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.

Tag: development

  • The long and narrow of property affordability

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    Lots sizes and dimensions vary from city to city, as well as from neighborhood to neighborhood. They come in many different shapes and sizes from long and narrow (common in Toronto) to rectangular or even wide and shallow. Charlie Gardner wrote a terrific post on this last year where he used Bing Maps to illustrate some of these differences. Tokyo, for instance, is shown as having more rectangular lots (32′ x 38′), whereas Buffalo is shown as having more long and narrow lots (30′ x 175′). Charlie then asks: why the prevalence of inefficient long and narrow lots? These dimensions obviously produce long and skinny houses.

    As he rightly points out in his post, there are economic reasons for this. Assuming you’re starting with deep blocks and lots, then there’s going to be a natural tendency toward subdividing and going long and skinny. That’s because the key dimension is frontage onto the street. The more frontages you create, the more front doors can be built, the more lots with access to the Mississippi can be created, etc. And that’s how you end up with 10-12′ wide row homes, which also helps to address overall housing affordability. This is not a new phenomenon.

    To further demonstrate this point, let’s look at how this phenomenon has translated into the condo market – specifically the mid-rise condo market here in Toronto. In this case street frontage morphs into window frontage (access to light). That’s now the guiding dimension. In a 1 bedroom apartment, that dimension might be something around 6-7m. That allows you to have both a bedroom and a living room with a window. So it makes for a great 1 bedroom or 1 bedroom + den apartment. (I’m ignoring corner suites for this thought exercise.)

    However, a tension often arises when you begin to look at larger suites, such as 2 bedrooms and 3 bedrooms. The obvious response would be to simply give over more window frontage. So instead of 6-7m, the suite may get 10m. This would allow you to create a split 2 bedroom apartment (both rooms get windows) with a living room in the middle. This would be considered a highly desirable floor plan.

    But up until now we’ve been ignoring the depth of the apartment. And as is the case with lot dimensions, this can have an impact on the amount of street/window frontage that gets designed. We’ve talked a lot about mid-rise buildings before on this blog and one of the challenges here in Toronto is that the 45 degree angular plane guideline produces deep floors on the bottom of the building and narrow floors on the top. Given this, it would not be unheard of to end up with 12m apartment depths on some of the lower floors.

    The counter argument would be that nobody is forcing these larger floor plates. Simply carve the building back. But the economic reality is that the margins are so thin on mid-rise buildings, that it would be inconceivable to give up this floor area. You have to max out the envelope.

    Why does this matter? Well let’s assume that the average downtown Toronto condo will cost you $857 per square foot. Using back of the envelope math, that means that the above 6m x 12m apartment (1 bedroom) could cost around $663,000 (774 square feet x $857 psf). And that the above 10m x 12m apartment (2 bedroom) could cost around $1,106,000 (1,291 square feet x $857). 

    These are obviously big numbers. Question becomes: Who will be able to afford these?

    So naturally the design exercise becomes about reducing the size of the apartments and often this means reducing the amount of window frontage. Of course when you do this, it means that one or more of the bedrooms will need to be pulled back from the front windows, which is how you end up with inset / recessed bedrooms (indirect light) and long and narrow apartments. These are often pejoratively referred to as “bowling alley suites”, but they are driven by a push for greater affordability.

    Again, this is not a new phenomenon. It is simply a trade-off that gets made. It’s the long and narrow of property affordability.

  • Triple-glazed sliding doors (or walls?)

    After my post about “the great balcony debate”, there was a bit of discussion on Twitter. Ken Wilcox then responded with a video talking about the mixed-use Timmerhuis building in Rotterdam designed by OMA. 

    At the 1 minute mark there’s a clip of one of the residents opening a large set of sliding doors. Here’s a screenshot of what that looks like:

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    I did a bit of digging on the project and found this fact sheet. The sliding doors in the residential units measure 1.8m x 2.6m. They go from floor-to-ceiling (~8′-6″). The windows are also triple-glazed! (3 glass panes + 2 air chambers.)

    I think this is a great way to open up a suite to the outdoors. It also looks like the glass balustrades sit inside, which keeps the building’s exterior envelope uninterrupted. Some of the other suites have large terraces where the building steps back.

    In case you’re wondering, the construction costs for the entire project was about €100 million and the total gross floor area (including all of the non-residential uses) is about 45,000 m² (~484,200 sf). Unit rate seems reasonable given that triple-glazing is virtually unheard of in Toronto.

    P.S. I am having some technical difficulties with Tumblr (my blogging platform) and Mailchimp (my email service provider). They both had problems and a few daily emails didn’t get sent out. Sorry about that. Hopefully it’s resolved now. If you missed the last couple of posts, you can read them online.

  • Site: Volume 6

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    Urban Capital just released Volume 6 of its annual publication called Site. (Sadly, I missed the party.)

    The cover, shown above, is a photo of Shayne Dark’s 90 foot public art installation at Tableau Condominiums. The piece is called NOVA and it’s located at the southeast corner of Peter Street and Richmond Street West in downtown Toronto. If you haven’t yet seen it, I would encourage you to go by. I love the scale that the art and architecture have brought to this stretch of Richmond.

    You can pick up a free copy of Site from any Urban Capital sales office. But in case you don’t end up doing that, I thought I would post a copy of the article I wrote for it. It’s called “Too Much of a Good Thing” and it’s a discussion about urban regeneration vs. gentrification.

    Some of you may also appreciate the Condo Development 101 feature that Urban Capital has been publishing alongside Site. The “how to” in this issue is on financing a development project.

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    Too Much of a Good Thing

    Urban Capital is an urban regenerator. From its start in Toronto’s King-Spadina district in the late 1990s to Ottawa and Montreal in the early 2000s and Halifax, Winnipeg and Saskatoon today, it has tried to be at the vanguard of urban change. But there’s a flip side of this – “gentrification”, where people get displaced. When does too much of a good thing – regeneration – become a bad thing – gentrification? Brandon Donnelly looks for the answer, and asks what can be done to offset the negative impacts of urban regeneration.

    The 1960s through to the 1980s were not kind to many cities in North America, Europe and the UK. The economy was going through a process of industrial restructuring. Racial tensions were high, particularly in the US. And the lure of the suburb proved irresistible to an auto-oriented generation who saw cities as blighted and dangerous.

    In 1967, Detroit saw one of the most destructive riots in the history of the United States. It lasted five days and resulted in 43 deaths and the destruction of over 2,000 buildings. From 1960 to 1980 the city lost nearly 30% of its population – a decline that continued into the 21st century and has only recently been reversed.

    On October 16, 1975, New York City was less than 24 hours from declaring bankruptcy, as $350 million of debt was about to come due. The economic fallout from deindustrialization had hit the city hard and crime had risen dramatically. By the end of the decade the city would lose nearly a million people and then see the start of what became known as the “crack epidemic.” People avoided “the city” – the city being Manhattan. It was simply too dangerous.

    Cities, it would seem, were dying.

    Yet despite this dire urban backdrop, concerns over gentrification were not non-existent. New York neighbourhoods such as the South Houston Industrial District (today’s SoHo) and the Lower East Side were embroiled in fights over highways, displacement, and gentrification throughout the 1960s, 70s, and 80s.

    Indeed, the term “gentrification” can be traced back to 1964, when it was coined by the German-born British sociologist Ruth Glass. She described it as a rapid process where modest mews, cottages, and previously subdivided Victorian houses were upgraded to elegant and expensive houses – ultimately upsetting the whole social order of the district.

    Baron Haussmann – the original gentrifier

    Even before the term had been coined, “gentrification” as an urban phenomenon had long entered the mind of city dwellers. From the 1850s to the 1870s, during Baron Haussmann’s complete destruction of working-class medieval Paris, the French poet Charles Baudelaire wrote about the estrangement he felt with this newer and richer Paris. This was 19th century gentrification at work.

    But is gentrification always a bad thing? As Detroit bled people in the post-war years, would anyone have opposed a new “luxury” condo tower, assuming it could have been built? Should Haussmann and Emperor Napoléon III have left Paris the way it was? The generation that was displaced wasn’t all that thrilled, but today Paris is one of the most admired and visited cities in the world. So was it worth it?

    De-gentrification is not a great alternative

    Another way to look at gentrification is that it by definition requires capital investment. To renovate and regenerate a neighbourhood is to invest money and make new things. Therefore, the opposite of gentrification – let’s call it de-gentrification – would be disinvestment. This is where capital investments are not made. Things are left to age, because let’s keep in mind that all built form depreciates over time. Nothing is static.

    Most people would probably agree that disinvestment is not an optimal outcome for communities. And you don’t have to look hard to find examples of it. In 1970, the United States had 1,100 urban Census tracts that could be classified as “high poverty.” By 2010, 40 years later, that number had climbed to 3,165. This is disinvestment. This is the lack of gentrification, which doesn’t always get talked about.

    Developers such as Urban Capital have positioned themselves as urban regenerators. What started with a late 1990s boutique loft project – Camden Lofts – in Toronto’s hollowed out Fashion District has grown into a firm philosophy around investing in and regenerating neglected urban areas. In 2013 the company completed the first phase of its four-phase River City development. It was the first building in Toronto’s emerging West Don Lands district, previously a derelict area completely outside the consciousness of Torontonians.

    Earlier, with its East Market development in 2001, Urban Capital kick started what ultimately grew into quite a condo boom in Ottawa. East Market was at the scruffy end of the city’s Byward Market, a one-acre empty parking lot adjacent to a Salvation Army hostel. It was the first major condominium development proposed in the city’s central district in over ten years.

    And today, with the completion of its Glasshouse development in Winnipeg, Urban Capital is delivering 200 new residential units in a downtown bereft of permanent residents.

    Wake up and smell the gentrification

    But at what point does urban regeneration become unwanted gentrification?

    In 2012, on the heels of its successful East Market and then Mondrian developments, Urban Capital returned to Ottawa to launch an infill project in an area of that city that they felt represented an urban void between the downtown core and the trendy Glebe neighbourhood. Their objective was to re-energize a stretch of blocks that, at the time, was characterized by a mostly surface parking lots.

    However, instead of being welcomed as an urban regenerator, as it had been with East Market and other projects, the company was seen as an intruder coming in to build luxury condos for the wealthy. An anti-gentrification campaign quickly emerged with flyers screaming: “Wake Up and Smell the Gentrification!” The gist of their strongly rhetorical message: Don’t get pushed out by the rich developers.

    Of course, this is not unique to Urban Capital in Ottawa. Gentrification battles and fears of displacement dominate headlines around the world. In many ways it is symptomatic of a larger socioeconomic shift: income inequality is rising and the middle class is being squeezed out. The results of this now play out on our streets with every new condo development and hipster coffee shop.

    Good at the beginning; not so good later

    Perhaps the main difference between welcome regeneration and unwanted gentrification is that the revitalization of neglected urban areas – the “welcome regeneration” – often does not directly impact that many people. There’s nobody there to oppose change at the beginning. Things are just getting starting.

    For instance, no one lived in Toronto’s Fashion District in the 1990s, and most people did not believe that this de-industrialized part of the city would one day be transformed into the thriving mixed-use community that it is today. So urban regeneration was not only not opposed, it was actively encouraged.

    But as communities mature and people begin to fear that additional investment will translate into displacement and/or a reduction (or even change) in their quality of life, NIMBYism takes root. Urban Capital has projects from the Maritimes to the Prairies, and partner David Wex describes the evolution this way: “I’m usually pretty popular at the start of a city’s upswing, and then disdained (at best) later on.”

    It would seem that cities only have two states: they’re either on the brink of death or they’re being gentrified and over-developed by nasty developers.

    Inclusive Urbanism

    It is short-sighted to think that as cities and neighbourhoods cross the chasm from under-the-radar regeneration to unwanted gentrification, simply stopping change will preserve the status quo. Instead, we must find the right balance between growth and preservation. And we need to get better at creating inclusive urbanism.

    Earlier this year, at the 24th Annual Congress for the New Urbanism in Detroit, Carol Coletta of the Kresge Foundation’s American Cities practice delivered a keynote speech where she spoke about the transforming city and the battles of gentrification. She urged everyone to consider the value of mixed-income communities, and gentrification – without displacement. She ended by saying: “Equity does not sit in opposition to a thriving, appealing city. It is central to it.”

    Since the very beginning, people have moved to cities in search of social interaction and wealth creation. So it strikes me that the concern may not necessarily be that neighbourhoods could be becoming wealthier (gentrified), but rather that the investments being made and the benefits being created are not being broadly shared. And that some people are not only being left out, but are in fact getting pushed out.

    So what should we do?

    First, we shouldn’t assume that this is entirely a design, real estate and city planning problem. Exponential technological growth has caused rapid structural changes in our economy, manifesting itself in an economic “decoupling”. This has been well documented. A 2012 study by Andrew McAfee, a research scientist at MIT, found that while U.S. productivity and GDP have continued to grow since the early 1980s, median household income has in fact decreased. This is the hollowing out of the middle class that is driving the populism – in Europe as well as the U.S. – that we are seeing today. Sadly, this is not a problem that architects and real estate developers, alone, can solve.

    Second, we – meaning everyone involved in the built environment – need to do more to create inclusive urbanism. This means mixed-income and mixed-use communities that minimize displacement and ensure that residents are well connected to jobs, education, and other services. Already, cities such as Toronto have by-laws in place to preserve affordable and mid-range rental housing in the face of new development. Residential rents are also controlled, with maximum annual rent increases set by the government. You could call these anti-displacement policies.

    Third, there has been much debate about the connection between new housing supply and affordability. On one side you have Harvard economist Edward Glaeser, who touts the affordability success of cities such as Houston, a sprawling metropolis with few land use controls. And on the other you have people like urbanist Richard Florida, who have become frustrated with this proposed solution to inclusivity.

    It is unlikely that supply alone will solve the urban affordability crisis, but there is a clear connection. Heavily supply constrained cities – Vancouver because of its hemmed-in geography, and Toronto (arguably) because of its greenbelt – have seen prices increase faster than more elastic markets. That’s because the rich will always outbid the poor for housing – particularly when supply is fixed. So stopping new supply does not guarantee that displacement will not happen. In fact, it may even exacerbate it. Without new supply, the wealthy will simply look to gentrify the existing housing stock.

    Vital cities evolve.

    As counterintuitive as some of this may seem at first, investment in cities is a sign of vitality. Every construction crane or sidewalk repair is money being spent to maintain and, hopefully, improve the environment in which we live. When cities and neighbourhoods fall into neglect, we seem to be able to recognize the value of change. That’s when we invite urban regeneration. That’s when we want to see that crane up in the sky. But at some point there’s a feeling – and it’s not a new feeling, as evidenced by the “Haussmannization” of Paris – that it’s simply too much of a good thing. Enough is enough.

    Not all development is good development, but we must find a balance. Cites are incredibly powerful and resilient organisms. They welcome us in. They allow us to live our lives with our families and friends. And they empower us to generate wealth. But in order for them to do that best, they need to be allowed to adjust, evolve, and grow.

    Rather than try and stop urban change, a more productive set of questions would be: Are we using this opportunity to improve the built environment and create inclusive urbanism? And how can we ensure that the benefits will be more broadly shared? These are the great challenges facing our cities today. And if we don’t address these issues head-on, the gentrification battles will only get nastier.

  • Supply down. Prices up. Unit sizes up.

    This morning BILD released its November new home data for the Greater Toronto Area. 

    The story is one we’ve been hearing for a while. Supply is trending downward. It’s becoming harder to build. And prices are up. The average new detached house in this region is now C$1,230,961 and the average new condo is now C$493,137 (~$601 psf). Overall, average pricing is up 20% for low-rise houses and up 10% for condos, compared to this time last year.

    One of the things that I find interesting about the data is how unit sizes have recently started trending upward on the high-rise (condo) side. Below is a chart from Altus Group that shows what I’m talking about. Look at the increase from the middle of 2015 to today. The average is now 820 sf, compared to what looks to be around 770 sf at its lowest point.

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    Now, there are a number of possible explanations for this. One is that boomers are starting to sell their houses and move into condos in larger numbers, and 500 sf just don’t do. The market is starting to cater to them. Another possible explanation is that low-rise pricing has become so out of reach for many people and families, that they are now looking to condos to fill that need.

    I see both scenarios playing out in new projects today. But this second scenario, in particular, is one that I’ve been thinking about for a few years now. It’s less obvious than the boomer play. But I think of it as the market maturing. I like seeing families living right in the city and I am sure we will see more of that in the future.

  • Miami nice

    Art Basel Miami Beach is going on right now so a few of us were talking about it in the office this week. If I had the time, I would have loved to go back this year.

    I think it’s great how Miami (Beach) seems to be infusing art, design, and culture into seemingly everything it does.

    Here is a really well done video tour of Miami’s Faena District (via Wallpaper*). It’s definitely worth a watch. Screenshot below.

    If you don’t know the story behind Alan Faena, you should also read up. He’s an Argentinian fashion designer turned real estate developer.

  • Below-grade urbanism

    I came across an interesting discussion on Twitter last night about tunnels, bridges, elevated walkways, and Toronto’s elaborate (mostly) underground shopping complex known as the PATH. It’s the largest of its kind in the world.

    Here’s the thing: the idea of pulling people off the street and into an underground shopping mall, runs counter to what many urbanists believe is the optimal outcome.

    Below is a footnote I found in a 2006 research paper by Pierre

    Bélanger called, Underground landscape: The urbanism and infrastructure of Toronto’s downtown pedestrian network.

    “The reluctance of urban designers and academics to engage the
    dynamics of the underground is stunning. For almost 50 years, urban
    designers, landscape architects and planners have longed for car-free
    pedestrian environments that are safe, secure and accessible. From a
    planning perspective, the Toronto underground may be the ultimate form
    of attrition of the automobile on the urban landscape: there are no parking
    lots, no asphalt, and no congestion. With its mass-transit accessibility, it is
    an ideal pedestrian network. This reluctance may in part be attributable to
    a prevailing attitude that privately-controlled underground shopping is
    undesirable, at best dismissible. As self-contained environments, they are
    perceived as lying outside the so-called public domain and that they kill off
    street life. As a more legitimate form of collective space, street-level
    activity located within municipal right-of-ways therefore receives much
    more advocacy.”

    Of course, there is truth to the notion that activity gets concentrated below grade. When people visit Toronto’s Financial District for the first time, they’ll often ask: Where is the retail? And then you have to explain that it’s all underground and that we live like mole people from 9-5.

    But despite this reluctance on the part of urbanists, people do seem to like it. When you’re marketing a building in the CBD, being PATH-connected is a feature, not a bug. I always joke that in the summer, I hate the PATH. But in the winter, I love it. 

    There’s also a feeling of hyper-connectivity during business hours in the PATH – particularly at lunch. You have everyone leaving their desks, descending from their towers, and mixing all about in a dense pedestrian-only network. It’s unusual not to run into someone you know.

    So love it or hate it, perhaps we should appreciate it for what it is: thriving city life.

  • Thoughts on public meetings

    A few weeks ago I received a community meeting notice in the mail for a new development happening in my neighborhood. I am excited about the project and so I immediately put it in my calendar and told myself: “I’m going to this.”

    But then a work commitment came up and I skipped the event. I always do this. I put these public meetings in my calendar with every intention of going, but then as soon as something else comes up, it gets bumped. So in the end, my voice will not be heard.

    I say this not because I think my singular voice is all that important, but because I suspect I’m not alone when it comes to these community meetings. I live and breathe city building and if I struggle to attend these things, what does that mean for the average resident?

    As soon as you create friction – such as having to go somewhere, physically – you’re going to lose a large segment of people. This also means that only those who are highly motivated will attend.

    I saw this phenomenon play out in my condo building. At our first annual general meeting – when the building still had a bunch of deficiencies and the elevators were spotty – we had a sold out and lively crowd. 

    But as soon as things started humming along in year two (we are now a well-oiled machine), we then struggled to reach quorum. Why show up unless you’ve got a bone to pick, right?

    What was the last public meeting that you attended in your city?

  • Crazy home prices

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    This afternoon I walked the High Line with a friend of mine who seemed to know everything there is to know about new residential development in Manhattan. 

    She recently purchased a place and so she had done her homework. She was pointing out every building and telling me the price per square foot range; whether the floor plans were well designed (or if they had misproportioned rooms and awkwardly placed columns); and who the architect was. 

    Takeaway: To be competitive in the luxury segment in New York, you really need to have a name brand architect on the project. That seems to be the price of entry.

    As she was telling me about the “competitively priced” building in the low $2,000′s psf and the expensive penthouse that recently sold for $7,000+ psf, I started to wonder about historical pricing in New York. How has it trended? 

    I also told her that you could buy a really great condo in Toronto for $700 psf. She laughed at how affordable that was. It’s all about your point of reference.

    In any case, I found a research report from 2004 called: Why is Manhattan So Expensive? The story is one that you’ve heard before. It’s about the impact of land use restrictions on home prices. But it does also include some historical data on average condo prices.

    In 1984, the median price per square for a condo in Manhattan was $359 psf. It peaked in 1987 at $505 psf and then dropped back down to the $300′s in the early 90′s. That was not a great time for real estate. However, by 2002, the median price had rebounded to $606 psf. All USD figures.

    From 2002 onwards, Manhattan saw a dramatic increase in home prices. Below are two charts from Corcoran (Q3 2016 data) and Castle Avenue, respectively:

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    Toronto is obviously not New York, but’s interesting to consider that the average price of a downtown Toronto condo, today, is probably in the low $600′s psf. That’s in Canadian dollars and that’s pricing that New York saw decades ago. 

    It reminds me that “crazy pricing” can oftentimes be a psychological reaction to a pricing anchor that we previously set in our minds. It feels crazy. But is it?

    Image: Me

  • Pause button

    Councillor Kristyn Wong-Tam recently put forward a request for a report on the implementation of a 1-year moratorium (let’s ”hit the pause button”) on new tall building rezoning applications in the downtown core of Toronto. You can read the full letter here.

    Not surprisingly, the building industry doesn’t like this.

    But besides that obvious point, I did want to draw attention to the following comment made by Quadrangle Architects partner, Richard Witt (taken from this BuzzBuzzNews article):

    “The city has, for years, used the development charges that should have been used to upgrade infrastructure to artificially lower property taxes by putting the development charges into general revenue,” he says.

    The intent of development charges is that they fund the infrastructure required as a result of new development – everything from transit to water. In the US, they are (I think) more commonly called impact fees. In this case the name makes the intent quite clear.

    I am curious to what extent we are relying on development growth to fund the status quo. Because growth may not always be there. History has shown us that.

  • Total work of art

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    I toured 56 Leonard Street in New York today. The only picture I have on my phone is the above photo of the lobby. The rest of the photos are on my Fuji and so they’ll make their way to my Instagram over the coming days. 

    There’s lots that has already been said about the architecture of 56 Leonard, but one thing I wanted to point out was this idea of a “total work of art.” The German word for this: Gesamtkunstwerk. I’ve written about this before, here.

    With many/most development projects, there will be a separate architect and a separate interiors firm. There’s absolutely nothing wrong with this approach, but it could lead to a disconnect between the exterior and interior. Or at least, some architects will tell you that.

    In the case of 56 Leonard, the architect (Herzog & de Meuron) also designed all of the interiors – right down to the kitchens, the sinks and tubs, the light fixtures, and likely a few other things. Hence the “total work of art.”

    It’s incredible to see what happens when you have one design sensibility brought to an entire project. 56 Leonard is beautiful. For the rest of the photos, make sure to follow me on Instagram.

    In case you’re wondering, the condo prices in the building run between $3,500 and $5,000 psf. One of the penthouses recently sold for USD$47 million.