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.

Subscribe

Tag: covid-19

  • My predictions for 2022

    As promised, below is a list of some of my predictions for this coming year. I have tried to be both punchier and more precise in my prognostications; because, well, obvious predictions are boring and precision will allow me to better evaluate my thinking at the end of the year. So here goes.

    1. 2022 will be the year that COVID-19 becomes endemic and finally fizzles out to a point where it no longer factors into our decision making in the same way that it has for most people over the last two years or so. I think this will happen by as early as the summer.
    2. As a result, I think the majority of people will be back in their offices by this September at the very latest, with many coming back much earlier. The whole hybrid/flexible work thing won’t completely disappear, but the majority of people who used to work in offices will be back.
    3. Recreational/fringe residential real estate will soften in 2022 as a result of 1) its tremendous run-up during this pandemic and 2) the renewed pull of urban/office life. Conversely, urban apartment rents will continue to rise and eventually surpass their pre-COVID levels. The SF Bay Area could be one exception.
    4. The explosion of travel that I thought was going to happen in 2021, will truly happen this year. The summer will mark its official return, with European travel volumes (to give just one example) returning to their pre-COVID levels.
    5. We will see meaningful efforts to further breakdown the hegemony of single-family zoning throughout many North American cities. This has been building for a number of years and I think we will see some tipping point-like moments in 2022. Specifically, expanded permissions for multi-unit housing and greater densities.
    6. I wish I could say that autonomous vehicles are destined to do something truly remarkable this year, but I think we are still a few years out (2024-2025?) before a large chunk of us are ride-hailing AVs. But on a related note, I do think that Uber will come into its own this year and finally become profitable (and not just with adjusted profits).
    7. Public transit ridership will, unfortunately, remain depressed and below its pre-COVID levels for this entire year. The beneficiaries of this will continue to be cars (not good), bikes, and micro-mobility solutions like e-scooters.
    8. 2021 was a huge year for NFTs and other fun stuff like digital fashion. Given these trends, I believe there will be growing demand from people to better integrate their digital and physical lives through technologies like augmented reality. Snap has been at the forefront of this space for many years and 2022 will be an important year for its Spectacles (AR glasses). But Apple and others will also make major announcements.
    9. Miami’s ascent as an important tech hub will get interrupted by questions surrounding the climate crisis and its own resilience. At the time of writing this post, the price of carbon on the EU’s Emissions Trading System (EU ETS) is about €80 per tonne. I think we will see it break €125 per tonne this year, and possibly go even higher.
    10. Ethereum, Bitcoin, and Solana (in this order) will be the top three cryptocurrencies according to market cap by the end of the year. At the time of writing this post, their market caps are $446 billion, $895 billion, and $55 billion, respectively. I am also expecting some breakout web3 consumer applications that will push, maybe, 40% of Canadians and Americans into the crypto space.

    Photo by Dave Xu on Unsplash

  • Londoners bought a record number of homes outside of the city this year — or did they?

    The Financial Times published an article this week talking about the record number of homes that Londoners bought outside of the boundaries of the city this past year. The total was about 112,780 homes worth some £54.9 billion — again, it was a record in terms of total value.

    The argument is that this pandemic continues to fuel decentralization, flexible working arrangements, and greater demand for larger spaces. Housing preferences have permanently changed. And the suggested takeaway is that this dynamic might have “serious consequences for the city’s population and housing market.”

    But of course, I’m going to question whether this is really the case. The ~£55 billion number is clearly a new high according to the article. The previous record was £36.6 billion back in 2007. But that doesn’t give you the full picture because homes cost a lot more today than they did back then.

    If you look at the total number of homes purchased outside of the city by Londoners, the record still belongs to 2007 with approximately 113,640 homes. When I see this number it makes me pause.

    Because here we are living through a global pandemic and the largest work from home experiment in modern history, and yet the total number of homes purchased outside of the city this past year is still comparable to that of the last housing cycle.

    Did this moment in time really create an anomalous and irreversible shift in housing preferences?

    Photo by Fineas Anton on Unsplash

  • Economic update with Benjamin Tal — get ready for the second half of this year

    Benjamin Tal — CIBC’s Deputy Chief Economist — is seemingly everywhere. And earlier today, he was delivering an annual economic update at an online event hosted by Brattys LLP (our condo lawyers) in partnership with CIBC. Below are a handful of slides that I found interesting and that I tweeted out during the event.

    All of our personal risk curves changed during this pandemic. When the first wave hit, we all had no idea how bad this was going to be and what to expect. And so we all stayed home and washed our hands and our groceries. That changed with each subsequent wave. And now we’re all ready and anxious to be done with this.

    Tal referred to this as one of the most unequal recessions we’ve ever seen. If you had a high paying job, you probably kept it. And after you stopped spending money on eating out, entertainment, travel, and watching the Leafs lose in person, you likely had a meaningfully higher savings rate. That has created some $100 billion of “excess cash” sitting on the sidelines.

    This cash wants to be spent and I think we’re going to see it flying out the door in the second half of this year. Much of it will also flow into services, which should help to prop up the hardest hit segments of the economy. So while there has been some real pain, many are expecting the economy to snap back pretty quickly. Get ready for some euphoria in the second half of this year.

    This last slide is particularly relevant to the kind of things we often talk about on this blog. It is essentially showing the increased demand for housing outside of the city during this pandemic (as of Q4 2020).

    A flatter line (Vancouver, Calgary) indicates that year-over-year price growth was less affected by “distance from the city center.” On the other hand, a steeper line (Toronto, Ottawa) indicates that price growth was stronger the more you moved outward from the core. In the case of Toronto, it was nearly 20% YoY when you got about 60-70 kilometers out of the city.

    But it’s important to keep in mind that the core of Toronto still grew at about 5% year-over-year. About the same as in Vancouver. And in the case of Ottawa, the number looks to be about 17.5% in the city center. These are meaningful numbers and not the kind of symptoms you would expect to see from downtowns in the middle of a death spiral.

    I would argue, as I have many times before, that this last chart is the result of short-term phenomena. I bet we’ll see a number of these pitches reverse by the time Q4 2021 arrives.

  • Venice in numbers

    Here are some interesting figures about Venice take from this recent FT article by Chris Allnutt:

    • Tourist visits to Venice last year were estimated to be about 1/5 of what they usually are
    • Short-term rental bookings as of December 2020 were down about 74% year-over-year
    • It is estimated that short-term rentals normally represent about 12% of homes in Venice (this is significantly higher than the “typical city” which is estimated to be about 1-2%)
    • Even before the pandemic, average property prices had declined from about €4,500 per square meter in 2018 to €4,341 in 2019 (2020 data is still coming)
    • Pre-pandemic, the population of the city was about 50,000, which is less than a third of what it was back in the 1950s
    • A 2018 study by Airbnb reported that for every local Venetian the city had 74 tourists on average (wow)
    • Being a dominant port city, the city has generally been disproportionately impacted by plagues and other health crises throughout its history
    • The Lazzaretto Vecchio, which still stands today, is a small island in the Venetian Lagoon that was founded in the 15th century as a hospital to care for plague victims; apparently it was the first of its kind in the world
    • During the 15th century, Venice saw its population drop by about two-thirds as a result of an epidemic
    • At the height of the Republic of Venice in the 1790s, the city had a population of about 170,000; after falling to Napoleon it halved to about 96,000
    • It’s worth pointing out that the “height of the republic” occurred after many great epidemics; the subsequent population decline was seemingly the result of a conquest and not pestilence

    Photo by @canmandawe on Unsplash

  • K-shaped housing market

    If you’ve been following the housing market (in most cities) over the last year, this chart likely won’t surprise you. It is from a recent City Observatory article by Joe Cortright talking about the “k-shaped housing market” that we have seen emerge over the last year. The above is for the US, but I would imagine that the chart would look similar for Canada, as well as for other countries. Here’s an excerpt from the article:

    There’s an obvious explanation for the different trajectories of house prices and rents:  Low income workers rent; high income workers own and buy homes. High income households have been barely grazed by the Covid-19 recession.  In fact, the combination of low interest rates and enforced savings (because many kinds of consumption spending, including dining, entertainment, travel and even much retail have been constrained by lockdowns), mean higher income households may find housing a much more attractive spending item.  If you can’t go out to dinner, or take a vacation, you have more money to spend on a new home.  Low wage workers are in the opposite situation.  Low wage workers have borne the brunt of the recession; they are also much more likely to be renters than higher income households.

    It is perhaps worth reiterating that our fixation on homeownership is not universal. If you live in Switzerland — a very wealthy country — you’re more likely to rent than own. And if you live in Germany, you’re more likely to live in an apartment than in a low-rise house. Still, that doesn’t change the fact that the impacts of COVID-19, and our lockdowns, have been felt unequally. This chart is an example of that.

  • Cities are not going away

    Here are the results from a recent survey by The Harris Poll and the Chicago Council on Global Affairs, which asked 1,200 residents from the six largest metropolitan areas in the US how they were feeling about urban and suburban life during this pandemic. (The exact timing was last fall.)

    The bar color indicates where the respondent current lives. So for example, of the respondents who currently reside in an outer suburb (blue bar), 73% said that they wouldn’t change where they live. They seem to be feeling pretty good about their life decisions right now.

    But for respondents who live in an urban area (black bar), 50% also said that they wouldn’t change where they live. And interestingly enough, 25% of all respondents living in a city responded by saying that they were actually more likely to move to another urban area. (Perhaps Miami?)

    For these urbanites, of which I would include myself, the city is far from dead.

  • Inaugural consumer trends report — what changed and what might stick

    The New Consumer and Coefficient Capital recently teamed up to publish their inaugural consumer trends report. It is a look at what changed this year and what might actually endure as we get past all of this.

    Some of it is perhaps intuitive once you see it. Makeup consumption is, for example, way down and home scent sales are way up. See above chart.

    And some of it I disagree with. Their survey results suggest that 81% of Millennials (and 66% of all consumers) are now perfectly content working out at home, as opposed to going to a gym. I am firmly in the 19% here. Get me back to the gym.

    But what is clear is that this year has accelerated a number of consumer trends that were already underway and so there are likely to be some structural changes as we move forward.

    To read the entire report, click here.

    Chart: Consumer Trends 2021

  • Five global airlines to start using a digital health pass

    The Commons Project and the World Economic Forum are piloting an initiative right now called the CommonPass framework, and a number of airlines, including Lufthansa and Swiss International Air, are expected to start rolling it out before the end of the year.

    What the CommonPass does is allow people and travelers to verify their health status via a digital certificate on their phone. Right now it can confirm that you’ve tested negative for COVID-19 and eventually it will confirm if you’ve received a valid vaccination.

    The framework also asks countries to publish their travel entry criteria in a standard format, so that it’s easy to update and it can be globally understood.

    Of course, much like all of the exposure alert apps that are out there, this is only really useful if people and companies actually start using it. But the travel industry knows that for customer confidence to return, people are going to need to feel safe again. And a digital health pass is one way to help with that.

    Here is a short video explaining how the CommonPass works. If you can’t see it below, click here.

  • Density is not destiny

    Back in March and April, there was a belief that big and dense cities were going to pose a serious problem in the fight against COVID-19. The narrative was that the benefits of urban density suddenly flip to glaring negatives during a pandemic. Elevators are a problem. Public transit is a problem. Busy streets and public spaces are a problem. Instead of density, you want dispersion. There was also some speculation that COVID-19 cases would be somewhat correlated with colder climates.

    The data that we are seeing today suggests the opposite. Note the above chart by Axios. On a per capita basis, COVID-19 cases are now the lowest — and below the national average — in large US cities with populations greater than 1 million people. Where cases are the highest, again on a per capita basis, is in rural areas. Non-metro areas less than 10,000 people. The county with the highest rate also isn’t the coldest of places. It’s Childress County, Texas, where the rate is about 1,265.3 cases per 100,000 people.

    I have a lot of questions about the most important factors affecting transmission rates. Is mask wearing, for example, more important than average temperatures? What is the impact of socio-economic status? I am seeing maps that, unfortunately, suggest this plays a meaningful role. What is really driving these so-called “hot spots?” But what seems clear to me is that density is not necessarily destiny during this pandemic.

    P.S. Here’s a related article on hospital capacities across the United States.

    Chart: Axios

  • How many people are actually using a COVID exposure alert app?

    One of the things that I don’t think we are doing a good job of here in Canada is promoting our COVID Alert app. Most of the people I talk to don’t seem to have it installed on their phones. And most of the people I talk to seem to be nervous about sharing personal information with it, including their location. (That’s not actually how the app works.)

    The thing with exposure alert apps is that they’re only really useful if most people are using them. And they’re only really useful if people who test positive for the virus enter the code that they are given into the app. So it relies on us trusting that other people will do the right thing. I get that. But those same shortcomings apply when we just ask someone if they’ve been exposed to anyone with COVID-19.

    I could be wrong, but my view on this is pretty simple.

    If everyone who had COVID-19 got immediately sick and showed highly discernible symptoms, then this virus would likely be a lot easier to control. Part of the problem, as I understand it, is that some people get really sick and some people don’t get sick at all. But these latter people can still unknowingly spread it around — perhaps to other people who might get really sick.

    Given this variability, it’s critical for us to know who has been potentially exposed and who has not been exposed. Otherwise, we’re running around mostly blind. From what I can tell, exposure alert apps are one of the best ways for us to track transmission. But, of course, it only works if you’ve got the app. For those of you who don’t already have it, you can download it for both iOS and Android by going here.

    P.S. I’m writing this post because it came up with my barber today while I was getting a haircut. He wasn’t all that aware of the app, but he ultimately concluded that we have a problem of education and that he was going to download it. Maybe some of you will do the same after reading this.