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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  • Gender earnings in the gig economy

    Last year, 5 economists published a research paper called “The Gender Earnings Gap in the Gig Economy: Evidence from over a Million Rideshare Drivers.” The authors are 2 economists employed by Uber; 2 professors at Stanford University; and the chairman of the University of Chicago’s economics department.

    The findings were widely discussed, including on Steven Levitt and Stephen Duber’s Freakonomics podcast (Episode 317). What’s interesting about Uber’s ridesharing data is that their compensation algorithm is believed to be entirely gender-blind.

    The formula is pretty simple. It takes into account distance, time, and sometimes a surge multiplier when demand is spiking. Gender does not factor. And the same goes for the actual dispatching of rides. The software doesn’t know who is male and who is female.

    What they discovered is that on average male Uber drives earn about 7% more per hour compared to females. And that 50% of this wage gap can be (apparently) explained by one variable: Men tend to drive a little faster than women. So they complete more rides per hour.

    It’s also worth noting that across the US, only about 27% of Uber drivers are female (at least at the time the report was published). Women also have a higher 6-month attrition rate; 76% compared to 63% for men. In other words, more female drivers drop off the platform.

    If you’re interested in this topic, you should probably have a listen to the Freakonomics podcast. They deliberate on the above in a lot more detail. You can also download a full copy of the research paper, here.

    Photo by Luke Stackpoole on Unsplash

  • People are camping out in Opendoor’s homes

    Inc. Magazine just did a profile on Opendoor, which is a company that we have, of course, talked a lot about on this blog and that I continue to follow closely.

    It’s interesting to read about some of the challenges that they’ve been having as a result of their frictionless open houses. Since all you need is a smartphone, the company has been having the ongoing problem of people camping out in their listed homes. Sometimes for weeks. They’ve been working to address this by restricting the hours (6AM to 9PM) and by installing motion detectors. I am sure they will figure it out.

    The company is also having to be careful in terms of how it positions itself alongside realtors. There are many livelihoods at stake here. Here’s an excerpt from the article:

    During interviews, Wu has chosen his words carefully when discussing Opendoor’s potential to replace Realtors. “The reality with Realtors today,” he said on stage at the Startup Grind Global Conference in Silicon Valley in February, “is their role is shifting from project management–especially in our ecosystem, where we’re automating a lot of the processes–to advisement.”

    Fred Wilson (venture capitalist) has argued many times before on his blog that business model innovation is far more disruptive than technical innovation. I think it’s valuable to keep that in mind in the context of this discussion.

    Opendoor continues to charge a commission fee (sometimes a higher one than is typical), but it also makes money on the flipping of homes and it has plans to vertically integrate other aspects of the real estate business.

    Will that do it?

  • GTA condo market posts strong Q2-2019 results

    Urbanation released its Q2-2019 condo market results for the Greater Toronto Area this week. It was a robust quarter, following a slower Q1. Here are a few highlights:

    – 8,902 condo units were sold across the GTA in Q2-2019. This is the second highest Q2 level on record after Q2-2017 (11,413 sales).

    – The average price for all remaining (unsold) inventory in the GTA hit $1,000 psf for the first time ever, representing a 9% year-over-year increase.

    – The region saw increased activity in the outskirts, including Hamilton, as a result of purchasers/investors looking for value buys.

    – Only 6 projects launched for pre-sale in the former/old City of Toronto (the core). The average opening price was $1,284 psf.

    – Average pricing for remaining units in the core is now $1,291 psf. This is the new standard for centrally located housing.

    For the full press release, click here.

  • #BestStreetInTheWorld

    The below Twitter thread, initiated by Brent Toderian, is a great collection of some of the “best streets in the world.”

    I would encourage you to click through and have a scroll. The one thing that you’ll likely notice about almost all of the contributions is that the streets tend to be fairly dense/urban and they tend to be oriented around the pedestrian. No surprise there.

    My only qualm with some, but not all, of these streets is that — while beautiful from an urban design standpoint — many of them can feel quite touristy and/or commercially generic. They are the street you go to when you’re visiting the place, but they are perhaps lacking in urban authenticity.

    I don’t mean to take anything away from the beautifully designed streets in the above thread. In fact, some of them aren’t at all commercial and are simply magical places to be — period, full stop. See, for example, La Condensa (neighborhood) in Mexico City.

    My argument is simply that the natural cycle of cities and neighborhoods sometimes means that the best streets for new ideas and small businesses are maybe not the most beautiful ones. Part of this is a function of rents and part of this is function of the fact that the best cities are constantly reinventing themselves.

  • Immaculate construction

    Emily Badger’s recent piece on “how ‘developer’ became such a dirty word” has been getting passed around within the industry over the last few days. I had a chuckle when I read this bit:

    The notion that development is inherently bad, or that developers are inherently bad actors, seems to ignore that the communities residents want to protect from developers were once developed, too, and often by people who made money at it. (That is, unless you believe in “immaculate construction.”)

    The article hits on a number of points that are absolutely true. There’s generally a lack of understanding around the economics behind new housing. And the cost structures, today, are dramatically different compared to the suburban-industrial complex.

    To provide one example, our cost consultant, Finnegan Marshall, recently shared with me a chart (dated April 2019) that broke down the various government fees that typically make up every new condo suite in Toronto.

    What it showed is that between 20-24% of the price of a new condo is generally compromised of government fees and taxes that span all three levels of government. This includes everything from development charges (impact fees) to parkland dedication.

    Similarly, the article quotes one developer from Montgomery County who estimates that the impact fees alone for his projects are usually upwards of $60,000 per housing unit. (This is pretty cheap compared to Toronto.)

    I raise this as an example because development charges/impact fees have become an important source of revenue for cities across both Canada and the US. They often offset lower property taxes. (Whether this is appropriate is an entirely other debate.)

    And so I find it paradoxical that many homeowners would like to simultaneously see lower property taxes, no new development, and more public services and infrastructure.

    Photo by EJ Yao on Unsplash

  • Junction House Sales Gallery wins “Best of Canada Award” from Canadian Interiors

    Today I’m excited to announce that the Junction House Sales Gallery has just received a Best of Canada Award (2019) from Canadian Interiors. Link, here. Shout-out to Dialogue 38, Vanderbrand, Unique Urban Homes, Superkul, and the rest of the team for making it happen. We are fortunate to have had such a cool space to work with. It was previously occupied by the art studio, Moss & Lam. And so from the very beginning the idea was always to find the right balance between old and new, raw and unpolished, playful and luxurious.

    Some of you may also not be aware that before we converted the above studio into a condo showroom, we donated it to a number of creative groups who were looking for space, but maybe didn’t have a lot of (or any) money. Lost & Gone used it to host an immersive rendition of Romeo & Juliet (video of the performance, here). DJ and designer Steve Aoki used it to launch one of his Dim Mak collections (okay, he has a lot of money). And Secret Walls used it for a live art battle. In fact, Secret Wall’s markings are still present within the Gallery if you look up toward the ceiling.

    Before we came along, the space was used as an art studio. That’s an important part of the Junction House story and we wanted to commemorate that in the build out of the Sales Gallery (the “Gallery” part is meant to reference this past use). It is also one of the reasons why we partnered with Ben Johnston for this “Forever” mural on the outside of the building (yes, we see the irony); why we created a place for artists to showcase their work (currently Leeay Aikawa); and why we commissioned a celebrated local artist (Thrush Holmes) to create a custom piece for the future lobby of Junction House.

    Art matters.

  • 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.