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.
Proptech Collective has just published their inaugural 2021 Proptech in Canada report. Here are a couple of screen grabs that you all might find interesting:
What these images should tell you is that the Canadian proptech landscape is fairly Toronto-centric, but that it’s also very much in its nascent stages. We’re just getting started here.
I would encourage you to download a full copy of the report. It’s very well done.
What We Started is an interesting documentary about the birth and history of electronic dance music (EDM), starting with house music in Chicago and techno music in Detroit.
Personally, I view EDM as being distinct from house & techno, and it’s generally not my favorite kind of electronic music. But that’s besides the point. EDM is now wildly popular. It has crossed over into the mainstream and bled into many other genres.
What’s fascinating about the story of electronic music is that it’s a reminder that new ideas and new movements tend to start out on the fringe. Electronic music came from hobbyists experimenting in their garages, basements, and in warehouses. It was people tinkering with something that they were passionate about.
And let’s face it, that’s the only way this genre of music could have gotten started because no record label would have signed an electronic DJ back in the 1980s. It was weird and underground, and in the early years, the US mainstream media was openly hostile toward it.
It reminds me of a blog post that Chris Dixon wrote back in 2013 called, “what the smartest people do on the weekend is what everyone else will do during the week in ten years.” New ideas start on the margin.
The other fascinating thing about this story is that the emergence of new ideas are often tied to a particular time and place. Think tech and Silicon Valley. In the case of techno, which is often described as being sharper, faster, and more precise than house music, it feels right that it originated in a city like Detroit.
Detroit was extremely musical, but it was also high-tech. It was machines and assembly lines and that clearly created fertile ground for a new genre of music that relied on, well, machines.
If you’ve been following the housing market (in most cities) over the last year, this chart likely won’t surprise you. It is from a recent City Observatory article by Joe Cortright talking about the “k-shaped housing market” that we have seen emerge over the last year. The above is for the US, but I would imagine that the chart would look similar for Canada, as well as for other countries. Here’s an excerpt from the article:
There’s an obvious explanation for the different trajectories of house prices and rents: Low income workers rent; high income workers own and buy homes. High income households have been barely grazed by the Covid-19 recession. In fact, the combination of low interest rates and enforced savings (because many kinds of consumption spending, including dining, entertainment, travel and even much retail have been constrained by lockdowns), mean higher income households may find housing a much more attractive spending item. If you can’t go out to dinner, or take a vacation, you have more money to spend on a new home. Low wage workers are in the opposite situation. Low wage workers have borne the brunt of the recession; they are also much more likely to be renters than higher income households.
It is perhaps worth reiterating that our fixation on homeownership is not universal. If you live in Switzerland — a very wealthy country — you’re more likely to rent than own. And if you live in Germany, you’re more likely to live in an apartment than in a low-rise house. Still, that doesn’t change the fact that the impacts of COVID-19, and our lockdowns, have been felt unequally. This chart is an example of that.
With the recent announcement that Jeff Bezos will be stepping down as CEO of Amazon later this year, there have been countless articles about the legacy that he will be leaving behind, as well as about the next act that is expected to follow. A big part of this legacy is centered around innovation.
Do any of you remember Amazon’s Fire Phone? Perhaps not. It was a complete failure. But that doesn’t matter because most people only remember the successes — everything from Amazon Prime to AWS, the latter of which was heavily doubted at the time. Isn’t this a distraction from the core business of selling books?
This recent FT article by Dave Lee also makes a good point about another one of Amazon’s innovations: thinking long-term and getting the market to buy in to that approach.
But another Bezos innovation has been his relationship with Wall Street, a world he was intimately familiar with, having previously worked at investment firm DE Shaw.
Starting with his first letter to shareholders in 1997, Bezos consistently warned investors that profits would forever be secondary to growth, in what would become a recurring theme throughout Amazon’s history as it expanded its distribution network from seven dedicated facilities in 1999, to more than 1,500 today.
“Bezos has an unparalleled ability to peddle his vision to Wall Street,” says Stacy Mitchell, from the Institute for Local Self-Reliance, who advocates breaking Amazon into smaller pieces.
“He was given this incredibly long leash, selling books at a loss. Independent bookstores could have multiplied across the country with that business model. But of course, they weren’t allowed to lose money.”
It reminds me of a blog post that Fred Wilson penned at the end of last year, where he argued that speculative frenzies tend to be off in their magnitude, but directionally correct.
The point he was making was that who knows what the market cap of a company like Tesla should be. With its current market cap, it has been able to raise a lot of money without much dilution and that is going to accelerate our shift toward electric vehicles — a good thing and the right path forward.
Of course, if you’re an independent bookstore owner, you may not look at Amazon’s approach as being all that innovative. In fact, you may have another word in mind.
But if you look at the parcel room in any condo or apartment building (as I do all the time), it’s pretty clear to me that the majority of ecommerce transactions are happening on Amazon. A machine has been built that seemingly renders people what they want, how they want it.
Here are the results from a recent survey by The Harris Poll and the Chicago Council on Global Affairs, which asked 1,200 residents from the six largest metropolitan areas in the US how they were feeling about urban and suburban life during this pandemic. (The exact timing was last fall.)
The bar color indicates where the respondent current lives. So for example, of the respondents who currently reside in an outer suburb (blue bar), 73% said that they wouldn’t change where they live. They seem to be feeling pretty good about their life decisions right now.
But for respondents who live in an urban area (black bar), 50% also said that they wouldn’t change where they live. And interestingly enough, 25% of all respondents living in a city responded by saying that they were actually more likely to move to another urban area. (Perhaps Miami?)
For these urbanites, of which I would include myself, the city is far from dead.
Swiss supermarket chain, Migros, has just launched what is being called the first store in Switzerland to not have any employees. The concept, called the Voi Cube, is a small container-like outparcel space that is open 24/7 and offers about 500 or so everyday items. You enter using their app, you grab what you need, and then you check yourself out. (Presumably the doors don’t open back up until you’ve paid.)
The concept is being positioned as a convenience add-on to its existing grocery store business. Swiss federal labor laws still prohibit retail staff from working on Sundays, and so this is a clever way for people to shop for essentials during that time. They just got rid of the labor component. It also begins to show just how flexible and adaptable grocery stores can be as the retail landscape continues to evolve.
Amazon unveiled the design for part of its new HQ2 campus in Arlington today. The plan is a cluster of new office and retail buildings that will accommodate some 13,000 employees. When fully built out, its HQ2 is expected to house upwards of 25,000 employees.
The centerpiece of the proposed campus is something that is being called the Helix, which is a spiraling building with outdoor walkways housing native trees and plants from the Virginia area. The idea is that it will become a place for people to go for walks and hikes “outside.”
Here’s what that looks like (image from architecture firm NBBJ):
In addition to a cool spiraling building, it’s of course also noteworthy that Amazon (along with many other companies) is continuing to forge ahead with its plans to build and occupy more office space in important urban centers.
Here’s a quote from a recent WSJ article talking about the HQ2 announcement:
While numerous tech firms have pledged to allow employees to work from home even after the coronavirus pandemic is contained, Amazon, Facebook Inc., Alphabet Inc.’s Google and others have continued to expand their urban office footprints. By investing heavily in big city real estate, they are betting that office space will be an important part of their corporate culture after the pandemic is over.
“We have to think about this as a long-term investment,” said John Schoettler, Amazon’s vice president of global real estate and facilities. “These buildings will begin to deliver in 2025. And so we believe that the world will be a much improved place than it is currently.”
Like most companies, they are naturally questioning to what extent some employees won’t be going into the office every weekday. But even still, the above announcement is yet another great example of why office space — and spiraling outdoor spaces — will continue to form an important part of the future of work.
A rezoning submission was recently filed with the City of Vancouver for two towers on Alberni Street in the West End. Designed by Heatherwick Studio for Bosa Properties and Kingswood Properties, this will be the design firm’s first high-rise project in the country when built.
There are some incredible pieces of architecture in the pipeline in Vancouver and I would now add this one to the list. Below are a few renderings and massing studies taken from Vancouver’s Shape Your City website.
It’s also worth noting that Vancouver’s Shape Your City website allows people to very easily comment on rezoning applications. And as part of that, you are asked to state your overall position on the proposal: Support, Opposed, or Mixed.
This strikes me as a step in the right direction, as I think it’s important to reduce the friction associated with participating. Asking people to show up to a community meeting (whether IRL or online) is a level of commitment that is simply too great for most people.
But I don’t think it solves the problem that opposition is usually a more powerful motivator than support. And so I’m not yet convinced that we have systems in place which accurately and broadly capture the way that cities and communities are feeling about certain proposed changes.
Google Maps recently introduced a new feature that allows you to search for electric vehicle charging stations by plug type. Here’s what it looks like when I tried it here in Toronto:
While helpful, it demonstrates two things. One, there are too many plug types and that’s a problem for EV adoption. Nissans and Mitsubishis use CHAdeMO, BMWs use CCS, and Tesla has its own proprietary plug, for example.
Two, this is one the main reasons why Tesla is so far ahead when it comes to EVs. They’ve been very purposeful in building out an expansive network of charging stations so as to avoid what is very clearly a chicken-and-egg problem. You need great EVs and then places to charge said vehicles.
As of January 2021, Tesla operates over 2,105 Supercharger stations worldwide with over 1,094 stations in North America, 589 in Europe, and 423 in Asia/Pacific. This is how you start to compete when there are over 160,000 gas stations in the US alone.
There are many development narratives that I don’t quite understand. (I’m thinking of Toronto, but you can probably replace Toronto with any number of global cities for this discussion.) One is the belief that our transit network is full and so no new development should be allowed in certain locations, next to certain transit stations. The thrust of this argument is that additional transit capacity must be added before any new development is allowed to occur. This might sound logical, except it ignores the fact that the need for new housing doesn’t magically disappear because subway cars are thought to be too busy during the morning rush.
Transit systems are also a network, and so does this mean that no more development should be allowed to happen anywhere in the city/region? Or is the goal to simply move development off of higher order transit and into lower-density areas so that the future residents in these new buildings can either take buses to the transit stations that were previously deemed to be at capacity or drive their cars everywhere? (Our highways have excess capacity during the morning rush, right?)
The second narrative that I find perplexing is that new developments don’t give back in any way. Above is a chart showing residential development charges in the City of Toronto, as of November 1, 2020. This chart outlines the fees that every developer must pay when building new residential, though it is important to keep in mind that there are many other government fees and charges that form part of almost every new development. These are things like parkland dedication and separately negotiated community benefits. But for the purposes of this post, let’s just focus on development charges (aka impact fees).
Assume you’re building a 400 unit apartment building, consisting of 240 one bedroom suites (60%) and 160 two and three bedroom suites (40%). Based on the above chart, your development charge bill would be:
240 one bedroom suites x $33,358 per unit = $8,005,920
160 two and three bedroom suites x $51,103 per unit = $8,176,480
For a total of $16,182,400.
But it’s important to keep in mind that these are the rates as of November 1, 2020. They will almost certainly go up by the time these charges become payable for your 400 unit apartment building. By how much you ask? Well according to Urban Capital’s most recent issue of Site Magazine, which compared a development pro forma from 2005 to 2020, development charges in the City of Toronto have increased by about 3,244% during this time period. (The S&P 500 was up about 220% during this same time.) These are obligatory fees that contribute to everything from transit and parks to subsidized housing and municipal services. (The line items above.)
So it strikes me that there are other more productive questions that we could and should be asking ourselves. Such as, why is it that our transit/mobility infrastructure hasn’t kept pace with new development and new housing demand? What are we going to do to fix that immediately? Why are we not taxing the things we don’t want (like traffic congestion) so that we have more resources for the things we do want (like transit and housing)? And most importantly, what is the best way for all of us to work together so that we can create the absolute greatest global city in the world?
Photo by Mimi Di Cianni on Unsplash
