Brandon Donnelly

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.

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  • Single-exit housing in Paris

    Lloyd Alter of Treehugger recently wrote about this infill housing project in Paris. Designed by Mobile Architectural Office (MAO), it is a 6-storey building with 6 residential suites (two of which are 3-storey triplex suites) and 1 ground floor non-residential space.

    Building section:

    But here’s where things get really remarkable: the area of this corner site is less than 100 m2 (~1,000 sf), the construction budget was €940,000 (excluding VAT), and almost the entire structure was built out of cross-laminated timber. So overall, this is an incredibly sustainable build: it uses land and services efficiently and it uses low-carbon materials.

    At this point, you should now be wondering, “why can’t we just do this everywhere?” And this would be the right question.

    Lloyd correctly points out in his article that one of the things that makes this building feasible is that it only has one exit stair (as well as no elevator). Typically you need two means of egress, which can serve as a real barrier to smaller builds like this one here.

    But in this case, and this is part of the argument, the building is small enough that, should a fire or emergency happen, occupants could be rescued through their windows. So technically there are still two ways of getting out.

    In this year’s predictions, I mentioned that we would see “supportive building code changes”, which would help to encourage more infill housing. Exiting is one of the changes I had in mind when I wrote the post. So here’s hoping that policy makers are reading this blog, looking to projects like this one in Paris, and recognizing the benefits.

    Talking about exit stairs may not be as exciting and seemingly impactful as something like a foreign buyer ban, but I promise you that removing the many barriers to building this scale of housing would ultimately bring more benefit to our cities.

    P.S. This project is also social rental housing.

    Image: MAO

  • An interactive map of industrial space in southern California

    Here is an interactive map, created by the Robert Redford Conservancy for Southern California Sustainability, showing the approximately 1,573,777,062 square feet of industrial space that can be found in Los Angeles, Riverside, and San Bernardino.

    The map allows you to zoom in on specific parcels to see things like site area, warehouse size, and year built. You can also play around with different map radii to create a rollup of warehouse space within a specific area, which includes an estimate of daily truck traffic and CO2 produced.

    The Guardian also used this data to create the following chart, which is helpful in showing the dominance of certain cities, as well as how much of this industrial space has been built since 2010:

    The point of this interactive map, this data, and the accompanying articles is to highlight just how disruptive all of this new industrial space is to these southern California communities and to the environment in general. But I think it is also an important reminder that, whether we like it or not, our online activities have real-world physical implications.

    Online shopping requires warehouses and logistics. Online food delivery requires (ghost) kitchens. And online activity, in general, requires the storage of unprecedented amounts of data. All of these “back-end spaces” take up room, even if they’re mostly easy to ignore when we’re just looking at our phones.

    This is our new “phygital” world and, yes, it is changing the landscape of our cities. Now our task is to figure out how to do this in a way that respects communities and respects the environment.

  • No more foreign buyers

    Here’s the thing about housing:

    The delegates insisted on one hand that “housing is for living not speculation”, but on the other, emphasised the critical importance of real estate to China’s economic growth.

    In other words, things are complicated. We want housing to be affordable to more people, but at the same time, we recognize that housing appreciation is kind of useful for overall economic growth. So we’re a bit conflicted. And that may be why we tend to take contradictory actions.

    Broadly speaking, the current playbook in Canada seems to be as follows: heavily tax new housing, force those who can afford new market-rate housing to subsidize those who can’t, and then tax/ban foreign buyers.

    Canada’s new foreign buyer ban came into effect on January 1 of this year. And for the next 2 years, it prohibits companies and people who are not Canadian citizens or permanent residents from acquiring non-recreational, residential property in Canada. (What is the definition of non-recreational?)

    While this may sound good to some — finally, more homes for Canadians — we’re talking about a relatively small portion of the market, which is likely why there’s also little evidence that any of our foreign buyer taxes have been all that effective.

    It’s really hard to imagine this one working much better. But it certainly sounds like something.

  • Japan pays people to leave Tokyo

    We have spoken over the years — here, here, and here — about the centralizing and decentralizing forces that play out within our cities. Agglomeration economies, for example, are a centralizing force. There are real economic benefits to people and firms clustering together in cities.

    However, there are also many decentralizing forces. Traffic congestion is one. And of course, the pandemic also proved to be a powerful one for many cities.

    But the fact that we even have cities in the first place should tell you that the centralizing forces do tend to win out over the decentralizing ones. And a perfect example of this is Tokyo. Usually considered to be the largest metropolitan area in the world, Tokyo has about the population of Canada in one city region.

    And here, the centralizing forces are so great — even for families — that the government actually pays people to relocate to places outside of Tokyo’s 23 wards (and its immediately surrounding areas). Previously the maximum figure was ¥300,000 per child (~CA$3,056), but this has now been increased to ¥1 million per child (~CA$10,188).

    A key driver of this is surely Japan’s demographic problem (namely a shrinking and aging population base). But it doesn’t change the fact that lots of people appear drawn to the world’s largest city.

  • Road salt vs. gravel

    It has been mild and wet in Toronto over the last week, but normally at this time of the year, the entire city looks like as if it was just hit by some sort of apocalyptic chalk storm. Everything is white. And that’s because we rely on rock salt and liquid salt brine to keep our roads and sidewalks free of snow and ice. Each winter, the city uses upwards of 130,000 tones of salt to maintain its service levels.

    This is the tool of choice because it is both reasonably effective and cheap. However, the trade-off is that it does horrible things to the environment. It also ruins perfectly good shoes, which should tell you something about what it’s doing to the environment. So it’s a balancing act: Yeah, it’s terrible for the environment, but we want usable roads and sidewalks. People slipping and falling is also a liability problem.

    That said, when I was in Montreal over the weekend, I did notice a greater use of gravel:

    This causes its own set of problems in the spring when it all needs to be tidied up. But in the interim, it did allow me to wear my neon Nike Air Max 90s without the fear of them disintegrating on my feet. Sometimes there’s also no choice. Road salts only work down to a certain temperature and then they become ineffective. So there are lots of examples of cities using sand and/or gravel to improve traction.

    This is not the case in Toronto. We rely on rock salt. And part of the reason for this is that our winter service levels dictate “bare pavement” on highways and arterial roads. Gravel doesn’t get you bare pavement. Salt does. Also, Ontario doesn’t require snow tires, whereas Quebec does. So there is an argument that, because of this, we are all ill-equipped to deal with anything besides bare streets. (Though have you seen our sidewalks and bike lanes?)

    I am not a salt management expert. I opted out of that fascinating elective in University. But in my opinion, the goal should be to use as little rock salt as possible. Maybe that means we need to rethink our service levels and our priorities. And maybe that means we need to do things like mandate winter tires.

  • Where the rich don’t drive — is density the new luxury?

    This data is from 2019, but I imagine that things would look pretty similar today and that it might even be a little more pronounced. The dataset from the above article looked at how many people have cars in a given area (a darker dot = fewer cars) and then plotted this against population density and income per capita.

    Here’s what that looks like for the regions of New York, Boston, Los Angeles, and Houston (data from 2013 to 2017):

    What is fascinating about these charts is that they show two different correlations. In dense and transit-rich cities such as New York and Boston, car usage is most closely linked with population density and not with income. The dark dots form a horizontal line near the top.

    However, in the case of Los Angeles and Houston, car usage is instead most closely linked with income and not with population density. The dark dots form a vertical line near the left — the lowest income per capita.

    So what does this tell us?

    It tells us that if you design a city to broadly require a car, then you are likely to sort people based on those that can afford a lot of car and those that cannot. On the other hand, if you design a city around transit, then you are likely to instead create a place where both the rich and poor get around in similar ways.

    There is also evidence that the latter is being increasingly viewed as more desirable. 2017 was the first year in the US where high-income young people (ages 26 to 33) drove less than low-income young people. Presumably these high-income people had choices, and so I tend to view this as a preference.

    As a whole, this is surely a good thing for our cities. But now I think we need to be careful not to allow density and walkability to become the new luxury that only the rich can afford.

  • What could happen in 2023

    The central bank tightening and interest rate hikes that we saw last year will come to an end in the first quarter of 2023 as inflation gets under control. This will ultimately lead to a recession but my sense is that it will be more mild than severe. For this reason, I don’t think anyone should expect ultra-low rates to return in the short-term.

    Much of the real estate sector went on pause in the second half of 2022. But ultimately this reset to a more balanced market is going to be necessarily painful for some. And I think we will see that pain play out in the first half of the year. This will obviously be bad for some, but it will create opportunities for others.

    Construction costs tempered in the second half of 2022 and started to show some evidence of price softening. I think we will see more of this in 2023, which will be healthy for the market. Cost management over the last few years has been a meat grinder for the development industry.

    Pre-construction condominium sales for well-located projects will return in a more fulsome way by the spring. This will be driven by buyers now having clarity around where interest rates will be hanging out in the short-term and, in the case of Canada’s largest cities, by record-high immigration levels.

    For the tertiary/fringe housing markets that saw big run ups in pricing during the pandemic, I unfortunately think it will take many years for prices to fully rebound. The price increases we saw in these submarkets were of course a result of low rates, but it was also driven by a view on urban decentralization that in my view did not actually materialize.

    The desire to add more housing to single-family neighborhoods will continue to pick up steam across North America. How exactly this plays out will be market specific, but in Toronto I expect to see new planning policies put in place, as well as supportive building code changes.

    Public transit ridership will remain below pre-pandemic levels throughout 2023. This will continue to exacerbate public finances.

    Autonomous taxis will grow rapidly this year. Companies, such as Cruise, will expand into a number of new US markets and, at some point during the year, I will take my very first ride in an autonomous vehicle.

    2023 will be a big year for augmented reality and “phygital” goods. Last year I thought Apple would release a new product in this space. That didn’t happen, but it will this year. At the same time, we will see more companies releasing products that blur the lines between our online and offline worlds (hence “phygital”). This will include NFTs and other crypto-related things that will start to operate more seamlessly in the background of consumer-facing products/services.

    I continue to be bullish on Ethereum and I think it will overtake Bitcoin in terms of market cap in the next 2-3 years. But I was very wrong about Solana last year. And now I am struggling with its value proposition. Today, layer 2 chains such as Polygon feel more likely to win out. Broadly speaking, I suspect 2023 will be a positive year for crypto, but not a record-setting one.

    In summary, I think we are going to see more pain at the beginning of 2023, but that on the other side of it will be healthier and more balanced markets. This means that we can look forward to the end of the year feeling much better than it does right now. All of this said, please keep in mind that I’m often wrong and that nothing in this post should be construed as actual advice.

    Happy 2023, friends. I’m excited to get going.

  • Happy new year

    We checked into a hotel in Montréal last night and I discovered this room service robot sitting next to the elevators. I have been told that if you ask it nicely, it will deliver champagne to your room. But I have yet to confirm this invaluable service.

    Montréal is one of my all-time favorite cities. I have been coming here regularly since I was a teenager and I have always felt uniquely drawn to it. It is the history, the urban grandeur, and the way that it feels effortlessly sexy. Not many cities are like this.

    So I’m happy to be ringing in the new year with family in this great city. Happy new year, everyone.

  • Warren Buffet doesn’t like crypto and streetcars

    I have a great deal of respect for Warren Buffet. Much of what I know (or think I know) about investing has come from listening to and watching him and his partner Charlie Munger. Surely they have got to be the most successful investors living today.

    But there are some things that I don’t always agree with them on. The first and most obvious one is crypto. Warren thinks it is speculative rat poison and I think it is the future of the internet. I understand where he is coming from in that it does not produce cash in the same way as say a farm or an apartment building. But that doesn’t mean it won’t have value.

    The second one, as I have learned today, is maybe streetcars. As a rule, Warren doesn’t typically engage in local politics. But he recently decided to break that rule through a letter he wrote to the editor of the Omaha World-Herald, lobbying against a new $306 million project that I believe is going ahead regardless.

    Here’s an excerpt from the letter:

    “Residents can be far better served by extended or more intensive service by the bus system,” Buffett wrote. “As population, commerce and desired destinations shift, a bus system can be re-engineered. Streetcars keep mindlessly rolling on, fuelled by large public subsidies. Mistakes are literally cast in cement.”

    I should, however, be clear that (1) I know nothing about Omaha and this streetcar project, and (2) “streetcars” can be nuanced. There are streetcars that compete with car traffic and have short station spacing, and there is light rail transit on its own dedicated tracks and with farther station spacing. One size does not fit all.

    Here in Toronto, we have lots of the former and they generally move you around at the slowest possible speeds. Sometimes it is faster to just walk. But we are also getting a new light rail line next year and that should move much faster. I can also tell you that when I worked in Dublin many years ago, I took their Luas to the office every day and loved it.

    Again, I don’t know the specifics of Omaha’s streetcar project. Maybe Warren is right or maybe he is wrong. And that’s why I was careful to say “maybe” above. But I do know that in the right urban contexts and when done well, I am a fan of light rail transit.

  • Agenda-setting headlines

    I am so tired of sensational headlines:

    The Ontario Line will zip across the core and up to Eglinton, easing gridlock and alleviating TTC misery. It will also plow through peaceful Toronto neighbourhoods, displacing homes, businesses and everything in its path.

    I know exactly what business model it is serving and why it is done, but I’ll ask the question anyway: Why do we need to make everything out to be a problem?

    In this case, we’re talking about a new and important piece of city building infrastructure. A subway line that will run through the densest parts of this country and alleviate congestion at key interchanges, as well as broadly across the city.

    It is something that we, as a city, have been griping about for many decades. And now, it is finally happening! Will it involve constructing things? Yes. Will it actually displace “everything in its path?” No.

    But as we all know, this is the way media works today. They set the agenda (i.e. tell us what we should be terrified and/or pissed off about) and then they sell our attention. And an effective way to do that is to make sure that the headlines get us really worked up.