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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  • New York City’s retail vacancy problem

    The New York Post has some interesting articles, here and here, on the growing retail vacancy problem in NYC. (Thank you Michael for the link in the comments this week.)

    The vacancy rate on Amsterdam Avenue in the Upper West Side is said to be around 27% and it is said to be around 20% on a stretch of Broadway in Soho. It has become such a problem that Mayor Bill de Blasio wants to implement some sort of retail vacancy tax:

    “I am very interested in fighting for a vacancy fee or a vacancy tax that would penalize landlords who leave their storefronts vacant for long periods of time in neighborhoods because they are looking for some top-dollar rent but they blight neighborhoods by doing it,” he said on WNYC. “That is something we could get done through Albany.”

    But this is based on the assumption that greedy landlords are simply holding out for exorbitant rents. It doesn’t consider the fact that, maybe, there is simply too much retail space:

    Only a few grasp the true scope of the problem. Vornado Realty Trust titan Steven Roth said we can only cure the national plague through “the closing and evaporation” of up to 30 percent of the weakest space — which would take five years.

    All of this, of course, has me thinking about the future of ground floor main street retail. What are your thoughts?

  • The golden era of Canadian graphic design

    Over a year ago I wrote about a Kickstarter campaign that wanted to make a documentary to celebrate “the golden era of Canadian graphic design.” 

    And after I wrote about it, my friend Dave Wex – who, like me, is a lover of all things Canada – backed the project. Yesterday he flipped me the latest update. 

    The trailer is out and the world premiere of Design Canada is scheduled for Wednesday, June 13, 2018 at the Hot Docs Cinema here in Toronto. After that, it will move to Montreal and Vancouver. 

    If you can’t see the trailer below, click here.

    [vimeo 263571655 w=640 h=280]

    Tickets available, here.

  • 11 Hoyt, Brooklyn

    Tishman Speyer just unveiled a new condo project in Brooklyn called 11 Hoyt. And it just so happens to be Studio Gang’s first residential project in New York City. Preview above. More renderings over here.

    It’s a 51 storey condominium with 480 residences and 55,000 square feet of indoor and outdoor amenities. The unit mix ranges from studios to four-bedroom residences, and prices range from $600,000 to over $4 million (USDs, of course).

    If you’re from Toronto, you’re probably looking at the renderings and thinking to yourself: “There are no balconies or outdoor spaces.” But that’s fairly typical in the NYC market, as I understand it.

  • Income sorting by city

    This is a fascinating study by Issi Romem about the characteristics of cross-metropolitan migration in the United States. The key findings are that in-migrants to expensive coastal cities tend to have higher incomes and more education than the out-migrants, and that the opposite is true for the less expensive cities in the US. “Expensive” means expensive housing.

    Here is the income chart:

    Let’s use San Francisco as the example since it’s the most expensive metro (all the way to the right on the x-axis). The way to read this is that on average, from 2005 to 2016, in-migrants to the San Francisco metro area earned $12,640 a year more per household (y-axis) after they arrived compared to out-migrants before they left. This chart shows the difference between in and out incomes.

    Take note of Miami which is sitting at a similar place to New York and Los Angeles on the horizontal income line, but has home values similar to Phoenix, Chicago, and Philadelphia.

    Now here’s the education chart:

    Similarly, it is showing the difference in educational attainment between in and out migrants.

    So what does all of this tell us? 

    Well, it tells us, among other things, that US metros are continuing to sort based on income and that this process of polarization is probably contributing to home price appreciation. Because even if the incomes of current residents aren’t growing, these “expensive cities” are effectively swapping out poorer residents for richer ones. That, alone, would mean more money for expensive homes.

    For Issi Romem’s full article, click here.

  • Meet Replica

    Sidewalk Labs is currently building out a platform called Replica that will support them in their development plans here in Toronto. Replica is: 

    “a user-friendly modeling tool that uses anonymized mobile location data to give planning agencies a comprehensive portrait of how, when, and why people travel in urban areas.”

    Here is a preview of the Replica dashboard showing a section of Main Street in Kansas City. I hope the animated GIF shows up for you.

    The platform uses a combination of mobile location data (~5% of the population) and on-the-ground checks, typical stuff like manual traffic counts and transit boardings.

    The goal is to understand in real-time who is using a street, as well as how (driving? cycling?) and why (going to work?).

    Their introductory blog post obviously stresses the importance of personal privacy, but I am curious how they determine where people are going.

    I suppose if they pair journeys with destinations (and the durations at those destinations) they can make reasonable assumptions around the why.

    I think the benefits to all of this are clear. But does any or all of this worry you from a privacy standpoint?

  • Half of Toronto condos completed last year became new rental housing

    image

    Shaun Hildebrand (Urbanation) and Benjamin Tal (CIBC) published a report today called, “A Window Into the World of Condo Investors.” In it they revealed that last year (2017 data) no less than 48% of the Greater Toronto Area’s newly completed condo units were closed on by “rental investors.” In other words, almost half of the units became new rental supply.

    This stat was not surprisingly turned into clickbait-y type headlines like, “Half of Toronto condos bought last year were by investors”; whereas an alternate headline might read: “Half of Toronto condos completed last year became new rental housing.” Not as jarring, I know.

    In any event, there are a bunch of other interesting stats in the reports. Here are a few of them:

    – 80% of all new home sales in the GTA last year were condo.

    – Average resale condo prices (per square foot) increased by 26% last year and rents grew by 9%.

    – Over 20% of condo investors purchased their property with no mortgage.

    – Average down payment made by investors was 20%; non-investors were closer to 15%, likely because of mortgage insurance and other factors.

    – Out of the condo investors who took possession in 2017 with a mortgage, no less than 44% are in a negative cash flow position – meaning their rental income isn’t covering their carrying costs. 

    – The returns, which the report calls exceptional, have been coming in the form of price appreciation.

    – As a stress test for the market – what if all these negative cash flow investors suddenly sold their condos? – the report also estimates that if you took all of the rental investors who closed in 2017 with a mortgage and who are in a negative cash flow position greater than $500 per month, it would represent only 3.4% of the total annual supply of condos (both new and resale product).

    If you would like to check out the full report, you can do that over here.

    Photo by Scott Webb on Unsplash

  • Living on water

    Phaidon has a new architectural book out that surveys 55 homes, all of which have some sort of connection to water, whether that be an ocean, lake, river, or pool. It’s called Living on Water. I don’t (yet) have a copy, but it looks like the perfect coffee table book for a cottage, summer home, or studio apartment with zero connection to water. Monocle on Design recently interviewed the editor of the book (podcast episode here). So if beautiful homes on the water are your thing, maybe check it, and the book, out.

  • Electric vehicles are mostly leased

    At the beginning of this year, Bloomberg published this article talking about how the vast majority of electric car drivers lease, rather than own, their cars. The stats are as follows: In the US, about 80% of electric battery vehicles and about 55% of plug-in hybrids are leased, whereas only about 30% of all vehicles in the country are leased. 

    It is, however, important to note that the above doesn’t include any data points from Tesla. Since they sell their cars direct to customers, as opposed to through dealers, they have no obligation to publicly release this data. And so apparently they don’t.

    Conventional wisdom suggests that if you plan to drive the same car for an extended period of time – the average age of a car on the road in the US is over 11 years – it makes financial sense to buy. But in this case, people seem to be worried about technological obsolescence and the weak resale market for electric vehicles. This may also speak to the type of customers who are currently buying electric vehicles; they are early adopters and don’t want old cars.

    I’ve also seen someone argue that because some states require a percentage of car sales to be zero electric vehicles, it can be more cost effective for manufacturers to sell/lease them at a loss than pay the penalties or buy the ZEV credits. And with a lease, they at least get parts back at the end of the term. But I honestly don’t know much of a factor this plays.

    I hadn’t thought of this before I stumbled across the Bloomberg article, but it all makes sense to me. I find this reversal in ownership interesting because it tells me that how we consume cars can very easily change, and probably will moving forward.

  • Top US metro areas for VC investment

    Below is a list of the US metro areas that saw a billion dollars or more in venture capital investment last year (2017). It is taken from a recent CityLab article by Richard Florida where he talks about the “geographic inequality of high-tech venture capital.”

    image

    It’s worth noting that San Francisco – not San Jose (Silicon Valley) – is at the top of the list with nearly 1/3 of the US total last year. It’s also interesting to note that when you look at each metro’s share of the total change from 2006-2017 (the chart below), you get Los Angeles now punching above San Jose. 

    image

    Florida also gets into which economic and demographic variables seem to be associated with higher levels of venture capital investment. For the rest of the article, click here. 

  • Autonomy, sometimes

    Benedict Evans raises a number of good points and asks a bunch of good questions about the “steps to autonomy” in his recent blog post.

    Right now we’re all talking about autonomous vehicles in terms of their level of autonomy – namely 1 through 5. L1 is some degree of autonomy, but in almost all situations, you still need a human driver. L5 is no human driver needed, ever.

    But as Evans points out, the level of autonomy depends on the place, and it is unlikely – at least initially – that L4 or L5 will mean L4 or L5 in all environments. Here is an excerpt from his post:

    It naturally follows that we will have vehicles that will reliably reach a given level of autonomous capability in some (‘easy’) places before they can do it everywhere. These will have huge safety and economic benefits, so we’ll deploy them – we won’t wait and do nothing at all until we have a perfect L5 car that can drive itself around anywhere from Kathmandu to South Boston. And so, if we call a car even L4, we have to say, well, where are we talking about? We might mean ‘most of this country’. But more probably, it will be L4 in one neighborhood, L3 in another and only L2 in a third – and a car might encounter all three of those on one journey. Put your route into the map and it will tell you if today is an L5 day or not.

    Thinking about the Gartner Hype Cycle, there’s often (always?) a “peak of inflated expectations”, as well as a chasm that new technologies need to cross as they are being adopted.

    Benedict’s article reminded me that we’re probably coming off that peak with autonomous vehicles and about to enter the so-called “trough of disillusionment.” 

    Autonomous vehicles represent a monumental shift in mobility, which will in turn impact our cities. That’s going to seem like an insurmountable challenge – until it doesn’t.