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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  • Why do more people in Quebec sell their home without an agent?

    If you ask most people, they’ll tell you that real estate agents will never ever disappear. 

    Despite the internet, mobile phones, social networks, and companies (here in Canada) such as comFree and PropertyGuys, the bulk of the market still employs an agent when it comes time to buy and/or sell a home. This is true both in Canada and the United States. And it may always be true.

    But there are lots of entrepreneurs and people in the real estate community experimenting with different models. OpenDoor and Open Listings are two new startups out of the US that I’ve been following closely.

    At the same time, there is a certain fraction of the market that is willing to go at it alone. By some estimates this number could be as high as 25% in Canada. Of course, this is a hard number to measure accurately since there isn’t just one method of selling a home privately and many transactions likely go untracked.

    But one thing that I’ve been wondering for awhile now is why the percentage of private home sales is seemingly so much higher in the province of Quebec. According to Wikipedia, this number might be greater than 50%. And a quick search on comFree (duProprio in Quebec) seems to suggest that this may indeed be the case.

    Here are the comFree search results for downtown Toronto. There are 62 properties.

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    And here are the duProprio search results for downtown Montreal (notice I tried to maintain the same zoom level). There are 2,746 properties.

    image

    If anyone has any insights on this phenomenon, I would love to hear from you in the comment section below. I don’t know why this is the way it is.

  • The high cost of poor land use

    Photograph London street of early 20th century Edwardian terraced houses by Bombaert Patrick on 500px

    London street of early 20th century Edwardian terraced houses by Bombaert Patrick on 500px

    Over the weekend The Economist published an interesting article called, Space and the city: Poor land use in the world’s greatest cities carries a huge cost. The argument is that land isn’t scarce. It’s the land use policies we have created that are artificially limiting supply and driving up real estate values.

    In fact, land is not really scarce: the entire population of America could fit into Texas with more than an acre for each household to enjoy. What drives prices skyward is a collision between rampant demand and limited supply in the great metropolises like London, Mumbai and New York. In the past ten years real prices in Hong Kong have risen by 150%. Residential property in Mayfair, in central London, can go for as much as £55,000 ($82,000) per square metre. A square mile of Manhattan residential property costs $16.5 billion.

    And part of the reason this has become so prevalent is because of the shifts we’ve seen in our economy and the great return back to cities.

    In the 20th century, tumbling transport costs weakened the gravitational pull of the city; in the 21st, the digital revolution has restored it. Knowledge-intensive industries such as technology and finance thrive on the clustering of workers who share ideas and expertise. The economies and populations of metropolises like London, New York and San Francisco have rebounded as a result.

    So how do we get better at meeting real estate demand in our cities? The Economist has two suggestions.

    One:

    First, they should ensure that city-planning decisions are made from the top down. When decisions are taken at local level, land-use rules tend to be stricter. Individual districts receive fewer of the benefits of a larger metropolitan population (jobs and taxes) than their costs (blocked views and congested streets). Moving housing-supply decisions to city level should mean that due weight is put on the benefits of growth. Any restrictions on building won by one district should be offset by increases elsewhere, so the city as a whole keeps to its development budget.

    Two:

    Second, governments should impose higher taxes on the value of land. In most rich countries, land-value taxes account for a small share of total revenues. Land taxes are efficient. They are difficult to dodge; you cannot stuff land into a bank-vault in Luxembourg. Whereas a high tax on property can discourage investment, a high tax on land creates an incentive to develop unused sites. Land-value taxes can also help cater for newcomers. New infrastructure raises the value of nearby land, automatically feeding through into revenues—which helps to pay for the improvements.

    These recommendations will probably be unsettling for a number of people. 

    I would imagine that many communities would prefer to have planning and growth decisions happen bottom up, as opposed to top down. But I think there’s some truth to this recommendation and I don’t think it has to mean completely excluding bottom up feedback. Communities and individuals are naturally going to look out for their own self-interests. And so I think many would agree that there’s value in having a holistic urban strategy in place.

    Recommendation number two pertaining to land value taxes is a loaded one. So I’m going to save my specific comments for a dedicated post on LVTs. 

    But I will say that I don’t think trying to squeeze landowners into development via taxes is the most efficient and immediate way to address supply shortages. In advance of this, we should be examining the current barriers to development. Because we’re talking about hyper competitive global cities with perpetual supply deficits. And I don’t believe the problem is incentive-based. The problem is finding sites. The problem is finding ways to build.

    What do you all think? This is an interesting topic of discussion.

  • But what about integrative thinking?

    After yesterday’s post about speed, price, and quality, a friend of mine from Rotman emailed me and said: but what about integrative thinking?

    When I was doing my MBA at Rotman and Roger Martin was the dean, integrative thinking was a significant part of the curriculum and the messaging for the school. 

    Here’s how Roger explains it:

    Over the past six years, I have interviewed more than 50 such leaders, some for as long as eight hours, and found that most of them share a somewhat unusual trait: They have the predisposition and the capacity to hold in their heads two opposing ideas at once. And then, without panicking or simply settling for one alternative or the other, they’re able to creatively resolve the tension between those two ideas by generating a new one that contains elements of the others but is superior to both. This process of consideration and synthesis can be termed integrative thinking. It is this discipline—not superior strategy or faultless execution—that is a defining characteristic of most exceptional businesses and the people who run them.

    So what my friend was getting at is why – when it comes to speed, price, and quality – do you only get to “pick any two?” Doesn’t that go against the rules of integrative thinking? Isn’t that a failure to look for a more holistic and integrated solution?

    It’s a great point. And it’s a thought that crossed my mind while I was writing yesterday’s post. The fact that “something had to give” made me second guess myself.

    In general, I’m a believer in integrative thinking. I think there are lots of opportunities to create new hybrid solutions and models that are superior to what might exist today.

    But what I was getting at yesterday was perhaps a bit more low level in thinking.

    Let’s say for instance you’re a developer constructing a new building and you and your construction manager are in the process of tendering for curtain wall. You receive 3 bids back and 2 of them are roughly the same, but one them is $5 million cheaper.

    My immediate thoughts would be: Why is that one bid so much lower? Did they bid on the same scope? Are they missing something? Will the curtain wall arrive on-site on time? And if it does, is it going to leak like a sieve?

    I’ll be the first to admit that the construction process is fraught with inefficiencies and ready for integrated solutions. I’m certain that the trade-offs between speed, price, and quality could be better managed.

    But more often than not, a rock bottom price usually means that something did in fact give. After all, great integrative thinking is a pretty rare trait.

  • Speed, price, and quality

    Project-triangle.svg

    “Project-triangle” by Cosmocatalano – Own work. Licensed under CC0 via Wikimedia Commons.

    When I was in business school, one of my friends – who runs his own agency – explained to me the Project Triangle and the “pick any two” philosophy. 

    Whether you’re building a building or building a mobile app, projects can be typically broken down in terms of 3 constraints: speed, price, and quality. The “pick any two” philosophy is that – because these dimensions are interrelated – you can only really get 2 of these dimensions at any one time.

    So for example:

    • If you want a project done really quickly and you want it to be high quality, then it’s not going to be cheap. It’s going to be expensive.
    • If you want something done really quickly and you want it at the lowest price possible, then it’s not going to be high quality. It’s going to be low quality.
    • Finally, if you want something high quality and you want it done cheaply, then it’s not going to be done quickly. You might get it done, but it will be deprioritized by whoever is doing it.

    Few things in life are truly black and white, but I really like this framework. It acknowledges the fact that something has to give. It’s unsustainable to think you can always get super fast, high quality work at rock bottom prices.

  • From seigneurial land tenure to condominium plans

    One of the things I noticed this past weekend when I was on my Porter Escape in Quebec City was that there’s still evidence of the seigneurial land use system. I saw it on île d’Orléans.

    Established in 1627 in New France, the seigneurial system was a feudal way of distributing land and creating subsistence farming for those who occupied it. It was ultimately abolished in 1854, but you can still see vestiges of it.

    With the seigneurial system, a typical farming lot was a long and narrow strip of land emanating from the water, which in this particular case was the St. Lawrence River. Here’s a map from 1641 showing what that looks like:

    image

    The reasoning behind this spatial arrangement was rather simple. By having long narrow lots, it meant that you could maximize the number of farmers who had direct access to water. This was needed for navigation, but also for many other obvious reasons. This was an efficient layout.

    At the same time, the long strips meant that each farmer had access to a broad cross section of different kinds of land. They had fertile land for growing, land for their home, and frequently land with trees so that they had material to build, fuel to burn, and so on. It also meant that, despite the overall lot sizes, people actually lived fairly close to each other. It created communities.

    Of course, there’s a lot more to the seigneurial system than just its physical form and there are reasons it was eventually abolished. But today I just want to focus on spatial layout. Because I think there are parallels to how we continue to plan our communities.

    If you live in a city you’ve probably come across a narrow rowhouse, a narrow townhouse, and/or a long and narrow condominium – which many people like to pejoratively refer to as a “bowling alley” plan. In these cases, the width of the home could be somewhere between 10 and 13 feet.

    If you stop and think about this, it’s exactly the same spatial principles as the seigneurial land use system. But instead of maximizing the number of people with access to the St. Lawrence River, it’s about maximizing the number of people who front onto the street and who have access to natural light.

    In tight urban conditions, it’s not uncommon to have no “side yard windows.” In my case, I live in a condominium with 20′ feet of windows on one side only. The other 3 sides of my box have none. And that’s a fairly common urban condition.

    I find this interesting because as much as the world is rapidly changing, some things don’t actually change all that much.

    Image: Wikipedia

  • Amazon Dash — foolish joke or disruptive innovation?

    [youtube https://www.youtube.com/watch?v=NMacTuHPWFI?rel=0&w=560&h=315]

    Earlier this week on the day before April Fools’, Amazon launched two new services. The first was called Amazon Dash (see above video) and the second was called Amazon Home Services. The entire internet seemed to think that Dash was actually an April Fool’s joke, but it turns out it’s not. In fact, it’s actually an incredibly smart product.

    The way it works is simple. Each branded Dash Button is about the size of a pack of gum. You mount it in, on, and near things that you replace on a regular basis, such as laundry detergent, coffee refills, and so on. Then all you have to do is push the button and your order gets sent to Amazon. Shortly after the product arrives at your door. I say “shortly” because you can be certain that Amazon’s goal is to make that time frame as short as physically possible.

    I don’t know about you, but I could definitely see myself using this product. There are a number of essentials – such as laundry detergent and toilet paper – that I just hate shopping for. I have to create reminder appointments in my calendar just so I don’t forget. In fact, I did that today and I still forgot to pick everything up on my way home (my phone died).

    But what’s even more interesting about Dash, I think, is that it increases the threat to brick-and-mortar retailing and, more specifically, big box stores. Because if same day and same hour delivery is a big threat to big box stores, just imagine one button and same hour delivery. And, is it only a matter of time before something like this comes to Apple Watch? It seems like the right medium for it.

    Isn’t it interesting how something that most people believe is a silly joke could actually turn out to be a huge innovation? I try to always remain open minded. Sometimes it’s hard. But it’s good practice.

  • The value in small retail spaces

    image

    This month’s issue of Monocle is centered around fashion, style, and retail. And one of the most interesting pieces is a report on small retail spaces. 

    The argument (which you can read in the preface shown above) is that micro retail spaces are incredibly important for entrepreneurship and urban vitality. Because if all a city has is large retail spaces, then you’re creating impossible barriers for new retail startups. The rents simply become too high.

    It’s on page 79 in case you have this month’s issue or want to go pick it up.

    After reading the article, I immediately thought of 2 posts that I recently wrote on related topics. The first is “Incubating new ideas in cities” and the second is “The hard things about retail.”

    In the first post, I questioned how cities might be able to encourage and incubate new ideas alongside new development and buck the Jane Jacobian truism that new ideas require old buildings. And in the second post, I expressed my concern for a micro retail condo complex here in Toronto that appears to be struggling.

    But maybe that micro retail complex is on to something (just with the wrong tenure: condo instead of rental). Maybe it’s as simple as starting with great urban design and small (affordable) retail spaces. 

    It seems to be working for Columbia Road in London, Knez Mihailova in Belgrade, and Tower Theater in Los Angeles (the 3 examples that Monocle gives).

  • “Project Snowball” cracks down on UberX drivers in Toronto

    Photograph Holding Pattern by Sean Arbuthnot on 500px

    Holding Pattern by Sean Arbuthnot on 500px

    https://500px.com/embed.js

    This afternoon I saw on Twitter that Toronto Police are now starting to crackdown on UberX drivers in the city. The investigation is called “Project Snowball” and they have already charged at least 11 people. The fines are anywhere from $200 to $20,000.

    My response on Twitter was the following:

    I get that Uber is a highly disruptive company. I’ve written about it many times before. But at the end of the day, this is not just about Uber. This is about a larger shift in the economy.

    The buzz term is “sharing economy.” But one of the ways I like to think about it is like so: Facebook doesn’t produce any of its own content, and yet you could define it as a media company. Airbnb doesn’t own any rooms, and yet it is disrupting hotels. Uber doesn’t own any cars or plates, and yet it is disrupting the taxi industry.

    What’s happening is that the internet and mobile phones are allowing for peer-to-peer connectivity and more decentralized forms of marketplace supply.

    What does that mean?

    It means that instead of having a fleet of cars or a centralized hotel building, anyone with an extra car or an extra room (and an internet connection) can plug themselves into the market. And that represents an entirely different cost structure for businesses.

    It’s worth noting that prior to Uber, Travis Kalanick founded a peer-to-peer music sharing company called Scour (1998). Its closest equivalent would have been Napster. Remember Napster? This is not a new trend.

    That said, I still think we’re at the early stages of this shift. I predict that many other industries will see disruptors similar to Airbnb and Uber. And so when I look at it in this context, I have a hard time believing that fining UberX drivers is the most enlightened way forward.

    I believe we should instead be taking a leadership position and trying to figure out how to adapt our rules and regulations to this changing economy. Toronto is not alone in this battle. But we could certainly be the one to lead the way out.

  • From suburban houses to downtown condos

    Last Friday the Financial Post published an interesting article talking about Mattamy Homes and the new office that its founder, Peter Gilgan, is in the process of opening up downtown in the Toronto-Dominion Centre (which just so happens to be my favorite office complex in the city).

    At 64 years old, Peter recognizes that his company has changed and the world has changed. He he himself recently moved downtown and now he’s bringing his company with him.

    “Our Oakville office [a western suburb of Toronto] is a reflection of what our business was 25 years ago,” he says. “We were a local, west-end Toronto builder. Now we’re the largest home builder in Canada and we’re the largest private home builder in all of North America.”

    Come September he will move his finance, legal, IT, human resources and strategic marketing team —  about 100 of Mattamy’s 1,100 staff — into the new downtown digs. He wants to attract “the absolute best talent.”

    “The young people seem to really want to work down here. So that’s one reason. The other thing is to make sure the business has the capital to move forward and expand. Well, where’s the capital? It ain’t in Oakville.”

    This of course isn’t a new thing for suburban homebuilders. Many in Toronto have made the switch – or at least expanded – from suburban houses to downtown/urban condos. And I’m assuming that’s what is going to happen here.

    Still, it’s fascinating to see this trend continue. Young people really do want to live and work “down here.”

  • Day 2 in Quebec City

    I’m writing this post on my flight from Quebec City back to Toronto. I promise that I have a bunch of non-personal urbanism posts in the pipeline, but I just haven’t had a chance to sit down and write them. So for now I’m just going to do a quick recap.

    One of the things I try and do when I visit a new place is not just bounce between the requisite tourist spots, but also dig a little deeper and get an understanding of the place. Thanks to some incredible people at Quebec Tourism, the Chateau Laurier Quebec, and to some of the locals I met, I feel like I was able to do exactly that.

    This morning I just wanted to walk the city. I started on Grande Allée and went into the walls of the center city, down to the lower town (La Basse-Ville), along the waterfront, and then back up towards the Saint-Roch neighborhood.

    Along the way I visited the Rue du Petit-Champlain in the lower town (shown above), which is the kind of small intimate urban street that will make you realize that Toronto’s vast network of laneways is hugely under-utilized.

    I was also told that historically the lower town was less wealthy than the upper town. This makes sense since the rich generally like to move upwards. Think about Hong Kong, Los Angeles, and even flat Toronto with neighborhoods like Forest Hill. Being up high is often considered desirable.

    And in a city like Quebec, there’s plenty of opportunity to adjust your altitude. In fact, its location was chosen precisely because it offered a strategic high ground.

    I often wonder how the first person settling a city decides where to setup camp. But in the case of Quebec City it’s clear. Samuel de Champlain chose high ground at the narrowest part of the St. Lawrence River (the name Quebec actually means “where the river narrows”). This was so that they could keep a close eye on aggressors sailing down the river and then defend against them when needed.

    After Petit-Champlain, I then made by way over to the Saint-Roch neighborhood. Rumor has it that it’s Quebec’s “petit Brooklyn”, so I had to check it out.

    The neighborhood was far more developed than I thought it was going to be. Oracle, Ubisoft, and many others have big offices there. But I did notice a few hipsters on the streets, so I must have been in the right place. The Saint-Roch neighborhood has an interesting history that is definitely worth reading.

    In the afternoon I had a late lunch back on Grande Allée and then popped by La Citadelle. It was fascinating to walk through, but it was equally as exciting to see snowboarders repurposing portions of the city’s fortified walls. Click here for a quick Instagram video of that.

    Before leaving for the airport, I also made a quick stop along the Promenade Samuel-De Champlain to take in some of the views of the river. I stumbled upon the look-out tower below.

    Quebec City is an absolutely stunning city and I’ve always had a soft spot for French Canadian culture. I grew up speaking French, but it has been a long time and I rarely use it these days. 

    Thankfully, Quebec City is the perfect place to get some practice in. In Montreal you can get by and even live there only speaking English. But Quebec City is decidedly French.

    And even though I sound like a real yank when I hobble together French words into occasional sentences, bilingualism is a big part of the Canadian identity for me. I hope that never changes.

    If you’d like to see a summary of all my social media posts from the weekend and/or if you’d like a special deal on your own packaged vacation to Quebec City, click here.