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.

  • Earth’s biggest ____store.

    Imagine this sequence of events (and don’t peak by clicking on any of the links).

    The year is 1994.

    You notice that the internet is starting to become a big deal and that more and more products are being sold online. As a result of this trend, you decide to start an online business.

    You write up the business plan and begin operations out of your garage. You then get lucky (or you’re just smart and talented). Within 2 months, sales reach $20,000/week. That’s over a million dollars a year.

    Business continues to grow and within 3 years you’re able to take your company public, raising $54 million at a $438 million valuation. Over the subsequent two years, you’re then able to raise an additional $2.2 billion in debt to fund your continued growth. 

    The year is now 2000.

    You were just named Time magazine Man of the Year. And traditional brick-and-mortar retailers are really taking notice (i.e. suing you). That’s pretty impressive after only 6 years of operation. 

    This company is called Amazon. And that “you” is Jeff Bezos.

    I was reading up about how much of an asshole Jeff Bezos is, and then became interested in the Amazon story. I thought I would share a bit of it with you all here.

  • Annual US Federal infrastructure budget

    I was browsing through Vishaan Chakrabarti’s new book, A Country of Cities: A Manifesto for Urban America, and I was struck by a diagram outlining the annual US Federal infrastructure budget. Here it is:

    It comes as no surprise, but it’s still a good reminder of how heavily subsidized roads and sprawl are. So the next time somebody argues that suburban sprawl is a natural market outcome, remind them of how much government encouragement it took.

  • Haussmannization

    If you’re into cities, then you’re likely familiar with the Baron Georges-Eugène Haussmann.

    He was Napoleon III’s urban planner and the man responsible for the Paris we all know and love today. Those broad avenues radiating from the Arc de Triomphe are his doing. His plans transformed Paris from a medieval city into what was considered to be, at the end of the 19th century, one of the most modern cities in the world.

    What spurred this post is an exhibition currently on display at the National Gallery of Art in Washington. It’s on the photography of Charles Marville, who was, interestingly enough, initially commissioned to document Paris before Napoleon and Haussmann “destroyed” it.

    In reading NPR’s summary, I was amazed to learn about the meticulous detail that went into the redesign of the city, which went all the way down to the gas street lamps that were rolled out following the “Haussmannization”of Paris. In fact, so much thought went into the appearance of these street lamps that their heights were actually modulated to match changes in street elevation; the effect being that as you looked down an avenue, the street lamps always appeared even and harmonious despite any ups-and-downs in the road.

    But beyond street lamps, the exhibition also got me thinking about urban renewal as a broader concept. Today, I suspect that most people would consider Haussmann’s interventions to have been a positive thing for Paris. Before these changes, Paris was a cramped and crumbling medieval city.

    However, while in retrospect these changes might seem positive, Parisians at the time hated what was happening to their city. The entire place was under construction. And if you’re a fan of Impressionism, you’ll know that many artists at the time began lamenting about the regularization of Paris. They yearned for the visual variety that once characterized the city.

    But as any developer will tell you, change is not something most communities tend to embrace. In fact, it’s human nature for us to down play positives and play up negatives when faced with uncertainty (see Prospect Theory). 

    And sometimes it’s merited. Fast forward to 1925 and you have yet another audacious Frenchman trying to destroy and rebuild Paris: Le Corbusier. Come to think of it, I wonder if he thought of himself as the next Haussmann. He certainly thought of himself as the man responsible for ushering in the next wave of modernity.

    But while he didn’t execute on his Plan Voisin in Paris, he certainly left his mark on cities all across the world. The plan he intended for Paris, was more or less what we used to clear slums in a lot of cities. However it turned out to be a complete failure.

    So I guess the moral of the story is that some change is good and some change is bad. But most of the time it’ll seem bad at first, making it hard to tell which is which.

  • Yale economist Robert Shiller awarded Nobel Prize in Economics

    Yale economist Robert Shiller – who is famous for his work on speculative bubbles and housing markets – was just awarded a Nobel Prize in Economics.

    By way of his Case-Shiller Home Price Indices, he has argued that from 1890 to 2012 home price appreciation in the US (in real terms) has been basically zero. It has been flat:

    image

    As a result, he’s been very critical of the notion that homes should even be thought of as an investment. In this interview, he says the following:

    “So, why was it considered an investment? That was a fad. That was an idea that took hold in the early 2000’s. And I don’t expect it to come back. Not with the same force. So people might just decide, “Yeah, I’ll diversify my portfolio. I’ll live in a rental.” That is a very sensible thing for many people to do.”

    He also gives the example of Japan, which saw a massive run up in real estate prices and homeownership rates in the late 80s, only to then see them fall and stagnate for the next 20 years.

    In the US, homeownership rates have gone from about 69% at the peak (2006) to roughly 65% as of 2013. The long term average is probably somewhere in between these two numbers.

    But homeownership is a fundamental and heavily subsidized part of the American dream. Could America ever be a nation of renters?

  • Airbnb subpoenaed for information on its 15,000 New York City “landlords”

    Last Monday, the Office of the New York Attorney General subpoenaed Airbnb for information about all of its 15,000 “landlords” who rent out spaces in New York through their service. Airbnb has since refused to provide the information.

    This is an interesting case. Airbnb is one of those startups that seemed initially like an idea too crazy to work, but has since grown to become a serious disruption to the hotel industry. However, the problem is that many jurisdictions have laws pertaining to illegal hotels. In the case of New York, the law prohibits short-term rentals under 30 days unless the permanent resident is present alongside the guest(s).

    What this means is that renting out your apartment while you’re away for the weekend-which from my experience here in Toronto is how a lot of people use the service-is technically illegal in New York. State senator, Liz Krueger, believes that apartment building residents shouldn’t have to worry that their neighbouring apartment could turn into a de facto hotel room.

    While I do sympathize with this concern, I think there’s a gradient of use here. Not every Airbnb user is operating a de facto hotel. Many, whatever that percentage might be, simply use it to earn extra income while their place sits idle. And to do this, the permanent resident is trusting their home to a stranger.

    So in a way, there’s a filter in place that isn’t there when the unit is being operated strictly as a hotel suite. Therefore, maybe we just need to expand the definition of having a “permanent resident present” to include having their belongings and life in the place.

    It’ll be interesting to see how this all pans out. But whatever the result, it’s clear that Airbnb is definitely shaking up the status quo. Do you think residents should be freely allowed to rent out their places on any term?

  • Transit rant

    Transit planning is absolutely and utterly broken in Toronto. Over the past few years, it has become abundantly clear that our current methods are completely ineffectual. We’re entirely useless at delivering transit infrastructure to the most important economic region in Canada. 

    The process is deeply political, and with all three levels of government involved, as well as countless agencies, we’re getting absolutely nothing done. And when we do manage to achieve some level of progress, such as provincial funding for the Scarborough subway line, it turns out that fact and evidence would suggest we’re actually headed in the wrong direction.

    It’s an unfortunate situation that we’ve gotten ourselves into, because transit and infrastructure have such a profound impact on productivity levels and our economy as a whole. And yet we’re just sitting back while our politicians fight over transit investment according to what best suits their voter bases.

    Politicians should not be making these decisions. At this point they’ve proven their inability to make effective progress and so I believe we need to strip them of this responsibility. Part of the problem is that we have a mismatch of time horizons: politicians need quick wins, while transit investment is a long term game.

    What we need is an entity – ideally one entity – that isn’t reliant on ad hoc funding hand outs. It needs a sustainable funding source and the power to make decisions about where infrastructure investments will be made in our region. We can’t continue to screw this up. Transit is far too important.

  • Getting to know Birch Cliff

    It’s no secret that TAS is working on a project in the Kingston Rd & Victoria Park area, technically known as Birch Cliff. As a result of this, I’ve been spending time getting to know this neighbourhood as well as the adjacent Upper Beaches area, which I truthfully didn’t know very well before.

    As someone who grew up in the west end of Toronto and never lived east of the DVP before, my sense of the place was limited. But I have to say that I’ve been pleasantly surprised by what a lot of people would simply call Scarborough. 

    Kingston Road is a thriving main street with lots of great local businesses, as well as a spattering of the usual chains – such as Starbucks – that arguably legitimize the arrival of a neighbourhood. On top of this, the next major block south is Queen Street East and the Beaches neighbourhood.

    So to all of my downtown friends, go hop on your bike and check it out.

  • [vimeo 76207227 w=500 h=281]

    Biking in Toronto means dodging cabs that don’t signal and closely watching parked cars for doors that might be about to open and could catapult you up and into the air. We have little in the way of dedicated cycling infrastructure. In fact, our incompetent mayor actually celebrates the removal of bike lanes

    Despite all this, Toronto has a fairly robust cycling culture. There’s no shortage of bearded hipsters riding around on fixies with a U-lock in their back pocket. However, it’s nothing in comparison to the city of Groningen in the Netherlands, where over 50% all of trips are made on a bicycle.

    If you’re into cycling or want to be converted, I recommend you take 15 minutes to watch the above video. The hoards of cyclists are interesting to see and they provide good background on how Groningen got to where it is today. Hint: It involves dramatic measures from a leftist city government.

  • Are department stores going to die?

    Here’s an interesting graph I found on Businessweek that outlines retail sales growth in America over the past decade:

    image

    What’s interesting is not that furniture stores suffered during the housing crisis of 2008-2009 – this much is obvious – but that there seems to be a few other trends at work.

    For one, warehouse club sales have gone from being the highest growth to the slowest growth sector (excluding, for a second, department stores). The urbanist in me wonders if this has to do with “The Great Inversion.” That is, the trend towards more and more young people choosing to live in inner city neighbourhoods – where warehouse club penetration is low – as opposed to the suburbs.

    The other notable sector is department stores. It’s the only sector that seemingly hasn’t been able to rebound along with the rest of the economy. I think this points to another larger trend at play: there are structural problems with the department store model. They’ve been beaten up by category killers, the internet and the fact that individual retailers seem to want to manage their own brands and experiences from top to bottom.

    I know that for me, personally, I rarely shop at department stores. What about you?

  • The essence of the stock market is speculation

    Dutch architecture firm OMA (Office for Metropolitan Architecture) has a subtle way of being incredibly subversive in their architecture.

    The recently completed 1.9 million square foot Shenzhen Stock Exchange (SZSE) building is presently making the rounds online and I personally find it incredibly striking. It has the same timelessness about it that makes me love Mies’ Toronto Dominion Centre.

    But it wasn’t until I read the description on OMA’s website that I decided to blog about it. Here’s the first paragraph:

    “For millennia, the solid building stands on a solid base; it is an image that has survived modernity. Typically, the base anchors a structure and connects it emphatically to the ground. The essence of the stock market is speculation: it is based on capital, not gravity.

    All of these factors suggest an architectural invention: our project is a building with a floating base. As if it is lifted by the same speculative euphoria that drives the market, the former base has crept up the tower to become a raised podium.”

    It’s a powerful, yet potentially controversial, symbol, as one could argue that efficient markets should, at least in theory, operate not on ramped speculation but upon fundamental values. However, if markets are an expectations game, perhaps you could simply argue that the building symbolizes a perceived bright future.

    Either way, very interesting.