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.
Barcelona is one my favorite cities in the world. I love the intimate laneways in the old part of town. I love how La Rambla functions as a spine for public life in the city–even if it is pretty touristy. I love the weather and beaches. And I love that there’s a strong culture of art and design that seems to permeate all aspects of the city.
Over the weekend I found an impressive website called BIG TIME BCN, that beautifully maps out the city’s more than 2,000 years of building. It covers over 70,000 plots of land and, if you hover of them, it’ll tell you the age of the buildings. It’s similar to what was done here for the Netherlands. But the colors on this one seem very Barcelona to me.
This blog post is a submission to a group blogging event being put on by Meeting of the Minds and Living Cities. The focus is on urban opportunity. Click here for more information about the event.
Since the beginning of time, the purpose of cities has been to bring people together to socialize with one another and to generate wealth. And, today, more than ever, the potential returns of being smart and being in a global city are huge. Cities are our economic unit. They are what’s driving the global economy.
But as the world continues to urbanize at an unprecedented rate and as the global economy becomes increasingly concentrated in select urban centers, how do we ensure that all city dwellers are connected to the economic opportunities being made available by this new information age?
Here are 3 suggestions.
First, we need broad and equitable access to education. I was deliberate in talking about the “returns of being smart.” Education and the right skills are even more critical today, because the labour market is not what it used to be. In Edward Glaeser’s book, Triumph of the City, he talks a lot about Detroit and how the greatest thing the city–and the car industry–did in its history was create lots of high paying jobs for people with little or no education. However it was also possibly the worst thing Detroit did because, today, the city is now stuck with that legacy. And those same high paying jobs for people with little or no education aren’t coming back. The labour market has changed.
Second, we need to ensure that people living in cities have the opportunity to be physically connected. That our cities offer strong transportation and mobility options and that our cities are designed to be inclusive. When I was visiting a friend in Los Angeles a few years ago and lamenting about the traffic, he responded by telling me that LA traffic is merely a socioeconomic problem. If you have the means, you get to live in desirable central neighborhoods where your commute is entirely reasonable. And if you don’t have the means, well, then you get stuck with a horrible 2-hour commute. We know that the rich will always outbid the poor for housing in any city, but as much as possible, we need to give people physical mobility so that they can then achieve economic mobility.
At the same time, the design of individual neighborhoods and buildings matters a great deal. If you’ve ever watched The Human Scale, you’ll likely remember the line:
“First we shape our cities and then our cities shape us.”
As one example, the documentary talks about how masterfully modernist architecture from the 60s and 70s achieved extreme forms of social isolation. It cleansed the urban environment of any sort of public life and brought it all up into disconnected towers. The problem was that it was far too rational. The power of cities lies in their organic and evolving nature. And when you constrain them with mechanisms such as single use zoning and other restrictions, you stifle their potential to generate economic opportunities for their residents–which, as we’ve said, is one of the main reasons people choose to live in cities in the first place.
Finally–and this is a bit of a tie in for everything we’ve been talking about–we need to be proactive about inequality. Research shows that there’s a direct correlation between income inequality and social mobility. The more income inequality a city or country has, the less intergenerational social mobility it has–not to mention that it also leads to more crime and other negative externalities. This is a complex issue though, and I won’t pretend that it can be easily solved with a better public transit and more bike lines. It’s something much deeper and more broad. This one is about a belief that cities should be designed to enhance everybody’s quality of life and to make everybody richer, not just a few.
There’s a fairly real divide between east and west here in Toronto. When people talk about real estate or describe the kind of person they are, they often say things like: “I’m an east end kind of person” or “I only want to buy on the west side.” There’s such a split that somebody recently said in a meeting I was in that the east vs. west real estate divide is like Christianity vs. Judaism.
Historically, the west has generally been considered more desirable than the east–regardless of what scale you’re looking at. Downtown west vs. downtown east, Etobicoke vs. Scarborough, and so on. And for whatever reason, this seems to be the case in a lot cities I’ve been to. Consider Montreal, Vancouver, New York, and London, to name a few.
But lately, I’ve been noticing a growing acceptance of the east side. Friends are telling me that, even though they don’t know the east all that well, they’re almost agnostic to which side they buy a home on.
At the same time, we’re seeing Toronto’s development boom spread to the east along streets like Church and Jarvis; paralleling the kind of intensification we’ve already seen on the west along Bay Street, University Avenue and further. I’m also noticing a lot of west end restauranteurs open up on the east side. See Carbon Bar and Gusto 501 as two recent examples.
But with the neighborhoods like the Distillery District and Leslieville attracting lots of yuppies and with neighborhoods like Regent Park and the West Don Lands coming online, it shouldn’t come as a big surprise to you that developers and other entrepreneurs are looking east. Maybe you should too.
On the left is a picture of some crowded and dense city at, I presume, the turn of the 20th century. And on the right is a picture, today, of your generic suburban city with lots of cars, a broad street and auto-oriented signage everywhere.
As the captions say, the city on the left is what modernist architects like Le Corbusier and powerful city builders like Robert Moses were trying to fix. What we ended up with, as a result of these efforts, is the city on the right. Now, today, we–architects, planners and urbanists–are all trying to correct what we see as a huge misstep in the way we designed and built cities.
But is it really an anomalous misstep or is it simply a preferential pendulum that swings back and forth from generation to generation? One generation thinks cities are dirty and evil and that they need to be evacuated. And then the next generation loves them and wants to move back into them, which is what’s happening today.
Dogma–particularly when it comes to cities–takes a long time to percolate through the system. Le Corbusier was espousing his city building ideals of “towers in parks” in the 1920s. That’s when he proposed to demolish 2 square miles of Paris (Plan Voisin) and turn it into what most people today would think looks like a New York public housing project.
But for these new ideas to take hold, young architects, planners and builders first need to become indoctrinated in school or wherever they’re learning the ropes. Then, they need to get out and start practicing and mature to a point where they’re starting to influence and control substantial city building decisions. That’s why, I think, Le Corbusier’s ideas of the 20s really only became widely accepted as planning principles in the post-war years.
Because of this though, I sometimes wonder if I too am just following the natural cycle of changing tastes. When I went to architecture school, we were taught that public transit is more efficient than private cars, density is good for the environment and for economic development, and that Le Corbusier was generally a crappy city builder. And if you’re a regular reader of this blog, you’ll know that that is generally the view I take here.
But when I ask myself this question, I think of a few things. First, if you look at the urbanization of ancient cities, they were always organized around strong public spaces. The desire for human beings to be able to walk around, conduct business and socialize with each other is not a new phenomenon. And our post-war planning ideals put a strain on that.
Second, take a look at the world and what’s happening. The majority of people now live in cities and we’re continuing to urbanize at a frenetic pace. Shenzhen in China went from a population of just over 300,000 people in 1979 to over 10.5 million people today. That is the pace of urbanization that city builders need to deal with. It’s unprecedented.
And to even begin to make that manageable, I don’t think we can continue to build cities like the ones on the right side of the picture, above. It’s unsustainable both environmentally and from a mere space planning standpoint. There simply isn’t enough room.
So call me a product of the times, but I just don’t see our current planning goals as one side of a swinging pendulum. I see them as a return to what cities have always been about: a place for people to interact, socialize and generate wealth.
I’ve talked a lot about laneway housing here on Architect This City. I’m a big supporter and I wish that Toronto would get on board and formally allow them. It’s been done and it is being done in cities around the world. Just this morning, a friend of mine sent me this NY Times article talking about how Portland has embraced the “granny flat”, which is one of the many names used for this type of housing.
Eli Spevak, a local alternative-housing developer who is among those who lobbied for A.D.U.-friendly policies, said, “The city changed two rules, and all of a sudden it went from 30 a year being built to 200 last year” — an impressive figure, considering the total number of applications approved for single-family houses in 2013 was 800.
This is a hugely impressive figure that shows that these homes are not really a niche product. Laneway homes have become a meaningful chunk of the new home market in Portland. Given that they’re a relatively affordable and sustainable option, I’m not surprised. But I am surprised that more cities aren’t following suit.
For anyone who has recently tried to buy a house in Toronto, you’ll know that multiple offer scenarios, also known as “bidding wars”, are a fairly common occurrence. Demand for housing in the city is great and interest rates are low. And so homes are frequently being priced below market to generate a feeding frenzy.
When I read articles like this, I’m reminded of how much frustration I have for the way the real estate market operates today. There’s poor liquidity, there’s a lack of transparency, and there are high transaction costs. I’m a free market kind of a guy and so I’m bothered by how “imperfect” the real estate market remains.
A lot of people in the business like things just the way they are, but I believe that markets function better, for everyone, when they are open and transparent, and all participants have access to information. Thankfully, I do believe that we’re headed towards a world with more transparency, not less. Information wants to be free.
Last year I wrote a post called Province of Toronto, where I briefly talked about the outdated nature of how cities are organized and governed in Canada. I was effectively arguing that, in today’s global economy, our dominate economic unit needs to be the city–not the province.
This isn’t something that gets talked about a lot, but I feel strongly that we should be looking at it. We’re unnecessarily crippling the economic, social, and cultural potential of our cities because we, to put it bluntly, haven’t gotten around to reorganizing our governance structure.
Well, this evening, I happened to stumble upon a great post by The Urbanophile called, Are States an Anachronism? In it, he cites a book by Richard Longworth called Caught in the Middle (that is now on my Clear reading list), which argues that states, as an economic unit in the US, are not only outdated, but hugely detrimental to the economy.
More specifically, he outlines the following concerns (taken directly from The Urbanophile blog):
States do not represent communities of interest.
Arbitrary state lines encourage senseless border wars.
Many state capitals are small, isolated, and cut off from knowledge about the global 21st century economy.
Metro areas are the engines of the modern economy, but the rules for municipal and regional governance are set by states, and often in a manner that is directly contrary to urban interests.
States can’t to much to help, but they can do a lot to hurt.
For a complete explanation of each of the above points, I would encourage you to check out the full blog post, here. As I said before, this isn’t a topic that’s top of mind for most people. But it’s an important one. Our global competitiveness is at stake.
Late last month it was announced that the 30 St. Mary Axe tower in London–also affectionately known as the Gherkin–had gone into receivership. The reason was a mismatch of assets and liabilities, specifically currency losses:
A fund managed by IVG Immobilien AG, once Germany’s biggest real estate company, and London-based Evans Randall Ltd. bought the Foster + Partners-designed tower from reinsurer Swiss Re Ltd. for 600 million pounds ($1 billion) in 2007. Part of the IVG fund’s loan was in Swiss francs, which have gained about 63 percent against the pound over the last seven years, increasing the amount owed to the point that it breached rules on how much debt could be held against the property.
But what I found interesting while reading Bloomberg and Monocle, and learning about the loan default, is that there seems to be a lot of people in London that really don’t like this tower. Shaped like a giant pickle, it’s been the brunt of many lewd jokes, I’m sure.
However, within the architectural community, the Gherkin tower is generally revered as a pretty awesome piece of architecture. It’s a highly sustainable building that employs a number of natural ventilation and passive heating and cool techniques. It’s estimated to consume half the energy of a “typical” office building.
And certainly, I hear lots of people criticize the building here in the city. Often, they mention how much wasted space the angular walls generate, which makes me wonder why we have so many people living in the suburbs when there are so many space conservationists among us.
Personally, I love the Crystal. And I also love the Gherkin. They’re big and bold and they piss a lot of people off. Good, I say.
Yesterday evening I was reading the Spring Summer Candy GPS Report put out by London-based property developer Candy & Candy. If you’ve never heard of Candy & Candy, then I guess you haven’t been in the market for a £60m apartment. Candy & Candy are the developers behind One Hyde Park in London, which is said to be the world’s most expensive residential development.
But what is interesting about a project like One Hyde Park is that it’s really only possible in a global city, like London, that attracts a massive amount of foreign investment. A project like One Hyde Park is a possibility of globalization, not a result of local employment numbers.
Which is why if you take a look at the Candy GPS report, you’ll see that their interest is in tracking the habits of ultra-high-net-worth-individuals (UHNWIs)–those with wealth exceeding US$30 million. Last year, the world was estimated to contain almost 200,000 of them, with a combined wealth of almost $28 trillion. This number is expected to rise to $40 trillion by 2020.
Now, you may not be in the market for the most expensive apartment in the world, but I thought it would be interesting to talk about where this money is coming from and which cities it’s going into–at least when it comes to real estate.
The top 3 countries for UHNWIs investing in real estate are Germany, Japan and the United States, respectively. The US has the most ultra rich people, but they have a lower propensity to invest in real estate compared to Germany. Nonetheless, these are the countries that dominate.
But who are the recipients of this money?
Well, first of all, it’s going into cities. But it’s flowing into a small number of them. Cities representing 5% of the world’s population are said to attract over 50% of the real estate investments made by the richest people on the plant.
According to Candy GPS, the top cities are Hong Kong, London, Moscow, Singapore and New York, respectively. Hong Kong sits at the top, largely because of money flowing in from mainland China, but London is said to have the broadest investment reach.
So there you have it, a quick overview of where the ultra rich buy real estate.
I’ve spoken about global cities, such as New York and London, many times before on Architect This City. I’ve also talked about the rise of consumer cities. That is, cities with a high “urban amenity premium”, which could be great outdoor amenities or great restaurants, theatre and so on. These are places of consumption.
Sometimes global cities and consumer cities are one and the same. But there are also cities–such as Vancouver–where I view the urban amenity premium as outweighing their status as a global city. Vancouver, quite simply, is an awesome place to live and enjoy life. I almost went to UBC for grad school because of Whistler Blackcomb and the city itself.
Today, I’d like to introduce another type of city into the discussion mix: the necessary city. I heard about it here and, although it seems somewhat intuitive, I think it’s an important reminder that, even though a city may not be an alpha global city, it may be fulfilling a specific function for a particular industry or aspect of the global economy. It may still be a necessary city for your corporate headquarters.
For example, Houston is the city for energy companies. If that’s your business, you likely need a presence there. For fashion and luxury, it’s Paris. And if you’re in the auto industry:
The major global equipment manufacturers are widely dispersed, but when you look at leading global parts suppliers, they virtually all have their North American headquarters in Detroit – including the German, Japanese and Korean ones. Among them are companies like Robert Bosch, Denso, Yazaki and Hyundai Mobis. If you’re in the auto industry in America, you have to deal with Detroit. Unsurprisingly, Detroit boasts several nonstop flights to key Asian destinations.
In essence, we’re talking about cities making themselves necessary by becoming niche experts. And what I think is interesting about this concept is that it’s likely much more attainable for a lot of cities. Most cities will never become New York. And most cities will never be able to transform themselves into the next Silicon Valley.
But maybe those are the wrong economic development goals. It’s not about becoming the next, whatever; it’s about finding and owning a particular niche and making yourself absolutely necessary to the global economy.
