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.
I am moderating a panel at the Toronto Real Estate Forum later this year (it’s on December 2 to be exact). The topic is innovation in development. There is a great panel of speakers (more info here) and the plan right now is to cover everything from new design and construction approaches to the rise of crypto and blockchains. Topics that are all near and dear to this blog.
But we are still in the early stages of planning and I haven’t yet figured out what the questions to the panel will be. So I thought it would be interesting to hear from all of you: What would you say are the most important topics to cover when it comes to innovation in development? What’s next for our industry, or what should be next for our industry?
If you have any thoughts, please leave a comment below. That way everyone can see them. Supposedly this is one of the most asked for topics at the real estate forum, and so it’s clearly top of mind for many people.
This recent post by Benedict Evans talks about the firehose that is the internet. To illustrate this point, he gives the example of unread emails. If you were to look at your phone right now, how many unread emails would it show?
My work email account is mostly read because reading and responding to emails is one of the ways that I manage to remain gainfully employed. But my personal email currently has 27,230 unread emails. Most of these are newsletters and emails from people wanting to somehow optimize this blog or help me reach 1 trillion followers on Instagram.
Whatever the purpose, it’s almost impossible to keep up. And since having unread asymmetric emails of little consequence doesn’t bother me in the slightest, I let it go.
This is one way to deal with the firehose — acceptance. And in Benedict’s post he makes the argument that maybe the push that we are seeing toward the metaverse is exactly that — full acceptance. “When software eats the world, it’s not software anymore.”
But the opposite way of dealing with information overload is extreme simplification. And there is something so beautiful about minimalism in a world of too much.
Today I learned about a bookstore in Tokyo called Morioka Shoten (shoten = bookstore). It is located in Ginza (pictured above) and the proposition is “a single room with a single book.” The bookstore consists of, you know, a single room and at any given time there is only one book for sale.
Each book is available for six days, after which time a new book is made available. In addition to selling one book at a time, the single room shop is used for things like events and exhibitions.
It’s a radical idea and perhaps it is best suited to Japan. But maybe we all need things that slow us down and focus our attention on only a few things or even a single thing. Maybe we need it to offset the information firehose.
Zillow just announced that it has paused its (algorithmic) US homebuying business for the remainder of this year. The company acquired some 3,800 homes in Q2 of this year and, apparently, it now has a backlog of repairs and sales to work through. As a reminder, this business model, which is sometimes referred to as iBuying, is based on using algorithms to quickly value and buy homes (mostly online). The homes are then renovated and flipped for a profit. The problem, as most of you know, is that this pandemic has, among other things, disrupted construction supply chains and made it difficult to hire people. That has hurt the renovation component of this model.
Today’s news was bad for Zillow’s stock, but good for Opendoor’s stock, which is their main competitor. Opendoor subsequently came out and announced that they remain open for business. (Disclosure: I am long $OPEN). But this announcement is perhaps a good reminder that buying and selling real estate remains a different animal than, say, buying and selling stocks. And so there are some perfectly understandable reasons for why real estate hasn’t been disrupted by the internet in the same way that other industries have. Matt Levine does a great job explaining this in his recent column, “Sorry, Zillow’s Computer Can’t Buy Your House Right Now.”
Here’s an excerpt:
“I’ll pay you $350,000 for your house as long as a human can go out there, look around, and make sure that price isn’t wildly off” is an interesting model but it’s not quite the same as “push this button to sell your house for $350,000.” And “I’ll pay $350,000 for a house and then send out a crew to replace the carpets” is not quite the same as “I’ll pay $350,000 for a house and flip it 20 minutes later for $355,000, collecting a small spread for providing liquidity.” Computerization has come into the housing market, but it hasn’t taken it over yet.
One of the challenges is that the supply of homes is heterogeneous, even in a suburban community or in a multi-family building where you might have the same set of floor plans that repeat. Because maybe the home has been renovated and fit out entirely in gold. Or maybe it’s the opposite and it has been poorly maintained. There are variables to contend with that have historically necessitated more rather than less human involvement. Homes are also something that don’t trade all that frequently, which is less than optimal when it comes to online marketplaces.
But what if buying and selling a home was dramatically cheaper and easier to do? How often would people actually do it? Presumably more often. I agree with Matt that “computerization” hasn’t taken over the real estate industry just yet. But algorithmic homebuying still appears to be one of the more promising approaches.
This is a great 30 minute talk by Horace Dediu that is structured around his 10 commandments of micromobility. If you can’t see the embedded video above, click here. What I think that many of you will appreciate about the talk is that he focuses on smaller interventions. Think bike lanes over big hyperloop moonshoots. In his words, we’re going to get to where we want to go not through hyperbole, but through humility. And micromobility is all about humility.
I’m also a big fan of his last commandment. It is titled: cities always win. Yup.
This past summer, the Bentway (in collaboration with the City of Toronto, the Waterfront BIA, and the Toronto Downtown West BIA) issued a call for expressions of interest to re-imagine two key intersections under downtown Toronto’s elevated Gardiner Expressway. The York Street intersection and the Simcoe Street intersection.
That process has run its course and the following six teams have now been shortlisted:
The next step in this process is a nine-week design exercise where the above teams will go away and prepare their design concepts. We work with a number of the companies on this shortlist and I am sure that there will be some fantastic ideas that are put forward. After selecting the two winners, the plan is to then start construction in 2022.
The Bentway is doing some fantastic work in reimagining the underside of our downtown highway. This is yet another example of that. For more information about the competition, click here.
I was out for dinner this week with a group of real estate developers. And as you might expect, we spent the majority of the time talking about real estate and complaining about how long things take. But a good chunk of time was also spent pontificating about the world of crypto. That’s what happens these days. In fact, one of my friends joked that my/this blog used to be a real estate and cities blog, but now it’s a crypto blog. It’s a joke, but I guess it’s becoming partially true.
For as long as I can remember, I have always been interested in what’s new and what’s next. And I think this is next. So I’m reading, playing, thinking, and writing about it. And the more I do these things, the more my conviction grows. But what really did it for me was the hands-on playing around part. I’m not interested in owning a crypto ETF (the US is about to get its first bitcoin ETF based on futures contracts). I want to own the cryptocurrencies directly so I can see what they can do and how everything works. (Though I will say that this space is still not very user friendly.)
One of the things that comes to mind as I continue to play is the future interrelationship between our offline and online worlds. Because already we are living in a world where people now buy and collect rent on virtual real estate in places like Decentraland (REITs are even starting to emerge). Where parties happen online instead of offline (but still attract big name DJs). Where people buy digital fashion instead of physical fashion, and pay just as much for it and sometimes even more. And where augmented reality is changing how we experience our cities in real life. A few weeks ago, I came across a park in Paris that had partnered with Snapchat to deliver an AR experience, to give just one example.
These are meaningful shifts that are gaining traction (and this post is by no means an exhaustive list). And while I remain steadfast in my belief that cities are profoundly resilient and real-world experiences are irreplaceable, I do believe that our emerging digital worlds are going to have an impact on how we design and build our cities going forward. From art murals of NFTs to entire new virtual worlds, this is an exciting time for cities and technology.
A close friend of mine is part of a company here in Toronto called Ourboro. They are a home financing company that offer up to $250,000 toward down payments on homes. In exchange for this, they take a stake in the home and their pro-rata share of any future appreciation. So they are really co-owners. And they make their money on the gains. The maximum hold period is 10 years, but the principal owner is free to buy out Ourboro and stay in the home if they want.
It’s an interesting model (and I have written about analogous ones before on the blog). Because in expensive housing markets like Toronto, saving up enough of a down payment is usually the biggest barrier to homeownership. But the question that I continually ask my friend is this: Does a model like this actually end up hurting overall affordability by increasing people’s buying power? Similar to what happens when interest rates go down. People can now afford more home.
Perhaps. But Ourboro’s roots are in social enterprise and their focus is on helping people who might not otherwise be able to buy a place. They also see their approach as addressing the “fundamental imbalance of housing supply and demand in Canada.” We know that more supply would help with affordability, but so does this I guess. And it’s easier to implement.
I suppose another way to look at this model is that it’s allowing individual homeowners to bring on co-investors, which is, of course, normal practice in the world of commercial real estate and development. Most developers don’t have all the equity needed to finance their own projects. They raise it from outside investors (and prosper through the magic of carried interest). Now end-users can do that too (but sorry, no carried interest per se).
So if you’re in the market for a new home in the Greater Toronto Area and are looking for a little help with the down payment, Ourboro might be an option for you to consider.
Toronto city council has decided to defer its decision on legalizing rooming houses across the city one more time. Some of you may remember that this item went to council in the summer and was deferred to this fall. So now a new report is going to be drafted and the item will then make its way back to council sometime in the new year. Perhaps a decision will be made at that point. We will see.
This is an interesting debate for many reasons, one of which is its divisiveness. Shawn Micallef wrote a searing piece in the Toronto Star over the weekend talking about how city council is showing its contempt for renters in this city and how council’s inaction is both “insulting and cowardly.” Article, here (paywall).
At the same time, we know that many/most councillors don’t want this to happen. Which is why you get comments like this (taken from Micallef’s article): “…fundamentally what we need to talk about is what we don’t talk about enough at this council … homeowners’ rights. People who invest in this city and who live in stable residential neighbourhoods, the people that pay the taxes in this city.”
I have already shared my views on this topic in past posts, but these are annoying comments. I live in a multi-family building. I build multi-family buildings as my job. And my next home is already planned to be in a multi-family building. Does that make me a second class citizen because I don’t live in a “stable residential neighborhood?” Am I not adequately investing this city?
Here is another article/report thing from McKinsey talking about the “fast-growing food-delivery ecosystem.” In the US, the top food-delivery players are DoorDash, Uber Eats, and Grubhub (in this order).
What is clear is that these platforms are growing very quickly and that COVID-19 was of course great for the business of eating at home. The demand is there.
But what is also clear is that food-delivery is a low-margin business that depends on scale. Last-mile and single-point delivery is tough. This is despite the fact that consumers have shown to be willing to pay a fairly significant premium in exchange for the conveniences of on-demand meals.
Here’s a chart from McKinsey that looks at the unit economics of delivery apps:
It is a race to capture “stomach share.”
But surely this evolves and gets further optimized with the continued rise of things like “ghost kitchens” and maybe autonomous delivery robots.
I remember driving home one night during the thick of the pandemic and placing an order on Uber Eats for pickup. When I arrived, I found a small food truck and one lonely guy in the middle of an empty (and wintery) parking lot on Lake Shore East. He handed me my poke bowls and I was on my way.
This is what is happening behind our apps and it’s changing the way we eat.
Here is a short film by Nils Clauss and Neil Dowling, which recently premiered at the Seoul Biennale of Architecture and Urbanism. (If you can’t see the embedded video above, click here.) The film is named after this year’s Seoul Biennale (which is going on right now until the end of October) and focuses on five crossroads of city life that were put forward by French architect Dominique Perrault: above/below, heritage/modern, craft/digital, natural/artificial, and safe/risk.
To illustrate these urban crossroads, the filmmakers visit New York, Seoul, Mumbai, Paris, and Nairobi. But instead of interviewing so-called “experts”, these crossroads are examined from the perspective of people just living through them. The documentary is very well done. And having just come back from Paris, I can say that I think they chose the right city to tackle the heritage/modern crossroad.
To close things out, I would like to share one screenshot from the film. Here you can see an ingenious little urban table that slips over a street bollard. It’s just perfect. There is so much that can be done to better activate our streets and public spaces.
