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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  • Non-consensus thinking

    The venture capital industry likes to talk about the importance of investing in ideas that are and turn out to be both non-consensus and successful. The idea here is that if an idea or opportunity is already consensus, then there’s too much money flooding into that space and it becomes too difficult to make money. This is particularly true in venture capital where a select few companies usually end up generating most of the returns. This is a high risk business. Supposedly, even the best VCs end up having to write off a big portion of their deals.

    But I don’t think that this logic need only apply to venture capital. In real estate development, you are often faced with similar situations. For example, if an area is already consensus — that is, it is already considered to be highly desirable — then capital is going to naturally flow into it and land prices will be relatively high. These high land prices might be justified by the revenue side of your pro forma, or they might not be. I know many developers who avoid “core” locations simply because the land is too much and the margins are too little.

    On the other hand, if an area is non-consensus — that is, you’re not sure people will want to rent or buy new space in the area — then the land prices should reflect this. But here’s the thing. What you’re doing is trading, among other things, a lower land price for greater market risk. Because the non-consensus bet could turn out to be either successful or unsuccessful. People will either want to occupy space here or they won’t. And remember, by definition, it being non-consensus means that most people believe they won’t — or at least not at the prices you might need in order to make the math work.

    What all of this means is that if you’re right about something that most people think is wrong, then you have the opportunity to do quite well. (Though I am not suggesting that you need to follow this framework in all situations.) This is on my mind right now because it feels to me that there are certain consensus opinions emerging as a result of this pandemic. For example, opinions around the demise of office space and the demise of downtown living. If you’re a regular reader of this blog, you’ll know that I think these death-of-the-city predictions are largely bullshit.

    I could be wrong. Or I could be right.

  • Azaleas — L-shaped infill housing

    This is an interesting infill housing project in Villa Allende, Argentina. Designed by Studio LZ, the community contains seven homes, built across a 600 square meter site. Each L-shaped home is 63 square meters and hugs a private courtyard space (many of which have an outdoor BBQ). On the main floor of each home are the kitchen and living areas. And on the second floor are two bedrooms, as well as a second bathroom.

    It’s a simple but clever design. Looking at a plan of the project, you can see that, despite its compactness, the L-shaped houses have been arranged in such a way that there are no direct facing conditions. The courtyards and window exposures alternate. It’s almost as if they are Tetris pieces that have been pulled apart. The result is a dense community that still manages to offer some of the benefits of low-rise housing.

    Photos by Gonzalo Viramonte

  • Project Profile: Gusto 501 by PARTISANS

    I finally visited Gusto 501 over the weekend. The place is amazing — both the food and the architecture. And I don’t know about you, but the food always seems to taste better when you’re surrounded by great design. If you haven’t yet been, I would strongly encourage you to go. Designed by PARTISANS for restaurateur Janet Zuccarini, it’s a 6,700 square foot multi-level complex made for the consumption of Italian food and drink. Now, I could go on about its elaborate clay walls, its vast double height spaces, and its massive operable glass facade (supposedly it’s one of the biggest anywhere). But really the best thing to do here is just show you. So here you are. All photos by Nic Lehoux. Architecture by PARTISANS. (Don’t mind the snow. It’s actually lovely in Toronto right now.)

  • The Copenhagen kolonihave

    Well this is an interesting concept. One part allotment garden and one part summer home. Copenhagen’s kolonihave is a community of small homes and gardens within biking distance of Copenhagen’s city center. A place to get away and maybe plant some fresh mint for mojitos. It shares some similarities with the Toronto Islands (land trust) in that the owners own their home, but lease the land. Except in the case of Toronto you’re not allowed to use your island residence as a summer home. If you want to live on the islands, you need to tough out the winters and make it your principal residence. Regardless of the ownership structure, there is something clearly endearing about these small homes and gardens. And I bet that there would be a lot of demand for something like this if it could be done at any sort of scale.

  • Mackay Laneway House is now under construction

    https://twitter.com/globizen/status/1291563335717203968?s=20

    Well, it only took 11 years.

    I still remember the first time I walked into Etobicoke Civic Centre and showed the lady at the counter my design for a laneway house. She didn’t know what a laneway house was and she couldn’t figure out where it fronted. “Wait, it’s behind the main house? It has no frontage. Where’s the street? Huh?” A lot has changed over the past decade, as I knew it would. All of the building permits are now in and Mackay Laneway House is under construction in Toronto’s Corso Italia neighborhood.

    Kilbarry Hill is overseeing the construction process. (Construction was supposed to start earlier this summer, but COVID-19 had something to say about that.) Regular updates will be posted on the Globizen blog and on the socials, with the goal of creating a kind of “how-to guide” for laneway suites. Expect detailed construction updates, a list of the individual trades that are being used, post-completion costing information, and probably a bunch more.

    The first order of business is the site servicing work, all of which has to be done via the existing house. No connections off the mains because, remember, these are intended to be secondary suites, similar to basement apartments. This raises the question of how best to submeter the utilities. Thankfully, the good folks over at Lanescape were kind enough to share how they have done it.

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  • Job mixes and job losses

    Recent job posting data from Indeed has revealed a bit of a paradox. The metro areas where more people are able to work from home — i.e. tech hubs and finance centers — have experienced larger job posting declines compared to all other US metros, as well as to tourism destinations such as Las Vegas and Orlando.

    We know that the hospitality and tourism sector has been the hardest hit by the current environment. But that doesn’t appear to be the biggest driver for overall job losses. In fact, one of the key takeaways is that job losses between February and June 2020 look to be correlated with metro size. That is, the bigger the city, the greater the job losses (% change).

    So what’s going on?

    Well, according to Indeed, it’s important to look at the local job mix. In “work-from-home metros” like Seattle, San Francisco, and Boston, there has been a relatively high percentage of people who were able to quickly transition to working from home. This is reflected in the anonymized mobile-device data for these cities. More people at home. Less mobility. And a seemingly stronger adherence to social-distancing protocols.

    The problem with this outcome is that it crushes most of the in-person sectors and businesses that relied on this workforce moving about the city — things like food prep and beauty & wellness. I mean, just think about all of the food businesses that survive off lunches in a CBD. According to Indeed, it is these sorts of local economic connections that have really been driving the declines in job postings and overall payroll employment during lockdown.

  • Missed housing payments in the US

    Back in April, the US Census Bureau started running weekly surveys in order to try and assess how COVID-19 was impacting people’s lives. They call this the “Household Pulse Survey.” They’re now up to week 12, with the latest data running up until July 21, 2020. Here’s some housing data that I think many of you will find interesting:

    • The July 1, 2019 population estimate for the US was 328,239,523, of which about 77.7% are persons 18 years or older.
    • One of the things that the survey looked at was the total population 18 years or older living in owner-occupied and renter-occupied housing. About 148 million people (~60%) identified as living in the former, about 78 million (~29%) identified as living in the latter, and about 27 million people (~11%) did not report their tenure. This seems to jibe with point number one and the overall home ownership rate in the US.
    • For the owners, 1/3 reported to own their home “free and clear” of a mortgage and about 58% said that they made last month’s mortgage payment. So about 91% of owners were seemingly okay in June. The remaining ~9% were people who either got a mortgage payment deferral, or simply didn’t pay. About 0.5% did not report.
    • For the renters, about 5% reported to be living in a home with free rent and about 75% said that they made last month’s rental payment. Over 18% said that they missed last month’s rent and just over 2% said that they had their rent deferred. The remaining 1% or so are people who simply did not report.
    • Combining both tenures, it looks like about 12.5% to 13% of respondents had a bit of a problem paying their housing costs last month. (I’m giving a range, because presumably the “did not report” crowd could go either way.) I don’t know about you, but this number doesn’t seem all that shocking to me.

    If you would like to download a copy of all of the survey results, click here.

  • Anxious urbanism

    One of the first things that I noticed when I visited Rio de Janeiro a few years ago was the clear fixation on safety and security. There are gates and cameras everywhere. And the guidance you tend to receive from the locals usually resolves around how to stay safe. Don’t wander around at night. Be careful when you take out your phone. Be mindful of certain areas. You know, those sorts of things.

    Of course, you never really know how dangerous a city is because it’s one of those things that’s impractical to test. You’re not going to wander around dark places just to see what the probability of being robbed is. The more sensible thing to do is simply believe what people are telling you and you observe the cues scattered around the built environment.

    The result is a general sense of anxiety. You’re not quite sure if all the gates and cameras are truly necessary, but their mere presence makes you believe that they might be. I mean, why else would they be so pervasive? Or, could it be that people are overshooting with their investments in safety and security because, well, fear and paranoia are strong motivators?

    I was reminded of all of this as I read through Ed Chartlon’s recent book review of, Panic City: Crime and Fear Industries in Johannesburg. The title of his review is Anxious Urbanisms, and I think that’s a good way of describing some of these phenomenons. It’s an urbanism of uncertainty. I haven’t read the book (yet), but it’s an interesting topic.

    So I will leave you all with this excerpt from the review:

    Ultimately, what we might take from Panic City, then, is less a comprehensive sociology of crime in the city and more a method of affective analysis. What the book provides is a sense of the ways in which the emotional sphere organises space, how feelings like anxiety or fear or panic, currently widely distributed across the world, materialise themselves, architecturally and politically. If immunity is anything like security, Murray offers us a cautionary tale. For wherever uncertainty thrives, so does the tendency towards paranoid thinking—which is to say, a contagion of a different sort, one that licences regimes of suspicion, self-protection and individual security, and all at the eventual cost of collective wellbeing and interdependence. 

  • Building great mid-rise buildings

    Alex Bozikovic is right to praise Gairloch’s upcoming development in the Junction. It’s a beautiful project and it’s exciting to see so many architecturally significant projects in one neighborhood — either completed or to be completed. I’m thinking specifically of DUKE Condos (TAS and Quadrangle), our Junction House project (currently under construction), and now Gairloch’s.

    But Alex (as well as Jeremiah Shamess) is also right to point out some of the tensions and contradictions that are inherent to building at this scale. We want European-type mid-rise buildings all along our avenues, but we also want our housing to be more affordable. Problem is, mid-rise buildings are the most expensive way to build.

    The approvals process also tends to privilege urban design considerations over things like livability and construction costs. We talk about the shadow impacts that the project might have on the surrounding community, but not about how well the suites will layout when it’s all said and done — not to mention how expensive they will be to build.

    The cynics will tell you that it doesn’t matter what it costs to build because developers will always profit maximize (as is the case with every other for-profit business). But that’s an oversimplification that ignores a bunch of factors.

    One, it’s not as simple as just price. You also have to consider sales velocity. Price and sales velocity tend to be inversely correlated. In other words, as prices increase, sales velocity tends to naturally slow. You then begin to trade-off higher prices for increased time (which has a cost) and more market risk.

    As I’ve said many times before on the blog, development happens on the margin. Usually the way this plays out is that you create a development pro forma, you look at all of your project costs, and then you say, “oh shit.” You’re then stretching to figure out how you’re going to make the math work.

    Two, there are usually always parts of a city where development isn’t feasible (in some unfortunate cases, it might be the entire city). The potential revenues simply don’t support the costs. And as costs continue the rise, any areas that have not seen a corresponding increase in prices and/or rents will also become undevelopable.

    So there’s price, and there’s also a question of where great buildings are even possible. As many have already pointed out, it’s certainly not everywhere.

  • Before and after: Sugar Beach turns 10 years old

    One of my favorite public spaces in the city is easily Sugar Beach at the foot of Jarvis Street. So I couldn’t resist sharing this before and after tweet by Waterfront Toronto. Sugar Beach turns 10 years old next week. It’s nearly a teenager.

    For those of you who were around and paying attention a decade ago, there was a bit of controversy over the cost of this park — specifically its pink umbrellas. The budget for the park was $14 million and each umbrella cost $11,000.

    It’s one of those things that’s easy to single out and make a big deal out of — if that’s what you’re trying to do. “How much? $11,000 for a candy pink beach umbrella? Come on.”

    But as Waterfront Toronto explained in this blog post from 2014, each umbrella was fabricated out of a solid piece of fiberglass and was designed to withstand hurricane winds, as well as a good old fashioned Toronto winter. They also serve as lighting for the beach at night.

    Part of this is coming from lessons they learned on previous waterfront parks, where the umbrellas weren’t as expensive and haven’t been as resilient to the elements. So there is a whole life cycle cost analysis to be considered here.

    Now I don’t profess to be an expert on candy pink beach umbrellas, but I will say this: Sugar Beach wouldn’t be Sugar beach without them. And ten years later, it’s easy to argue for this being one of the most successful public spaces in the city.

    P.S. If I could make one small request for Toronto’s waterfront, it’s that we need to better engage the lake. We need proper places to swim. Think of the Strandbad Tiefenbrunnen or the Seebad Enge in Zurich. We may need to tidy things up a little, but it’ll be worth it.