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 price of leadership

    Like many of you, I have been watching The Last Dance. It is a powerful reminder of just how competitive, disciplined, and emotional Michael Jordan was, and still is, about winning at the game of basketball. But the most powerful moment so far has easily been his monologue on leadership at the end of episode 7. Here is that scene. If you can’t see it below, click here.

    https://twitter.com/ZekeHealy/status/1259884600769331205?s=20

    Watching this brought tears to my eyes. Over the years, I have had teachers, professors, and bosses who have subscribed to this philosophy of leadership. I’m sure many of you have as well. It’s never fun at the time. In fact, it sucks. But usually in hindsight it becomes clearer what that person was trying to accomplish. And you realize how they pushed you to grow.

    My own view is that there are ways to win without resorting to emotional bullying. But then it begs the question, if you’re not being extreme, does that reduce performance? Would it have been better for Jordan to be a bit nicer to his teammates, if it meant winning fewer championships? Depends on who you ask.

    When you’re determined to move a mountain, win a championship, or create something that has never been done before, it can be incredibly frustrating when you feel as if the team isn’t on the same level or that they don’t care as much as you. So you push. And that’s what Michael did. Winning has a price.

    We all need to be challenged. Some people, like Michael, are good at pushing themselves to be the best that they can be. Others need more external help. How best to do that is the great debate. But as Fred Wilson said on his blog earlier this week: “Leadership is not being liked. Leadership is being respected and followed.”

  • Building size matters

    If you’re trying to figure out how to make housing more affordable, it should be fairly obvious that it’s probably a good idea to actually understand the costs associated with building new housing. That is, more or less, the title of this recent series by Brookings about innovation in design and construction. The four-part series is based on the findings of a report that was written by Hannah Hoyt and published by Harvard’s Joint Center of Housing Studies and NeighborWorks America.

    Now, costs vary by geography. Each city has its own nuances when it comes to development. And this should not be construed as a silver bullet. But what they are trying to do is identify design and construction savings to help the overall equation. Part of their argument is that building typology matters. Build smaller — hopefully out of wood — and you can bring your hard costs down. The problem with this thinking is that the trend lines are moving in the opposite direction.

    Here is a chart from the same Brookings article:

    In 2000, about 23%, or almost a quarter, of all multifamily units completed in the US were in a building with fewer than 10 units. As of 2018, that number had dropped to somewhere around 5%. At the same time, the number of completed units in buildings with 50 or more units has gone from 14% in 2000 to about 61% in 2018. Things got a little wonky after the global financial crisis, but generally the trend lines are pretty clear.

    Some of this likely has to do with our “return to cities.” But I think the bigger part of this story is that development cost structures are pushing the market in this direction. For more on this topic, check out: Demystifying the development pro forma.

  • 85 years of US advertising

    There’s an argument out that there this pandemic isn’t necessarily going to precipitate new changes, it’s simply going to accelerate changes that were already underway. Benedict Evans begins to illustrate this point in a recent blog post called, COVID and cascading collapses.

    In it, he starts by looking at US print advertising revenue. In the first decade or so of the consumer internet, newspapers and magazines actually managed to hold their own. It’s not until after 2008 that they really start to fall off and lose significant market share to internet advertising (most of which belongs to Google and Facebook).

    Intuitively this makes sense. During a crisis, budgets invariably get cut. And then when the market comes back, as it always does, you have people actually thinking about where those dollars should be spent: “Hey, maybe we should put some more money toward that Facebook thing.” It’s a reset moment.

    The other interesting thing about the decline of print advertising is that if look at a longer time horizon — say 85 years, as Benedict did — you can see that its share has been declining for a very long time thanks to television. Of course, now television is changing. US consumers are “cord-cutting” faster than they’re moving to buy things online.

    Cascading collapses, as he calls it.

  • City guides in the pre-smartphone era

    I came across this stack of old Wallpaper city guides while reorganizing a few things over the weekend (because that’s what happens on the weekends now). They are pretty beat up and color faded from travel. It looks like these guides are still being published by Phaidon (along with an app), but it’s been well over a decade since I bought one.

    I know the exact time period of the above books because I used to do really nerdy things like date and location stamp them when I got them. The Rome book was July 2007 and I picked it up in Dublin, while I was there working for a real estate developer before the global financial crisis. I also discovered old phone numbers and email addresses written inside of them. Usually it was a Hotmail address.

    What I liked about these guides is that they were fairly condensed — good for a long weekend — and they were generally design-focused — perfect for architecture nerds like me. Their restaurant, bar, and club selections were also just fine as a jumping off point. After that it was up to you to make your own adventure.

    I sent this photo to my friend Alex Feldman over the weekend — he also went without any sleep in Berlin — and he reminded me what it was like at this time. This was 2007. The first iPhone was just being released. Its map functionality was nowhere near what it is today (or didn’t exist). And I certainly didn’t have one. I had a Blackberry with a plastic wheel on the side. It was basically a giant pager.

    To navigate a city at this time meant using a physical map. It also meant getting repeatedly lost and having to ask real people where to go. Alex also reminded me that I made him wander all around Berlin so that I could buy a new pair of glasses. What can I say, this was pre-laser Brandon and I needed cool architect glasses. They ended up being red.

    As frustrating as this must have been at times, there’s something nice about traveling without knowing each and every step and without being able to summon an Uber at any point in time to take you exactly where you want to go. In fact, this is probably the central ingredient of all good travel: you need to allow yourself to be open to new experiences.

    One of the great lessons of Anthony Bourdain was that you have to get out of your comfort zone. Cities have both highs and lows, but there’s real value and authenticity in the lows if you’re willing to engage beneath the surface. Perhaps that is the irony of old fashioned guide books in the pre-smartphone era. They were supposed to tell you exactly where to go, but they actually helped you find the opposite.

    The only city that I never actually got around to visiting from the above stack is São Paulo. As you can tell, Brazil has been on my list for many years. I did make it to Rio de Janeiro a few years ago and São Paulo was supposed to be October 2020. But I’m pretty sure that trip will need to wait. Maybe I should leave my phone at home.

  • Spiky population density maps

    I rediscovered the maps and work of Alasdair Rae this morning. (He has appeared on this blog before in posts like this one here.) Alasdair works in the Department of Urban Studies and Planning at the University of Sheffield and is author of the blog, Stats, Maps n Pix. Recently, he’s been publishing maps showing population densities around the world. He also gets into the details of how they’re made. They are pretty cool to see.

    Here are the Great Lakes.

    And here is Brazil, as well as a map of the world (without any land shown). Canada and the United States barely register on this second one.

  • A question of land value

    Let’s say that we have a piece of development land worth $100. That is the market value of the land based on its highest and best use at this particular point in time. Now let’s assume that the land was just encumbered with a new burden: inclusionary zoning. All of a sudden there is now a requirement to make available X% of any residential units built at 50% of average market rents for the area.

    Technically, the land is now worth less than $100. And there is a school of thought out there that, in instances like this one, the price of all land should automatically reset downward to offset and account for the inclusionary zoning burden. But as I have argued before on the blog, land prices tend to be fairly sticky, unless the owner is distressed and really needs to sell.

    So what can often happen is that the land owner will stubbornly cling to the original $100 number. The thinking being, “I was once told that my land is worth $100 and so that’s the minimum price I’m willing to accept.” In this scenario, you may need a broad increase in rents in order for a transaction to occur. This way the market rate units might be able to fully subsidize these new affordable units, preserving any margins and justifying the original $100 number.

    Of course, the impact of inclusionary zoning is a hotly debated topic and there are a number of variables to consider. And so I will leave it at that for today. The real purpose of this post is to consider another permutation. Let’s once again say that we have a piece of development land worth $100. But instead of being owned by 13 siblings — and 3 cousins that live abroad and can’t be reached other than by fax — it’s owned by the government.

    In this case, the government wants to sell the land and is considering two options. It can either (1) sell it for $100 and maximize immediate taxpayer revenue or (2) it can sell it for $80 with the condition that the buyer agree to deliver X% of affordable units (and a bunch of other goodies and positive externalities). I would also add that this fictitious town is experiencing what some might call a housing crisis.

    If you were a private sector actor, you would probably choose option 1. You would take the additional $20 and retire to Florida (I’m off by a few zeros). But this is the government we’re talking about and presumably the government is thinking about the broader public good. Which option do you think is better at maximizing that?

  • Sidewalk Labs, Uber, Lime, and the demise of urban density

    Today I am going to talk about 3 things that recently happened and/or that are on my mind.

    Sidewalk Labs pulled out of Toronto. I think this is sad. A lot of people have said that they’re surprised, but not surprised. The official reason is that this unprecedented environment has made it financially infeasible for them to develop the 12-acre site, while still adhering to their core principles. I don’t have any inside knowledge of the situation, but I can’t help but think that this is probably just an opportune excuse. They were getting beat up pretty badly by Toronto on all fronts, even though they had put forward an incredibly ambitious development proposal. As I said before, I can’t imagine many (or any) “conventional” developers coming forward with something like this. The last plan I saw was 1/3 non-residential, and 40% of the residential component was to be priced below market. And never mind all of the other innovations that were being contemplated.

    In other tech news, Uber just led a $170 million investment in Lime (the micromobility scooter company). I think this is smart — both from an overall mobility standpoint and, selfishly, as a shareowner of $UBER. It is being reported that this round of investment values Lime at about $510 million. This is a 79% decline from April 2019 when it raised its last round. So presumably, Uber is getting a pretty good deal here. The bet is that the urban landscape demands multi-modal transportation solutions, everything from bikes and scooters to cars and public transit. There is also an argument to be made that in the short-term, our post-pandemic world is going to gravitate toward individual mobility and away from things like public transit. I’ve heard a few people say that, as we re-open the global economy and try to maintain social distancing, we’re going to face two major mobility bottlenecks: transit and elevators. Sounds like more testing would be a prudent idea.

    Above, I was very careful to say “in the short-term” because I think the narrative that is emerging around the demise of urban density is entirely overblown. Few of us are clamoring to jump back into a mosh pit right now (perhaps a metaphorical mosh pit), but I also don’t believe that we will suddenly look to sprawling Brasilia as a source of urban inspiration. While it is true that “disease did shape architecture in the 20th century” (Alex Bozikovic wrote a good piece on this over the weekend) and that there have been oscillations in terms of how we view urbanity, I also know that this isn’t the first pandemic that our cities have lived through. The Hong Kong flu of 1968 is thought to have killed one million people around the world after, allegedly, emerging in one of the densest cities ever created. Hong Kong’s relationship with Beijing is a tenuous one right now, but it still remains one of the world’s most important global cities.

    Perhaps cities are more resilient than we give them credit for.

    Photo by Touann Gatouillat Vergos on Unsplash

  • The redevelopment of Toronto’s residential market

    Somehow — even after I sarcastically put out the above tweet — I ended up on a BISNOW panel next week about the impact of COVID-19 on Toronto’s residential real estate market.

    When I was asked if I would do it, I replied with: “Does this mean I will need to put on pants?” That was interpreted as a, “yes, I will join the panel.” And so here we are.

    It’s on Wednesday, May 13 at 2:30pm. Steve Keyzer of Gin & Sonic fame (Colliers International) and Kevin Stark (Trinity Development Group) are also speaking on the panel. To register, click here. I’ll do my best to be as controversial as possible.

  • Toronto Regional Real Estate Board releases housing market statistics for April 2020

    The Wall Street Journal reported today that the median home price across the United States rose 8% year-over-year in March to $280,600. One explanation for this is that while, yes, demand did drop off, so too did supply and that has led to a shortage of available housing. The other possible explanation is that these March deals were papered earlier in the year (or late last year) when most of us were blissfully unaware of what was about to happen and so the real impact of this pandemic isn’t yet showing up in these numbers.

    Let’s drill down.

    The Toronto Regional Real Estate Board also released numbers today, but for the month of April. Not surprisingly, residential resales across the region are down by 67% compared to April 2019. The number of listings is also down by a similar amount (-64.1%). Overall though, pricing remained relatively flat (0.1% increase). And by overall I mean for all housing types and for all areas of the region. There are larger variances within specific areas and for certain types. See below.

    Drilling down even further, my friend and agent Christopher Bibby noted in his monthly newsletter over the weekend that transaction volumes in the central (resale) condominium market are down some 85-90%. So the market is effectively at a standstill. Those who do not need to sell or move are justifiably deciding not to right now. But just as Warren Buffet got on stage over the weekend — with some great flowy hair, I might add — and told us in Times New Roman never to bet against America, I am not about to bet against Toronto. This too shall pass.

  • A YouTube channel about simple living and small homes

    I just subscribed to Kirsten Dirksen’s YouTube channel. She makes videos about simple living, self-sufficiency, and small homes, among other things. She has nearly 1.3 million subscribers and her videos have almost 500 million views. I think many of you will really enjoy her channel.

    The above video is about an apartment in Lapa, Lisbon that was renovated by architect João Gameiro. Originally constructed in 1819, the top floor space had been pretty badly neglected. João renovated it by striking, what seems to me like, the right balance between old and new.

    Some of the other homes featured on her channel include a laneway house in Toronto, a tiny floating home in Berlin, and an off the grid cabin in Joshua Tree.