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.
Today the Partnership for New York City took out a full-page ad in the New York Times with an open letter to Amazon chief executive Jeff Bezos, asking him to reconsider the decision to pull out of NYC. The letter was signed by a long list of prominent leaders in the city. Here is a copy (a PDF version can also be found, here):
The third edition of Savills’ annual Tech Cities report is now out. Savills is a global real estate company headquartered in London and a few years ago they started looking and what makes a successful “tech city.” As always, you should take these rankings with a healthy dose of scepticism. But this one is based on over 100 individual metrics across 6 main categories:
Here are the top 30 cities for tech and startup companies:
New York takes the top spot, supposedly because of its deep talent pool and position as one of if not the capital the world. But my friends in the Bay Area tell me that their housing shortage is also starting to impact SF’s tech dominance.
Generally, the report finds that the above “tech cities” should see their GDP rise by 36% over the next decade, compared to 19% for other developed cities. I’m not sure how much of this has to do with tech, but the above list does differ from what you’d see in a more conventional global cities index. Here you have Austin ahead of global cities such as Hong Kong. And you have Toronto ahead of cities like Tokyo and Paris.
One takeaway that shouldn’t come as a surprise to readers of this blog is the rise of Chinese cities in the index. Beijing is ahead of New York, London, and San Francisco by a wide margin in terms of annual VC investment. And Chinese cities as a whole are starting to take a greater share of global VC dollars (second chart below).
If you’d like to download a PDF of the full report, you can do that here.
Image: Photo by Jason Briscoe on Unsplash
At the beginning of this year, the City of New York filed this lawsuit in an attempt to shut down an Airbnb business that has supposedly generated around $20 million in revenue since 2012. It is currently illegal to rent out an apartment in most buildings in the city for less than 30 days unless the owner/permanent tenant is present. And that’s not how this business was being operated.
Here are the locations of the rentals named in the lawsuit (map from the New York Times):
The defendants include a real estate brokerage, the three partners behind the business (more on them here), as well as others. NYC has been trying to pass legislation that would force Airbnb to disclose more information to the Mayor’s Office of Special Enforcement. Information such as the full name(s) and address(es) of every host and whether the short-term rental is an entire dwelling or a room. That presumably would have helped here.
For more on the lawsuit and the backstory, click here.
You may also find it interesting to go back to the five-point plan that Airbnb put forward back in 2016. It was intended to serve as a framework for new short-term rental legislation. The points make a lot of sense.
On Monday, Christopher Hume of the Toronto Star responded to the recent backlash against Sidewalk Toronto with a piece called, Anger over Google’s vision for Toronto waterfront is misguided.
The below excerpt is what I was trying to diplomatically allude to with my post on net present value. We need to look at what we are getting and what we are giving up (by way of foregone revenue).
What had civic (and provincial) nabobs gnashing their teeth was Sidewalk’s suggestion that it should receive a share of city property taxes and development fees. And what would the New York-based outfit do in return? A few things, it turns out. Specifically, it would finance the long-delayed Queens Quay LRT, build the infrastructure necessary to remake much of the Port Lands, launch a new wood-based construction industry and, oh yes, kick-start redevelopment of 140 hectares of long neglected landfill.
I also don’t understand how the possibility of expanding into the Port Lands has come as a surprise to anyone. That was always integral to the opportunity here in Toronto.
What your thoughts?
Yesterday’s post was about Amazon pulling out of NYC. Today I thought we’d talk about another contentious city building debate that is happening closer to home.
This week Sidewalk Toronto announced that it would like to expand its development focus beyond Quayside to the entire Port Lands district along the waterfront.
To pay for all of this, the Alphabet company is looking for a share of the city’s property taxes and development charges (impact fees), and they want to capture some of the increase in land value.
Not surprisingly, many reacted poorly to this announcement. Some people are already grouchy about what Sidewalk is up to at Quayside and so this was inevitable.
But sharing revenue and upside is not necessarily a pioneering idea. It is called a partnership. Perhaps the partners have different skill sets. That is usually a good thing. But regardless, the best partnerships are when all parties win.
What Sidewalk allegedly wants to do is shoulder more risk upfront in exchange for a kicker on the backend. This, too, also has a name. You can call it real estate development.
I don’t know the specifics of the deal being proposed, but the question that comes to mind is: What is the net present value to the city — both quantitative and qualitative — with and without Sidewalk?
(No links in today’s post because I’m writing on mobile while standing at the airport.)
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 April 2017, Jean-François Houde (of Cornell), Peter Newberry (of Penn State), and Katja Seim (of UPenn) published a paper on this very topic called, “Economies of Density in E-Commerce: A Study of Amazon’s Fulfillment Center Network.” There’s also this Knowledge@Wharton podcast on the paper if you’re looking for a quicker listen or read.
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’m working on integrating an iPad (back) into my workflow as a developer.
I used an iPad 2 (c. 2011) while I was completing my MBA. I mainly used it for taking notes and saving money on hard copy textbooks. But after it got old and painfully slow, I stopped using it. It was a nice to have, but I never felt the need to replace it with a newer model.
Lately, however, I have been hearing from a number of developer friends that an iPad – along with an Apple Pencil – is simply invaluable for people, like me, who are constantly reviewing, signing and marking up documents and drawings. So I have decided to reevaluate how I work.
I am still getting set up, but I can already see how it is going to dramatically streamline some of my workflows (for one, there will be much less scanning).
I am currently on the hunt for apps that can help with floor plan designs – something that will work like trace paper but with dimensions. We spend a lot time working to make these perfect. It’s the core product, after all. So far I’ve found TracePro by morpholio. Maybe you all know of something better.
Outside of the office, I also think I’ll be able to replace my laptop when it comes to writing this blog and editing photos on the road. There’s Lightroom for iPad and all you need is an SD card reader to download all of your photos to it. (Too bad it isn’t possible to connect my Fujifilm directly.)
I’ll let you know how all of this goes. But if any of you have already gone paperless, please feel free to leave your tips in the comment section below.
Photo by Kelly Sikkema on Unsplash
