I was just introduced to a development firm based in Los Angeles called SuperLA. They are focused on sustainably built infill apartments and last year they completed what is the first ever mass-timber multifamily housing project in Southern California. Located at 3520 Marathon Street in Silver Lake and called the "Bungalows on Marathon", the project is 3-storeys (with parking underneath that takes advantage of the slope of the site) and has 9 homes.
Six of the homes are one-bedroom (~660 sf of interior space) and three of the homes are two-bedroom (~1,320 sf of interior space). It's a beautiful project. And because it's LA, all of the building's circulation is outside and tucked toward the back of the site. It's also not a huge site -- my rough Google Map take-offs have it at approximately 12m x 40m. So let's call it the equivalent of two Toronto single-family lots.
Based on suite count, this is similar to the kind of density that you could get in single-family neighborhoods throughout Toronto. However, the built form here on Marathon is decidedly more urban. Despite its horizontality, LA is not as low-density as many might think. For more on SuperLA, here's their website. They've also done a great job with their brand and identity.
Photos via SuperLA
Happy new year, everyone! Yesterday we spoke about what actually happened in 2024 (and evaluated my predictions from exactly a year ago). Today, let's prognosticate about what might happen in 2025 (keeping in mind that I'm based in Toronto and so there will naturally be a bias toward this market):
Very broadly speaking, our current commercial real estate downturn started, in my opinion, around the middle of 2022. That's when sentiment started to feel different and the market was starting to respond to increasing interest rates. Over the past few years, I've been overly optimistic in terms of how soon the market would reset. But eventually I'll be right. So I'm going to call 2025 as an important turning point where we see more capitulation, more bankruptcies, and a shedding of legacy assets/deals. For the other side of the market, this will mean more new deals.
This, however, does not mean that we will see a development environment that anywhere resembles what we saw prior to 2022. On the new construction residential side (condominium and multi-family rental specifically), I think it's going to take 2-3 years for us to work through and absorb our current supply pipeline. This will be an obvious headwind for land prices. The successful projects in this environment will be located in core/prime locations, underwritten at more modest scales, and focused largely on end users.
In 2024, we saw the continued rise of more people going back to the office. Here in Toronto, the average weekday figure is approximately 73% of what it was pre-COVID (data from November 2024). This year, I think we'll see this figure get close to 90% and then likely start to level off, some five years after the first lockdowns. I think it makes sense that we'll stabilize at some number below pre-COVID levels, but I also think it'll be a number that is much higher than most people expected just a few years ago.
I am reversing my position on autonomous vehicles (relative to last year). I believe we're much further along -- specifically Waymo is -- than most people think right now. Autonomous vehicles are happening and, in 2025, I think we'll see a significant expansion of coverage across the US led by Waymo + Uber. I don't think we'll see anything earth shattering from Tesla in regards to FSD, but who knows, Elon is good at making things happen. The big test will be cities with snow. This will likely take longer.
At the time of writing this post, the price of EU carbon permits is approximately €71.98 per tonne of carbon dioxide. It's all-time high was €105.73 in February of 2023, but some/many believe that it will need to be closer to €150 by 2030 if the world hopes to reach net zero by 2050. So for this reason, I'm going to say that its price rebounds to between €90-100 this year. This is largely a guess, but I'm including it in my predictions (at least partially) because it's quantifiable and easy to score later.
Crypto and technology more broadly are going to have an awesome year in 2025. As Fred Wilson wrote on his blog yesterday, one of the things we saw in 2024 was "Silicon Valley's hostile takeover of the federal government, via an infiltration of Donald Trump's MAGA movement." The "establishment government" was seen as being antagonistic toward tech and innovation, and so the industry jumped teams. One would expect that to pay dividends this year.
More specifically, I think we're going to see a web3 consumer application that finally breaks into the mainstream. Already, I've been impressed by NFT marketplaces like Rodeo. Many people won't appreciate that it's powered by some blockchain, but that's exactly what we want. We want the underlying technology to recede into the background and for the experience/utility to come into the foreground.
And with that, I will end and leave you all with this recent tweet from Chris Dixon. It's worth clicking through and reading the entire thing.
And so this knowledge will be unfolded…
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A big thank you to everyone who continues to read this blog. We're now into year 12 of this daily writing practice (my first post was in August 2013), and I'm still feeling more inspired than ever. It truly feels like we're at the dawn of so many new and exciting things: a new real estate cycle, an unprecedented innovation environment, and the list goes on. Next up, I'm going to write specifically about what we at Globizen are focused on for this upcoming year.
Cover photo by Tyler Rooney on Unsplash
I have been through two major downturns in my real estate career. The first was the 2007-2008 financial crisis. And the second is what's happening right now. Right before the first one, I was working for a small real estate developer/consultancy in Dublin and, let me tell you, it was an exuberant time. Ireland was at what ended up being the tale end of its "Celtic Tiger" and everything was possible.
One of the projects I was working on was the proposed U2 Tower at the mouth of the River Liffey in the Docklands area. We were running the international design competition to select an architect and everyone from Foster and Partners to Zaha Hadid was participating. It was going to be the tallest tower on the island of Ireland and in the penthouse was going to be a recording studio for the rock band U2.
But then, the great financial crisis happened and the tower got cancelled. By then, I had returned from the US (where I was finishing grad school) to work in Toronto. The writing was starting to be on the wall, but I managed to get a summer internship for a developer. By fall, shit had hit the fan and they reneged on my full-time offer, citing that the market was just too bad.
In reality, though, things were much worse in the US. I vividly remember developers claiming that it would take decades for development to return to feasibility. That's how bad things felt. In hindsight, this was pivotal timing for me for two reasons. One, it taught me early on in my career just how bad things can get in real estate, and I try to always remember that. And two, it forced me out of the US after graduation.
I had initially planned to stay and work there for a few years, but there were simply no real estate jobs and, if there was one, they weren't going to hire a Canadian with a background in architecture. Who knows where I would have ended up had I stayed. Despite it being my plan, it's possible I may have never returned to Toronto.
During this period, I remember thinking to myself that development is super risky, it shuts off periodically, and so it's a good idea to also own long-term assets with long-term leases, like office buildings. And after returning to Toronto, I ultimately went to work for a company that did both development and that owned office buildings, among other commercial assets.
This seemed like a reasonable approach up until 2020, which is of course when office buildings were negatively impacted by the pandemic. But I don't know how anyone could have predicted this. It was truly a black swan event that had far reaching implications on real estate beyond just office assets.
But here's the thing: I feel lucky with the timing I've had. These are the best times to be starting something. During the first cycle, I was just starting my real estate career and it taught me things. And now, during this current downturn, I'm focused on growing Globizen. It's hard to imagine a better time to find opportunities that the rest of the market may be overlooking or simply can't execute on.