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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  • Data centers and the arctic circle

    I don’t think a lot of people consider the spatial implications of the online world. By this, I’m specifically referring to the massive data centers required to power the internet.

    Earlier this year Facebook opened its first European data center in Sweden, less than 70 miles from the arctic circle. It’s 900,000 square feet. That’s about equivalent to a 102 storey condo tower.

    Behind the virtual worlds we live in – Facebook, Twitter, Tumblr and others – lies nondescript buildings with repeating rows of machines inside them. They’re the complete antithesis of the vibrant lives we pretend to have on the consumer web, but they’re making it all possible. It feels just like the Matrix.

    And there are some interesting shifts taking place in the data center space. Facebook – through its Open Compute Project – now designs its own centers and makes the work available to others, for free. It’s an “open hardware” play that could threaten incumbents in the space such as Dell and Cisco.

    Facebook’s goal is “to build one of the most efficient computing infrastructures at the lowest possible cost.” Their Swedish outpost represents their first self-designed center. And it’s proven to be a highly efficient one.

    While the average data center might use 3 watts to produce 1 watt of computing tower, Facebook’s Swedish center was able to get that ratio down to 1.04 : 1, largely because the colder climate allowed for a dramatic reduction in cooling loads. It makes a ton of a sense.

    I’ve actually thought about this before. Why aren’t more data centers – which have massive cooling requirements – built in colder climates? I just so happen to know of a country with lots of prime arctic circle real estate.

  • From sunset to sunrise

    Tonight is Nuit Blanche in Toronto. Running from sunset to sunrise, the festival is a collection of more than 110 contemporary art projects scattered all around downtown. It’s one of my favourite events in the city.

    This year one of my good friends has organized an installation called My Virtual Dream. It involves some sort of large dome structure and is located at University & College in front of the UofT pharmacy building on the north west corner.

    But other than the art, one of the things I love about Nuit Blanche is what it does for the city. It brings everybody out and onto the streets in order to explore and experience the city in a totally different way. Spaces get repurposed and new environments emerge. It’s a fun time to be in Toronto.

  • Mirvish + Gehry

    I was reading Novae Res Urbis this morning and they had a piece on the 3 tower Mirvish + Gehry proposal in Toronto’s Entertainment District. It was talking about David Mirvish’s “sales pitch” to the Empire Club of Canada this week, an attempt to help overcome the criticism around the design, height and overall density of the project. The article ended by saying that the developer will be appealing to the OMB this January.

    I know that I’m probably biased in this matter, but I fail to understand the concern around height and density – particularly since the site is 2 blocks from a subway station. Why are we – citizens and policy makers – so obsessed with building height? Good architecture and urban design involves a lot more than the number of floors. Can we not have more sophisticated conversations about built form rather than fixating ourselves on building height?

    Secondly, whenever a building gets proposed in Toronto that attempts to, literally, step outside of the box it gets pegged as controversial. Take, for example, the Royal Ontario Museum by Daniel Libeskind. When people used to ask me what I thought of the crystal addition, I used to say that I was a fan simply because it was pissing off so many people. Love it or hate it, it’s architecture. The same can’t be said for a lot of the other stuff going up in this city. Why doesn’t mediocrity invoke the same response? It should.

    So my issue is that we seem to be far more comfortable accepting banality than we are with accepting bold new changes like the Mirvish + Gehry proposal. And frankly, if we could actually pull off three 80+ storey towers, it would be down right impressive in this market. How many cities in the world have a real estate market robust enough to support this scale of development?

    But this is not a post of unconditional support. I do have concerns.

    I’m concerned that 4 heritage designated properties will need to be destroyed in order for this project to move forward. This makes me wonder: What’s the point of a designation if the building can still be demolished? I’m actually surprised that this topic hasn’t been getting its fair share of attention. Again, we’ve been more interested in talking about building height.

    Further west along King Street, I have similar concerns with a development proposal that would demolish “restaurant row.” This a spectacularly successful – albeit touristy – restaurant strip and I would hate to see it go. It’s difficult to create this kind of fine grain retail experience from scratch. 

    Now don’t get me wrong, I believe in development. I am a developer, after all. But I don’t believe we should be so quick to erase our history.

  • [youtube http://www.youtube.com/watch?v=sBYPuSE0huc?wmode=transparent&autohide=1&egm=0&hd=1&iv_load_policy=3&modestbranding=1&rel=0&showinfo=0&showsearch=0&w=500&h=375]

    I wasn’t at TEDxToronto this year, but I just stumbled upon the conference opening video and I think it’s brilliantly done (by @BizMediaAgency). You need to watch it. It makes me proud to be a Torontonian.

    (Source: http://www.youtube.com/)

  • Why I came back to TAS

    After I rejoined TAS, I was asked to write a blog post on why I came back. It went live this week on tasdesignbuild.com, and so here it is:

    After almost four years at Morguard Investments, I’ve made the move back to TAS. The first time I was here was in 2008, while I was still completing my master’s in architecture and real estate development at the University of Pennsylvania.

    I was then, as I am obviously now, a big supporter of TAS’s commitment to “Shaping Beautiful Cities™”; however, I decided to spend some time on the commercial and more institutional side of real estate. During that time I was fortunate enough to work under someone I consider to be one of the best in the business. She taught me a ton and I’m hugely grateful for that opportunity.

    So why did I make the switch? I did it for one simple reason: alignment.

    I love cities. That’s why I blog about them daily. I’m also a big believer in the power of design to make them more beautiful, livable, prosperous and environmentally sustainable. I see the vitality of our cities as the key to Canada’s overall economic competitiveness and I see this vitality as starting with each individual neighbourhood. Every building matters. As a trained architect, I don’t think I’ll ever be able to shake this belief. Real estate is, and will always be, something more to me than just bricks and mortar.

    So when I say alignment, I mean a shared sense of purpose. A belief that, as real estate developers, we have the opportunity (and responsibility) to shape cities and, hopefully, improve the way people live, work and play. It’s no easy task, but I think half the battle is knowing that we’re all in this business for the same reason.

    Over the past five years I’ve watched TAS evolve as an organization. From its roots in the custom home business to a company in transition, it has grown to become–in my humble, and now biased, opinion–one of the best builders in the city.

    TAS is now laser-focused on developing urban mixed-use buildings and is committed to doing so using its Four Pillars of Sustainability™. This means that everything TAS does is considered in terms of its impact on (1) the social fabric of communities, (2) the environment, (3) culture and (4) local economies.

    It’s an admirable ambition and it really resonated with me.

    I was born and raised in Toronto and I can say with all honesty that I care deeply about this city and its future. It pains me when I see buildings go up that clearly privilege economics over experience–not only because it makes for poor city building, but because I think it’s pretty clear that good design also pays (to put on my MBA hat for a second). So on a more basic level, I could also say that we’re aligned around one simple goal: To build really great urban buildings. It doesn’t need to be more complicated than that.

    But this distinction around urban buildings is an important one because I believe that our world is entering a decidedly urban era. In 1900, only 13% of the world’s population was urban. Today, 75% of the developed world’s population is urban and by 2025 that number is expected to rise to 84%. At the same time, cities all around the world are witnessing what author Alan Ehrenhalt calls “The Great Inversion.” Census figures show that there’s a growing preference for more compact and walkable communities – people are returning to city centres.

    Having said all this, I truly mean it when I say that I’m thrilled to be joining a team of ambitious people, passionate about cities and design. I’m honoured by the opportunity and I look forward to collectively working towards making Toronto an even greater city.

  • Is Hong Kong’s transit model exportable?

    Hong Kong’s MTR (Mass Transit Railway Company) is one of the most profitable transit systems in the world. Rider fares amount to roughly 186% of its operating costs.

    In comparison, Toronto recovers about 70% of its operating costs from fares and New York recovers 57%. This means that in the latter two cases, government subsidies are required to keep the systems in operation.

    On top of this, Hong Kong relies on a unique “rail plus property” model, meaning that they also use the profits from real estate development activities to fund transit expansion. Here’s more on how it works:

    “In a value capture scheme, MTR is granted low-cost land around its future stations [from the government]. It then develops the land and uses the profits to pay for system expansion. Through this system, MTR has managed to build subways and elevated rail lines throughout the islands that make up Hong Kong, largely paying its own way.”

    Overall, this seems to make a lot of sense. Which begs the question, could this model – specifically “rail plus property” – be exported to other cities?

    NextCity asked this question with respect to New York, but came up with 3 problems: first, New York has an operating shortfall, unlike Hong Kong; second, New York doesn’t have the same amount of government owned land; and third, construction costs are way higher in NYC.

    The first thing that comes to my mind is, why are Toronto and New York so bad at farebox recovery? Our infrastructure is not self sustaining; we’re reliant on government handouts.

    Looking at fare pricing, there’s a big difference between the cities. Hong Kong charges based on distance traveled, whereas Toronto and New York charge a flat rate. Intuitively, dynamic pricing makes sense, since you’re then able to capture shorter rides that would otherwise be replaced by walking (or other alternatives) and you capture more value during longer rides.

    The other big difference is the hyper density of Hong Kong, since we know there’s a correlation between urban density and transit ridership. I would assume that the demand for most of their rail lines is fairly high. And it’s for this exact reason that I’m opposed to the new Scarborough subway line here in Toronto. Building subways in areas of the city without the densities to support it will only exacerbate our farebox recovery problem.

    As for the other two points regarding government land and high construction costs, I have to believe that there’s a way to create a “rail plus property” model that circumvents these concerns.

    For one, why does it have to be government land? Could we not reward developers with additional density if they build a subway station in the basement of their new building or contribute to a transit fund? The city already allows additional density near subway stations. Why not do the same for locations where we simply want a station?

    Transit is too important not to get right. I hope Toronto will soon understand that.

  • Pay what you want

    In my pricing class this morning we looked at the strategy used by Radiohead with the release of its In Rainbows album. For those of you who aren’t fans, what they did was offer up the new album via their website on the basis that customers could pay whatever they want.

    At first blush this probably sounds ridiculous. But if you break it down, it turns out to be pure brilliance.

    First, it’s important to understand how pricing overall works in the music industry. In the olden days when people still bought CDs, an artist might make 15% of that sale price. So if you buy an album for $14.99, the artist’s royalties would be in and around the range of $2.25. The rest goes to the record label, their overhead and so on.

    With the advent of iTunes, artists still make around 15%. But now a typical album costs $9.99. This is because overhead costs are lower for an online-only store. Still, the artist now only makes $1.50 or so per album sale.

    In case the of Radiohead, their record label contract had expired and so they decided to self release In Rainbows. This obviously means that they were able to cut out a lot of overhead and other expenses. But would it not have been better to just sell the album for a fixed, but discounted, price?

    The thing is, when you give people the option of paying nothing, you maximize your potential distribution. This is good when you’re trying to sell concert tickets, merchandise and other revenue producing items in the future.

    But interestingly enough, when you give people the option you also maintain a business model. In this case, it turns out that, on average, people paid over $3 per album. This may sound irrational, but people do it for a number of reasons: because they’re big fans, because they want to support the artist, etc.

    Whatever the reason, Radiohead actually brought in more per album than if they had gone through a record label and/or sold through iTunes. In fact, In Rainbows netted the group over 8x more than their previous album Hail to the Thief – which was released through a record label. 

    This got me thinking.

    What other markets would be well served by a pricing model such as this? Could you make parking a pay what you want service? I know that Shakespeare in High Park uses the model. So does it only work for artistic markets where people feel an emotional connection? I certainly don’t think we could sell condos using this approach.

  • How much space do you need?

    Urban Capital has just unveiled its new Smart House condo project here in Toronto. With units starting at 289 square feet, the project is all about ultra-compact and ultra-smart living.

    While micro-apartments are trending right now, they’re not a new idea. Architects have been fascinated by modular, adaptable and compact living for ages. Here’s an example of 100 square foot living capsules built in Tokyo in the 1970s.

    Tokyo, of course, is a unique example. There you have the entire population of Canada living in one city. But that doesn’t mean that Toronto isn’t feeling the pressures of urban intensification. Apartments are getting smaller.

    But the interesting thing about space is that it’s a relative thing. I personally live in 650 square feet and find it more than enough space. Though I also place a huge value on my time and try to minimize the amount of traveling I need to do.

    And this is really the trade off you make with space. As you move further away from a city (and housing costs drop), you’re effectively shifting those housing costs to transportation costs. Which includes real costs like gas and time, as well as more intangible costs like quality of life.

    However, I know many people that are willing to make that trade off for more space. But I wonder sometimes how much of that incremental space is necessity versus perceived necessity.

    How much space do you need?

  • Why was Lafayette Park so successful?

    One of the places I had to visit during my trip to Detroit last weekend was Lafayette Park. Designed by famed German-American architect Mies van der Rohe, it’s the largest collection of his buildings and one of the most successful examples of urban renewal in America.

    Still today it remains one of the most economically and racially diverse neighbourhoods in the city and a bastion of stability within Detroit’s eroding urban fabric. But from a planning standpoint, it shares many of the same characteristics as other tower-in-a-park renewal plans. 

    It was built at a lower density than the neighbourhood it replaced (the unfortunately named Black Bottom slum) and it was far more insular in terms of its relationship to the greater city. From cul-de-sacs to expansive green space areas, it’s an island in the middle of Detroit.

    This recipe has created many spectacular urban failures all across the world. So why not in Detroit? One would think that Detroit of all places would suffer the same fate.

    I have 3 hypotheses.

    First, the fact that it’s a Mies community matters.  I’m sure it attracted and continues to attract residents simply because of who designed it. The entire neighbourhood is on the National Register of Historic Places.

    Second, the community doesn’t have the same monoculture that many other master planned communities had. From the beginning, the intent was to develop a self sustaining mixed-income neighbourhood with shops, restaurants, schools and so on.

    Third, I think the fact that the neighbourhood was more insular actually helped it. As the rest of the city’s fabric crumbled, Lafayette Park remained this kind of curated semi-urban space in the core of the city.

    These are just some of my initial thoughts.

    There has, of course, been a lot of rigorous academic thought on this topic by the likes of Charles Waldheim, the late Detlef Mertins, and others. 

  • The Social Venture Exchange

    MaRS has just launched a Social Venture Exchange (SVX) here in Toronto in collaboration with the TMX Group. And I’m proud to announce that TAS is a founding venture member.

    Here’s the mission of the SVX:

    “The SVX is a local, impact first platform connecting impact ventures, funds, and investors in order to catalyze new debt and equity investment capital for local ventures that have demonstrable social and/or environmental impact, including nonprofits, co-operatives, and for-profit corporations.”

    The focus of the SVX Is on triple bottom line accounting. So it’s very well aligned with the philosophy of TAS. However, I like to think of our “four pillars” as a kind of quadruple bottom line framework. In addition to measuring social, environmental and economic impact, we also care about cultural impact.