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.

Subscribe

  • Minimum project size — how small is too small?

    Many, or perhaps most, developers I know have a minimum project size that they will work on. That’s why you’ll hear people say, “No, that project is too small. I need at least X square feet or Y number of units.” Given that smaller scale development such as laneway housing and “the missing middle” are so in vogue today, I thought I would discuss some of the reasons why scale matters.

    But first, it’s worth mentioning that “laneway suites,” as we have structured them here in Toronto, are intended to be built by individual homeowners and not by developers. The lots can’t be severed and most lots will yield less than 1,000 square feet. So this is a bit of a unique circumstance. As most of you know, I am a big supporter of this initiative.

    When you get into larger developer-led projects, it’s a different ball game. For one, it’s hard to even find sites. And good luck if you need to deal with multiple owners as part of an assembly. Most landowners have pricing expectations that do not even remotely align with “missing middle” level densities.

    But assuming you’ve been able to find land at a reasonable price, you still have to contend with the fact that projects have a lot of fixed costs, as well as diseconomies of scale. In other words, there are schedule, cost, and resourcing considerations that won’t change no matter how big or small you go. It’s still going to take this long and cost this much, and you’re still going to need a set of humans to manage it through.

    This can then create a situation where there’s not enough margin for error. The project is simply too small to absorb any shocks, such as an unforeseen delay or an unforeseen groundwater concern that is now adding millions to your project budget. There’s a lot of risk with development and it’s prudent to have contingency room. That’s harder to do with smaller projects.

    The other problem developers run into with smaller projects is that the construction subtrades also tend to think of them as smaller projects. They have their own set of fixed costs and margins to worry about. So unless you happen to catch them with an opening in their schedule, you run the risk of them telling you they’re too busy or them giving you a stinky price, which is just another way of them saying they don’t want the job.

    On top of all this, there’s minimum project size inflation. If capital is not a constraint, there’s a tendency to want to do bigger projects (see above). And because the cost of everything keeps going up, it’s simultaneously getting harder and harder to make smaller projects pencil; unless you, maybe, go ultra luxury and ultra exclusive. But that’s kind of the opposite goal of this whole “missing middle” movement, is it not?

    Photo by JOHN TOWNER on Unsplash

  • Look what fits in a parking lot

    Brent Toderian likes to start Twitter hashtags that revolve around city building. One of his most recent is #LookWhatFitsInAParkingLot. For this one, he asked the Twittersphere to consider the things we love in cities that might fit inside a parking lot.

    Here is one of the best responses — Dodger Stadium edition:

    https://twitter.com/pw3n/status/1176349879154556931?s=20

    Venice, Amsterdam, and Shibuya (Tokyo) were all overlaid — at the same scale — on the surface parking surrounding Dodger Stadium. There are about 16,000 parking spaces, which actually take up more land than the stadium itself.

    To be fair, I bet if you overlaid parts of Los Angeles on this same parking, it would look similarly astounding. But that shouldn’t change what you take away from this post: parking is very land consumptive.

  • What you do is who you are

    I very much enjoyed Ben Horowitz’s last book called, The Hard Thing About Hard Things. In fact, five years later, I still find myself going back to it in my mind, particularly the bits about high quality decision making.

    So I am looking forward to his latest book about how to create and sustain the kind of business culture that you want. It’s called, What You Do Is Who You Are, and that should give you a sense of where this is going.

    Here’s an excerpt from Ben:

    Because your culture is how your company makes decisions when you’re not there. It’s the set of assumptions your employees use to resolve the problems they face every day.

    It’s how they behave when no one is looking. If you don’t methodically set your culture, then two-thirds of it will end up being accidental and the rest will be a mistake.

    Your culture is who you are. Who you are is not the values you list on the wall. It’s not what you say at an all-hands. It’s not your marketing campaign. It’s not even what you believe.

    It’s what you do. What you do is who you are. My new book aims to help you do the things you need to do so you can be who you want to be.

    If you’d like to pre-order a copy, you can do that here. 100% of the proceeds will go to anti-recidivism and to Haiti.

  • Mapping auto emissions in America

    This morning the New York Times published what they are calling the most detailed map of auto emissions in America. In it, they remind us that transportation is the largest source of greenhouse gases in the US today and that most of it comes from our driving habits within metro areas. See below charts.

    Not surprisingly, if you look at total on-road emissions, the biggest cities — New York and Los Angeles — are at the top of the list. But you also have car-dependant regions like Dallas-Fort Worth that punch above their (population) weight in terms of total emissions.

    Now, here’s where it gets interesting. The story flips as soon as you adjust for population.

    On a per capita basis, New York is pretty much at the bottom of the list. It is yet another reminder that one of the most sustainable ways to live is in a dense urban environment where it is possible to get around without the use of a car. New York is, of course, one of the best places in the US to do exactly that.

    Charts: New York Times

  • The Central Arizona Project

    Phoenix is the 5th largest city in the United States. It has a city proper population of about 1.6 million people and a metro area population of close to 5 million. It is also one of the fastest growing cities in the US.

    But being the desert city that it is, its population consumes more water than its natural aquifers can support. Which is why there is something called the Central Arizona Project (CAP).

    Approved in 1968, the CAP diverts water from the Colorado River into the state of Arizona. The system is 336 miles (or 541 km) and it runs from Lake Havasu to Tucson, via Phoenix.

    Here is an aerial image of the canal from Wikipedia Commons:

    And here is a system map from CAP:

    Today, it is the single largest water source (and consumer of power) in Arizona, serving about 80% of the state’s population. This obviously makes it invaluable. It delivers on average about 1.5 million acre-feet of water per year. (Acre-foot = Acre of area x one foot in depth.)

    I was reading about this project today and I found it fascinating. Maybe some of you will too.

  • The 14th Street busway

    On October 3, New York City did something very similar to what Toronto did on King Street. It restricted through traffic on 14th Street to only trucks and buses, and turned the street into the city’s first “busway.”

    Under the new rules, cars, vans, and taxis are restricted every day of the week from 6am to 10pm, unless they’re dropping off or picking someone up, or entering into a parking garage (i.e. local traffic only). But after this, they need to make the first available right and turn off the street. Again, it’s pretty similar to the way things work here on King.

    https://twitter.com/travis_robert/status/1179813054235721728?s=20

    On the first day of the 18-month pilot program, the buses actually had to slow down in order to keep to their schedule. They were moving too quickly. Previously one of the slowest routes in the city, the M14 bus is now expected to increase its average speed by about 25%.

    Not surprisingly, a number of people were concerned that this new busway would hurt businesses along the route. This same concern has been an issue in Toronto. But this is New York. We’re talking about the US city with the highest percentage of households without a vehicle.

    The reality is that we need to get better at moving people around our cities without a car. This is one way to do it and we know it works. My prediction is that the 14th Street pilot will prove to be a success. It will then get replicated in other parts of Manhattan. Probably on other crosstown streets.

  • TikTok’s revenue is apparently over $7 billion

    Last week, audio clips from an internal Q&A session at Facebook were leaked and published by the Verge. These meetings have historically always been private. In what I think was the right move, the company then decided to publicly livestream a subsequent Q&A session — you know, to show that they had nothing to hide.

    The media tended to focus on Mark Zuckerberg’s comments about the threat of Facebook being broken up by regulators. #BreakUpBigTech. Lots of people are also attempting to glean what this leak might signal about the company’s current corporate culture. But there are lots of other interesting soundbites.

    Here’s an excerpt from Zuckerberg about the Chinese social media app, TikTok:

    So yeah. I mean, TikTok is doing well. One of the things that’s especially notable about TikTok is, for a while, the internet landscape was kind of a bunch of internet companies that were primarily American companies. And then there was this parallel universe of Chinese companies that pretty much only were offering their services in China. And we had Tencent who was trying to spread some of their services into Southeast Asia. Alibaba has spread a bunch of their payment services to Southeast Asia. Broadly, in terms of global expansion, that had been pretty limited, and TikTok, which is built by this company Beijing ByteDance, is really the first consumer internet product built by one of the Chinese tech giants that is doing quite well around the world. It’s starting to do well in the US, especially with young folks. It’s growing really quickly in India. I think it’s past Instagram now in India in terms of scale. So yeah, it’s a very interesting phenomenon.

    TikTok now has over 1.4 billion installs outside of China according to TechCrunch. And in the first half of this year, it supposedly booked more than $7 billion in revenue (though most of it came from China). The company is also saying that it posted its first profit in June of this year.

    All of this is, indeed, “a very interesting phenomenon.”

    But it’s even more interesting because this is probably the first consumer-facing Chinese internet product with massive global adoption. And it has Facebook paying attention. They’re now the ones who have to play copycat — their version of TikTok is called Lasso. Of course, it’s not nearly as popular.

  • Global distribution of wealth

    Bloomberg recently came up with a new index to define the distribution of wealth across adults in the world. They’re calling it your “net worth number” and the scale ranges from -2 to 11. Sadly, because the gap is so significant between the rich and the poor, it is based on a logarithmic or non-linear scale. Here’s how they break it down:

    Logarithms of negative numbers aren’t a thing, and so, technically, if your liabilities exceed your assets (i.e. you have a negative net worth) you shouldn’t appear on this index. But Bloomberg has added those people — which could be students with debt, after all — into the -2 category of their scale. These are people with a penny to their name.

    Now, the number of adults in each bracket is purely an estimate. If you look at different sources, you will end up with different numbers. Bloomberg believes that there are 2,800 adult billionaires in the world (numbers 9 to 11); whereas Credit Suisse’s estimate is about 1,600. (I wonder if it’s easier to estimate the number of billionaires or the number of -2’s.)

    Still, it is eye-opening to see where most adults sit (at number 3) and how bottom heavy this index is.

  • How Medellín fixed its slums

    I have written about Medellín, Colombia before on the blog. But the content has mostly come from my urbanist friends. About five years ago, my good friend Alex Feldman — who is a Managing Director at U3 Advisors — wrote this guest post about what other cities could learn from Medellín. He wrote it following a trip to the city for the World Urban Forum.

    I haven’t been to Colombia, but it’s high up on my list. So I enjoyed watching the story of Medellín’s turnaround in this Future of Cities Retro Report. It is the same story that Alex told over five years ago, but that doesn’t make the lessons any less valuable. (If you can’t see the embedded video at the bottom of this post, click here.)

    Eugenie Birch — who is interviewed in the video and who is a professor at my alma mater — hits the nail on the head when she says that a lot of this stuff isn’t rocket science. Look, we know how to lay pipes. We know how to build transportation systems. It comes down to this: Is there the political will?

  • Average household size in the US is now increasing

    Newly released data from the US Census Bureau has just revealed that the average household size is increasing for the first time in over 160 years. Put differently, the formation of new households has started to trail overall population growth. And that is causing the average number of people per household to increase.

    In 1790, there were about 5.79 people per household in the United States. That number has been in decline pretty much since then, though there was a slight increase in the decade that began in 1850. Last year (2018), the number grew to 2.63 people per household (2.71 for owner occupied households and 2.48 for renter occupied households).

    Here are two charts from Chris Fry’s recent piece at the Pew Research Center:

    So what is causing this?

    Well, we know that US fertility rates aren’t on the rise. In fact, they’re generally viewed as hitting record lows. I say “generally” because there are a number of different ways to measure fertility. There’s the general fertility rate, completed fertility, the total fertility rate, and others. But we are seeing some alignment here: fertility rates are down.

    One probable explanation is the fact that more Americans are living multi-generationally. According to the Pew Research Center, 1 out of every 5 Americans lived in such a household as of 2016. Part of this may be a result of immigration. Asian and hispanic populations are more likely to live in a multi-generational household compared to white people.

    Another demographic trend is the increase in people living in shared quarters, whether that might be with a roommate or someone else. This is interesting because it suggests that there’s an affordability constraint. Are people being forced to “double up?” The current co-living trend is at least partially because of this.

    These are all noteworthy trends because household formation is viewed as “the underlying driver of long-term demand for new housing.” I am assuming that more people per household also means less square footage per person.

    Graphs: Pew Research Center