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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  • Why many tall buildings in Hong Kong have holes in them

    Hong Kong is known for having mysterious holes in many of its tall buildings. The Repulse Bay Hotel (pictured above) is one example. Completed in 1986, its hole is 16m wide by 24m tall.

    The reasoning for these holes is apparently twofold.

    They started because of feng shui and more specifically because of “spirit dragons.” Some believe that spirit dragons live in the mountains surrounding Hong Kong and that they like to descend each day in order to bathe in the water. Legend therefore has it that if you obstruct their path of travel, bad things could happen to you. These holes are where they fly.

    The other reason for these tower holes is far less superstitious and entirely practical. Hong Kong has a kind of built form known as “wall-effect buildings.” These are large buildings with large floor plates that create a kind of wall in the landscape. So to break up the massing and allow more natural light and air to flow through, holes are introduced.

    So maybe it’s because of spirit dragons or maybe it’s to encourage more light and air. Either way, these tower holes have become part of the Hong Kong landscape.

    Image: Hongkong and Shanghai Hotels

  • Income-to-expense ratio

    Professor Scott Galloway’s recent post called “The Algebra of Wealth” makes the argument that there are four key factors in the creation of wealth: focus, stoicism, time, and diversification. Some of you may argue with his points around diversification. I’ve heard Warren Buffet and Charlie Munger say before that diversification is really just admitting that you have no idea what the hell you’re doing. Because if you did, you wouldn’t need diversification to protect you.

    That said, I like a lot of the points that Galloway makes on his blog. For one, he calls bullshit on the age-old advice that you should just “follow your passion.” Finding something you love to do is important and ideal. I feel incredibly fortunate that I found something (there were pivots) that I want to be my life’s work. But that doesn’t mean that I didn’t and that I don’t think about money. As I’ve said before, I never understood why money is often a taboo topic in architecture schools.

    Galloway also takes a stab at defining, what is rich?

    “I know a lot of people who make an extraordinary amount of money, but few people who are rich. Rich is having passive income greater than your burn. People on a path to money focus on their earnings; people on a path to wealth also focus on their burn. Joseph Heller said, “It takes brains not to make money.” (Note: I think he was casting a favorable light on his starving artist friends). This may be true, but it definitely takes brains to hold onto it (i.e., money).“

    “My father receives $48,000 per year from Social Security and his Royal Navy pension (he was a frogman). He spends $40,000, and it’s enough to make him happy. He swims every day, watches a shit-ton of hockey (Leafs fan), and on Fridays goes to The Taco Stand (an actual restaurant in La Jolla) where he orders something called a michelada. (Apparently it’s medicine delivered in a chilled salt-rimmed glass — he claims his hair is regrowing and that he’s sleeping better. I believe half of that so … I believe it.) Anyway, it’s not your income, but your income-to-expense ratio, that determines if you’re rich.“

    When I was growing up, my dad used to always tell me that it doesn’t matter how much money you make, it matters what you do with the money that you make. That is another way of saying, focus on your income-to-expense ratio. Spend less than you make and be strategic with what’s leftover. This is a good principle to follow for real estate as well. As a rule, it’s generally a good thing when your revenue is greater than your operating expenses and your NOI is positive.

    But there’s another important message in Galloway’s excerpt: you don’t necessarily need a lot to be happy. (Sign me up for The Taco Stand on Fridays!) And if you’re in position where your passive income is greater than your burn, then you also have something called freedom.

    For Scott Galloway’s full post about The Algebra of Wealth, click here.

  • Mackay Laneway House is now complete and available for rent

    Eleven years and a few setbacks later and we now have a completed laneway house.

    As Bill Gates once said, “most people overestimate what they can do in one year and underestimate what they can do in ten years.”

    Construction is all finished up and Mackay Laneway House is available for rent starting immediately.

    For photos and more information, click here.

  • Net new housing units in New York City since 2010

    Here are a few interesting stats from a brief report that New York City published this month about their supply of new housing units:

    • From January 1, 2010 to June 30, 2020, New York City delivered 205,994 net new housing units across the five boroughs.
    • This total includes 202,956 units from new construction and 29,161 units from the alteration/conversion of existing buildings. However, it also factors units that were lost as a result of demolition (-17,400) or alteration (-8,723).
    • Brooklyn saw the most supply, followed by Manhattan. The four highest-growth Community Districts were responsible for 1/3 of all new housing additions. These CDs are all formerly non-residential areas that were rezoned to allow living.
    • Manhattan saw the greatest loss in housing units as a result of alterations (people combining units). This was most prevalent in wealthy neighborhoods such as the Upper East Side, Upper West Side, and Greenwich Village.

    What is interesting about this last point is that it shows you that cities are far from static. New York City lost 26,123 housing units during the above time period, with 8,723 units being lost to alterations and people combining units.

    The orange areas on the above map are neighborhoods which actually became less dense over the last decade. And of course, this phenomenon is not unique to New York City. We are seeing the same thing play out in some/many neighborhoods in Toronto.

    What this mean is that the role of new development is really twofold. It allows a city to grow (i.e. house new New Yorkers), but it also replaces lost housing and relieves some of the pressures on the existing housing stock. I don’t think many people appreciate this dynamic — or perhaps they don’t care.

    For a copy of the full report (it’s only two pages), click here.

  • Luxury housing surges in San Francisco

    The story of two markets continues. Median rents in San Francisco are down some 27% percent over the last year. Sales of homes priced under $300,000 are down by about a fifth. And yet, according to the Financial Times, sales are up significantly for homes priced above $2 million. For the top 5% of homes, prices ended the year up about 26.5%. Overall, the median home price in San Francisco was up 16.8% last year. It now sits at $718,000. As we’ve talked about before, much of this can be chalked up to the fact that the financial impacts of this current environment are being unequally felt. But I also see it as evidence that, despite all of the media headlines, many/most people aren’t actually betting against cities.

    Chart: FT

  • The great unbundling

    Every year, Benedict Evans publishes a presentation about the “big macro tech trends” impacting the global economy. They are always excellent and I usually share them here on the blog. It’s also becoming harder and harder to differentiate tech trends from the rest of the economy, and so in many ways this is just a presentation about important macro trends.

    In this year’s presentation, he focuses on the “unbundling” of retail, ecommerce, advertising and TV; China and the end of the American internet; and a few other timely topics. To view the presentation, click here. Benedict also delivered this same presentation at a recent event by Protocol and Nasdaq (video link) in case you’d prefer to consume the content that way.

  • Using Clubhouse to talk about real estate and proptech

    Okay, Clubhouse is pretty awesome. I participated in my first discussion room — thanks to my friend Evgeny, who has been a vocal supporter of the platform — and I have now seen the light. The topic was real estate and PropTech. And we hope to do it again.

    It feels a bit like Twitter to me, but obviously with audio and with greater controls and visibility in terms of who can participate inside of a discussion room.

    It also makes perfect sense to me that Twitter is piloting their own version of Clubhouse called Spaces. That feels like a natural extension and something that needs to happen. Perhaps some of the moderation features will also make their way into the rest of Twitter.

    As many of you already know, what makes Clubhouse unique is that the communication is free-flowing and impromptu. You are able to see what topics people are talking about and then jump in and out of those audio rooms, as well as invite people to join a discussion that you may be having.

    All of this makes the communication feel like you’re at a party or in an open office. Over there you can see/hear that someone is talking about the “Pensky file.” If that’s interesting and/or relevant to you, you have the option of jumping into that conversation.

    I wouldn’t be surprised to see some of these features and behaviors translated over into workplace collaboration tools. I think it would be helpful to see what other discussions are taking place within a team or company.

    Maybe if we made things a little more free flowing, we wouldn’t need so many damn Zoom meetings.

  • The 25 top-funded proptech startups in Canada

    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.

  • The birth of electronic music

    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.

  • K-shaped housing market

    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.