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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  • Price of a new condominium in Toronto increased 12.5% over the last year

    This morning BILD and Altus Group released their January 2019 new home sales figures for the Greater Toronto Area.

    Here are the highlights:

    • 1,362 new homes sold in January 2019 across the GTA. This is up 14% compared to last January.
    • Of these, 942 (~69%) were condominiums (includes low, mid, and high-rise, as well as townhouses). And 420 (~31%) were single-family homes (includes detached, semi-detached, and freehold townhouses).
    • Condominium sales volume is sitting only about 5% below the 10-year average and the benchmark price increased this month to $803,638, which represents a 12.5% year-over-year increase.
    • On the other hand, single-family home sales are down about 53% from the 10-year average and the benchmark price decreased by about 8.1% compared to last year. It is sitting at $1,130,046.

    While there continues to be a bifurcation in the new home market, we are seeing improvements across the board and the data is consistent with Altus’ prediction that 2019 will see an increase in overall sales.

    It is also important to consider how geography might factor into the above numbers. Here are the January sales numbers for the last three years broken down by region within the GTA:

    Just under 80% of the new condominiums sold last month took place in Toronto, whereas only about 1.2% of the single-family homes sold last month took place in the city. You can count them on one hand. There were only 5.

    So rather than just look at this in terms of housing type, I think the other way to interpret the data is that it could suggest strong and continued demand for centrally located and transit-oriented communities.

    And that just so happens to translate into a condominium.

    Photo by Eugene Aikimov on Unsplash

  • Electric scooter startup Lime raises $310 million series D round

    Earlier this month it was announced that the on-demand electric scooter and bike startup, Lime, had closed a $310 million series D round. This values the 18-month old company at around $2.4 billion and brings its total raise to $867.1 million. For comparison, Bird — its main competitor — has raised around $400 million.

    These numbers should tell you about the kind of growth that the “micromobility” startup is seeing. They are now in 15 countries and its riders have taken over 34 million trips. In the last 7 months alone, the company reports that it has seen a 5.5x increase in ridership. They are seen as an affordable last-mile solution. Supposedly 1/3 of its users report an income of less than $50,000 per year.

    Lime entered the Canadian market last fall via Waterloo. They have yet to expand anywhere else, though I suspect we’ll see them in Toronto this spring/summer. One of the barriers is that their scooters (with airless tires) aren’t equipped to deal with snow, so they currently pack them up during the winter months.

    This is in addition to the regulatory challenges they are facing in cities all around the world. But like Uber, I am sure there is a compromise to be had.

  • The top 30 cities for tech and startup companies

    The third edition of Savills’ annual Tech Cities report is now out. Savills is a global real estate company headquartered in London and a few years ago they started looking and what makes a successful “tech city.” As always, you should take these rankings with a healthy dose of scepticism. But this one is based on over 100 individual metrics across 6 main categories:

    • Business environment (such as the size of the financial services industry)
    • Tech environment (such as the amount of inward VC investment)
    • City buzz and wellness (is it a cool place to live?)
    • Talent Pool (is the city creating and attracting young/smart talent?)
    • Real estate costs
    • Urban mobility

    Here are the top 30 cities for tech and startup companies:

    New York takes the top spot, supposedly because of its deep talent pool and position as one of if not the capital the world. But my friends in the Bay Area tell me that their housing shortage is also starting to impact SF’s tech dominance.

    Generally, the report finds that the above “tech cities” should see their GDP rise by 36% over the next decade, compared to 19% for other developed cities. I’m not sure how much of this has to do with tech, but the above list does differ from what you’d see in a more conventional global cities index. Here you have Austin ahead of global cities such as Hong Kong. And you have Toronto ahead of cities like Tokyo and Paris.

    One takeaway that shouldn’t come as a surprise to readers of this blog is the rise of Chinese cities in the index. Beijing is ahead of New York, London, and San Francisco by a wide margin in terms of annual VC investment. And Chinese cities as a whole are starting to take a greater share of global VC dollars (second chart below).

    If you’d like to download a PDF of the full report, you can do that here.

    Image: Photo by Jason Briscoe on Unsplash

  • Airbnb empire comes to an end in NYC

    At the beginning of this year, the City of New York filed this lawsuit in an attempt to shut down an Airbnb business that has supposedly generated around $20 million in revenue since 2012. It is currently illegal to rent out an apartment in most buildings in the city for less than 30 days unless the owner/permanent tenant is present. And that’s not how this business was being operated.

    Here are the locations of the rentals named in the lawsuit (map from the New York Times):

    The defendants include a real estate brokerage, the three partners behind the business (more on them here), as well as others. NYC has been trying to pass legislation that would force Airbnb to disclose more information to the Mayor’s Office of Special Enforcement. Information such as the full name(s) and address(es) of every host and whether the short-term rental is an entire dwelling or a room. That presumably would have helped here.

    For more on the lawsuit and the backstory, click here.

    You may also find it interesting to go back to the five-point plan that Airbnb put forward back in 2016. It was intended to serve as a framework for new short-term rental legislation. The points make a lot of sense.

  • A visit to BMW World

    Today we visited BMW Welt (World) and the BMW Museum in Munich.

    BMW Welt was designed by COOP HIMMELB(L)AU out of Vienna. It is the result of a design competition that the BMW Group held in 2001. Construction of the ~73,000 square meter facility was completed in 2007.

    The project is centered around a great hall and an elevated vehicle delivery area known as Premiere. It was designed — and this includes the HVAC system — to handle 40 car deliveries per hour, or 250 per day. I guess they don’t work a full 8 hours.

    Below are two photos that I took of the delivery area. The circles you see on the floor in the second picture are rotating platforms. This is where you want to pick up your new car.

    And here is a plan of the entire Welt space via COOP HIMMELB(L)AU:

    I also really enjoyed the BMW Museum, which is housed in a separate building adjacent to the BMW Tower (the one that looks like engine cylinders).

    The “art cars” were a lot of fun. I’m sure that many of you will be able to guess the artist behind this one:

    But what I enjoyed most were the classics like this one here:

    The least interesting cars for me were the ones that weren’t old enough to be “classic”, but also weren’t new and shiny. This can happen with architectural styles as well. Designs sometime need time to settle in.

    For more photos of BMW Welt and the BMW Museum, follow me on Instagram.

    Drawings/Isometrics: COOP HIMMELB(L)AU

  • 200 km/h on the Autobahn

    We drove on the Autobahn today. Our Ford remained as smooth as ever. They take their cars seriously here and force regular inspections.

    But this got me wondering about safety records and why more countries haven’t adopted similar approaches to highway driving.

    Here is Germany’s 2014 record from Wikipedia:

    It turns out that the injury and fatality rates on the Autobahn — measured per billion vehicle kilometers traveled — are actually relatively low compared to urban and rural road classes.

    It is also relatively low compared to international standards. Here is a 2012 comparison, also via Wikipedia:

    Europe as a whole does very well in this regard (not that this specifically addresses Autobahn safety). Generally, fatalities have declined significantly over the last few decades.

    Here is a chart from the World Health Organization:

    What is clear to me after seeing this data, though, is that the greater problem looks to exist outside of our highways and motorways.

  • How America uses its land

    Last summer Bloomberg ran a visual essay on how America uses its land. In case some of you missed it, I thought I would share it here today.

    They started by breaking the country down into 6 main land uses. Each square represents about 250,000 acres.

    What likely won’t surprise any of you is that urban areas punch well above their weight:

    Even though urban areas make up just 3.6 percent of the total size of the 48 contiguous states, four in five Americans live, work and play there. With so much of the U.S. population in urban areas, it’s little surprise that these areas contribute an outsize amount to the economy. The 10 most productive metropolitan areas alone contributed to about 40 percent of U.S. GDP in 2016.

    Here’s a further breakdown of the map:

    There is a lot that is interesting here. Note that golf courses made the cut.

  • Redeveloping the Port Lands — among other things

    On Monday, Christopher Hume of the Toronto Star responded to the recent backlash against Sidewalk Toronto with a piece called, Anger over Google’s vision for Toronto waterfront is misguided.

    The below excerpt is what I was trying to diplomatically allude to with my post on net present value. We need to look at what we are getting and what we are giving up (by way of foregone revenue).

    What had civic (and provincial) nabobs gnashing their teeth was Sidewalk’s suggestion that it should receive a share of city property taxes and development fees. And what would the New York-based outfit do in return? A few things, it turns out. Specifically, it would finance the long-delayed Queens Quay LRT, build the infrastructure necessary to remake much of the Port Lands, launch a new wood-based construction industry and, oh yes, kick-start redevelopment of 140 hectares of long neglected landfill.

    I also don’t understand how the possibility of expanding into the Port Lands has come as a surprise to anyone. That was always integral to the opportunity here in Toronto.

    What your thoughts?

  • 10th annual

    It is that time of year again.

    For those of you who are regular readers of this blog, you’ll know that every year around this time I go on a snowboarding/ski trip with groups of friends that I went to grad school with and/or grew up with.

    We have been doing this for a decade now. Last year we were in Jackson, Wyoming (my favorite place so far). And this year we are in Austria.

    Here is a photo that I took — of paradise — this afternoon:

    I’m not sure there’s anything to say after a photo like this. So I’ll leave it at that. See you tomorrow.

  • Algorithmic home buying — what’s the end game?

    Bloomberg recently published a good summary of Zillow’s business and their move into algorithm home buying and flipping. (They are trying to avoid the “flipping” moniker because of the negative connotations associated with it.)

    Zillow started buying homes directly from owners last spring. They charge the seller between 6-9%, so more than using a typical agent, but inline with their competitors. There’s clearly a segment of the market willing to pay a premium for the added convenience.

    The thinking used to be that discount brokerages were the way to disrupt the housing market. This is the opposite strategy.

    Interestingly enough, Zillow felt that they needed to make this pivot with their business model. It used to be about selling ads. They were definitive in that they were not a disruptor of real estate agents.

    But now:

    If getting an offer from an iBuyer became a crucial step in the selling process, they worried, Zillow could lose its audience and its advertising base. What’s more, market researchers kept finding that consumers said they’d pay a modest premium to get a cash offer. “People expect to press a button and have magic happen,” says Rascoff, a 43-year-old former Expedia executive who’d earlier started the travel search engine Hotwire, which he sold to Expedia for $700 million. Getting into the business of buying homes directly, Rascoff says, was “the only way to remain in a leadership position.”

    Here is a map of the companies in this particular space and the cities in which they operate:

    Some investors aren’t sold on this strategy and have begun short selling Zillow (according to the Bloomberg article). I keep getting the sense that there’s a greater end game in the cards here. It is about building up A (algorithmic home buying and flipping) in order to unlock B.

    But what’s B — a new end-to-end transactional model for the housing market?