Americans lived in a zip code where Amazon offered free same-dame delivery. That number has obviously increased since.
And in the paper “Economies of Density”, they discovered the following cost savings as a result of Amazon’s growing fulfillment network:
We find that Amazon saves between $0.17 and $0.47 for every 100-mile reduction in the distance of shipping goods worth $30. In the context of its distribution network expansion, this estimate implies that Amazon has reduced its total shipping cost by over 50% and increased its profit margin by between 5 and 14% since 2006. Separately, we demonstrate that prices on Amazon have fallen by approximately 40% over the same period, suggesting that a significant share of the cost savings have been passed on to consumers.
The interesting question for real estate people and city builders — which is brought up in the Knowledge@Wharton podcast but is difficult to answer — is whether there are diminishing returns to this “economies of density” phenomenon. In other words, how dense does Amazon’s fulfillment network want to be?
I just finished watching this Bloomberg video on Shenzhen, called “Inside China’s High-Tech Dystopia.” The video obviously has a particular point of view, but there are parts of it that I wasn’t overly fussed about, such as the push toward increased factory automation. Jobs evolve. We used to have elevator operators. Now we don’t. Presumably those people found other empoyment.
What stood out to me was Shenzhen’s solution to jaywalking. They use cameras, facial recognization software, and a “wall of shame” to fine and then discourage people from illegally crossing a street ever again. One guy in the video explains how he once had the fine automatically withdrawn from his WeChat account. No authorization required. And it happened within seconds following the infraction.
That feels unsettling. (If you only want to watch the jaywalking part, skip ahead to 5:35 in the video.)
Shaping Cities in an Urban Age is the third book to come out of the London School of Economic’s Urban Age project. It was published last fall. The first two titles were, Living in the Endless City (2011) and The Endless City (2007).
If you’re familiar with the first two publications, you’ll know that these books are heavily illustrated. Lots of maps, charts, and diagrams. So they make great coffee table books. But they’re also filled with insightful essays — this one has 37 of them.
In this particular book the focus is on the following:
“It identifies current trends that are making cities more fragmented, less equitable and environmentally more damaging, and argues powerfully for a more integrated social, environmental and spatial approach that can inform and inspire city-makers that are shaping an increasingly urban world.”
I am sharing this with all of you today because I have always really enjoyed these books. They have a way of quickly putting things into perspective globally.
Around 2.5 billion more people are expected to live in an urban agglomeration by 2050. And 90% of this growth is expected to happen in just two places: Asia and Africa. This is an unprecedented shift that will obviously create many challenges and many opportunities.
At the end of last month, Toronto City Council adopted the “Housing Now” action plan. The first phase of the plan involves the public marketing of 11 city-owned sites for the purpose of finding non-profit and private sector partners to help redevelop the lands with new mixed-income housing. It is expected that these lands could accommodate about 10,000 homes.
Here is the list of sites:
As part of the offering, around 2/3 of the built units will need to be rental (the above chart shows more), and of these rental units, 50% will need to be affordable with rents set to 80% of Toronto’s average market rents. All of this should translate into approximately 3,700 new affordable homes. (Mayor Tory’s plan is to build 40,000 affordable rental homes by 2030.)
The City wants to ultimately retain ownership of these lands, and so the sites will be offered up through long-term land leases. It looks like they’ll be for 99 years. The City will also be forgiving a number of fees and levies for the 3,700 affordable homes. They are pegging the PV (present value) of these development incentives at just over $280 million:
Making use of surplus public land to increase the supply of affordable housing certainly makes a lot of sense. But there’s a cost burden associated with these affordable units, which is why discussions around inclusionary zoning often come back to offsetting measures. Who is going to pay for these subsidies?
The above “financial incentives” — which in this case are simply foregone revenue — speak to this cost burden.
