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: financial times

  • CloudKitchens quietly expands across Latin America

    Despite having somewhere around 4,000 employees and being valued at upwards of $15 billion (2021 figure), CloudKitchens remains an incredibly secretive company. In 2020, it was reported that they had spent over $130 million in the preceding two years on properties in about two dozen cities, and this week the Financial Times reported that they have been quietly building “dark kitchens” across Latin America, alongside a new food and convenience goods business called Pik N’ Pak.

    The way this all supposedly works is that the “dark kitchens” prepare the food for delivery and pick-up takeaway, and any excess space within these buildings is used to store convenience goods like over-the-counter medicines and pet foods. I guess it is literally about picking and packing various items that you can then attach to takeout orders. In both cases, the food and goods are delivered to customers using local app companies such as Uber Eats.

    All of this appears to represent a shift in the supply chain for takeout food and various convenience goods. But what I am really curious about right now is what the real estate footprint of this network looks like within our cities. What is the optimal square footage of a ghost kitchen? What radius do they serve? And how does this ultimately change the landscape of our cities? I don’t know the answers to these questions, but change appears to be underway. Here’s an excerpt from the above FT article:

    “…the growth of dark kitchens across Latin America has caused controversy in certain cities. The proliferation in São Paulo, the largest city in the Americas, sparked objections from residents living nearby, with banners against new facilities appearing in well-heeled neighbourhoods. The town hall has proposed local regulation of dark kitchens and earlier this year placed a temporary ban on the issue of new licences. People have complained about noise, smells, smoke and motorcycle drivers — known colloquially as motoboys — waiting outside to collect orders. One unhappy local said his son had been nicknamed “bacon” and bullied in school because of the odour on his clothes, according to Cris Monteiro, a city councilwoman.”

    Travis Kalanick seems to have a knack for upsetting people and changing the way our cities operate. Although, the same could be said about a lot of other startups.

  • Wineries are a leading indicator for climate change

    We have talked about this before on the blog, but wineries continue to be a great leading indicator for our changing climate. Above is a chart from the Financial Times showing the official start dates of vendange for two wine regions in France. The Champagne region is further north and so the harvest dates naturally tend to be a bit later compared to the Rhône region. But in both cases, we seem to be seeing a shift to about a month earlier: September instead of October and August instead of September. And the turning point, at least according to this data, appears to have been 1987. The winemakers interviewed in this article appear confident that they can continue to adapt and find ways to deliver wonderful bottles of wine. But of course, that is not what you should be worrying about when you see this chart.

    Image: FT

  • Lobbies as pseudo-public spaces

    This is a good idea (taken from a recent FT article by Edwin Heathcote):

    The hotel lobby is already understood as a kind of public space, the corporate lobby should belong to that same world, a place open to the functions of the city, porous and welcoming. It is no accident that the vast lobbying industry has that name, lobbies are where encounters occur.

    Sometimes we do this. Maybe there’s a coffee shop or some other activations in your lobby. But more often than not, a “good” corporate lobby is about grandeur and security, which means that they do very little to animate the street.

    In the above article, Edwin reminds us that before the invention of the modern office building, the entire city functioned as a kind of dispersed workplace. Places like coffee shops and pubs were, of course, central to this.

    While this is still partially the case today — people continue to like coffee and beer — it is interesting to think about what more we could be asking of our office lobbies. And I do think it is more.

  • Insufficient electrical capacity until 2035

    One of the things that you need to do when you’re constructing a building is arrange for new utility connections. Sometimes there’s enough capacity to support what you’re building and sometimes the capacities need to be upgraded (which usually becomes the responsibility of the developer).

    But according to this recent Financial Times article, some new applicants in west London are now being told that there won’t be “sufficient electrical capacity for a new connection” until, oh I don’t know, maybe 2035. And it could affect all new housing projects with 25 or more units.

    This is a pretty wild piece of news. And it certainly won’t be good for overall housing supply. The three west London boroughs that are being impacted by this capacity issue were responsible for about 5,000 new homes between 2019-2020. That’s about 11% of London’s total housing supply.

    So what and who is to blame for this? The Greater London Authority is saying that data centers are at least partially responsible. Too many new data centers in the area with high electrical loads.

    I don’t know exactly what is going on here (maybe some of you do), but now feels like a good time to turn our attention to solar power. I recently visited a large 3,000 panel rooftop installation here in the Greater Toronto Area, and so naturally there is a blog post in the works. Stay tuned.

  • Le Pen’s voter base: France’s poor rural drivers

    The presidential election that is underway right now in France is playing out exactly as one might imagine. The first round of votes took place on April 10, and the second and final round — which is now between Macron and Le Pen — will take place on April 24.

    How people voted in the first round can be mostly explained by geography. If you live in an urban center, an attractive tourist center, or have reasonably good rail connectivity to either of these two kinds of places, you likely voted for Macron.

    On the other hand, if you live in a poorer rural area, you were more likely to vote for Le Pen. Our spiky unequal world remains, even in France, where more wealth tends to be redistributed compared to places like the UK and the US.

    But there’s another potentially correlative factor that should interest readers of this blog (even if it is somewhat obvious). If you voted for Macron in the first round, you were also less likely to rely on a car to get to work. Here are two charts from the Financial Times:

    This point is perhaps obvious because geography and built form largely determine whether or not you want/need to drive. And the way to not drive is to live in a dense city. But I think it’s also a useful reminder that owning a car does not necessarily need to correlate with high economic status.

    In fact, when I look at these charts, not having to drive to work feels like a good thing.

  • Shrinkflation in the housing market

    We all know that inflation is a thing right now. Prices are rising. One way businesses can choose to respond to this is through something called “shrinkflation”, which the Financial Times writes about here. The idea behind shrinkflation is that, instead of just raising end prices to absorb higher costs, you instead shrink or reduce your product or service offering. Of course, you could also do a combination of both things: increase your price and shrink your offering.

    This shrinking can take many forms. A few less chips in your bag. A slightly smaller chocolate bar. Smaller food portions at the restaurant. Or maybe opt-in room service for your hotel room. It can also take the form of less space. Average apartment sizes in most big cities have trended downward over the years for this exact same reason. Developers are working to maintain some kind affordability in the face of rising costs.

    I think a lot of people like to scoff at these sorts of practices. Why can’t we just build bigger family-sized suites? But the reality is that it is being driven by real market constraints. Without something giving, like suite sizes, urban housing would be multiples less affordable compared to current levels. The developers I know don’t have any sort of deep-rooted philosophical aversion to selling 5,000 square foot estates in the sky. The problem is simply that most buyers and renters won’t like the sticker price.

  • Kaunas — European Capital of Culture

    So each year Europe runs a program called the European Capitals of Culture. The objective is to celebrate the richness of European culture and presumably drive throngs of tourists to its various locales. They do this by choosing a set of cities, designating them “capitals of culture”, and then running events and programming all throughout the calendar year in those places.

    When the program was created in 1985, it was originally called the European City of Culture, as there was only one city being chosen at a time. In the first year that city was Athens. But the program has since evolved and now multiple cities are chosen each year. For 2022, the European Capitals of Culture are Esch-sur-Alzette (Luxembourg), Kaunas (Lithuania), and Novi Sad (Serbia).

    I was reading about Kaunas in FT this morning and I was fascinated to learn that this city of approximately 300,000 people has some 6,000 modernist buildings. Some are apparently in disrepair, but many remain in good form and, as part of the festival, visitors can book stays in some of the restored ones.

    There is, of course, an interesting story behind these buildings.

    This collection of modernist buildings is the result of a relatively narrow window of time and a specific set of circumstances. Lithuania gained independence from the former Russian Empire in 1918, following WWI and while Russia was busy fighting with itself. But at the time, its capital city Vilnius, which remains the capital today, was mostly occupied by Poland.

    So Kaunas became its temporary capital city from 1920 to 1939, the latter date being when Vilnius was returned to Lithuania. This temporary designation created a tremendous need for new buildings, both public and private, and it just so happened to line up with the flourishing of European modernist architecture.

    Kaunas didn’t get any modernist “icons” from architects such as Le Corbusier, but there’s absolutely nothing wrong with that. Kaunas instead created its own varietal of modernism, one that incorporated elements of Art Deco and one that you could argue is now deeply symbolic of a very important moment in its history: A peaceful period of interwar freedom and optimism.

    Image: Kaunas 2022

  • Who cares if there’s an NFT bubble?

    The Financial Times recently reported on “the great NFT sell-off” here in this article. Daily trading volumes on OpenSea, which is the largest NFT marketplace, are down 80% ($50M) from their high in February ($248M). Bored Ape Yacht Club, which is the most expensive NFT collection out there, has seen its average daily price come down by about a third (see above). Of course, they still remain extremely valuable NFTs. And a recent CryptoPunks auction was just pulled from Sotheby’s so that the owner could “HODL” until things recover.

    I don’t think any of this should surprise both NFT holders and the naysayers. This is a high-risk space and it is all very speculative. You can’t run a discounted cash flow (DCF) model on a Bored Ape and most other NFTs (though some might actually produce cash flow through, for example, secondary sale royalties). The more important point of all of this is that we are living through what many people believe is the creation of a new kind of internet. Cryptocurrencies are what underpin these new digital economies, but we are still figuring out how they will function and what their long-term business models will be.

    For me, this is an exciting thing to be a part of. I’m not a venture capitalist, but buying NFTs and doing other crypto things feels a bit like I am an amateur one. Holding ETH or SOL is similar to holding Canadian or US dollars (currencies that underpin economies). So what I am doing is using these currencies to put money into ventures (NFTs) that seem interesting. And to do that, you look at the art, the team behind the project, the roadmap, and how well they appear to be executing against that plan. Indeed, many of the most successful NFT projects are naturally run by teams who are constantly building and shipping.

    At the same time, I mentally write off every NFT I buy to $0 as soon as I purchase it. I am also limiting my total crypto allocation to between 5-10% of my non-real estate investments and buying with a scheduled dollar-cost averaging approach. So if this whole web3 thing went to zero tomorrow (which I firmly do not believe will be the case), my life would still go on. None of this is, of course, investment advice. Please do your own research and make your own decisions. But I can tell you that it is a lot of fun following and learning about what smart, creative, and entrepreneurial people are doing in this emerging space.

    If you’re interested in NFT photography, check out my global citizen collection on Foundation.

    Chart: Financial Times

  • 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

  • To collect is to be human

    Nearly 1,000 lots from Karl Lagerfeld’s estate are soon to go up for auction. I was reading about it over the weekend in FT and, what is obvious, is that Lagerfeld liked to collect things. He had homes all over the place and in those homes were lots of nice things, ranging from art and tapestries to unique furniture and iPods.

    Yes, he really liked iPods. After he passed away, over 500 of them were discovered in one of this drawers and another 70 were found in his office in Paris’ 7th. Apparently he used to curate music on them and then gift them to people. It was one of his things.

    Of course, Lagerfeld was a wildly successful fashion guy and his estate is surely pretty unique. But I think it’s important to keep in mind that to collect is a deeply human endeavor. We have been doing it forever. And in this context, it’s not surprising at all why non-fungible tokens (NFTs) have taken off in the way that they have.

    Our world is profoundly digital, but before blockchains and NFTs, we were missing a way to validate ownership over digital assets. That’s no longer the case. For more on this, here is an interesting TEDx Talk by Roham Gharegozlou, who is the CEO of Vancouver-based Dapper Labs (the company behind CryptoKitties and NBA Top Shot). The talk is from 2018, but it’s just as relevant.