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.
Starting today and running until the end of the weekend, 8,000 glowing balloons will recreate a 15 km long section of the former Berlin Wall. It’s to commemorate 25 years since the fall of the wall.
Here’s an aerial view of what it’ll look like:
I think this is a fascinating art installation. And I wish I could be there to see it first hand. My friend Nick Iozzo is there right now with his wife, so hopefully they’ll respond to this blog post with some highlights.
But none of these divides are anything like the divide faced in Berlin. The Berlin Wall was arguably the most visible physical manifestation of the entire Cold War. Once a major point of entry for Eastern Bloc emigrants, East Berlin was basically bleeding people before the wall went up in 1961. It was designed to keep East Berliners in place.
I can’t even imagine what it would be like to live in a place like that.
McKinsey recently put out a great interview with one of the founders of Airbnb, Brian Chesky, talking about the relationship between his company and cities. I thought it was fascinating. Click here to watch the video.
If you don’t feel like doing that, I’ve also pasted the interview transcript below and bolded some of the really interesting takeaways. Let us all know what you think in the comment section below.
It’s a currency of trust, and that used to live only with a business. Only businesses could be trusted, or people in your local community. Now, that trust has been democratized—any person can act like a brand.
Airbnb is a way that you can, when you’re traveling, book a home anywhere around the world. And by anywhere, I mean 34,000 cities in 190 countries. That’s every country but North Korea, Iran, Syria, and Cuba.
The reason we started was I was living with my roommate, Joe, in San Francisco, and I couldn’t afford to make rent. That weekend, the International Design Conference was coming to San Francisco. All the hotels were sold out. Joe had three air beds. We pulled the air beds out of the closet, we inflated them, and we called it the “Air Bed and Breakfast.”
The reason it’s grown so fast is, unlike traditional businesses, we don’t have to pour concrete. The infrastructure and the investment was already made by cities a generation ago. And so all of a sudden, all you needed was the Internet.
The ‘disruption’ debate
I never really loved the word “disruption,” because it suggests that maybe it’s the kid in a class who was disruptive, who probably didn’t add a lot to class. I think that we have a lot to add to society.
Over time, cities have gotten so big that the sense of community has gotten lost. And I think once you know everyone, that community can reemerge. And as far as our relationship with cities, we can’t succeed without a city. Or we can’t really thrive without a city. We don’t want to thrive in spite of a city. And I think if we work together, it’s going to be amazing. I think the people win. And I think if we don’t work together or if we fight, the loser isn’t really us or the city—it’s the people in that city.
Getting cities to embrace sharing
Fundamentally, the idea of the sharing economy is going to be great for cities. It means that people all over a city, in 60 seconds, can become microentrepreneurs. And they can be empowered. And they can make an income. Now, this is amazing, but it’s also complicated because there are laws that were written many decades ago—sometimes a century ago—that said, “There are laws for people and there are laws for business.” What happens when a person becomes a business? Suddenly these laws feel a little bit outdated. They’re really 20th-century laws, and we’re in a 21st-century economy.
It’s probably going to be a fair amount of work to revise some of the laws and rethink the way cities and platforms work together, but I think that work is worth it. Because what cities don’t have to do is invest billions of dollars in infrastructure to create jobs. Whereas historically, to create opportunities, cities would need massive projects and investments, these jobs only require the Internet. Now what they need to do is navigate the legal framework, which is typically outdated. We want to work with the cities. We’re not telling them that their laws are terrible. The world continues to change. Laws must continue to adapt for that world.
We want to help cities understand what our world looks like so they can modernize the laws to make sense. We’re not against regulation. We want to be regulated because to regulate us would be to recognize us.
Airbnb’s plans for growth
We want travelers to be able to book homes anywhere. Anywhere includes Asia. Asia’s a nascent market for us. Number two, we’re also looking at other use cases. Airbnb started as a way for travelers to find a budget way to vacation in a city. But now we’re starting to see people who aren’t on a budget. They want a much more high-end experience. And the third is that at the end of the day, if you’re traveling to Tokyo, you’re not traveling to Tokyo to stay in a home or a hotel. You’re traveling to Tokyo—if you’re on vacation—because you want to have an experience. And we’d love to do more to make that experience special and memorable.
The future of sharing: Your free time
I don’t think people would view the jobs created in the sharing economy as jobs. I don’t even know if they get counted as jobs when the White House has a new jobs report. They are jobs. As far as I can tell, people are working, they’re making income, and they depend on that income. Half of our hosts depend on it to pay the rent or mortgage. Maybe it’s a new kind of job. Maybe it’s like a 21st-century job. Tom Friedman talks about how in the future people may not have jobs. They’ll have income streams.
I believe that the sharing economy broadly can probably provide tens of millions of jobs or income streams for people all over the world. This is going to have a pretty big effect on the economy, mostly a good one.
The sharing economy started by democratizing and creating access to probably two of the biggest assets people have: their homes and then their cars. But I think the whole idea of ownership is changing. When my parents were young, owning things was a privilege, and there was a sense of romance to owning a house, owning a car.
Today’s generation sees that ownership also as a burden. People still want to show off, but in the future I think what they’re going to want to show off is their Instagram feed, their photos, the places they’ve gone, the experiences they’ve had. That has become the new bling. It’s not the car you have; it’s the places you go and the experiences you have. I think in the future, people will own whatever they want responsibility for. And I think what they’re going to want responsibility for the most is their reputation, their friendships, their relationships, and the experiences they’ve had.
So I think the biggest revolution will be in the biggest asset of all. The biggest asset is not a house. It’s not a car. It’s people’s time. People’s time may start with just gigs: waiting in line for you, delivering something for you. Over time, I think it’s going to move upmarket. And eventually, menial tasks become real trades, and real trades become art forms.
Somebody may say, “I cook a great brunch. I wonder if people would enjoy having brunch at my house?” And you could be able to book a brunch at someone’s house, instead of at a restaurant. That person isn’t trying to create a restaurant, they’re just allowing someone to have brunch. They build a reputation. One day, that person can be a Michelin-rated chef in their house.
If you have been following the headlines over the past year, you’re probably aware that Atlantic City — the “Gambling Capital of the East Coast” — is in trouble. This year alone, 4 casinos shut their doors – including Revel, which only opened in 2012.
To be perfectly honest with you, gambling isn’t my thing. I’ve only been to Atlantic City once, and it was really just so that I could say I had been (it was when I used to live in Philadelphia). But I know that many people derive a lot of entertainment value out of gambling.
However, I worry when cities starting believing that a casino can fix all of their city building and economic development challenges. They are not a silver bullet. And many would argue that they cause far more harm than potential benefit. The negative socioeconomic impacts have been well documented.
In the case of Atlantic City, I suppose you could say that casinos “worked” – for awhile. But that’s because Atlantic City had a monopoly on gambling. In 1978 the city opened the first legal casino in the eastern United States. And that led to a boom in casinos and a spike in municipal revenue. But those revenues peaked in 2006 and have been on the decline ever since.
My good friend Alex Feldman argued in a recent Next City article that Atlantic City is, quite frankly, the next Detroit. It repeated the same mistakes and now it’s going to need to go through the same painful rebuilding process:
It’s no exaggeration to say that Atlantic City is poised to become the next Detroit. In many ways, the trajectories of the two cities are similar. Both cities relied on one industry to prop up their economies — and both failed to innovate as competition increased. Similarly, both Atlantic City and Detroit failed to invest in a sense of place — casinos and factories were more successful when their customers and employees had little reason to go outside. The result: defensively built cities designed around the automobile that gave visitors little reason to stay.
The article talks about some of the transit-oriented development that we’ve seen at various nodes along Toronto’s Yonge subway corridor (St. Clair, Eglinton, Sheppard, and so on). But it goes on to argue that these are exceptions to the rule. For the most part, we’ve missed the boat:
The tragic history of our massive capital investments into transit infrastructure is massive under-development.
Indeed, the Bloor-Danforth subway corridor is a land use crime scene.
His main argument is that until we expand the supply of transit-oriented land (through increased intensification), we will continue to undersupply the kinds of walkable and transit-oriented neighborhoods that many, if not most, people actually prefer. And that, out of necessity, will force people into their cars. Because affordability trumps location preference.
As one example, he talks about the intersection of Bloor Street and Dundas Street in the west end of the city. Next to Union Station, this is probably the best connected mobility hub in the region. You have the Bloor-Danforth subway line, a streetcar line, and a GO regional rail line which all feed into it. Next year it’ll also become a stop for the new express train to Pearson airport.
And yet the city has a history of opposing intensification in this location, including the old Giraffe Condominiums proposed by TAS. Does that make sense to you?
One of the biggest pieces of infrastructure currently under construction in Toronto is the Crosstown LRT line, which will run on and under Eglinton Avenue right through the heart of midtown. The total length of the line is 19 km, and 10 km of it will be underground along with 12 of its stations.
Here’s a map:
But as the Chief Planner of Toronto, Jennifer Keesmaat, rightly pointed out in this blog post earlier this year, it’s important to think of this line, not just as a piece of transit infrastructure, but as a broader city building initiative. With this line comes a tremendous opportunity to rethink and rebuild one of Toronto’s most important avenues.
I have no doubt that this will happen over the coming years and decades. I mean, just look at the development activity taking place on St. Clair Avenue West right now, which you could argue is the result of its right-of-way streetcar line. But in this instance, what I’m specifically curious about is what will happen at each of the stations along Eglinton Avenue.
If you take a look at the Stations and Stops page on the Crosstown website, you can see where all of the primary and secondary entrances will be and how each station will generally function. But what is not clear is whether we will be using this opportunity to build additional density on top of them.
Here’s how they have “blocked out” the primary entrance for Avenue station:
I have no idea what it’ll become. But if it ends up as single-storey and single-purpose building, then I think we will have missed an opportunity. And the same goes for many, if not all, of the other stations along the Eglinton Crosstown line. Fixed rail is such a massive driver of real estate value, and so it seems silly not to take advantage of that in some way.
If anyone has any insights into how these stations will or will not be developed, I would love to hear from you in the comment section below.
It came from a study that looked at 74 cities in terms of two measures: the percentage of people that travel by car and the traffic congestion levels within those cities.
The way to read the chart is to first look at the red dots. Each dot represents one of the cities studied. The position of the red dot corresponds to that city’s congestion levels. So for example, if we were to take Toronto, the congestion level is 27%.
If you then take that same dot and draw a vertical line to the top of the green shaded area, you get the percentage of people who travel by car. In the case of Toronto, it is 56%.
What’s interesting about this chart is that as congestion levels rise, it forces people out of their cars. In other words, the cities with the highest congestion levels also have the lowest auto share percentages.
But the other way I interpret this chart is that the decision is almost binary: you’re either planning for cars or you’re planning for people. Based on this data, it’s hard to have both.
One company that came up during our discussion was not surprisingly Amazon.com. But the initial comment was that they don’t make any money. Fortunately for me I had just gone through a presentation by venture capitalist Benedict Evans the night before called: Mobile is eating the world. And so I pulled out my phone and presented this slide:
The fact that Amazon operates with basically no net income is on purpose. Look at their revenue growth! So I wouldn’t dismiss them as being a fad. They may only account for 1% of all US retail sales today, but I’d put money on that percentage growing.
The other reason I bring up Amazon is because, in some ways, I think of them as the online equivalent of a big box store. Just like a Walmart or Costco, where you can buy everything from tires to groceries to prescription drugs, I buy a lot of different things, besides just books, off of Amazon.com. You might do the same as well. And this is where I see the immediate threat to offline retailing and retail real estate: big box stores.
In the second half of the 20th century, big box stores were incredibly disruptive to the retail landscape (and to cities). They used cheap land on the outskirts of cities, cheap buildings, and economies of scale to offer rock bottom prices to consumers. The value proposition was about cheap, not about differentiation. But as cheap as they may be, the internet can still do it cheaper.
And retailers know this, which is why I think they all now sell groceries. Groceries have a very low online penetration. Basically everybody still buys groceries in-person. So if you offer that, you have a reason to draw people inside your store, where they will hopefully buy all the other stuff that they need. But as the online value proposition continues to get stronger, I think we’ll see many other, more significant, changes.
Earlier this week I stumbled upon this entertaining article from the Guardian talking about how expensive housing is in London. The author’s tongue-in-cheek suggestion was to setup a new miniature London in the middle of nowhere where everyone could flock for affordable housing, but where many of London’s attributes could be exported: “We can all refuse to wear socks and sell each other overpriced cocktails in jam jars.”
But affordable housing is not the reason why people want to live in places like London and New York. If it were, they wouldn’t be coming. Instead, they come for lifestyle, wealth creation, and the dating market – among other things. However, at a certain point, usually when they form families and start to need/want more space, they start looking around.
Here’s an infographic via the Atlantic showing how relationship status impacts where people tend to live in London. The purple areas indicate an “above average concentration” of a particular relationship status. As you can see, single people tend to live in the core of the city, and when they get married, they move out to the periphery. Intuitively, this probably makes sense to you.
However, I’m always curious as to whether this trend happens more because of consumer preference (people don’t want to raise kids downtown) or because of economic necessity (they can’t afford anything beyond a shoe box apartment). Because if it is largely out of economic necessity (and the Guardian article would suggest it is), then we’re not creating the inclusive cities and neighborhoods that all city builders like to talk about.
So how do we get better at this?
In my view, and I’ve argued this before, the first step should be about improving supply. That is: get more housing built. And the way to start doing that is to make land available and improve the approvals process for new developments. In a recent McKinsey report, they referred to my first point as “unlocking land.”
“Land cost often is the single biggest factor in improving the economics of affordable housing development. It is not uncommon for land costs to exceed 40 percent of total property prices, and in some large cities, land can be as much as 80 percent of property cost.”
The reason this is important is because most big cities operate with massive supply deficits. There simply isn’t enough housing. And so if you can address that at a fundamental level, you can actually do a lot to start improving affordability.
Last month I wrote about an upcoming city building event in Toronto called called Engaging In-Between Spaces. It’s being hosted by a non-profit group called The Laneway Project and it’s going to be this city’s “first summit on laneways.”
While many people associate the potential of Toronto’s laneways with laneway housing, the focus of this event will be on laneways in a much broader context. Laneway housing will certainly be a part of it, but the event will also look at our laneways as public spaces, gathering spaces, and so on.
I’m going to be giving a short presentation that looks at Toronto’s laneways from a real estate development perspective, and so I hope that you’ll be able to attend. The event is only $10 and the money will help support the group’s mission of transforming our laneways into vibrant, safe, and people-friendly spaces.
In 2010, Toronto voted for its new mayor, Rob Ford, like so:
It was basically the core of the city (old Toronto) versus all of the boroughs. And it was perfect ammunition for anyone who believed that Toronto’s amalgamation was a mistake. (I personally don’t think it was.)
Yesterday, Toronto did better.
While we’re still a divided city — with Etobicoke and Scarborough largely remaining loyal to Ford Nation — we’re not quite as divided as we were 4 years ago:
However, there is one thing that Torontonians did largely agree on last night: the next mayor should be white and male. And this got the Guardian Cities out of the UK asking why one of the most multicultural cities on the planet (apparently we’re third behind Luxembourg City and Dubai), continues to elect middle-aged white guys.
Now, I’m not a fan of the article. And I take offence to the way Toronto is portrayed. But it did get me thinking. And I thought it would be interesting to see how some of Toronto’s demographic data overlays on top of these election maps.
Looking at 2006 census data (2011 isn’t available in map form yet), here is a map showing the total number of visible minorities broken down by census tract. The darker the red the more visible minorities.
And here is a map showing immigrants as a percentage of the population. Again, the darker the red, the higher the percentage.
What should be apparent from these maps is that Ford Nation is actually, in some ways, immigrant and visible minority nation. In the above map, the darkest red areas indicate that immigrants represent anywhere from 65-80% of the population. That’s a significant number.
So why didn’t this group vote for the Hong Kong-born Olivia Chow? It’s because she wasn’t telling them the right story. Rob and Doug Ford, on the other hand, were.
