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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  • Pleasure and product discovery

    Benedict Evan’s most recent blog post, called “Amazon as experiment,” draws some interesting parallels between what Amazon is doing today (and experimenting with) and the beginning of mass retail, namely the invention of the department store. He also talks about some of the shortcomings of Amazon’s model, which isn’t at all focused on (or good at) things such as “pleasure” and product discovery. Here are a couple of excerpts:

    On the other hand, it’s interesting that Amazon seems to be doing as much experimentation as possible around the logistics model—from stores to drones to warehouse robots of every kind—but much less around the buying experience, other than small-scale tests of the Four-Star stores. After all, historically, department stores were about pleasure as much as they were about convenience or price. They changed what it meant to “go shopping” and helped turn retail into a leisure activity.

    This has always been the gap in the Amazon model. It’s ever more efficient at finding what you already know you want and shipping it to you, but bad at suggesting things you don’t already know about, and terrible whenever a product needs something specific—just try finding children’s shoes by size.

    This is probably inherent in the model. For Amazon to scale indefinitely to unlimited kinds of products, it needs to have more or less the same commodity logistics model for all of them. That’s the line it’s never been willing to cross. Amazon doesn’t do “unscalable.” And yet, while we now know there is nothing that people won’t happily buy online, not everything will fit that commodity model. So maybe that’s the real test of Amazon’s pride: can it work out how to let us shop, rather than just buy?

  • Getting things done

    Fred Wilson wrote a post this morning about the “certainty of close.” He was talking about fundraising for startups, but similar parallels can be drawn to other aspects of life and business. The point Fred makes is that if you can live with the “bird in the hand” economics and if you have a comfort level with the humans/partners you’re getting involved with, it’s hard to go wrong and it’s often the right approach for early stage companies where fundraising speed is critical.

    The tension that usually gets weighed against this line of thinking is one of maximizing economics, which often sits part and parcel with a fear of “leaving money on the table.” Should I take the deal in front of me or should I push and/or wait to extract every last dollar? This can lead to indecision. Oftentimes, as Fred mentions, these decisions aren’t particularly black and white. Few things are.

    While every deal and situation is unique, there is nothing inherently wrong with a fair and reasonable price if the the economics make sense for you, and your investment and return criteria are being met (or whatever criteria you have set for yourself). It is “satisficing” vs. “optimizing.” The latter may appear most favorable, but there are countless benefits in moving as quickly as possible and in getting things done. I am a fan of doing.

    Photo by Jacek Dylag on Unsplash

  • Portuguese pavement

    One of the defining characteristics of Portuguese cities is the stone paving that is used in many or most pedestrian spaces. In European Portuguese, it is called calçada portuguesa. Above is a photo — that I didn’t take — of Rossio Square is Lisbon.

    This craft was also exported to Portugal’s former colonies, including Rio de Janeiro, Macau, and Luanda. Supposedly, the Portuguese used to load up their boats with limestone in order to weigh them down and make them stable before they set sail. And that’s, at least partially, the reason why this tradition ended up traveling.

    They’re dangerously slick when wet — particularly in a hilly city like Lisbon — but they sure are beautiful. Here’s a short video talking about the tradition in Macau. It’s an interesting example because the Chinese ended up adding their own touches.

    Click here if you can’t see it below.

    Photo by Alex Paganelli on Unsplash

  • The childless city debate

    There’s an interesting debate happening online right now. A recent article by Derek Thompson (of the Atlantic) made the claim that today’s urban renaissance is great for young college graduates, but not so good for kids.

    Here’s a quick synopsis:

    Cities have effectively traded away their children, swapping capital for kids. College graduates descend into cities, inhale fast-casual meals, emit the fumes of overwork, get washed, and bounce to smaller cities or the suburbs by the time their kids are old enough to spell.

    Raising a family in the city [New York City] is just too hard. And the same could be said of pretty much every other dense and expensive urban area in the country.

    Michael Lewyn (of the Touro Law Center) responded to this argument with a post titled “the myth of the childless city.” While it is true that the US fertility rate is at an all-time low, the numbers — at least some of them — suggest that cities aren’t all that childless:

    Furthermore, not all urban cores are doing poorly in retaining children. Washington, D.C. had just under 32,000 children under 5 in 2010, and has over 45,000 today. In Philadelphia, the number of children under 5 increased from just over 101,000 in 2010 to 104,152 in 2018. Even in San Francisco (which, according to The Atlantic article, “has the lowest share of children of any of the largest 100 cities in the U.S.”), the number of under-5 children increased from 35,203 in 2010 to 39,722 in 2018.

    What I would be curious to see is a more granular look at where children are being raised within specific cities, and how that may, or may not, be changing over time. City boundaries can be broad.

  • Driving distance between two adjacent homes

    I came across this tweet by Sean Galbraith last night. You will probably need to click through to see the full extent of the photos. It is a series of images showing two back-to-back houses. The lands touch one another. But if you were to drive from one house to the other, it would take you about 18 minutes because of the area’s road network. Approximately 7.1 miles.

    This, of course, is far from urban. It would take over two hours to walk this same distance (assuming an average walking speed of 1 mile every 18 minutes). If you’re an urbanist, this is surely galling to you. But I think it’s also important to remember that this is, at least partially, a result of a consumer preference for dead end streets that limit through traffic.

  • Average living space per person in Hong Kong

    This recent NY Times article — which makes the case that the current protests in Hong Kong are at least partially a result of inequality — has a pair of interesting diagrams that speak to the city’s tight housing market.

    The first compares average living space per person in Hong Kong to Paris and New York City. New York City appears palatial compared to the illegally subdivided apartments that are discussed in the article.

    The second looks at housing affordability as a multiple of median household income. Hong Kong is over 20x. I am curious what median incomes were used for each of the cities. A small denominator makes the multiples look worse.

    In this chart, New York also includes the entire metropolitan area, which would help to improve its affordability ranking. So one could argue that this isn’t really a fair comparison.

    At the same time, none of this changes the fact that Hong Kong has some of, if not, the most expensive housing in the world.

    Images: NY Times

  • Toronto approves city-wide expansion of laneway suites

    This a big month for laneway (housing) advocates in Toronto. Last week, City Council voted in favor of expanding the policy provisions for laneway suites to all Neighbourhoods within the city. (Neighbourhood is a defined term in the city’s Official Plan.)

    Previously, the policies — which allow laneway suites to be built as-of-right — only applied to the Toronto & East York Districts. Here’s a copy of the recent staff report in case you would like more information.

    On Monday, my friend Alex Sharpe (of Lanescape) was on BNN Bloomberg talking about why this is a good thing for the city. Alex and the rest of the team at Lanescape have been instrumental in these policy changes.

    If you’re a Toronto homeowner with a property that fronts onto a laneway, I would encourage you to consider this opportunity. It’s a way to increase the value of your home and it’s a way to create more rental housing in this city.

  • Smart home market penetration in Canada and the US

    Here are the results of a Global Consumer Survey that was conducted in Canada this year (2019) and that asked respondents whether or not they own a smart home device. That is, a device that can be controlled via a smartphone / internet connection.

    Even with all of the concerns around privacy, virtual assistants (such as Amazon Alexa and Google Home) appear to be the most popular device with Canadians. Next are connected speakers and smart thermostats.

    The vast majority of respondents (68%) stated that they don’t own any smart home device. However, if you look at the trend lines for Canadian household penetration in the “smart home market,” this is naturally changing:

    Curiously, there appears to be a household penetration rate spread between Canada and the US, with the US exhibiting meaningfully higher numbers. Here is the US chart:

    Based on these charts, the lowest penetration rate appears to be for “energy management” devices, which would include anything that helps households reduce energy consumption. The rates are the lowest in the case of both Canada and the US.

    This is a bit unfortunate given that energy management is an important one. But it’s also one that isn’t best addressed with only a few smart devices. It should involve a more holistic approach to the way in which we design and build homes.

    All charts and data taken from Statista.

  • The Information Age: Tech & the S&P 500

    The below chart from this morning’s Wall Street Journal is perhaps a good example of our ongoing transformation from an industrial economy to an information economy. Just four stocks — namely Microsoft, Apple, Amazon, and Facebook — have accounted for 19% of the S&P 500’s total return this year. All of them are “tech.”

    And this is not new to 2019. Similar contributions were made by tech last year and in 2018. I have been used to hearing about the 4 horsemen of tech. But apparently there’s even now something called the “FAANG stocks,” which refers to Facebook, Amazon, Apple, Netflix, and Google (Alphabet).

    This shift is, of course, one of the reasons why every city is trying to establish a strong tech ecosystem. I saw that first-hand in Lisbon this past week. And frankly I think the city has many of the same characteristics that made Berlin a great place for tech. It’s affordable. It’s filled with young and smart people. And it’s a fun place to be.

    There’s a reason that Lisbon now hosts the annual Web Summit, which is generally considered to be the largest tech conference in the world. (The North American offshoot, called Collision, relocated to Toronto this year in order to be in a more global city.)

    Portugal only has a population of about 10 million people. There are some 3 million people in the metropolitan area of Lisbon. But that doesn’t really matter because most startups today are immediately targeting a global customer base.

    I learned more about Portugal and Spain’s colonial pasts on this trip and I found it fascinating. In many ways, it was the start of globalization. But that was the Age of Discovery. Those centuries are over and done with. Our century is the Information Age. The above chart is part of that story.

  • Supply is up and rents are down in Sydney

    The Sydney Morning Herald recently reported that an oversupply of apartments has started to put downward pressure on rents and upward pressure on vacancy rates in the city. Here are a few excerpts from the article:

    Sydney is in the grip of an apartment building boom, with 30,880 multi-unit dwellings built last year, a record for any Australian city. There were 16 multi-unit projects finished in the first three months of 2019, adding another 1948 units.

    These numbers are flowing through Domain.com.au, where 17,500 units were listed for rent in June 2017, and ballooned to 32,680 listings in June 2019. The result has been landlords asking for $25 a week less median rent than last year.

    Sydney-wide rental vacancy rates have almost doubled from 1.7 per cent 2017 to 3.2 per cent this year. But on the upper and lower north shore, in the hills district and Sydney CBD, apartments are sitting vacant at more than twice this rate, SQM data shows.

    The narrative here is that you can build your way to lower rents. Make supply exceed demand, and this is what will happen.

    But in this case, something else has also impacted the demand curve: China.

    Beijing has made it harder to get money out of the country in recent years and their overall economy has slowed. China’s economy is thought to be growing at its slowest rate since 1992 (which is when the country started official record keeping).

    The above article suggests that about 80% of new construction apartments in Sydney were sold to investors over the last few years. More than a few were probably Chinese. Though I have no idea if that is an accurate number.

    What is unclear, to me, is whether this doubling of rental listings over the last two years is a result of previously bought supply simply making its way through the system, or if current market conditions have encouraged more owners to put their units up for rent.

    Whatever the case may be, supply is up and apartment rents appear to be coming off slightly in Sydney.