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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  • Multiple paths to a quick yes

    I have heard a number of people describe this blog as covering all that is new. That wasn’t my explicit goal when I started writing it. My goal was simply to focus on cities and all the wonderful things that shape them. But it turns that new ideas form a big part of that and that I am very interested in new ideas. Change is what moves the world forward.

    Of course, there is no shortage of new ideas. We all have brilliant ideas. Maybe you’re looking at Toronto’s public garbage bins right now and thinking to yourself, “You know what, I have some terrific ideas for how these could be greatly improved.” And chances are, your ideas are good ones. The problem, however, is that ideas are fleeting. The real challenge is bringing them to fruition before they die.

    So here are a few thoughts that came to mind this morning:

    • There is a difference between incremental improvements and directional/fundamental change. Generally speaking, we tend to be naturally better at ideas related to the former than the latter. When we look at a Toronto garbage bin on the street and see it overflowing with rubbish and see all its side panels swung open, we intuitively see the problems. But it is less common to think about, oh I don’t know, subterranean garbage networks for moving refuse around or networked robots that come out at night and tidy our streets with purple brooms. This is also why when we come up with something new like a horseless carriage or an iPhone, we often name them after the thing we already know and are familiar with, even though it probably undersells how meaningful the change is. It helps our minds make the leap.
    • Many organizations have separate decision making processes that depend on the above. Amazon, for example, likes to ensure that incremental improvements have “multiple paths to yes” within the company. Again, these are the more intuitive kind of changes and so you don’t want some brilliant, yet fragile, idea to get killed by some naysayer along the way. You want as many of them being implemented as possible. On the other hand, ideas that might change the direction of the company are typically slowed down and carefully deliberated. This is a common split. “Major decisions” go up to some greater governance body; whereas all other day-to-day decisions just get made on the fly by those “in the field”. This is one way to keep things moving quickly.
    • On a related note, venture capitalist Fred Wilson wrote today about the virtues of small and flat partnerships when it comes to early-stage investing (but I don’t think the lesson only applies to this sector). In his view, the biggest venture winners — at least when it comes to early-stage companies — often come from the most “controversial and out there” ideas. And to make these sorts of bets it is helpful to have a small and flat team with a lot of trust. I found this particular insight really interesting because it implies that when you have the opposite — big and hierarchical organizations — you naturally start to lose your ability to experiment with non-consensus ideas. And so what you’re likely left with is just the intuitive and incremental stuff.
    • Recently, we also spoke about the argument that generations view change differently. Young people are often more open to new ideas, at least partially because they view it as a way for them to make their mark on the world. Older generations, on the other hand, often view change as a threat to their current position in the world. None of this is universally true, but think about how this often plays out with new housing. Young people view housing supply as a way for them to buy or rent something new and form their own household. Whereas already established households can view it as a threat to their community and their existing way of life.

    These are a broad set of thoughts. But if there are any lessons to extract from these bullet points it is perhaps these: One, consider the kind of decision that needs to be made. Is it something incremental and intuitive? Is it an obviously sound infill housing project? Because if so, you want multiple paths to a quick yes. And two, consider who gets a say and who controls the decision. Because the wrong group dynamic can kill even the best new ideas.

  • We really just wanted faster horses

    It’s easy to forget stuff like this:

    In the first decade of the 20th century there were no stop signs, warning signs, traffic lights, traffic cops, driver’s education, lane lines, street lighting, brake lights, driver’s licenses or posted speed limits. Our current method of making a left turn was not known, and drinking-and-driving was not considered a serious crime.

    There was little understanding of speed. A driver training bulletin called “Sportsmanlike Driving” had to explain velocity and centrifugal force and why when drivers took corners at high speed their cars skidded or sometimes “turned turtle” (flipped over).

    The transition from horses and buggies to horseless carriages, as they were first called, was one of the most impactful things to ever happen to our cities. Cars were more dangerous. Some, or perhaps many, were opposed to them initially (and didn’t see the need to move away from horse-drawn wagons). And we had to invent a myriad of traffic systems in order to try and make them remotely safe for people.

    One could easily argue that we are still grappling with these same safety problems. See yesterday’s post about traffic-related fatalities. But is the answer to have never invented horseless carriages or is the answer that we need to be much better about managing and controlling them within our built environments and around humans? I would say it’s the latter.

    And I would also argue that there are parallels here with how some people feel about electric scooters today. What is clear is that both urban clutter and safety are valid concerns. When electric scooters first started becoming popular, they were being left all over the place. But I think that has been largely solved through geofencing and by forcing people to take a photo of their parked scooter at the end of their rides.

    Progress is also happening around safety. E-scooter company Superpedestrian, for example, has designed larger and more stable scooters, and also has something called Pedestrian Defence, which uses fancy AI to block people from riding on sidewalks, from going the wrong way on a one-way street, and from generally doing dumb and unsafe things.

    Does this solve all of our problems? I don’t know. But I think innovation in the e-scooter space is a positive thing and I hope that cities like Toronto will one day become more openminded around these sorts of micro-mobility solutions. It’s not like our horseless carriages have an immaculate safety record.

  • Turns out big cities are pretty safe

    Conventional wisdom suggests that cities are pretty dangerous. There’s crime, the chance of getting killed, and there are lots of cars, some of which have a tendency to fly off the road and do bad things on occasion. And in some ways, this is true. Here is a chart from Bloomberg showing homicides per 100k people:

    What this tells us is that if you live in a large metropolitan area in the US, you have a higher chance of being killed by someone else than if you were to live in a rural non-metro area. However, based on this data, one of the safest places you could actually live is in New York City. This might surprise some of you.

    On top of this, if you layer on the chance of dying from a transportation-related accident, the absolute safest place you could live in America is in fact New York City:

    This is because New Yorkers are only about a third as likely to die from a transportation-related accident as compared to the average American. Oddly enough, when you have a city where the vast majority of residents don’t drive their own car around, people seem to die a lot less from traffic accidents.

    But how does this compare to other cities around the world? Let’s take Paris, which is another big and important global city. According to Bloomberg, the risk that Parisians face from possible killing and transportation accidents is about one-third that of New Yorkers. So it’s even safer over there.

    Turns out that some big cities aren’t as dangerous as people might think. For the full Bloomberg article, click here.

  • New York City is back

    So here’s the headline: More people are moving to Manhattan than before the pandemic. This is true. But an even more accurate description might be that New York City was losing people before the pandemic and it is still losing people. But things have rebounded since the lows of the pandemic and it is now losing less people. Here are two charts from Bloomberg:

    This is generally good news since the increased exodus (to places like Miami) led some to believe that one of the most important global cities in the world was now dying. I never thought that was the case. But there’s no arguing against the fact that the fastest growing cities in the US are the ones with more affordable housing and fewer constraints on new development.

  • Does off-site construction equal more compromises?

    We have been talking about prefabricated and modular buildings for so long that it’s easy to think it might never happen. (Here’s a related post that I wrote back in 2015.) There are also lots of groups that have tried and failed. Perhaps the most high profile is the bankruptcy of off-site construction company Katerra, which had raised some $2 billion in funding, but for whatever reason(s) couldn’t figure things out.

    That said, I’m starting to get the feeling that change might actually be underway in our industry. Over the last few months we’ve been talking about startups like Nabr. But there are many others, including Factory OS, which has been quietly building affordable housing in California (presumably far away from here). To date, they have completed 10 buildings and over 1,200 units, and they have another 24 or so buildings in the pipeline.

    This feels promising to me. And I think it’s being aided by our current environment — costs are way up and people are desperately searching for efficiencies. But if this is really going to transform our industry, I think we’re going to need to be willing to make some sacrifices. Standardization and efficiency likely means making some concessions around design and overall specificity. Not every project can be custom, as is generally the case today.

    That likely means that cities and communities will also need to become more forgiving when it comes to urban design guidelines. Could you please step your building back right here and follow this oblique angle that lines up with this important historic datum line? Nope, sorry, can’t. Our production line can’t accommodate that sort of change. Would you like the most affordable housing possible with today’s means or would you like a custom design?

  • What am I paying more for?

    So here’s the thing. The whole reason we are all talking about how to build more sustainably is that there isn’t often a quantifiable ROI for doing so. If building a net-zero building cost less than building a regular building, everybody would be building one. But that is not the case, which is why our industry, and others, are grappling with how to justify the added costs, even though we all know it’s absolutely the right thing to do.

    The questions we are asking ourselves look something like this: If I spend X% more on this build, what kind of rent premium could I command? And in some cases this premium is quantifiable and in some cases it matters a great deal. For instance, in the case of a new office building, you might need to spend the extra money so that you can attract the right tenants. While in other cases/asset classes, you might feel as if there’s no rent premium and nobody will ever pay more.

    But I like how Seth Godin thinks about it in this recent post: people never pay extra. If you’re paying more for an electric car, for example, you aren’t actually paying extra. What you are paying is a price that you feel is fair for what you are receiving. And what is it that you’re receiving? Well, in this case, you’re getting an electric car, but you’re also buying in Seth’s words, “sustainability, community awareness, cachet, status, safety, quiet, and the feeling of being an early adopter.”

    These things have value to some people. And as long as you can deliver on your promises, extra isn’t extra at all. But perhaps more importantly, this early adoption can help encourage change. Electric cars are becoming cheaper and cheaper, and I think it’s pretty clear that they will soon replace combustion engine vehicles. This model of starting at the top of the market and then moving down seems to have worked.

    Now, the auto industry isn’t perfectly comparable to the building industry. They have been good at improving productivity and bringing down costs, and we have been awful at it. Depending on how you measure it, construction productivity growth over the last half century is sitting somewhere between flat to some negative number. But I don’t think this dubious achievement changes Seth’s message. Think about what you’re offering. Maybe extra isn’t extra.

  • I was here first

    Connor Dougherty published this thoughtful piece about NIMBYs over the weekend in the New York Times. And it has been making the rounds online ever since.

    It is thoughtful in that Connor tries to understand what makes NIMBYs tick. And he does this by interviewing people like Susan Kirsch, a resident of Marin County, California who generally opposes all of the things that California is doing to try and address its housing shortage and who has been fighting a townhouse project in her neighborhood for the last 18 years.

    The developer, who is now 86, started the project in his 60s. In the article he is quoted saying that he’s either going to succeed or he’s going to die. It’s one or the other.

    What is clear is that we all see things differently. While some people might see new housing as serving an important need. Others see new development as running counter to environmentalism and good stewardship. Indeed, for some, there is no shortage of housing (even in cities that are growing in population). It’s simply a problem of too many investors buying and creating rental homes or too many Airbnbs or some other red herring.

    Whatever the case may be, it’s hard not to pay attention to quotes like this one:

    “From my backyard I see the hillside,” Ms. Kirsch wrote from her Hotmail account. “Explain how my property value is not deflated if open space is replace(d) with view-blocking, dense, unsightly buildings.”

    Look, we all get this. Nobody wants their views obstructed. Nobody wants more cars parked in their neighborhood. And nobody wants more dog shit in their local park, among many other things. But implicit in this statement is a view that certain people’s needs and desires are more important than those of others. I was here first. Too bad for you.

  • Augmented reality is coming — will it finally reach construction sites?

    Apple has been working on new virtual reality and/or augmented reality headsets for at least 6 years. This has been widely reported. But in typical Apple fashion, nobody knows anything about them, even though something is set to be revealed as early as this fall. I also don’t know anything about them, but I already want one. I am sure Tim Cook will get up on stage at some point and convince me that I need it immediately, so I’m trying to get ahead of that moment.

    VR/AR headsets are, of course, not new. Google tried and failed. Nobody wanted to wear them besides nerds. I had a pair of Focals by North but they were far too cumbersome to use and about as comfortable as having a smartphone duct-taped to your face. Meta’s headsets currently control the market. They have about 78% market share. But the overall market remains small. It’s mostly gamers. But the same could have been said about tablets before Apple did its thing.

    The promise is that these AR headsets might replace our phones as the dominant personal device. AR > VR. And that feels to me like a reasonable assumption once the requisite tech arrives. But even before that, there are a ton of great use cases for highly-functioning AR — everything from online shopping and digital fashion to finally fulfilling the dream of walking around a construction site and visualizing the design and coordination clashes.

    Technically these things are already possible, but the technology remains fairly niche. I hope Apple changes that.

    Full disclosure: I am long Apple.

  • Centralizing in cities

    This is not all that surprising:

    It is not surprising for at least two reasons:

    • We knew that central banks would tighten the money supply at some point and that it would have a negative impact on asset prices.
    • Many of us believed that a lot of people were making a somewhat long-term decision (flee the city) because of something that would ultimately prove to be short-term dislocation (a ~2 year health crisis).

    So one of the things I think you can glean from Daniel’s tweet is that our best urban centers are resilient. Notwithstanding the fact that we have things like Zoom and previous pandemic-suffering generations did not, the core value propositions associated with centralizing in cities hasn’t gone away.

  • Practicing what I preach

    In yesterday’s post I wrote about happiness vs. satisfaction (among a bunch of other things). And I mentioned that I derive deep satisfaction from the work that I do, which is real estate development. On the back of this post, I received a question from a reader this morning that more or less asked me if I think about the impact of my work on other people’s happiness / satisfaction. Part of the point that was being made was that while it may be a positive endeavor for me, I may be completely destroying the satisfaction, happiness, and lives of others. Do I give this any thought? Lastly, a point was made that very few developers seem to live in their own housing projects, which should tell you something.

    I thought these were all very good points/questions and so I’d like to respond to them publicly:

    • I do think carefully about the happiness and satisfaction of others. In fact, part of the reason this work is satisfying is that, in my opinion, it is both challenging and important work. Growing cities require new housing and the reality is that almost all of this housing comes from private developers.
    • This may sound cheesy, but I also care deeply about beauty. This is something that is of course in the eye of the beholder. But I do want things to be beautiful. I want our cities to be more beautiful. And I don’t think we talk about this enough. I mean, just look at the garbage bins we have in Toronto.
    • Some people may not like or appreciate the form that development usually takes in cities such as Toronto, but the housing needs to go somewhere. As a result of restricting development in most areas of the city, we are now forced to highly concentrate development in relatively few areas. Many are reacting to this.
    • There will almost certainly be tensions between incumbents and new entrants when it comes to city building. That’s part of what makes this work so challenging and rewarding. Everyone involved in the building of our cities has to constantly problem solve and manage competing interests. It’s not easy.
    • I am in fact moving into one of our projects (Junction House). I am doing this because (1) I think our team is creating an awesome and beautiful project and (2) I believe that living in multi-family buildings in walkable neighborhoods is a more sustainable (and enjoyable) way to live. I want to practice what I preach.