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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  • Some tweets about construction costs

    Today was the 2019 Land & Development Conference here in Toronto. I was on a panel in the morning about Proptech. I then sat in on a discussion about construction costs. But after that I had to get back to the office to prepare for a couple of meetings.

    Here are my tweet takeaways (from the back of the room) during the construction cost session. You may need to click through to see the full thread.

    https://twitter.com/donnelly_b/status/1133758132767907840

    The construction cost escalations that we have seen over the last 2-3 years have had a significant impact on new construction in this region. Niall Finnegan’s view is that we are 85% of the way through this “storm.”

    From his experience, it takes 18 months or so for hard costs to respond to changes in demand. And so the storm we are currently in is a result of elevated condo sales from 2017-2018.

    The general consensus from the panel was that costs should start to moderate sometime soon, though maybe not this year. Nobody really knows when that will happen. But if/when hard costs do adjust, it typically happens quickly.

    One comment that didn’t make it into my tweets, but that I found interesting, was about how uncertainty and volatility in the market — like what we are seeing today with construction costs — could actually stifle innovation.

    Because it creates additional project risks, it limits people’s appetite for other kinds of risks — like trying new things. I can see that.

  • Toronto’s first all-female condo project

    Real estate development has historically been, and unfortunately still is, a male dominated business. (The story of Florence Casler is, however, a great outlier.) If you want some empirical evidence for this, pay attention to the length of the line for the men’s bathroom the next time you’re at a real estate conference or event.

    This needs to change. Which is why my good friend Taya Cook (of Urban Capital) has just announced, in partnership with Sherry Larjani (of Spotlight Development), the first all-female development project in Canada. It’s called Reina and it’s planned for a vacant site at 689 The Queensway, Toronto. Here is an excerpt from a recent RENX article:

    “We’re embarking on this project to create more visibility for women in real estate development, and to inspire younger women to see career possibilities,” said Cook, the director of development at Urban Capital, in a release announcing the project. “It’s a huge industry and a massive economic driver for the region. For some reason it has been seriously lagging behind in gender equity.”

    Two things are probably important to mention about the team and project.

    Firstly, the women developing Reina are all leaders and key decision makers. This is important for the project’s broader mission, but also because it will likely remove male biases from the design process. Everything from architecture to construction will be led by women and will incorporate a “female perspective.” Secondly — and this just makes the narrative even better — the site used to house a strip club.

    Congratulations Taya, Sherry, and the rest of the project team on a terrific development and initiative: “Condominiums designed by women. Developed by women. Built for everyone.” Follow Reina on Instagram, here.

    Image: Reina Condos

  • Canada delimits its continental shelf in the Arctic Ocean

    Last week the Government of Canada filed a 2,100-page submission with the United Nation’s Commission on the Limits of the Continental Shelf. Under UN Convention on the Law of the Sea (UNCOLS), states with coastal territory have the exclusive rights to about 370 kilometers beyond their shores in order to conduct economic activity. This includes the exclusive rights to any resources. However, states may also make claims to further extensions underneath the water if they can substantiate them through scientific research. Last week’s submission attempts to do exactly that for an additional 1.2 million square kilometers of sea bed.

    Here is a map from High North News:

    The challenge with all of this is that Norway, Denmark, and Russia all have their own continental shelf claims, and there’s geographic overlap. (The US has not yet ratified their UNCOLS agreement.) So it is unlikely for this to be resolved anytime soon, though all states seem willing to work with the UN. This is a relatively new debate because the North Pole and Arctic Ocean were previously considered neutral territory. But climate change is opening up new economic opportunities (i.e. there’s a lot less ice). That’s worrisome in its own right.

    Click here for the full press release from the Government of Canada.

  • Toronto should placemake a “sports alley”

    Being a sports fan is like having a bipolar disorder. The highs are high. And the lows are low. But right now — with the Toronto Raptors having clinched their first ever NBA Finals appearance — we are all on a high. Though the job is far from over, this city has waited 24 seasons for this moment. Turns out, all we were missing was one of the greatest basketball players of all time.

    https://twitter.com/donnelly_b/status/1132668677600501760

    It’s pretty amazing to see how far we have come both as a franchise, and as a global city. When Scotiabank Arena was completed in 1999, it, and the surrounding area, looked like this. On Saturday night after the win, it looked like this, a veritable “sports alley.” I have long thought that Bremner Boulevard should be placemade into a sports alley connecting Scotiabank Arena (on the east) and the Rogers Centre (on the west).

    From now until this Thursday, all is right in the world. Enjoy it Toronto, and Canada. Masai Ujiri made a bet that I think most, if not all, of us would agree has paid off. Had it not, Raptors fans across the country would be criticizing him for trading away our franchise player. But that’s par for the course in this bipolar world of sports fandom.

  • US cities with the highest millennial homeownership rates

    Across the 50 largest metro areas in the US, about 31.9% of millennials — those aged 18 to 34 — owned a home as of 2017. And according to recent census data (via the Redfin), only 5 of these cities had a millennial homeownership rate higher than 35%. They are as follows:

    The top spot goes to Salt Lake City, which sits at just over 40%. It also has the highest share of businesses owned by millennials at 8.4%. Not surprisingly, the cities on this list all have relatively affordable home prices, with Detroit being the most affordable.

    I think you could interpret this list as a bit of a leading indicator for US cities on the rise. Affordability, and walkability, may be the draws today, but as millennials lay down roots, start businesses and earn more money, I am sure we’ll see these cities transform even further.

  • How developers shape public life

    The most recent episode of The Urbanist is about the role of private developers in shaping public spaces and public life within our cities. How do you balance private and public interests?

    Much of the discussion focuses on the redevelopment of King’s Cross in London, which is generally considered to be a successful example of large-scale, developer-led, urban regeneration. Andrew Tuck is less complimentary of Hudson Yards in New York.

    One point that I found interesting was the remark that modern zoning tends to force buildings apart. It creates more in-between space. The result is that we are losing some of the more intimate public spaces found in older neighborhoods.

    To listen to the full 30 minute episode, click here.

    Photo by Josh Edgoose on Unsplash (King’s Cross, London)

  • The taxi medallion bubble

    In 1937, New York created taxi medallions as a way of dealing with the sheer volume of unlicensed cabs in the city. About 12,000 were initially sold. They cost $10. And you needed one, fastened to your car, in order to operate a taxi service.

    In 2002, the price of a medallion had risen to about $200,000, though its value had been fairly stable since about 1995. Below is a graph from a recent NY Times investigation on taxi medallions. At their peak, in and around 2014, they were worth over $1 million.

    The common narrative is that ride sharing services simply killed the value of medallions. They disrupted the taxi business. While it is certainly true that mobile apps have forever changed the way we navigate our cities, the above investigation by the NY Times has revealed something potentially more impactful:

    The medallion bubble burst in late 2014. Uber and Lyft may have hastened the crisis, but virtually all of the hundreds of industry veterans interviewed for this article, including many lenders, said inflated prices and risky lending practices would have caused a collapse even if ride-hailing had never been invented.

    At the market’s height, medallion buyers were typically earning about $5,000 a month and paying about $4,500 to their loans, according to an analysis by The Times of city data and loan documents. Many owners could make their payments only by refinancing when medallion values increased, which was unsustainable, some loan officers said.

    So at the same time that Uber was being vilified in the media for destroying the taxi business, the industry itself was working to manipulate medallion prices and shill unaffordable debt onto new immigrants. An interesting read from the NY Times.

  • Development is a local business

    This past weekend I toured my friend’s purpose-built rental project in Wynwood, called Midtown 29. It was completed last year and has already been stabilized.

    Real estate development is very much a local business. It is that way because so much of it is driven by relationships, but also because every market has its own little idiosyncrasies.

    This is always valuable to see. Sometimes we do things in our home market because it makes perfect sense to do so and sometimes we do it just because it’s, “the way we’ve always done it.”

    One of the most obvious things about development in South Florida is that the parking is always above-grade. No basements. That has the result of bringing down construction costs; though I understand that, with sea level rise, insurance costs are on the rise.

    If (or when) this whole autonomous vehicle thing does in fact take hold, it’s going to be a hell of lot easier to convert all of that excess parking in Miami than it will be in Toronto.

    Image: Midtown 29 (Art by Peter Gronquist)

  • The coldest and hottest global cities

    Below is a list of the 44 cities found in the 2018 Global Power City Index by the Mori Memorial Foundation’s Institute for Urban Strategies.

    The index ranks the major cities of the world according to their “magnetism”, which they generally define as a city’s ability to attract people, capital, and businesses from around the world.

    As with all rankings, the output depends entirely on the methodology that you use. The GPCI seems to have the right executive committee in place. It includes global city authorities like Saskia Sassen. But that’s not really the point of today’s post.

    Beside each city, I have added the average highs and lows (in celsius) for both the coldest and hottest months of the year. For cities in the northern hemisphere, these are typically January and July/August, respectively.

    I have also added the spread between the hottest and coldest months to get a sense of variability. I always find it interesting to see how cities like Singapore, Kuala Lumpur, Jakarta, and Mumbai basically stay the same temperature all year round.

    When you look at this list, remember that you can ski in Dubai.

    All weather data taken from the NOAA (National Oceanic and Atmospheric Administration).

  • Beautiful cities are growing faster than ugly ones

    People move to cities for a whole host of reasons, whether it be for more money, more affordable housing, and/or better weather. The fastest growing cities in the US, for example, tend to be in the south where it’s warmer and where housing supply is more elastic. However, we also know that “consumer leisure amenities” increasingly factor into this decision.

    A new research paper by Gerald A. Carlino (Federal Reserve Bank of Philadelphia) and Albert Saiz (MIT) has tried to quantify this relationship by looking at the perceived beauty of a place. To do this, they analyzed the number of tourist visits and the number of “crowdsourced picturesque locations” in a metro area. Read: Instagrammable moments.

    What they found was that beauty, not surprisingly, matters (much like it does in other facets of life). Between 1990-2010, metro areas that were perceived as being “twice as picturesque” experienced greater population growth — about 10 percentage points higher. These metro areas also attracted a higher percentage of educated individuals and experienced greater housing appreciation.

    If you’d like to download a copy of Beautiful city: Leisure amenities and urban growth, click here.