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.
In fact, a big part of what I do for a living is imagining what things could be in the future. However, the bias that humans have toward the status quo has been well documented by people like Seth Godin, as well as many others. It is easier to defend that which already exists. Here’s how Seth puts it:
All one has to do is take the thing we have now as a given (ignoring its real costs) and then challenge the defects and question the benefits of the new thing, while also maximizing the potential risk.
So as I was reading this recent blogTO article about the work of Stephen Velasco, I wasn’t surprised to see some of the responses. Stephen has built an outstanding 3D model of all the towers that are currently planned or under construction in Toronto. Here’s what that looks like:
Room to grow – Toronto’s ongoing development boom continues to reshape its urban landscape.
For some of you, this is exciting. And for others, this may look like too much density. In both cases, we might think we are being fair and reasonable in our assessment, but the reality is that it’s actually quite difficult to be a neutral judge. We are all guilty of poor logic and too much emotion.
But here’s a good mental exercise, put forward by Seth, to test your logic: flip the story and then see if you still feel the same way.
In this particular case, imagine that all of the above proposed buildings are already built. This is the city that we all live, work, and play in. This is the status quo. Now consider an exciting new proposal being put forward to demolish many/most of these buildings, create more surface parking lots in the core, industrialize our waterfront, and reduce our overall population density.
As promised, below is a list of some of my predictions for this coming year. I have tried to be both punchier and more precise in my prognostications; because, well, obvious predictions are boring and precision will allow me to better evaluate my thinking at the end of the year. So here goes.
2022 will be the year that COVID-19 becomes endemic and finally fizzles out to a point where it no longer factors into our decision making in the same way that it has for most people over the last two years or so. I think this will happen by as early as the summer.
As a result, I think the majority of people will be back in their offices by this September at the very latest, with many coming back much earlier. The whole hybrid/flexible work thing won’t completely disappear, but the majority of people who used to work in offices will be back.
Recreational/fringe residential real estate will soften in 2022 as a result of 1) its tremendous run-up during this pandemic and 2) the renewed pull of urban/office life. Conversely, urban apartment rents will continue to rise and eventually surpass their pre-COVID levels. The SF Bay Area could be one exception.
The explosion of travel that I thought was going to happen in 2021, will truly happen this year. The summer will mark its official return, with European travel volumes (to give just one example) returning to their pre-COVID levels.
We will see meaningful efforts to further breakdown the hegemony of single-family zoning throughout many North American cities. This has been building for a number of years and I think we will see some tipping point-like moments in 2022. Specifically, expanded permissions for multi-unit housing and greater densities.
I wish I could say that autonomous vehicles are destined to do something truly remarkable this year, but I think we are still a few years out (2024-2025?) before a large chunk of us are ride-hailing AVs. But on a related note, I do think that Uber will come into its own this year and finally become profitable (and not just with adjusted profits).
Public transit ridership will, unfortunately, remain depressed and below its pre-COVID levels for this entire year. The beneficiaries of this will continue to be cars (not good), bikes, and micro-mobility solutions like e-scooters.
2021 was a huge year for NFTs and other fun stuff like digital fashion. Given these trends, I believe there will be growing demand from people to better integrate their digital and physical lives through technologies like augmented reality. Snap has been at the forefront of this space for many years and 2022 will be an important year for its Spectacles (AR glasses). But Apple and others will also make major announcements.
Miami’s ascent as an important tech hub will get interrupted by questions surrounding the climate crisis and its own resilience. At the time of writing this post, the price of carbon on the EU’s Emissions Trading System (EU ETS) is about €80 per tonne. I think we will see it break €125 per tonne this year, and possibly go even higher.
Ethereum, Bitcoin, and Solana (in this order) will be the top three cryptocurrencies according to market cap by the end of the year. At the time of writing this post, their market caps are $446 billion, $895 billion, and $55 billion, respectively. I am also expecting some breakout web3 consumer applications that will push, maybe, 40% of Canadians and Americans into the crypto space.
Past performance, we are often told, is not necessarily indicative of future results. At the same time, history has a funny way of repeating itself. I recently stumbled upon this research paper by Marc Francke (University of Amsterdam) and Matthijs Korevaar (Erasmus School of Economics) looking at the impact of pandemics on housing markets. More specifically, it looks at the impacts of the bubonic plague on 17th-century Amsterdam and of cholera on 19th-century Paris. Here’s an excerpt that summarizes what they found:
Our analyses for both cities point to substantial impacts of pandemics on property prices. We find that sales prices respond negatively to outbreaks, in particular in heavily affected areas, and that responses are short-lived, with the effects on sale prices being particularly significant in the first six months of an epidemic. Evidence from aggregate house and rent price indices suggests a smaller negative impact on rent prices. Amsterdam and Paris were very resilient to these outbreaks, with population and house price growth quickly reverting to prior trends.
This paper was first published at the beginning of 2021. A lot has changed since then and, in some ways, their findings now seem obvious. There was still a great deal of uncertainty in the market 12 months ago. While it seems like eons ago, I remember our team having discussions around when would be the right time to launch sales for One Delisle. Of course, 2021 turned out to be a record-setting year for housing and that includes the core/urban housing that the media was quick to write off at the onset of COVID.
This is not to say that certain things haven’t changed or that there won’t be further changes — both positive and negative — that come out of this. To give one just example, we all continue to hear anecdotal evidence that a lot of tech talent would now prefer to be in cities like Miami over San Francisco. (I’m not tech talent, but this would be my strong preference.) Did the pandemic help fuel this? Probably. It opened a door for the people who no longer wanted to live in a city with such a supply-constrained housing market. (I’m sure there were other reasons, too.)
These things, of course, happen. Cities are powerfully resilient, but they still need to compete. The bigger point is that cities continue to be our greatest centers of opportunity. And here we have centuries of data and housing records to support the fact that opportunity is both a powerful motivator and a centralizing force for urbanization. This is true even in the face of things like pestilence.
Happy new year, everyone. I think there’s a lot to look forward to in 2022, including far less talk about pandemics and hopefully far more talk of places like Miami.
Following my recent post about the largest cities in the world (from 100 to 2015 CE), a number of you rightly pointed out that the data looked questionable. Where, for example, is Shanghai in this latest list of largest cities? So I think it’s important that I do a follow-up post.
There are a number of nuances to consider when trying to measure urban populations. Perhaps the two most obvious are the geographic extent of each city (i.e. what urban boundary do you use) and the number of people living in informal settlements.
The UN recently estimated that there are some 1 billion people living in slums or informal settlements. That represents nearly a quarter of the world’s urban population, which is a staggering number and a pressing global need. We desperately need more housing.
When it comes to measuring the size of an urban agglomeration, most of the studies that I have seen tend not to focus on municipal boundaries (“city propers”) or metropolitan areas. The former is often based on arbitrary political boundaries and the latter often contains undeveloped rural land.
So for the purposes of this post, I’m going to go with Demographia’s definition of “built-up urban area.” They define this as being a continuously built-up area with one labor market and with no rural land. In their view, the world is either urban/built-up or rural. The built-up part is the lighted area that you would see on a nighttime satellite photo.
Given this definition, there are a number of interesting fringe cases. For example, contiguous/adjacent urban areas with more than one labor market get split up into multiple ones. This is the case in the US with the northeastern “megalopolis” that runs from Boston to Washington.
Conversely, if adjacent urban areas share a labor market and are linked together by similar commuting flows, then they get grouped into one urban area. This might be the case even if the area(s) straddle a national border. In this particular case, the free movement of people and goods would be another prerequisite.
With these definitions out of the way, below is another stab at sharing an accurate list of the world’s largest megacities or built-up urban areas. This is one is by Demographia and there are a number of key changes compared to the last one I shared. Shanghai now features in the top 10. But Lagos drops down to number 20, which remains a bit of a question mark for me.
For a copy of Demographia’s full report, click here. It looks at all urban areas with a population greater than 500,000 people (total is 985). Of course, if any of you have any other data sources that you think I should take a look at, feel free to share them in the comment section below.
The Financial Times published an article this week talking about the record number of homes that Londoners bought outside of the boundaries of the city this past year. The total was about 112,780 homes worth some £54.9 billion — again, it was a record in terms of total value.
The argument is that this pandemic continues to fuel decentralization, flexible working arrangements, and greater demand for larger spaces. Housing preferences have permanently changed. And the suggested takeaway is that this dynamic might have “serious consequences for the city’s population and housing market.”
But of course, I’m going to question whether this is really the case. The ~£55 billion number is clearly a new high according to the article. The previous record was £36.6 billion back in 2007. But that doesn’t give you the full picture because homes cost a lot more today than they did back then.
If you look at the total number of homes purchased outside of the city by Londoners, the record still belongs to 2007 with approximately 113,640 homes. When I see this number it makes me pause.
Because here we are living through a global pandemic and the largest work from home experiment in modern history, and yet the total number of homes purchased outside of the city this past year is still comparable to that of the last housing cycle.
Did this moment in time really create an anomalous and irreversible shift in housing preferences?
I just discovered this set of maps (via Brian Potter) looking at the largest cities in the world from 100 CE all the way through to today (well 2015 CE). Here are what the two bookends of this map series look like:
It is an interesting reminder of just how centralized the world was around the Mediterranean and parts of Asia, and also how nothing is guaranteed. As recent as 1900, cities like Manchester and Philadelphia were among the top 10 largest cities. Today they aren’t even close.
Some people, okay a lot of people, used it as an opportunity to be tongue in cheek and respond with things like: cheaply built condos, boarded up Starbuckses, Hooker Harvey’s, Drake’s house in the Bridle Path, the crumbling Gardiner Expressway, and that McDonald’s at the northwest corner of Queen and Spadina (this one is no longer a contender for me now that they’ve gotten rid of their walk-up window).
Of course, there were also a lot of the usual suspects: The Sky Dome, The Gooderham Building (our miniature Flatiron Building), Casa Loma, The Royal Ontario Museum (specifically the expansion by Studio Libeskind), “New City Hall”, The Royal York Hotel, Honest Ed’s, The St. Lawrence Market, Robarts Library (University of Toronto), and a bunch of others that you might find displayed on the seat screen on your next Air Canada flight.
But I’d like to unpack the initial question a bit more. Because what does it really mean for something to be a symbol of a city? And is there an important distinction between the symbols that resonate with locals on a personal level and the symbols that get exported around the world as a city’s brand and identity? Indeed, one of the criteria in most global city rankings is a prominent and recognizable skyline. Icons are important.
Let’s consider an example. I agree entirely with Sean Marshall that “New City Hall” is a deeply symbolic building. Built in the early 1960s after decades of work, New City Hall was the outcome of an international design competition. And it was decidedly modern at a time when Toronto really wasn’t that modern. Montréal was the biggest and most global city in the country and multiculturalism hadn’t yet become a federal mandate. And so New City Hall symbolized our genuine ambitions to becoming something more.
But does the rest of the world care? If you were to ask somebody my question on the streets of Rio de Janeiro or Tokyo, what would they say? What would they remember? The thing about most tall buildings or other city symbols is that they become abstractions. They turn into pictures on social media — like logos of a company. But maybe that’s all we can reasonably ask of the world. Maybe all that really matters is that a symbol has local significance; it’s then up to us to export it and tell that story to the rest of the world.
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.
The Institute for Transportation & Development Policy (ITDP) is a non-profit group that works all around the world — everywhere from Jakarta to Rio de Janeiro — to design and implement both transport solutions and policies that help to make our cities more livable, equitable, and sustainable. If you’re interested in learning more about the kind of work that they do, you can download a copy of their latest annual report, here.
Most recently, the group published a report called, “The Compact City Scenario – Electrified.” In it they argue that two things need to happen together if we are to move humanity toward net-zero carbon emissions and reduce global warming to less than 1.5 degrees Celsius by the end of the century. One, we need to fully electrify our transport (which I think is fairly obvious at this point). And two, we need a modal shift.
To be even clearer, ITDP argues that both of these things need to happen at the same time in order to successfully hit our targets. Full electrification of our transport without any sort of modal shift isn’t going to cut it, and the same is true for a modal shift without electrification.
Why all of this is important is because electrification is in many ways just a technical problem. We need electric vehicles, we need batteries, and we need the infrastructure in place to charge these vehicles. Among other things, this has meant building new charging stations, retrofitting existing buildings, and encouraging/requiring new buildings to make provisions for a future with predominantly electric vehicles.
But for the most part, EVs allow us to continue living the way that we have already been living. Just instead of pumping gas, we now plug in our cars at the end of the day. On the other hand, encouraging a modal shift is a fairly significant behavioral change. Though we know that one of the most effective ways to encourage less driving is to build more compact cities.
This means changing the way we live. Changing the way we get around. And accepting more intense forms of development in our own backyards. It is fundamentally linked to land use planning and so it is going to be much harder to achieve. But if you agree with the above report, we won’t be able to meet our sustainability goals without it.
We knew it was coming. But it’s important and worth mentioning again. This week, Toronto City Council adopted new Zoning Bylaw Amendments that will remove most parking minimums across the city. We now join many other cities across North America who have done similar things in order to try and encourage more sustainable forms of mobility.
If you’d like to take a spin through the draft amendments, you’ll find them linked here. I haven’t gone through them in detail, but I did do a word search for “maximum” given that this week’s adoption represents a pretty clear change in perspective. Here’s an excerpt from the staff recommendation report that speaks to what I’m talking about:
Recognizing these challenges, this review of the parking standards in the city-wide Zoning By-law 569-2013 was guided by the principle that parking standards should allow only the maximum amount of automobile parking reasonably required for a given use and minimums should be avoided except where necessary to ensure equitable access. The previous review, which began in 2005, was guided by the principle that the zoning standards should require the minimum responsible amount of parking for a given land use. This is inconsistent with Official Plan policies which discourage auto dependence.
One other thing I found in the documents that went to Council was this map of parking spot selling prices in active high-rise developments across the city. Not surprisingly, downtown and midtown are showing the highest prices per parking space. I can’t vouch for the accuracy of all of these dots, but it looks directionally right and I can tell you that at least one of them is correct.
All of us in the industry know how much parking drives decision making. There’s a joke (half-joke) that when you’re designing a building, first you lay out the parking and then you design all of the residential suites around that structural grid. That’s not the way things should be done. The future of this city should not and cannot be centered around the car. This week’s adoption is in service of that.
