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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  • Urbanization in the developing world

    A few days ago I asked a reader of this blog if there was anything, in particular, that she’d like to see more of on here. She responded by saying that she’d love to learn more about how other cities—outside of Toronto—are managing urbanization, as well as how we shape cities and cities shape us.

    It’s an interesting and important question because, frankly, the challenges are greater outside of Toronto. One of the stats that often gets cited here in the media is how the Greater Toronto Area gets approximately 100,000 new immigrants every year. This doesn’t include domestic migration though, so I would assume that our total number is even greater.

    But if we stick with 100,000 for now, it means the GTA receives about 11.4 new immigrants every hour (100,000 people / 8,765 hours in a year). Lagos, Nigeria, on the other hand, receives between 50-60 new people every hour. In fact, it’s predicted to be 7th fastest growing city in the world between now and 2020. 

    If you take a look at the complete list of the world’s fastest growing cities (all estimates, of course), you’ll likely notice that the vast majority of the cities are in the developing world. And that’s really the challenge. The world is rapidly urbanizing and becoming the most urban it’s ever been, but the changes are the greatest outside of developed nations. This poses entirely unique challenges.

    Of the kinds of cities I’m talking about, I’m most familiar with Dhaka, Bangladesh. In my last year at Penn, I was part of a studio led by KieranTimberlake Architects that focused on water and housing issues in that city. It was a partnership with the University of Dhaka. We spent roughly 2 weeks there and it was an eye opening experience.

    Here’s a telling slide from our final presentation:

    image

    What we were trying to do with this chart was compare population and per person land value for our development site according to various city types. In other words, we were essentially asking: If we were to build out our proposed site in the same way, as say, Dallas, Los Angeles, Hong Kong, or what is typical for Dhaka, how many people could we fit and what would be the resulting per person land value?

    I don’t remember where we got the land value figures from, but we were trying to be cognizant of the fact that every city requires a unique solution. Using the same per person land values in Dhaka as in Dallas would be unimaginable because Dhaka has over 40,000 people per square kilometre (top right on the diagonal line above) and Dallas has under 1,400 per square kilometre (bottom left on the diagonal line above).

    The challenges of urbanization in the developing world are profound, particularly in places like Dhaka where most of the city is subject to severe annual floods. By some estimates, 18% of the city’s land area gets flooded every year—talk about adding another layer of city building complexity.

    We didn’t solve all of the problems in that studio and we’re not going to do it here, but I do think it’s important to fully understand the problem. One of my favorite books on cities is called “The Endless City.” It examines New York, Shanghai, London, Mexico City, Johannesburg and Berlin, and has a ton of great data and diagrams.

    Here are a two that outline densities and land use patterns for the above 6 cities (same order starting on the top left):

    image

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    If you’re interested in cities, it’s definitely worth having it on your coffee table. And fitting to @PhatNancy’s tweet, ”The Endless City doesn’t just show how cities are changing but also how they are changing us.”

  • The Penn Annual

    I spent this morning booking the last leg of my flights for my annual ski and snowboarding trip this February. It’s a tradition that a few of us started during grad school at Penn. We call it the “Penn Annual” and we’re now into our fifth year. This year we’re going to Jackson Hole, which has been on the top of my list of places to snowboard for a number of years now.

    We started the Annual because we obviously love to ski and snowboard, but we also did it as a way to reconnect at least once a year. It’s a forced reunion. We pick a spot and all convene. The core group is about 4-5 people. But depending on where we go, it often expands as local friends and family join in. 

    Interestingly enough, we’re apparently a defined target market known as the “brocation” segment. Or at least this is what a marketing guy told us during the Third Annual in Lake Tahoe. So far we’ve been to Tremblant, Stowe, Lake Tahoe and Whistler. We usually alternate between Canada and the US. Next year we’re already thinking it’ll be Banff.

    One of the things we’ve talked about doing since the beginning is turning the The Annual into a larger Penn alumni reunion and networking event. In fact, we’ve parked pennannual.com. If we did this, we could bring down the per person costs, as well as create a much larger pull for participants. I love the idea of staying connected and meeting new Quakers (as well as others).

    Of course this is one of those ideas that usually loses air once the trip is over. But this year I thought I’d put it out there on my blog, and also send the idea over to Penn Alumni. So if you’d like to join us in Jackson Hole, drop me a line.

  • Merry Christmas

    Merry Christmas everyone! I love it when Toronto gets a white Christmas.

    If you were hit by #icestorm2013, then you may still be without power. If that is the case, I hope you’ve found someplace warm to celebrate with friends and loved ones.

  • BlackBerry started our forest

    A friend of mine posted this article on my Facebook wall yesterday: “A Snowier Silicon Valley in BlackBerry’s Backyard.”

    It essentially talks about the fact that despite the rapid decline of BlackBerry (it just reported $4.4 billion in losses), the Kitchener-Waterloo region is thriving. Many companies—both local and international, such as Google and Motorola, Square, Desire2Learn, Kik and others—have all hung their shingle in the area. 

    Part of this certainly has to do with the University of Waterloo, but much of it also has to do with the legacy of BlackBerry. In fact, you could argue that BlackBerry (formerly Research in Motion) is what started at all.

    In reading the New York Times article I was reminded of a post that Fred Wilson wrote last year called, “The Darwinian Evolution of Startup Hubs.” It’s a great post. In it he talks about how he looks for the company that gave birth to the hub. In Silicon Valley he argues that it was Fairchild Semiconductor and in New York it was Doubleclick.

    Once started, he likens the hub to a growing forest. The big trees (mature companies) start dropping seeds and new trees then start to grow (more startup companies). This is important, because it kick-starts a non-linear cycle of entrepreneurial growth.

    Here’s how he maps out Silicon Valley:

    “In my mental model of Silicon Valley, the first “tree” was Fairchild Semiconductor (founded in 1957) which begat Intel (founded 1968) which begat Apple (1976) and Oracle (1977), which begat Sun (1982), Silicon Graphics (1981), and Cisco (1984) which begat Siebel (1993) and Netscape (1994), which begat Yahoo! (1995) and eBay (1995), which begat Google (1998) and PayPal (1998), which begat YouTube (2005), Facebook (2004), and LinkedIn (2003) which begat Twitter (2006) and Zynga (2007), which begat Square (2010), Dropbox (2008), and many more.”

    Using this logic, Fred Wilson argues that Silicon Valley is about 10 cycles in and New York is at about 2. So what about Kitchener-Waterloo? Well if you buy into the argument that BlackBerry is what started it all, we’re really only into our first cycle. BlackBerry created a lot of wealth and talent, and now it’s being deployed into local startups. Our forest has begun.

    Part of me worries, though, if Kitchener-Waterloo is the right place for a startup hub over the long term. Sure it has the University of Waterloo, but does young talent want to be there? At about 320,000 people, it’s no San Francisco, New York or Toronto. And we’re already seeing a significant pull towards urban centers.

    But let’s look at it from the perspective of Southern Ontario as a whole. We’re at a critical moment in our evolution. The mother tree has caught a disease and it’s starting to take its toll. It may be able to fight it off, but right now it’s not looking promising. Thankfully, there are many young trees sprouting up to replace it. But we’re going to need to take special care of them, because they’re probably our best shot at creating our own thriving forest.

  • Why real estate is an imperfect market

    I’ve said many times before that the real estate market is an imperfect one. Participants lack access to a lot of valuable information and there’s a significant amount of friction between buyers and sellers.

    A perfect example of this can be found in this recent Toronto Star article, which is suggesting (at least in the headline) that only about 23% of Toronto’s condos are owned and rented out by investors. The article is reporting on the Canada Mortgage and Housing Corporation’s annual publication called the Canadian Housing Observer.

    Of course, to come up with this number, CMHC is only reporting on data held by the MLS. It does not include units that may have been rented out via Craigslist, Kijiji, social media, a billboard in the lobby, or some other means. And I would argue that the rental side of the marketplace has a much stronger tendency to go outside of MLS as compared to sales.

    So what what this means is that we have absolutely no idea what the actual percentage of investor owned units in the city really is. Here’s how CMHC put it:

    Mathieu Labarge, CMHC’s deputy chief economist, acknowledged that “to complete the picture there’s a need for data,” and it simply doesn’t exist.

    Nobody seems to know exactly where buyers, or their money, is coming from, why they are buying and how they intend to use the condo.

    In reality, the investor percentage is going to be higher:

    “We think the number is closer to 50 per cent,” says veteran Toronto development consultant Barry Lyon. “The data they (CMHC) are using has some shortcomings. It’s only part of the story.”

    Now, I don’t have the answer, but I think it’s pretty safe to say that consumers and the market as a whole would be better off if it had all the information.

  • Am I supposed to like this city?

    Marketer Seth Godin just wrote a typically short blog post called, “Am I supposed to like this?”

    In it he talks about the fact that we are, for example, more likely to enjoy the food at a fancy restaurant. And we’re also more likely to enjoy a bottle of wine if it’s expensive or if we believe it comes from some desirable wine region and it’s supposed to be good (you can even just switch the bottle).

    He then sums up this idea in one line that I really like: “Judgments happen long before we think they do.”

    Now, I’ve thought about this same idea with respect to cities. Take New York, for example. New York is famous. If I had to pick a capital for the world, it would probably be New York.

    You watch it in movies and shows (even if it’s actually filmed in Toronto, Chicago or some other stand in). We read about it. We hear about it. We generally form judgments without the actual experiences. That builds brand equity. We’re supposed to like New York. Sex and the City told us so. And that makes it all that much better when we eventually get there.

    Of course, it’s a bit of a catch-22. You have to be an awesome city for people to want to make movies and songs about you. But in this era of global connectedness, I think everyone, from citizens to economic development agencies, can fake it until that city makes it by investing in “supposed to.” Am I supposed to like this city?

  • Wrapping my head around Bitcoin

    There’s been a lot of talk about Bitcoin over the past year, particularly as of late when the value of one bitcoin peaked at over USD $1,200.

    Truthfully, it’s only been over the past few months that I’ve really started to wrap my head around how Bitcoin works and what the implications of it might be. But the more I learn about it, the more it strikes me as something enormous in the making.

    If you’re not yet familiar with Bitcoin, you can check out this video (simple version) or this video (complicated geek version).

    Essentially though, it’s a decentralized and open source digital currency that’s managed using networked computers, as opposed to any one government. And functionally, it works as a distributed public ledger that logs every single bitcoin transaction. What this means is that when you buy or sell something using bitcoin, no exchange of bitcoin actually takes place. Instead, the distributed public ledger (called a block chain) gets updated to show who owns which coins both today and previously. 

    This is potentially a big deal for 2 reasons.

    The first is that many people view Bitcoin as the first internet native currency. The decentralized architecture of Bitcoin matches the decentralized architecture of the internet. And so it has the possibility of becoming the transactional protocol for the internet and global commerce.

    The second reason (and this is where your mind will really get blown) is that transactions can be logged in the block chain/ledger with additional information embedded into each bitcoin. What this means is that you can use Bitcoin to create contracts, such as deposits, escrows, loans and so on. And since Bitcoin is designed to function in low trust environments (ie. where nobody knows each other), there’s an opportunity to really optimize the way we buy and sell almost anything.

    In fact, if you dig deeper into what’s being contemplated with Bitcoin, you’ll find things like “smart property.”

    “Smart property is property whose ownership is controlled via the Bitcoin block chain, using contracts. Examples could include physical property such as cars, phones or houses.”

    Of course, it’s still early days for Bitcoin. But if it truly does become the transactional protocol for the internet, then I certainly do think we’ll see dramatic changes in the way we buy things like cars and real estate.

  • The story behind the name “Architect This City”

    I was having drinks with an old friend a couple of weeks ago and I told her about my blog. She immediately asked me what it was called. At the time, it was just called “Cities.” And truthfully, I hadn’t given the title much thought. I just knew that I wanted to take a multi-disciplinary approach to examining cities.

    After that night I started thinking more about the idea of a proper title for my blog and I came to the conclusion that I did need something more creative. I should have a stronger brand and identity. So I experimented with a few names and, as you’ve probably noticed, I settled on “Architect This City.”

    Now that I’ve been using the name for a few weeks, I thought I would share my thinking behind it.

    I wanted the name to convey 3 things. (1) I wanted it to be clear that this blog was about cities. (2) I wanted it to be something personal to me. (3) And I wanted to somehow demonstrate that this blog isn’t a siloed look at any one particular discipline, such as architecture, planning or real estate. It’s more than that.

    Given my background in architecture and the fact that “city” is in the name, I think that objectives 1 and 2 made it through. But what I hope is also clear from the name is that the term “architect” is supposed to refer to something much broader than just building design. It’s about the underlying systems, processes and structures of our cities—which could tie into the real estate market, our governance structures or some new technological innovation. Cities are complex and there are many “architects.”

    Finally, I wanted the name to be a directive—a call to action. I wanted it to be a reminder that cities don’t just build themselves. They require careful thought, planning and deliberation. And that’s fundamentally what this blog is all about: city building.

    What do you think about the new name? I’d love to hear your thoughts in the comment section below.

  • Priced out of the city

    Earlier this month, the Royal Bank of Canada and the Pembina Institute co-published a report on Toronto’s housing market called “Priced Out”. The overarching argument is that homebuyers in the Greater Toronto Area (GTA) are being “priced out” of the areas in which they really want to live, which happen to be walkable and transit-oriented neighborhoods.

    In fact, according to their research, 80% of residents in the GTA would be willing to sacrifice space (size of house and yard) if it meant they could live in a more walkable and urban neighborhood. But at the same time, more than 70% of GTA residents say that they live where they do because of affordability reasons, not because of actual preference. This, of course, isn’t new. It’s the whole “drive to affordability” notion—just keep driving until you can afford the housing. 

    Overall though, the report does reinforce a macro tend that I’ve discussed many times here at Architect This City. People are returning to cities in droves (or would at least like to, if they can afford it).

    If you’re interested, the report also has some good data on Toronto and Canada’s housing markets. 

    Here’s how average home prices in Canada trended between 1980 and 2012. Vancouver became a total outlier starting in the early 90s (thanks Hong Kong).

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    And here’s a look at housing completions (so new construction) by product type in the Greater Toronto Area. Note how apartments/condos surpassed single-detached houses in and around 2008. 

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  • A question of infrastructure

    One of the main reasons why I hear people oppose certain development projects is because of a lack of infrastructure. Whether it’s roads, transit or something else, the concern is that what we have is inadequate to service what we’re about to build.

    Now, I understand that we can’t completely overburden the city, but I still have fundamental concerns with this line of thought. 

    The population of the Greater Toronto Area is expected to grow by 2.5 million people over the next 20 some years, to almost 9 million people by 2036. What this means is that growth is happening and it doesn’t really care whether or not we have the “right” infrastructure in place. It’s coming and we need to figure out how best to house these people while at the same time building the most livable and prosperous city on the planet.

    And I’m not sure most people appreciate that if we don’t build up (intensification) it means we’re going to be building out (sprawl). Again, the growth isn’t going to stop. And this represents an even greater strain on our region’s infrastructure (both built and natural) because it puts people into less intense land use and into cars.

    So what I’m going to suggest is that instead of asking if our current infrastructure will handle the future, we ask why the future hasn’t been built into our current infrastructure? It’s a question of being proactive, rather than reactive.

    We should be demanding better infrastructure instead of holding back progress because of our inability to properly city build. We should be demanding the best as opposed to knocking everything else down to the lowest common denominator.

    A perfect example of this is transit.

    I strongly believe that transit is one of, if not the, biggest issue facing our region today. Decades of disinvestment are really showing my friends. And if we don’t get our act together, the impact on our quality of life, our environment, and our economic productivity is only going to worsen.

    We need to be asking the right questions: Is the development the problem or is the real problem our infrastructure deficit?