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.
There are many reasons why one might want to host the Olympics. Brand building is certainly one. Making some kind of profit is another. But the direct economic benefits aren’t always clear. Embedded above are two recent charts from the WSJ outlining 1) the cost of the Olympic Games over the years (the exact numbers are likely debatable) and 2) some of the overruns that host cities have seen. Montreal stands out as an unfortunate outlier with cost overruns exceeding 700%. And Tokyo stands out as being the most expensive games ever. As I understand it, the economics are challenging in the best of times. So one can only imagine what kind of dent the Tokyo Olympics might leave behind.
One, there are silver linings to this pandemic. And one of them is that it has forced us to rethink how we allocate public space and how we engage with it. It is incredible seeing Toronto right now with so many outdoor patios in full swing. Why eat inside when you can eat outside? We should have been doing this all along.
Two, the transformation of Toronto’s Yonge Street cannot happen fast enough. We are sorely missing a pedestrianized spine through the middle of our downtown. This portion of Yonge Street currently looks like shit and I know that we can do much better.
Think La Rambla in Barcelona. Grafton Street in Dublin. Lincoln Road in Miami Beach. These are the streets that seem to always draw you in. They are places where public life can play out. I’m pretty sure that I have never once visited any of these cities and not walked these streets.
Thankfully Yonge Street’s transformation is underway. So let’s make it truly remarkable and one of the most beautiful streets in the world. That should be the bar we set for ourselves.
Each year, the Serpentine Galleries in London commission a leading architect to design a new temporary summer pavilion in Kensington Gardens. The installation usually runs from June to October. Sometimes it then travels around the world, as was the case with Unzipped Toronto (Bjarke Ingels).
Now in its 20th year, the Serpentine Pavilion is a tradition that started in 2000 with a building by architect Zaha Hadid. (There was no pavilion last summer because of COVID.) And as I understand it, the commission is usually awarded to an architect who has not yet completed a building in England.
This year’s pavilion will open to the public on June 11. Designed by Sumayya Vally of Counterspace, the pavilion is intended to be a “puzzle of many different [historic] elements.” See video above. Vally also happens to be the youngest ever architect to be commissioned by the Serpentine Gallery.
Architecture tends to take a long time. The Serpentine Pavilion happens much faster and happens every year (when there isn’t a pandemic). This strikes me as a very good thing for the world of architecture. I think we should do something similar — but of course better — here in Toronto.
This is a really nice kitchen extension. In response to an “oppressively” low ceiling height, the architects — DGN Studio — lowered the existing ground floor by about 500mm. At the same time, they created a kind of “concrete tray” that fills the width of the Victorian home’s property and extends outward to create a sunken patio space off said kitchen. From the outside, this drop makes the house feel as if it’s sitting on a concrete plinth — hence the name. (A good photo of this can be found here.) It’s a simple move, but a good one. Sometimes you just have to play with the section. If you can’t see the above video, click here.
It was recently announced that the City of London — the historic town center and primary CBD of the region — is aiming to create at least 1,500 new residential units in the Square Mile by 2030. Part of its strategy is to convert disused office buildings into residential. Currently, the City has about 7,850 residences, which is a drop in the bucket and whole lot smaller than its 19th century population of 125,000.
Tony Travers, director of LSE London, is quoted in FT saying that the City is really facing “twin challenges.” You’ve got Brexit, which caused prime office cap rate rates to stagnate in the UK, and you’ve now got the whole work from home thing. Nobody really knows how this latter piece will fully shake out when it’s all said and done, but we shouldn’t forget the power of agglomeration economies. It’s what powers cities.
Calgary is another example of a city that is looking to encourage change. Last month a $1-billion plan was approved to help convert office buildings into housing. (Shout out to Steven Paynter of Gensler who is quoted in the article talking about what makes for a suitable office conversion project.)
What’s interesting about these announcements is that oftentimes cities cling to their non-residential spaces out of fear that once that supply gets converted it will never come back. That is certainly the case here in Toronto with its office replacement policies, although many years ago when downtown living wasn’t nearly as cool, there was a similar push to encourage more residential development in the core. Looks like that idea worked.
We know that office space isn’t going away. Zoom is an awful substitute for in-person interactions. People need to congregate (and tend to like doing it). Urban agglomeration economies drive innovation. Bigger cities with higher population densities tend to create more wealth for their inhabitants. So perhaps the takeaway from these announcements should be that, yeah, office space is vital, but it’s okay to do a little rebalancing once in a while.
London has a breed of specialist developers that are known as rooftop or airspace developers. What these developers do is build on top of existing and occupied buildings — mostly residential. Firm examples include Upspace and Apex Airspace. According to this recent WSJ article, the city is also making moves to relax regulations so that more of these top-ups can be completed.
Brokerage Knight Frank estimates that in central London alone there are probably 23,000 buildings that could support a few extra floors, resulting in upwards of 41,000 new homes. I have done early feasibility studies for similar projects here in Toronto and they’re not simple to execute. But building structures are typically constructed with a factor of safety and so, in some/most cases, you can build a little on top without doing any additional reinforcing. (Note: I am not a structural engineer.)
In any case, the benefits of airspace projects are obvious. You’re creating additional supply in a tight housing market like London. Similar to Toronto’s laneway housing program, it’s not going to completely solve the larger problem of affordable housing. But every bit of new housing helps, regardless of where it lands on the spectrum of affordability.
One of the drawbacks, which is the headline of the above WSJ article, is that penthouse residents are getting demoted in the process. They’re going from penthouse to sub, or sub-sub, or sub-sub-sub penthouse. They also need to endure a bit of construction right above them. Cry me a river?
But what is also important to point out is that there are lots of buildings out there which are facing capital expenditure shortfalls. They have maintenance and repair demands that simply aren’t adequately funded. Adding additional floors can be a way for these buildings to generate that cash and, in some cases, residents are even partnering with airspace developers to share in some of the profit upside.
Not surprisingly, these sorts of arrangements are seemingly being met with a fair bit of support. Because in these instances, your options are basically as follows: Either you cut a repairs and maintenance check right now or you support a bit of development and then hopefully you’ll be the one receiving a check in the future. I suspect we’ll be seeing a lot more of this, not just in London, but in cities all around the world.
The latest (15th) edition of Knight Frank’s annual The Wealth Report was published last month. I find these interesting because they give you a global view of how and where capital is flowing into real estate (specifically prime real estate). London, for example, did rather well last year despite the pandemic. Buyers from the around the world spent nearly $4 billion on what is commonly referred to as “super-prime properties.” This is real estate with a sale price of US$10 million or more. London saw 201 super-prime properties trade hands last year, with an average price of $18.6 million and with 31 of these transactions being at or above $25 million. This is an increase compared to the year prior (2019), which I suppose is something given that the UK’s housing market was more or less frozen between March and May of last year. These figures put London at the top, ahead of New York and Hong Kong, when it comes to super-prime real estate sales in 2020. (London figures via the Financial Times.)
Another interesting thing that you’ll find in the report is a city ranking that Knight Frank calls their City Trifecta. What this index does is take Knight Frank’s City Wealth Index (which considers where wealth is currently concentrated) and then adds in two other dimensions: innovation and wellbeing. The idea here is that innovation should drive future economic growth and wealth, and that wellbeing (quality of life) is pretty important when it comes to the future competitiveness of our global cities. When you look at the world’s top cities through this lens, the ranking starts to differ from what you may be used to seeing with cities like London, New York, and Hong Kong at the top (see above chart). Now you have Munich taking the number one spot; Boston and Toronto in 5th and 6th position, respectively; and cities like Zurich jumping up ahead of cities like Hong Kong. These kind of rankings always need to be looked at with a critical eye, but they can be interesting nonetheless.
This is an interesting article by ArchDaily, looking at the “evolution of the house plan in Europe” between 1760 and 1939. The article focuses on London, Paris, Amsterdam, and Moscow and includes floor plans, photographs, as well as well-known illustrations like the one shown above. Created by Bertall in 1845, the drawing shows a section through a Parisian house and is called The Five Floors of the Parisian World.
What it shows is the declining opulence that used to exist in Paris’ apartment blocks as you moved upward. If you were rich, you lived on the second floor, right above the ground floor lobby. The ceilings were higher on this floor and maybe had a balcony overlooking the street. If you lived on the third floor it meant that you were a less rich. And if you lived in the top floor attic, you were poor. That is what this comic is showing.
Now, all of this changed over time as new technologies, namely the elevator, were brought to multi-family buildings. All of a sudden it became convenient to live higher up and all of a sudden people wanted better views and to get further away from the chaos of the street. What I’m curious about, though, is how posterity dealt with the lower ceiling heights on these upper floors.
The Financial Times is running a series right now on the future of the City of London. In their latest article, they looked at “How London grew into a financial powerhouse,” while at the same time comparing it to other global financial centers. It’s interesting to see how much of a banner year this was for companies going public. Companies listing on the Nasdaq and the NYSE raised a record $150 billion in 2020. This is compared to about $6 billion raised in London (both the London Stock Exchange and AIM). But what I really want to draw your attention to are the below maps from FT showing the clustering of banks, hedge funds, asset managers, insurers, and professional services firms in London. This is what urban agglomeration economies look like.
“…the pandemic and its aftermath have also created a rare openness to doing things differently. Seizing this opportunity won’t be easy, or a short-term affair. But if we can be certain of anything, it’s that cities will adapt and evolve, and that they have the potential to come back stronger.”
– Kearney 2020 Global Cities Report
The Kearney 2020 Global Cities Report is out and it incorporates two main rankings: their Global Cities Index (GCI) and their Global Cities Outlook (GCO).
The former is intended to be a snapshot of where things stand today and the latter is intended to be a forecast of where things might be heading.
Here’s their GCI:
And here’s their GCO:
Note: The big mover in their GCO is Toronto, jumping nine spots to take second place behind London.
