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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  • The car revolution is being powered by software

    Frederic Filloux publishes a regular newsletter called the Monday Note. It’s generally all about tech and new emerging business models. His latest post, called “Code, on wheels,” is about Tesla and the software revolution that is currently underway in the car industry. And it’s a good reminder of just how unique Tesla appears to be as a car company and how software is bound to infiltrate all aspects of our economy. Already you’re hearing people make a distinction around “pure” software companies. This is necessary because of how ubiquitous it has become.

    Here is a a longish excerpt from Filloux’s article:

    But the ultimate leap in value will be the creation of an application ecosystem. The limit will only be the imagination of app creators. As an example, airport operators are likely to develop apps to manage car traffic and passenger flows. Here is a use case: Your flight departing from San Jose Airport leaves in an hour. Your dual app system — one in your phone, the other in the car — checks the flight status, the gate, and the traffic. It notifies you when it’s time to leave. Once in the vicinity of the airport, the app guides you to the parking space nearest to the gate. An alternative and slightly more futuristic scenario involves you dropping your car in front of the terminal, then letting the autopilot send the car to the long-term parking lot a few miles away (this will soon become feasible as geofenced environments such as airports will be well-suited for Level 4 autonomous driving).

    Again, this implies major changes in the way car software is currently handled. These scenarios require the car and the phone apps working seamlessly, exchanging data in real-time with the airlines, the airport, the navigation system of the car, the parking infrastructure, and eventually, the autopilot. We are not there yet, but by that time, the dust will have settled: either carmakers will have developed their own OS — along with the SDKs to foster the development of third-party apps — and/or, tech giants will have taken-over, leveraging their current market positions in the phone sector to impose their own norms. I always thought that Apple had that in mind when it hired legions of engineers for its Titan project and filed applications for self-driving cars to the California Department of Motor Vehicles. I doubt that they completely gave up on the idea of replicating what they achieved for the 500 billion smartphone market with the 3 trillion dollar car sector.

    There are many in the planning world who are quick to dismiss autonomous electric vehicles as being more of the same. They’re still cars, right? For better or for worse, the internal combustion engine was massively transformational to cities — just as previous advances in transportation were. But what comes next is still mostly unknown because, even if you assume that autonomy is a foregone conclusion, it’s unclear how this and an app ecosystem could change how “cars” function in our cities. What will be the spatial impacts?

    It is, however, clear to me that when things do start to really change, it will be because of software.

    Photo by Jannis Lucas on Unsplash

  • The urbanization of families

    Toronto has more people living in apartments than not. Looking at 2016 census data, the City of Toronto has about 1,112,930 occupied private dwellings and the breakdown between apartments (both lower and higher than 5 storeys) and grade-related housing is roughly 60/40. If you look at what’s been built more recently, the split is closer to 80/20. From 1996 to 2014, about 78% of all housing completions in the city were condominiums/apartments.

    So what is obvious to me is that the City of Toronto is becoming more dense, rather than less dense, and that family housing is destined to become more urban. As of 2011, there were 10,145 more families with children living in apartments/condominiums in the city compared to 15 years earlier. By comparison, the number of families with children living in low-rise housing remained more or less flat over this same time period.

    Of course, what this data doesn’t speak to is the number of people and families that may have opted to leave the City of Toronto for the suburbs — driving until they qualify for the kind of housing product that they would like to consume. The number of children living in higher density housing might be increasing within the city, but we probably shouldn’t ignore the pull toward the suburbs that still exists during family formation.

    Cities around the world are working to make their urban environments more suitable to families and young children. Here in Toronto we have something known as the Growing Up Guidelines. But the focus seems to be largely on design considerations — think playrooms and stroller-friendly foyers. That’s crucial, but it’s not everything. There are also very real economic realities to consider.

    The average price of remaining condo inventory in the Greater Toronto Area last quarter was nearly $1,100 psf. That puts a family-sized 1,000 sf suite at $1.1 million — and a lot more if you’re in a central neighborhood. The average would be closer to $1.5 million downtown. Obviously not all families can afford this. So there’s an affordability challenge. It’s one thing for the critics to say that developers should be building larger suites, but the market needs to be there.

    Another consideration is that of financing. Most developers rely on construction financing in order to build their projects. And in order to build a new condominium, there is typically a requirement to pre-sell a certain number of suites (revenue is the actual governor). This is generally a lot easier to do with smaller suites and with investor suites because these buyers tend to be more comfortable waiting out construction.

    Families, on the other hand, usually have a more immediate time horizon. It’s harder to forecast when the need will arise and it may not be financially viable to do that pre-emptively. And so I would argue that in addition to having an affordability challenge, we also have a financing structure in place that biases the type of homes that get built. There are, of course, advantages to this model. Pre-sales are a way for lenders to mitigate risk. It helps to ensure that the market doesn’t get ahead of itself. But there are side effects.

    Despite all this, we are seeing more families with children in higher density housing. Anecdotally, I see it happening in elevators with the number of strollers. This trend is destined to continue, but the winds are not entirely at the back of this shift.

  • 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.