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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  • A story about oranges

    A friend of mine circulated this tweet storm over the weekend. It is an explanation of how NYC’s housing market works using the example of oranges. The author ends by saying that, “it is a parody and an exaggeration, but I promise you it’s not much of one.”

    The crux of this story about oranges is that if you don’t deliver enough to meet market demand, you’re going to invariably run into a problem of affordability. If people really want oranges, they are going to bid up the price of whatever oranges they can get their hands on. The same is true for housing.

    But there are, of course, some obvious differences between homes and oranges. People don’t live in oranges. And I would imagine that there are other ways to get your daily recommended intake of vitamin C.

    As far as I know, people also don’t buy oranges with the hope that they can derive a rental income stream and/or that they will be worth more tomorrow. And so I’m sure that many of you will be quick to point out that it is perhaps the speculative nature of housing that makes it different from most oranges.

    Still, there’s no denying that, in most cities around the world, we do a lot to make it exceedingly difficult to build new housing. We constrain supply — such that we perpetually underserve the market — and then we wonder why prices continue to rise.

    Disagree with this take? Let me know in the comment section below.

  • Popular times — how live is live?

    I was searching for a location this morning on Google Maps and I came across the “popular times” chart that many of you are probably familiar with. It shows you how busy the location you’re looking at tends to be throughout the day. But this time around, I noticed a pulsing “live” dot and it got me wondering: How live is live?

    Google collects this data from of our phones.

    It is aggregated and anonymized Location History data from anyone who has opted in on their Google Account. If you’re using Google Maps and have your location services set to “always”, you can actually see a timeline of the places you’ve visited — even if you haven’t explicitly navigated to them (see above).

    So the short answer is that the live data is really live. If there’s a spike in the busyness of a particular venue — one that doesn’t match historical busyness patterns — the Google network can pick it up.

    I’m fascinated by this kind of city data because I see it as part of the future of city building. Why not use more data to inform the way in which we plan and build our cities. Retail data, traffic data, migratory patterns, population densities — all of this and more is now available to us.

  • Ground-related housing vs. apartment permits across the Greater Golden Horseshoe

    Here are two charts from a recent blog post by Ryerson University’s Centre for Urban Research and Land Development. The charts compare residential building permits issued for ground-related housing vs. apartment suites.

    Over the last two quarters (Q4 2020 and Q1 2021), the Greater Golden Horseshoe (GGH) issued a record (all-time record?) number of permits: 39,734 housing units. This represents a 56% year-over-year increase.

    The biggest contributor to this increase is, not surprisingly, apartment units. These permits saw a 73.6% year-over-year increase. There’s simply no other way to deliver this amount of new housing — at least in the context of the GGH. You have to go up.

    But given the price increases that we have seen across the region for ground-related housing, Ryerson’s CUR concludes that there must be a strong home buyer preference that is simply not being met by the amount of low-rise supply we are delivering.

    Notwithstanding this potential mismatch, I don’t see things changing anytime soon.

  • Too much low-rise — Theresa O’Donnell in conversation with Larry Beasley

    I attended the above talk last night over Zoom. (Shoutout to Michael Mortensen for inviting Slate’s development team and for helping to moderate the Q&A.) The talk was a conversation between Larry Beasley (former Director of Planning for the City of Vancouver) and Theresa O’Donnell (the newly appointed Director of Planning for the City of Vancouver). Prior to this, Theresa was the director of planning for cities such as Las Vegas, Nevada, and Arlington, Texas.

    I’d like to point out two comments that she made last night that I found interesting.

    The first is that community meetings over Zoom actually aren’t all that bad. And the reason that they’re not all that bad is that they tend to draw out larger crowds (they are easier to attend), and so the feedback on development applications tends to be a bit more inclusive / representative. I agree with this overall view and I’ve been arguing for years (here on the blog) that the typical approach to community engagement is pretty much broken. The opinions become lopsided when you erect too many barriers to participation.

    The second point has to do with the amount of land in Vancouver (and other North American cities) that is dedicated to low-rise housing. It’s too much and it’s going to need to be addressed in order to increase overall housing supply and to chip away at the housing affordability problem. This won’t be news to this audience, but it’s interesting to see how widespread this belief has become. Of course, the big questions remain: How gentle should gentle density be? How much intensification should these neighborhoods see?

    I also appreciated her comment that it’s pure lunacy (my words, not hers) to have higher order transit lines running through mostly low-rise neighborhoods. We need much higher densities to sustainably support these kinds of investments in infrastructure. For us Torontonians, a good example would be (most of) the underdeveloped Bloor-Danforth subway line, though there are other culprits.

    Welcome Theresa.

  • Small suites — responding to the market or social engineering?

    Let’s talk some more about floor plan designs and the economic constraints that form part of the decision making process. There continues to be a narrative out there that for-profit developers only want to construct small apartments (a form of social engineering perhaps) and that they aren’t focused on livability. So let’s dig into some of the constraints.

    Consider that the average price of a new construction condominium in downtown Toronto last quarter (Q1 2021) was $1,419 per square foot. And I bet that this number has already increased. Now consider that, in the City of Toronto, the “growing up guidelines” suggest that an ideal family-sized three bedroom suite should be around 1,140 square feet.

    When you multiply these two numbers together, you get an “ideal” three bedroom suite that costs just over $1.6 million. Of course, this is without parking. So if you want downtown parking, add another $100-200k (which, at this price point, is still almost certainly going to be a loss leader for the developer).

    All of a sudden, you’ve now got a $1.7 – 1.8 million residence. This will work in some submarkets and in some locations, but certainly not all.

    So what happens is that the end price becomes a constraint. And in order to make the suite more affordable, the developer will naturally look for ways to make it smaller. Turn this into a 900 square foot three bedroom and all of a sudden you shave off over $300k from the price.

    The point I am hoping to make is that developers generally aspire to respond to what the (sub)market wants. If the (sub)market wants a certain price point, developers will try and meet that need. If the (sub)market wants massive apartments, developers will gladly deliver. (We’re working on combining some supremely awesome suites at this very moment in fact.)

    It is “what if” instead of “should be” thinking.

    Photo by Loewe Technologies on Unsplash

  • Floor plan comments, and thoughts on inset bedrooms

    https://twitter.com/donnelly_b/status/1399368976229097473?s=20

    I came across the above floor plan over the weekend. I reshared it on Twitter and there was then a pretty good discussion about what people like and don’t like. I mean, who doesn’t like looking at floor plans?

    The suite is 790 square feet with 2 bedrooms and 1 bathroom. It rents, at least according to Bobby’s original tweet, at $2,600 per month. That’s $3.29 per square foot. I’m guessing that the apartment is in Philadelphia solely based on Bobby’s location.

    The divisive thing in this floor plan is the two inset bedrooms. Some people don’t like these. But designing a good floor plan is like working through a puzzle. You have all these constraints (some of which are just personal preference) and you have to find ways to work around them.

    When you’re working with a deep urban floor plate, you pretty much have no choice but to design floor plans with inset bedrooms. Otherwise, the suites get too big and they stop making economic sense. I have talked about this a few times before on the blog.

    So what you do is “bury” the bedroom(s) and keep the main living space as open as possible. In this case, the living/dining dimensions are about 17′ wide x 10′ deep. So a pretty good size, and certainly a very good width.

    An alternate solution might be to flip one of the bedrooms up towards the main glass (keeping the second one inset). But given that you only have 17 feet to work with here, something is going to have to give. So if you made the living room 9′ wide, you’d then only have somewhere around 8′ for your bedroom.

    Personally, I don’t mind inset bedrooms, especially if they allow for more generous living spaces. So I think that this is a fairly reasonable and functional suite layout. I would have absolutely lived in an apartment like this when I was going to school in Philadelphia. (Is this even the right location?)

    But if I were to make a few tweaks:

    I would compress the bedrooms slightly to enlarge the living space even more. (Though if the target market is student roommates, perhaps the idea is to allow for a desk in the bedroom.) I would then flip the closets to the partition wall between the two bedrooms to improve sound attenuation.

    I would also try and get the kitchen out of the hallway and into the main living/dining area. I don’t know where all the plumbing stacks sit (see, constraints), but perhaps it just slides up toward the glass. Another solution might be on the other side of the upper bedroom (where there is currently a closet).

    But what are your thoughts? Would you rent this apartment? Comments welcome below.

  • Economic update with Benjamin Tal — get ready for the second half of this year

    Benjamin Tal — CIBC’s Deputy Chief Economist — is seemingly everywhere. And earlier today, he was delivering an annual economic update at an online event hosted by Brattys LLP (our condo lawyers) in partnership with CIBC. Below are a handful of slides that I found interesting and that I tweeted out during the event.

    All of our personal risk curves changed during this pandemic. When the first wave hit, we all had no idea how bad this was going to be and what to expect. And so we all stayed home and washed our hands and our groceries. That changed with each subsequent wave. And now we’re all ready and anxious to be done with this.

    Tal referred to this as one of the most unequal recessions we’ve ever seen. If you had a high paying job, you probably kept it. And after you stopped spending money on eating out, entertainment, travel, and watching the Leafs lose in person, you likely had a meaningfully higher savings rate. That has created some $100 billion of “excess cash” sitting on the sidelines.

    This cash wants to be spent and I think we’re going to see it flying out the door in the second half of this year. Much of it will also flow into services, which should help to prop up the hardest hit segments of the economy. So while there has been some real pain, many are expecting the economy to snap back pretty quickly. Get ready for some euphoria in the second half of this year.

    This last slide is particularly relevant to the kind of things we often talk about on this blog. It is essentially showing the increased demand for housing outside of the city during this pandemic (as of Q4 2020).

    A flatter line (Vancouver, Calgary) indicates that year-over-year price growth was less affected by “distance from the city center.” On the other hand, a steeper line (Toronto, Ottawa) indicates that price growth was stronger the more you moved outward from the core. In the case of Toronto, it was nearly 20% YoY when you got about 60-70 kilometers out of the city.

    But it’s important to keep in mind that the core of Toronto still grew at about 5% year-over-year. About the same as in Vancouver. And in the case of Ottawa, the number looks to be about 17.5% in the city center. These are meaningful numbers and not the kind of symptoms you would expect to see from downtowns in the middle of a death spiral.

    I would argue, as I have many times before, that this last chart is the result of short-term phenomena. I bet we’ll see a number of these pitches reverse by the time Q4 2021 arrives.

  • ONE DELISLE: Official launch video

    Last week was the official broker launch for One Delisle. In normal times, we would have packed the house and done a fun in-person event involving food, and probably some negronis. Instead, Lucas, Riz, and I did a livestream from the sales gallery at Yonge & St. Clair.

    That video is now available online (embedded above and here). You’ll have to get past our hair (Lucas and I are both in desperate need of a cut), but otherwise it’s pretty cool. Shoutout to Veronica for pulling everything together and making it awesome.

    If you’d like to schedule an appointment at the sales gallery, send a note to sales@onedelisle.com. Please also feel free to contact me directly (or copy me on the email to the sales team). If you’re interested, I would encourage you to act quickly as demand has been incredibly strong.

  • How meaningful is the exodus from Hong Kong?

    When I was in my early 20s, I spent a summer living and working in Taipei and Hong Kong. It was a wonderful experience. I’ll never forget my apartment in Hong Kong’s Causeway Bay. It was a small single room with a small bed and an even smaller bathroom. The bed didn’t fit me — at all — and my legs would hang over the bottom of it. I couldn’t stop hitting my shins on the bottom of the frame at night. The bathroom didn’t have a dedicated shower, just a hose coming out of the wall. So everything would get wet. It also took me 15 minutes the first morning I showered to figure out how to make the water hot. Eventually I got it.

    Despite all this, I remember being enchanted with Hong Kong. Here was this tiny little place with very little developable land that had managed to become, through trade, finance, real estate and other things, one of the wealthiest places in the world. Capitalism! I could also feel the connection to Toronto. Hong Kong has one of the largest Canadian expat communities in the world. In fact, I ran into one of my high school math teachers in a bar in LKF. That was wild. He had moved there with his wife to teach. I suppose because of all of this, I have tended to follow the region a bit more closely.

    Last July, the British government promised a path to citizenship for the 3 million or so Hong Kong residents who hold or are eligible for a British National Overseas passport. This passport, as I understand it, was given to citizens at the time of the 1997 handover. Though I don’t know how utility was actually derived from it over the years. Before last year’s announcement, this document didn’t include the right to stay in the UK. However, now it does. And the UK government expects that some 300,000 Hong Kong residents are going to take advantage of this in the first five years of the program. And indeed, according to the Financial Times, 2020 was the first year since SARS back in 2003 that the region lost people — it had a net outflow of about 39,800 people.

    What will this mean for Hong Kong? Well, Bank of America estimated earlier this year that capital outflows from Hong Kong could reach £25 billion in the first year of the program. But maybe this is being too conservative. Here in Canada, capital outflows from Hong Kong hit a record last year at C$43.6 billion. But this too could be an underestimation, as it doesn’t include transfers below C$10,000 and probably a bunch of other transfer methods. How much money is actually flowing outward?

    This weekend the Financial Times published the above survey results showing sentiment around leaving Hong Kong. Surveys are, of course, a funny thing. Saying you might probably potentially do something is a lot different than actually doing something. But for what it’s worth, about a quarter of pro-democracy supporters (which is maybe half of the population?) responded by saying that, yes, they would be prepared to leave. If you include those who responded no, but that they would reconsider and leave if things got worse, the number increases to about 70%.

    I don’t know how meaningful all of this becomes for Hong Kong. Time will tell. But it has me thinking about my tiny bed and tiny shower in Causeway Bay.

    Image: Financial Times

  • Trying to be remarkable

    “Very little remarkable comes out of bureaucracies for a simple reason. The members of the bureaucracy seek to be beyond reproach. Reproach is their nightmare, their enemy, the thing to avoid at all costs. And the remarkable feels like a risk.” —Seth Godin

    I went into the office yesterday to sign some documents (they had to be originals) that I have been working on finalizing for the last 6-7 months. I’m not going to share what the documents were or who was involved, but I will say that it took the entire 6-7 months to get two lines added to the agreement. No other changes. Just the addition of two lines — okay, it was more like a line and a half. On the one hand, I am horrified that such simple things can take so long in the hands of bureaucracy. On the other hand, this is not an outlying situation.

    I say this not to bitch, but to instead make a case for the remarkable. As I was signing the documents yesterday, I couldn’t help but think of the writing of Seth Godin and quotes like the one at the top of this post (which is from a post called “Bureaucracy = death”). Because one of the professional goals that I have set for myself is to always strive to create things that are remarkable. I want people to look at whatever the thing might be and think to themselves, “yeah, this is extraordinary.”

    But here’s the thing about remarkability. It lives on the edges. It’s by definition not ordinary. It is extra-ordinary. And so there’s risk. Maybe it won’t work. But you know, that’s okay. It also thrives on novelty. You have to be the first and you have to be the best. Because when it does work, it’ll very quickly become the ordinary. But this too is okay because it’s how the world moves forward. Remarkability is not a one time event, it is something that is continuous.

    That we have organizations with cultures and processes that systematically eschew the remarkable makes me sad.