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: manhattan

  • New ideas like buildings people don’t want

    There is a very common story that plays out in cities. It starts with an area that has seen disinvestment and is probably a little seedy and/or dangerous . This creates an environment where rents and real estate as a whole are relatively inexpensive. New, cool and creative businesses start to move in (attracted by said inexpensiveness) and the area begins to turn around. Eventually it becomes suitable for institutional-type investors, and this ultimately leads to everything becoming expensive as a result of demand outstripping supply. Gentrification complete.

    The great irony of this story is that you sometimes, or oftentimes, lose the very things that made the area cool and interesting in the first place. Here is an example from Miami:

    The result has been a property speculation boom that, when combined with the city’s relatively low wages, put many businesses and residents on the street. Asking rents for industrial space, for instance, went up by 53 percent in the last year alone. Nobody can afford to buy, let alone rent, adequate space for a music venue because so much land has been snapped up by outside investors with a predilection for grand, “world-class urban” designs. 

    And for some areas, it is arguably the result of a careful and deliberate plan that was put in place nearly two decades ago:

    Teele’s commissioner district in the early 2000s included both Park West and the historically Black neighborhood of Overtown. At the turn of the millennium the area was blighted and crime-ridden thanks to years of racist, regressive policy decisions from segregation to redlining. His plan was simple but incredibly effective. He spearheaded a campaign to revitalize the area by granting a limited number of 24-hour liquor licenses to clubs like Space. Dozens of venues rose up on and around 11th Street, including vast, multi-room clubs like Metropolis, live venues like Studio A and Grand Central, and more intimate spots like Vagabond. Sporadic police raids also gave the area a druggy, dangerous reputation, inadvertently raising its allure. 

    This reoccurring arc has led some people to conclude that cities and/or areas seem to want to follow a kind of binary outcome: they’re either dying or they’re too successful. Why can’t we just have urban homeostasis? I don’t think this is necessarily always the case. Cities go through cycles just like any other market. I also know that it’s complicated. But I do feel strongly that we need to be mindful that part of what makes cities such wonderful places is that they are factories for new ideas and creativity.

    I can’t remember when or exactly how he said it, but YouTuber Casey Neistat once described New York City as an incredible island (Manhattan?) where misfits from all over the world come to do whatever the hell they want. And that part of the reason for this is that nobody cares what you do, because everyone is just so damn busy. You could certainly argue that New York isn’t what it used to be. But the lesson here remains the same: Cities are at their best when they allow humans to create, build, experiment, and express themselves.

    And oftentimes a great place for that is in a space that nobody else wants.

  • Bikes and property in Paris

    I have been reading Fred Wilson’s blog for over a decade now (and he has been blogging for almost two decades). A lot of the time it is about venture capital and tech, but similar to what I do here, it can be about almost anything. Today he wrote about the two weeks that he just spent in Paris with his wife (the Gotham Gal). And the post covers everything from real estate to relationship advice. But here are two points that will be particularly relevant to what we usually talk about around here:

    • Paris has done an excellent job of prioritizing cycling and building a ton of new lanes over the last number of years. We know this. But another good point that Fred makes is that Paris has allowed competition in their micro-mobility ecosystem. It started with Velib, but now you can also use Dott and Lime. The last time I was in Paris I used Lime bikes and scooters, mostly because I already had the app and because they were everywhere. Competition is good and Toronto should probably allow the same. Our bike share system — specifically the mobile app — is incredibly cumbersome to use, and the last time I checked most of the e-bikes were consistently out of service. Let’s see if someone else can do a better job. We should, of course, also add scooters to the mix while we’re at it.
    • Next, Fred describes Paris’ real estate market as being more “stable.” And by this he means that, for whatever reason, values and rents seem to be more moderated. This has some benefits. Restaurants and other retail businesses seem to stick around for decades, whereas according to Fred, “it’s hard to find a shopping street in Manhattan that doesn’t have multiple vacant stores”. I’m not exactly sure why this is the case in Paris (assuming it is). I don’t believe that they have any sort of vacant store tax. Though they do have a tax on unoccupied homes. Maybe this is just what happens when you’re a little less capitalistic. (This is me deliberately avoiding the term socialism.)

    If any of you have more insight into the real estate market in Paris, I would love to hear from you in the comment section below.

  • Manhattan is still looking at a congestion charge for south of 60th Street

    We talk a lot about congestion charges and road pricing on this blog. Here’s a list of some of those posts. I found 46 that were tagged with “road pricing.”

    I continue to believe that it’s the only way that big cities can effectively solve the problem of traffic congestion. It’s not being caused by the bicycle lanes that were just added to your street. It’s not the new COVID street patios. And it’s not the new apartment that was just built with too many parking spots.

    The problem is mispricing.

    If you want free roads, then you don’t get free-flowing traffic. That’s how this equation works, which is why I have always thought it a good idea to dynamically price roads based on demand, and then to direct those funds toward more efficient forms of mobility — such as transit.

    Despite all this, it’s not a very popular approach in this part of the world. Toronto looked at road pricing back in 2016, but we got nervous and backed away from it. New York City has also been looking at a congestion charge for Manhattan south of 60th Street for at least 4-5 years. But this one appears to still be on the table.

    According to this recent CityLab article, New York’s congestion prices could look something like this (note that this chart includes other pre-existing tolls):

    But with some exceptions (I think this is an interesting approach):

    Primary residents of the Manhattan central business district, which is south of 60th Street, and New York State residents with adjusted gross income of less than $60,000 would be eligible for a state tax credit equal to the amount of the new tolls, paid during the taxable year.

    In total, this current pricing scheme is expected to generate an additional $1 billion in annual revenue for the city’s transportation authority. The MTA also plans to bond against this revenue and raise an additional $15 billion for new transit projects.

    This sounds like a reasonable approach to me.

  • New York City is back

    So here’s the headline: More people are moving to Manhattan than before the pandemic. This is true. But an even more accurate description might be that New York City was losing people before the pandemic and it is still losing people. But things have rebounded since the lows of the pandemic and it is now losing less people. Here are two charts from Bloomberg:

    This is generally good news since the increased exodus (to places like Miami) led some to believe that one of the most important global cities in the world was now dying. I never thought that was the case. But there’s no arguing against the fact that the fastest growing cities in the US are the ones with more affordable housing and fewer constraints on new development.

  • Location always matters

    Well this is interesting, yet not surprising: According to RBC’s annual “Home Ownership Poll”, three out of every five respondents (so nearly 60%) said that location is more important than buying a larger home. Now, there’s only so much you can glean from a single survey question, but the overarching sense is that people’s home-buying attitudes are now starting to revert back to pre-pandemic levels.

    Other evidence includes how quickly urban residential rents/prices have bounced back and, in many cases, now exceed their pre-pandemic levels. Below is a chart from the WSJ showing residential net-effective median rent prices in Manhattan. The low came in November 2020 when the median rent price hit $2,743 per month. But today it is well over $3,500, which is the highest it has been in a decade.

    Certain aspects of how we will continue to live and work in our cities is admittedly still evolving (see my recent post on office utilization). But part of our pandemic narrative was that location was no longer going to matter, or at least not matter nearly as much. New York City, to give just one example, had died forever. But that was obviously bullshit. And what we are seeing in the residential space is an important leading indicator. Location always matters.

  • Berlin is considering going car free

    Berlin is considering something pretty radical. A grass roots movement called Volksentscheid Berlin Autofrei, or the People’s Decision for Auto-Free Berlin, is trying to turn the entire core of the city into a car-free zone. (There would be some exceptions and so we should maybe call it primarily car free.)

    The area in question is everything inside of the city’s circular S-Bahn train line (pictured above), which would make it the largest car-free zone or mostly car-free zone in the world. It’s larger than Manhattan and it’s about the size of London’s zones 1 and 2, to help give you a sense of the scale.

    So far the group has collected about 50,000 supportive signatures and, according to Fast Company, the Senate of Berlin is set to make a decision on the proposal next month. I have no idea how much community and/or political momentum this actually has, but I love how bold of an idea this is.

    Is it too bold?

    Again, it is perhaps useful to flip the question and use Seth Godin’s status-quo-bias-checker model when thinking about this. If the center of Berlin was already car free and a community group had just come forward with a plan to now allow vehicles, how do you think you’d feel? I could see that being contentious.

    Do you think Berlin should do it?

    Image: City of Berlin via Fast Company

  • Building on rooftops in New York City is really tough

    Hedge fund manager Bill Ackman is a pretty wealthy guy and so it is fairly safe to assume that he could choose to live almost anywhere. For some people the ideal might be a low-rise house with a backyard in the suburbs.

    But since 2018, Ackman has chosen a kind of penthouse apartment on the roof of a 1920’s co-op building in Manhattan’s Upper West Side. It was formerly the home of author Nancy Friday and Ackman supposedly purchased it for $22.5 million.

    He is now looking to demolish the penthouse and build a new two-storey residence designed by architect Norman Foster. The design looks like this, which kind of reminds me of Philip Johnson’s The Glass House:

    Today it was in the news that Ackman has been having a fun time trying to convince his co-op board that a new set of glass boxes on the roof their building is a good idea. FT reported that the project has created “an atmosphere of fear and distrust among residents in the building.”

    I’m not exactly sure what it is about this proposal that is causing fear and distrust but Ackman is on record saying that he thinks this isn’t about heritage preservation or architectural integrity; it’s about people not wanting the disruption that comes along with construction. Fair.

    One way to test this, I suppose, is to propose something more traditional or similar to what’s already there. But I suspect that the other dynamic at play here is simply that he is a rich guy with a starchitect trying to build something cool.

    Building things is tough.

  • It’s okay for urbanism to be a bit messy

    The urban-to-rural transect is a New Urbanist planning framework that prescribes a smooth continuum of settlements that go from least dense to most dense. The six zones are as follows: natural (T1), rural (T2), sub-urban (T3), general urban (T4), center (T5), and core (T6).

    Part of this framework is about rejecting single-use Euclidean zoning. Instead of segregating uses, New Urbanism looks to return to a mix of uses within close proximity of each other. This is a good thing.

    But the transect also advocates for a certain orderliness. There should be a smooth transition as you move outward from T6 toward T1. It is about placing things in their useful order and maintaining a certain kind of character.

    Witold Rybczynski makes an interesting observation about this in a recent post called “urban discontinuities.” The point he makes is that some of the most remarkable urban moments are the result not of smoothness, but of “odd juxtapositions.”

    Think:

    – Mount Royal (T1) in the middle of downtown Montreal (T6).

    – The North Shore Mountains (T1) that terminate views from within the building canyons of downtown Vancouver (T6)

    – The walls of tall buildings (T6) that frame Central Park (T1) in Manhattan

    – The wonderful ravines (T1) that cut through Toronto’s urban fabric (T6)

    These are contrasting zones in the transect bumping up against each other. And it turns out that most of us really like these moments. But I think that the bigger point to be made here is that urban environments aren’t always neat and tidy, and that’s because they are a constantly evolving organism.

    That’s not a bug. It’s actually a feature to be celebrated.

  • Upsizing to a larger apartment in New York City

    This is an interesting story about New Yorkers starting to seek out larger homes. Last month, Manhattan saw 140 purchase agreements signed for homes priced at $4 million or more. In the last week of February alone, 40 contracts were signed, which is apparently a weekly record for this price point that hasn’t been seen since August 2016.

    What’s also interesting is that, in some of these cases, we’re talking about buyers who bought preconstruction and then went back to the developer to swap for a larger apartment. Developer Scott Avram is quoted in the above article saying that 10 buyers have “upgraded their contracts” at 130 William (David Adjaye project) over the last six months.

    As we’ve talked about before, this is likely happening for a bunch of reasons. People have been working from home and want more space. Interest rates are low. And New York saw some softening in prices and now people are jumping back in to seize on those opportunities. At the same time, it is yet another example of people going long on dense urban living.

  • Net new housing units in New York City since 2010

    Here are a few interesting stats from a brief report that New York City published this month about their supply of new housing units:

    • From January 1, 2010 to June 30, 2020, New York City delivered 205,994 net new housing units across the five boroughs.
    • This total includes 202,956 units from new construction and 29,161 units from the alteration/conversion of existing buildings. However, it also factors units that were lost as a result of demolition (-17,400) or alteration (-8,723).
    • Brooklyn saw the most supply, followed by Manhattan. The four highest-growth Community Districts were responsible for 1/3 of all new housing additions. These CDs are all formerly non-residential areas that were rezoned to allow living.
    • Manhattan saw the greatest loss in housing units as a result of alterations (people combining units). This was most prevalent in wealthy neighborhoods such as the Upper East Side, Upper West Side, and Greenwich Village.

    What is interesting about this last point is that it shows you that cities are far from static. New York City lost 26,123 housing units during the above time period, with 8,723 units being lost to alterations and people combining units.

    The orange areas on the above map are neighborhoods which actually became less dense over the last decade. And of course, this phenomenon is not unique to New York City. We are seeing the same thing play out in some/many neighborhoods in Toronto.

    What this mean is that the role of new development is really twofold. It allows a city to grow (i.e. house new New Yorkers), but it also replaces lost housing and relieves some of the pressures on the existing housing stock. I don’t think many people appreciate this dynamic — or perhaps they don’t care.

    For a copy of the full report (it’s only two pages), click here.