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: cities

  • Two perplexing development narratives

    There are many development narratives that I don’t quite understand. (I’m thinking of Toronto, but you can probably replace Toronto with any number of global cities for this discussion.) One is the belief that our transit network is full and so no new development should be allowed in certain locations, next to certain transit stations. The thrust of this argument is that additional transit capacity must be added before any new development is allowed to occur. This might sound logical, except it ignores the fact that the need for new housing doesn’t magically disappear because subway cars are thought to be too busy during the morning rush.

    Transit systems are also a network, and so does this mean that no more development should be allowed to happen anywhere in the city/region? Or is the goal to simply move development off of higher order transit and into lower-density areas so that the future residents in these new buildings can either take buses to the transit stations that were previously deemed to be at capacity or drive their cars everywhere? (Our highways have excess capacity during the morning rush, right?)

    The second narrative that I find perplexing is that new developments don’t give back in any way. Above is a chart showing residential development charges in the City of Toronto, as of November 1, 2020. This chart outlines the fees that every developer must pay when building new residential, though it is important to keep in mind that there are many other government fees and charges that form part of almost every new development. These are things like parkland dedication and separately negotiated community benefits. But for the purposes of this post, let’s just focus on development charges (aka impact fees).

    Assume you’re building a 400 unit apartment building, consisting of 240 one bedroom suites (60%) and 160 two and three bedroom suites (40%). Based on the above chart, your development charge bill would be:

    240 one bedroom suites x $33,358 per unit = $8,005,920

    160 two and three bedroom suites x $51,103 per unit = $8,176,480

    For a total of $16,182,400.

    But it’s important to keep in mind that these are the rates as of November 1, 2020. They will almost certainly go up by the time these charges become payable for your 400 unit apartment building. By how much you ask? Well according to Urban Capital’s most recent issue of Site Magazine, which compared a development pro forma from 2005 to 2020, development charges in the City of Toronto have increased by about 3,244% during this time period. (The S&P 500 was up about 220% during this same time.) These are obligatory fees that contribute to everything from transit and parks to subsidized housing and municipal services. (The line items above.)

    So it strikes me that there are other more productive questions that we could and should be asking ourselves. Such as, why is it that our transit/mobility infrastructure hasn’t kept pace with new development and new housing demand? What are we going to do to fix that immediately? Why are we not taxing the things we don’t want (like traffic congestion) so that we have more resources for the things we do want (like transit and housing)? And most importantly, what is the best way for all of us to work together so that we can create the absolute greatest global city in the world?

    Photo by Mimi Di Cianni on Unsplash

  • The war on beauty

    A recent essay by The School of Life asks: “Why is the Modern World So Ugly?” Here’s how it opens:

    “One of the great generalisations we can make about the modern world is that it is, to an extraordinary degree, an ugly world. If we were to show an ancestor from 250 years ago around our cities and suburbs, they would be amazed at our technology, impressed by our wealth, stunned by our medical advances – and shocked and disbelieving at the horrors we had managed to build. Societies that are, in most respects, hugely more advanced than those of the past have managed to construct urban environments more dispiriting, chaotic and distasteful than anything humanity has ever known.“

    Naturally, it turns out that this is, at least partially, the fault of greedy and unscrupulous real estate developers:

    “When property developers heard that the artistic avant-garde was now promoting a concept of functionalism, they rejoiced. From the most high brow quarters, the most mean minded motives had been given a seal of approval. No longer would these developers have to spend any money on anything to do with beauty. Out could go the symmetry, the flowers, the nice but slightly more expensive materials. It could all be as quick, ugly and cheap as possible; after all, isn’t that what the great minds of architecture had advised?“

    The author goes on:

    “Yet this nuance was lost on the property developers who came after them. Their constructions weren’t elegantly pared down with grace. They were something far worse: sloppy, mean-minded and ugly. Except that now, because of the words of the modernist masters, there was apparently nothing one could do to charge them with a dereliction of duty. The concept of beauty had been rendered old-fashioned, it smelt elitist and woolly. No one could any more complain that beauty was missing from the world without sounding soft-headed.“

    To be fair, the essay doesn’t entirely blame developers. It, more specifically, outlines six possible reasons for the ugliness of the modern world. And I do agree with some of them.

    Click here for the full essay.

  • A few thoughts on working from home/anywhere

    One of the big questions for this year is about whether or not work from home (WFH) and work from anywhere (WFA) policies are going to stick following this pandemic. It’s something that I mentioned in my 2021 predictions at the beginning of this year because it is something that would obviously have a massive ripple effect. So today I thought that it would be interesting to look back on data and articles that were published prior to 2020, before everyone really started prognosticating about the rise of fully distributed workforces.

    What is clear, at least from census data, is that working from home was on the rise before COVID-19, but that it still only represented a relatively small percentage of the overall workforce. The numbers are significantly higher if you consider people who maybe occasionally worked from home, but for those who were 100% remote, it was estimated to be only about 5.2% of the US workforce in 2017 (~8 million people), about 5% in 2016, and about 3.3% in 2000. But the question still remains: Now that many/most people have had a taste of the increased flexibility, to what extent will it stick?

    There’s a ton of research out there about the impacts of working remotely — covering everything from productivity to morale. But one takeaway that makes intuitive sense to me is that WFH/WFA flexibility is perhaps best when two things are present: 1) the employees already know how to do their job really well and 2) the work that these employees are doing is fairly independent.

    The corollary to this is that remote work is probably not the best environment for newer and younger employees who would benefit from being around other more experienced people, and for situations where collaboration among coworkers and outside humans is essential for the job. When I think of the job of a real estate developer, I would place it high on the collaboration scale. Building a building involves a full orchestra of people that all need to be playing in sync. Personally, I find that easier to do when you’re sitting across a table.

    My belief continues to be that we are are greatly exaggerating the extent to which work is going to disperse in the short-term. I recognize the trend line that existed prior to this pandemic and I recognize that some jobs are perhaps well suited to decentralization. But I think we will continue to see real limits on how much of this sticks as we move past this moment in time and into 2022.

  • My 2021 predictions

    Life will feel a lot more normal by spring/summer (Q2). By this time, the various vaccines should be broadly available (at least in the developed world). This is something that never happened during the Spanish Flu. From what I have read, the Spanish Flu lasted about two years and there were four major waves, the second of which was by far the most deadly. Ultimately, a vaccine was never found. It just petered out as people developed immunity. But medicine then was not what it is today, so surely we are destined to do better.

    What happens with working from home is going to be one of the most important outcomes of 2021. Right now it feels like tech vs. commercial real estate. The tech industry has been quick to renounce offices (while many large tech companies continued to lease more space through 2020). And the commercial real estate industry has naturally pointed out that we’re all still going to need physical offices.

    My view is that, yes, people appreciate the flexibility of being able to work remotely, but that we’re greatly exaggerating the extent to which work is going to disperse in the short-term. I think it comes down to three main things. 1) It’s nice being around other humans, both in the office and for those after work drinks. 2) Collaborative and knowledge-intensive endeavors work better when people are in the same room. And 3) corporate politics will encourage people to return to the office. Who do you think is going to get promoted first, the person who Zooms in from the Caribbean for meetings or the person who shows up to the office and grinds it out every day?

    As the world returns to normal, we will, however, see an explosion in global travel. Many will be questioning how Airbnb’s sky-high valuation makes any sort of sense, but it’ll have the right story for what’s going on in the world (some people call these “story stocks”). The reality is that there will be a massive amount of pent up demand that starts to come out as soon as people start to feel safe and governments start to allow people to travel en masse. I’m already looking forward to the 2021-2022 ski season, which I fully expect to be a blockbuster season.

    Because of this, we will see a decline in recreational real estate. The kind that was fulfilling people’s need for local travel during this pandemic. Instead, people will turn their attention to more international experiences and try and make up for lost time. Many will also come to realize that the whole working from home thing didn’t stick as expected and so they’ll start deriving less utility from their property outside of the city. Expect a kind of reversion to the mean when it comes to prices.

    Urban/downtown real estate will strongly rebound in the second half of 2021. As restaurants reopen, as people return to offices, and as urban life in general resumes, we will see an increase in demand for condos/apartments, and probably larger urban spaces given the run-up in prices for single-family homes that many cities saw last year. (A bit more on this point can be found over here.)

    The trends that are being accelerated as a result of this pandemic are not going to stop, though their rate of increase will temper. The apps and platforms that people started using in 2020, perhaps for the first time, have established new habits. People’s credit cards are now on file and it’ll be very easy for those online habits to remain. But the opposing force to all of this will be the strong desire for socializing, travel, and novel experiences. It’ll be the more routine stuff that will continue to live entirely on our phones.

    The restaurant/food industry will bounce back in a slightly different form. Sadly, many businesses will have failed. But we will also see an explosion in new ideas and new concepts, satisfying our demand to be out socializing and trying new things throughout the new roaring twenties. Ghost kitchens and on-demand food delivery companies will continue to disaggregate how some restaurants are setup. Companies like Uber will see their ride-sharing businesses quickly snap back, which will more than offset the decline in food delivery as people resume eating out.

    Public transit ridership probably won’t return to its pre-pandemic levels until at least the fall. Possibly late fall. This is going to be a serious problem for the various levels of government that subsidize virtually all public transit authorities. Many transit networks have seen ridership declines of 70% or so and, if my timing projections are correct, that will have been the case for about a year and a half.

    The migration from high tax states (like California and New York) to low tax states (like Texas and Florida) will continue. This trend was well underway before COVID-19 and so I don’t see it reversing. What is perhaps more interesting to consider is how this dispersion of economic activity will ultimately play out against some of the centralizing/polarizing forces of the global economy. Urban agglomeration economies aren’t going to go away.

    To end, I will say that I think it’s safe to assume that we’re all looking forward to the world getting back to normal, whatever that happens to mean. But ironically, once that happens, I reckon that some of us might look back on this period of time and feel hints of nostalgia. Perhaps you learned a new skill or perhaps you were able to spend more time with love ones. Time and distance may better reveal these silver linings.

    Onward, my friends. What a time to be alive.

  • The Great Dispersion

    It’s that time of year again. It’s time to make predictions for the upcoming year and time to look back on the ones we all got wrong from a year prior. I don’t recall many people (if any) predicting that a pandemic would cripple the global economy.

    I like how Scott Galloway put it in his 2021 predictions post. It’s obviously better to be right than wrong, but it’s okay to be wrong. The value in writing down your thoughts is that it forces you to think. It’s the reasoning that matters. (It’s one of the reasons why some people write blogs.)

    A key theme in Galloway’s predictions post is something that he calls “The Great Dispersion.” This involves two things: (1) The physical distribution of products and services over wider areas and (2) the bypassing of gatekeepers and other intermediaries (which is something the internet has always been good at).

    You could interpret this as being directly antithetical to cities. Urbanism, after all, is all about agglomerations. But I think it’s more nuanced that that. Cities have generally always had both centralizing and decentralizing forces. The two can co-exist.

    I will get into this in more detail in my own 2021 predictions post. But in the mean time, I would encourage you check out what Scott Galloway recently published, over here. And if any of you have any thoughts about what’s in store for us in 2021, please leave a comment below.

    Don’t worry, it’s okay if you’re not right.

  • Building cool things is not as easy as it may seem

    There was a good discussion on Twitter this morning about small-scale commercial uses in residential neighborhoods, like the coffee shop shown above on Shaw Street. In most residential neighborhoods in Toronto, this kind of commercial activity is not permitted if you were to try and initiate it today. The small convenience stores and bodegas that remain are often legal non-conforming uses. And while generally considered desirable in their current confirm, if you were to try and make a change, you could get caught in some municipal red tape where your grandfathered status suddenly no longer applies.

    That is exactly what happened in the case of the above coffee shop and, from the discussions that happened on Twitter this morning, it is a problem that is not unique to Toronto. Alex Bozikovic wrote about this coffee shop and this project in the Globe and Mail over seven years ago. Getting it approved and built was no easy task. And my friend Jeremiah Shamess — who renovated a similar and formerly commercial corner building in the area — ran into the exact same challenges.

    But let’s consider the other side of this argument for a minute. It’s easy to look at a great and well-designed neighborhood coffee shop like this one and say to yourself that it is obviously a desirable use and that we should be encouraging more of them in our residential neighborhoods. But what if it was a noisy late-night bar, a nail salon, or a massage parlor? Would your opinion change? Would it change if you were an immediate neighbor? It is perhaps easy to see why the fear of the things we don’t want has led us to sterilize our neighborhoods to the point where we no longer allow the things that we may in fact want.

    And herein lies the immense frustration that many of us have with our land use policies. There are countless examples of obviously desirable uses and built forms that are exceedingly difficult to execute on because of the barriers that we ourselves have put in place. Whether it’s a cool neighborhood coffee shop or new affordable housing, there are far too many examples of these sorts of projects being stuck in some kind of planning ether — sometimes for decades. We say and know that we want these things, but then it is frequently the case that we can’t get out of the way so that they can actually happen.

  • Where people are moving in the US

    Another day, another set of announcements about large companies and rich people moving to lower cost US states. Yesterday it was announced that Oracle will move its corporate headquarters from Silicon Valley to Austin, Texas. (If you remember, Elon Musk also recently announced that he had moved himself to Austin from California.) The company has said that the move puts Oracle in the best position to grow and to give its employees greater flexibility about where and how they work.

    While these sorts of moves are making headlines right now, it’s important to keep in mind that this is not necessarily a new phenomenon. In fact, depending on how you look at it, you could argue that these headlines are a lagging indicator for trends that have been underway for some time. Below is a chart from New Geography showing the top 50 state-to-state moves last year. Number one is the move from California to Texas with 45,172 net movers. And number two is the move from New York to Florida with 38,512 net movers.

    According to New Geography, California saw a net domestic migration loss of 912,000 people from 2010 to 2019. And the most popular receiving states are what you would expect: Florida (1,230,000 people) and Texas (1,146,000 people). A big part of this story obviously has to do with housing affordability and the search for an overall lower cost of living. As well, since companies are always in need of young and smart talent, it makes since for them to locate in places where young and smart people want to live.

    But urbanists like Richard Florida have also pointed out at this relocation of companies could be a leading indicator for something else: the decline of innovation in America. Here, he argues that in the nascent stages of a new invention, there tends to be a tight clustering phenomenon. Think steel in Pittsburgh, cars in Detroit, and computing in Silicon Valley. However, as the industry matures, the tendency to centralize seems to decline and companies then start moving around.

    I’m not yet convinced that this is what’s happening. Because there seems to be a pile on happening in specific cities like Austin (which, by the way, I hear is terrific). Even before this pandemic, there was a growing sense (from the outside, mind you) that the Bay Area had simply gotten too expensive, both for individuals and for companies. It would seem that when you greatly restrict the supply of new housing and make it unattainable for many, people go find housing somewhere else. Sometimes in other states.

    Photo by Tomek Baginski on Unsplash

  • The 99% Invisible City

    Roman Mars and Kurt Kohlstedt of the 99% Invisible podcast have a recent book out that is all about cities. True to their radio show, it is about the often-overlooked design choices that have shaped and continue to shape our cities. Everything from why jersey barriers are curved the way that they are to how roadway centerlines came to be. The book is called The 99% Invisible City: A Field Guide to the Hidden World of Everyday Design. And in some ways, it is what I try and do on this blog every day; look a little deeper and look at things — often cities — from a slightly different perspective (though I am no Roman Mars). So I think that many of you will appreciate this book. If you’d like to learn a bit more about it, here’s a recent interview that Roman did with StreetsBlog.

  • How not to build missing middle housing

    Here is a good example of why “missing middle” housing is so challenging to build in Toronto, despite everyone talking about how great it would be if only we could build more of it.

    It’s the story of a minor variance application that was asking to sever a 50-foot lot at 2165 Gerrard Street East so that two semi-detached buildings and two laneway suites could be built. It would have added 10 family-sized rental units to a site that is on a streetcar line and that is within walking distance of both the subway and regional rail. And yet the consent to sever was denied.

    How come you ask?

    “I don’t believe dividing the property is in the best interest of the community,” said committee member Carl Knipfel, himself an architect and planner who complimented the beauty of the existing house and critiqued the design of the new buildings. “What is proposed is too dense … I really have serious concerns as to where this consent may lead us.”

    The last sentence is the best part.

    The article then goes on to argue that this is really all about the supremacy of single family homes and the desire to keep renters out of these neighborhoods. (Hey Airbnb, it’s not just short-term rentals that people have a problem with; it’s also long-term rentals.)

    The kicker, for Mr. Galbraith [the project’s planner], is he knows if he wanted to sever the lot for two single-family homes he could get that permission without delay and likely also get permission to build more than local zoning allows.

    “I can get variances for a one-unit McMansion every day of the week,” he said. “Lot coverage variances are very common; you want to take a bungalow down and make some big ugly house with a weird roof and a high first floor? You see those all over East York and Etobicoke.”

    If missing middle-type housing is “too dense” for sites that are endowed with every form of fixed rail transit that we have available in this city, then your guess is as good as mind as to where the hell it’s supposed to go. It’s time to grow up Toronto.

  • The roaring twenties

    We’ve all heard stories or know people who have made the decision to leave the city during this pandemic, either temporarily or permanently. Some young people have moved home until things settle down and some people have sold their real estate and bought something outside of the city.

    I don’t know know what the exact numbers are, but you can see this trend being reflected today in downtown rental rates and other indicators. This is happening in many cities around the world.

    But here’s what I think about when I hear these stories:

    1) Are these people assuming that we will never go back to offices and that WFH is our new reality? In this case, the thinking is simple. The world has changed. I need a proper Zoom room and a home gym.

    2) Did these people never really like urban living or have they simply outgrown the city? Pre-pandemic, family formation was still a major pull away from downtowns for many. In this case, a move was going to happen regardless.

    3) Or are these people taking a short-term view of the world and forgetting/ignoring that our global cities are going to rebound and that 2 hour commutes really suck? (Sitting in front of Zoom all day is also no way to live in my opinion.)

    There are both positives and negatives to urban living. There are forces that make people want to centralize and there are forces that make people want to decentralize. And the reality is that many of the benefits and perks of living in a city are temporarily turned off right now.

    Things are not fun right now, but this isn’t going to last. I’m looking forward to the roaring twenties.