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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Tag: china

  • Buy land, Chip. Buy land.

    Bloomberg Businessweek just published a longish article about Vancouver and the Chinese capital that fuels it. It’s called, The City That Had Too Much Money. 

    Most of you are already familiar with this narrative, but here’s an excerpt that talks about the city’s economic base and its apparent dependency on foreign capital:

    Change will be difficult and fraught. Vancouver has been closely connected to Asia since the late 19th century, when the first Chinese laborers arrived to help build the trans-Canada railway, and the city is proud of its record of integrating immigrants. Also, beyond real estate, Vancouver’s economic base is shallow. It’s not the business capital of western Canada—that’s Calgary—and it has few major corporate headquarters or large-scale manufacturing operations. “Asian capital has kept this economy alive, end of story,” says Ron Shon, a Chinese-Canadian venture capitalist who arrived as a teenager in the late 1960s. “You can see it in every aspect of our lives.”

    One of the things I found particularly interesting were Chip Wilson’s comments around what is going on. Chip is the founder of Lululemon and is largely credited with pioneering the current “athleisure” trend.

    Yet as Wilson explains, sitting in his office on the top floor of a century-old warehouse, these days he’s as interested in bricks and mortar as in quick-drying fabrics. “The global capital flowing out of China across the world, you’d have to be an idiot not to acknowledge it,” he says. “You know, we could just be at the cusp of that.”

    To profit from the deluge, he’s been buying up land all over town, especially in False Creek Flats, a derelict industrial area that’s slated for redevelopment. He estimates that about a third of his holdings are now in real estate. British Columbia’s current government may succeed in slowing inflows temporarily, Wilson says, but China’s boom has created many multimillionaires who need a place to put their money. “So where do you go if you’re Chinese? Sydney, maybe. But nowhere, probably, is more friendly than Vancouver.” One way or another, he says, those funds will find their way to Canada.

    That’s why, Wilson says, whenever he returns from a trip to Asia, his first thought is simple: “Buy land, Chip. Buy land.”

    For the full article, click here.

    Image: Jens Kristian Balle/The Forbes Collection/Contour/Getty Images (via Bloomberg)

  • How ecommerce is growing in rural China

    This piece in the New Yorker about how e-commerce, and in particular JD.com, is transforming rural China is worth a read.

    In typical New Yorker fashion, it’s a good long-form read, but one that you can also listen to if that’s your thing.

    What’s immediately fascinating are how important trust is to JD’s rural expansion strategy and how locals from these rural communities are used to penetrate the social networks.

    Today, Xia oversees deliveries to more than two hundred villages around the Wuling Mountains, including his birthplace. But, in line with JD’s growth strategy, an equally important aspect of Xia’s job is to be a promoter for the company, getting the word out about its services. His income depends in part on the number of orders that come from his region. Across China, JD has made a policy of recruiting local representatives who can exploit the thick social ties of traditional communities to drum up business.

    This is important because:

    “Chinese people don’t easily believe the good will of strangers,” Liu told me. “Why do you think Chinese fight tooth and nail to get on the bus and subway?” He shook his head and laughed. “It doesn’t matter that it’s less efficient or unnecessary. It’s a complete reflex for them, because it’s what they’ve been taught since they were young.”

    When you have some time, here is the full article. 

    According to the New Yorker, JD.com is the third largest tech company in the world in terms of revenue. They also have the largest drone delivery platform in the world.

  • How large metro areas are driving the global economy

    “The concentration of economic growth and prosperity in large metro areas defines the modern global economy, creating both opportunities and challenges in an era in which national political, economic, and societal trends are increasingly influenced by subnational dynamics.” -Brookings Institute

    The Metropolitan Policy Program at the Brookings Institute has a new report out for 2018 called the Global Metro Monitor.

    Here are some of the highlights (data is from 2014 to 2016):

    – The 300 largest metro areas in the world accounted for 36% of employment growth and 67% of GDP growth.

    – Metro areas in China and the Asia-Pacific region outperformed, whereas Latin American cities, and in particular the largest Brazilian cities, were weaker performers.

    – The majority of large metro areas had growth rates that exceeded that of their respective regions. So again, cities are the driver.

    And here is an interesting interactive chart (better to click through) that shows the % change in GDP per capita. 

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    Look at how much of an outlier San Jose is. Though, check out Dublin in the footnote. And if you look at the actual data table, it is all China, except for Dublin at the top.

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    For the rest of the charts, click here. And to download the full Global Metro Monitor report, click here.

  • What to do about Hong Kong’s land supply problem?

    My friend Jeremiah shared this ULI article with me this morning, which talks about Hong Kong’s land supply problem. The interesting thing about this problem is that only 9.3 square miles of the city’s land (out of ~424 square miles) is actually developed (and about 60% of the region’s area is water). The rest has been preserved for parks, farmland, and so on. And that is certainly a remarkable characteristic of Hong Kong. It doesn’t take very long to escape its hyper-urbanism and be in the countryside.

    Preserving greenspace is of course vital. But at what point do population and growth pressures justify the unlocking of some of that land for development? This is the question that Hong Kong appears to be asking itself. At the same time, it is looking at developing other islands (such as Lantau, which I understand is a pretty lush place); reclaiming (i.e. creating) additional land; and positioning the city as part of a planned “Greater Bay Area.” 

    If it were up to you, how would you suggest that Hong Kong deal with these pressures? The city is already fairly adept at building up.

    Photo by Annie Spratt on Unsplash

  • Relationship between female literacy and total fertility rate

    This recent post by Sam Karam at NewGeography illustrates the relationship between female literacy and total fertility rates in Sub-Saharan Africa, India, and China. The overarching argument, which won’t surprise any of you, is that, “higher female literacy is a reliable predictor of lower fertility and improved prosperity.”

    The following graph uses data from populyst, the UN Population Division and UNESCO. The time period for the dataset varies by country but approximately corresponds to the latest 2000′s. All Sub-Saharan countries are represented, except for the Congo, Somolia, and South Sudan.

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    Noteworthy about this dataset is that the biggest decline in the total fertility rate happens precipitously after female literacy reaches and exceeds 80%. What is also interesting, but not surprising, if that the countries with the lowest gender equality rankings tend to also have high fertility rates. And that’s because low gender equality tends to translate into lower female literacy rates. 

    According to populyst, the above phenomenon – precipitous decline in TFR with rising female literacy – has already proved itself out in China. 

    Based on data from the World Bank, China’s total fertility rate dropped from 6.38 in 1966 to 2.75 in 1979. And since the one-child policy was only enacted in 1979, it doesn’t appear to be driven by that. (I would have initially expected some sort of surge in births prior to that policy.) From 1982 to 2000, the female literacy rate in China rose from 51% to 87%. Today it is 99.6%, which is basically the same as it is for males.

    For a more detailed look at the above data, check out this populyst post.

  • 1 out of 5 commuters in Manila relies on ride-hailing

    Earlier this year Uber sold its Southeast Asia business to Grab. At the time, it was estimated that Grab had 95% of the ride-hailing market in Southeast Asia. That’s why Uber decided to sell. Instead of continuing to bleed, they figured it would be better to instead merge businesses in exchange for a “sizeable stake in Grab.” This is similar to the deal that it struck in China with Didi.

    It’s clear evidence of cultural advantage. Though maybe you could argue it’s first mover advantage. Either way, many, including Wired, have argued that while Uber has dominated in the West, it has often struggled in the developing world. Different markets. When Grab launched you could pay with cash because so many users didn’t have a credit card.

    Here is another interesting insight from Bloomberg (see above): Nearly 1 out of every 5 commuters in Manila relies on a ride-hailing service because the public transit situation is allegedly so dire. Grab controls 90% of the market with 35,000 vehicles receiving somewhere around 600,000 requests a day.

    When Uber launched it was positioned as “Everyone’s private driver.” It was expensive. It was luxurious. And it was done because they knew they weren’t going to be able to compete on speed and/or price in the early days. But now ride-hailing services are tackling the very opposite end of the spectrum.

  • Shenzhen has just electrified its entire bus fleet

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    This is impressive: Shenzhen recently finished converting its entire bus fleet to electric vehicles. That’s 16,359 buses and around 8,000 charging stations according to Electrek.

    It is estimated that this all-electric fleet saves 345,000 tons of fuel per year and reduces carbon emissions by 1.35 million tons.

    Shenzhen is now working on doing the same to its 12,518 taxis. Already 62.5% of them are electric-powered and the goal is 100% by 2020. 

    But let’s not forget that China still generates most of its electricity from coal. Coal represented 72% of its electricity generation in 2015. And in 2014, carbon emissions from China allegedly made up almost 30% of the world .

    Photo by Anton Strogonoff on Unsplash

  • Paris syndrome (in China)

    French photographer and graphic designer François Prost has a new photo series out that I thought I would share with you today. It’s called “Paris Syndrome” and I discovered it via CityLab.

    What the series does is visually compare Paris to a housing estate in Hangzhou, China called Tianducheng, which was designed to be a replica of Paris. Tianducheng even has its own Eiffel Tower, though this Chinese version is only 108m tall and the French original is 324m.  

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    Still, in many of François’ photos, you may find it difficult to distinguish between the two (provided you ignore the Chinese people and the Chinese signs). The neighborhood was initially a ghost town, but apparently it’s now starting to fill up.

    The reason I mention this photo series is because it reminded me of the day that I spent in Macau last week. I’m not much for gambling – and Macau is firmly the gambling capital of the world with revenues that greatly exceed Las Vegas – but I was curious to see it.

    Similar to Hong Kong, Macau is a Chinese Special Administrative Region with a lot of autonomy. But from 1557 to 1999 it was under Portuguese administration. And so historically it has been home to this very unique Eurasian culture spanning everything from food to language. 

    I say “historically” because the Macanese and their Patuá language – which is supposedly a blend of Portuguese, Cantonese and Malay – seem to be on the brink of extinction. 

    Today it’s all about the casinos. And the demand is firmly coming from mainland China. In 2016, 90% of Macau’s 31 million tourists came from there.

    I fully appreciate the demand drivers, but I struggle to understand the allure of replicating and bastardizing attractions from other places. Macau also has an Eiffel Tower, as well as a Venetian (like Las Vegas). You can go for gondola rides in its canals.

    The more interesting part for me was the historic center of Macau with its Portuguese paving on the sidewalks. But maybe that’s just me.

    Image: François Prost

  • The Hong Kong window ledge

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    My friends at the architecture practice Valente Rodgers told me something fascinating about the Hong Kong real estate market last night. Both partners worked as architects in Hong Kong for a number of years.

    In Hong Kong, you’re allowed to deduct certain projecting windows from your calculation of Gross Floor Area. 

    This is provided they’re a certain height above the finished floor level, they don’t project beyond certain distances from the outer face of the building’s structural elements, and so on. The precise measurements seem to vary depending on things like the building’s use.

    Since space is such a precious commodity in Hong Kong, it shouldn’t surprise you that lots of developers and architects take advantage of this. The result being a proliferation of these projecting window ledges all across the city. 

    It’s a phenomenon that happens in many cities when a perfectly legal loophole is found in the land use policies.

    In Toronto it used to be solariums. You could also deduct these from your overall GFA, which means a lot of them them got built in condos and apartments of a certain vintage.

    In New Orleans it was the camelback house. These were houses with a single storey toward the street and a second storey toward the rear of the property. This was done because property taxes were assessed based on the height of the house as it met the street. Pushing the density toward the rear of the lot meant homeowners weren’t taxed more. 

    I find these outcomes fascinating because they have absolutely nothing to do with architectural intent and everything to do with trying to optimize within a given framework.

    But what’s even more interesting about the Hong Kong example are some of the downstream externalities.

    Firstly, it sounds to me like these projecting windows have become a normal part of underwriting projects in Hong Kong. Meaning, if you don’t factor in these projections, you’re effectively giving up free GFA. (Can anyone familiar with the HK market confirm this?)

    However, building these projections also means you can’t do unmodulated and clean floor-to-ceiling windows. And if that’s the desired aesthetic, somebody has got to be willing to pay for that “luxury.” So arguably there’s a socioeconomic dimension to having and not having this ledge.

    Secondly, because space comes at such a premium, these ledges are fully taken advantage of and furniture makers have responded by designing pieces that can dovetail with them.

    Below is a photo of a bedroom in Hong Kong that I found on bohemia.life:

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    This may be a custom bed and I don’t know how deep that window projection is, but it begins to show you how valuable these ledges can be from a space perspective.

    I think we should try and come up with a name to describe these sorts of built form phenomena. If you have any ideas, please drop them in the comments below. And if any of you are familiar with the HK market, let me know if I’m off the mark with any of the above.

    Photo by Jason Wong on Unsplash