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.
Today, I’m excited to share that I’ll be attending the second annual Elevate event this December as an industry ambassador. This means I get to ride alongside industry celebrities like Norm Li. (He better be DJ’ing.)
Put on by Zonda, in partnership with Livabl and ARCHITECT Magazine, the event is focused exclusively on “the art of high-rise luxury living.” Everything from the overall state of the housing market to how to sell branded residences.
I wasn’t able to attend last year, but I heard from a number of industry friends that it was very well done, which is why I agreed to participate this year. That now means I have a discount code you can all use if you’d like to attend — BRANDONVIP30.
For those of you who like art and culture things, the event also happens to fall right after Art Basel. This was done on purpose, and so now you have at least two good reasons to be in Miami Beach in December.
Here’s an unproven hypothesis that you can all challenge me on: many or most people only care about the environment while it is convenient to do so. Said oppositely, once it becomes inconvenient to care about the environment, we tend to start prioritizing other objectives.
The example I have in my mind right now is parking. Now, to be clear, cars are not the best mobility solution for the environment. But let’s assume for a minute that you need parking and you have only two available options: below-grade parking or above-grade parking.
The former is worse for the environment. If you were to look at the embodied carbon in below-grade parking versus above-grade parking, it would be higher. So from an environmental perspective, you want above-grade parking.
It also makes for more flexible spaces. It’s hard to convert below-grade parking to much else. Again, this strengthens the environmental case, because now you’re building something that can be repurposed in the future.
However, unless you’re forced to only build above-grade parking (as is the case in Miami), many/most cities tend to shun it. The most common objectives are (1) that it’s unsightly, and therefore needs to be wrapped with occupiable spaces, and (2) that it kills street life.
What this suggests is that (1) and (2) are seen as being more important than the environment. And I think this is noteworthy in its own right. But here’s the other thing: this is arguably a false dichotomy. I mean, does above-grade parking necessarily kill street life?
The above two street view images are from 1111 Lincoln Road in Miami Beach. It’s a parking structure and area of the city that I have visited many times. And I have to say, the street life seems fine to me. What do you think?
This is the message that the mayor of Miami Beach, Dan Gelber, delivered this week as it moved to sell $97.6 million of new municipal debt. The proceeds are intended to help the city fund more cultural projects and move away from its “old economic model” of selling Bellinis on Ocean Drive. But it is also a case of Miami Beach flexing its rising property values.
Residential property values across Miami Beach grew by about 125% over the past decade
Between 2019 and 2022, the number of “million-dollar zip codes” more than doubled (presumably these are just zip codes with median home prices above $1 million)
And from 2012 to 2022, the number of high-net-worth individuals in the city increased by about 75% (I wonder how many moved to the city versus just got richer while already living there)
All of this has been good for property tax revenues:
And now the city is leveraging them to invest in culture.
Venture firm a16z just announced that it will be “moving its headquarters to the cloud.” At the same time, it announced 3 new offices in Miami Beach, New York, and Santa Monica. These will be in addition to their existing offices in Menlo Park and San Francisco.
Part of their argument is that hybrid work is weakening the network effects and agglomeration economies associated with being right in Silicon Valley. So they’ve deiced to be virtual, but still have offices where they can “materialize physically” when needed.
They acknowledge that physical presence is important for developing a company’s culture, building relationships, and helping entrepreneurs (their core business).
What’s interesting about all of this is that it’s further validation for Miami (Beach). Here is one of the most important venture firms out there saying that when they quickly materialize in real life, they want to be able to do that in Miami Beach.
It also raises some interesting questions. Because even if the network effects of Silicon Valley are weakening when it comes to tech, this announcement still speaks to the importance of agglomeration economies. These three new office locations were chosen for a reason.
I’m not sure what the exact dates are for this dataset, but it seems to again suggest that this migration was already a trend before the pandemic happened.
Either way, Miami is red hot and the continues to lead the US in residential rental rate growth. But all of this growth is now apparently starting to catch up to the city. Here is just one example from the same article (though developers here in Toronto would gladly take this sort of timeline):
Right before the pandemic, when he moved to Miami, he said it took no more than four months from when he submitted development plans to when he got city approval. Now, with the number of projects swamping Miami Beach’s staff and resources, that same process takes nearly a year, Mr. Curnin said.
This frenetic run-up is also causing some in the city, including Barry Sternlicht of Starwood Capital Group, to pause:
“Everyone and their cousins are looking to build a building here,” he said. “I’m getting nervous.”
Miami has historically always been a boom and bust kind of market. I don’t know if this is one of those times, but there’s clearly no denying the allure of palm trees, warm winter weather, and no state income tax.
If you happen to find yourself in Miami or London in the near future, I would highly recommend that you check out Superblue. Neat B and I visited Superblue Miami this past weekend and it was an incredible experience.
Above is a short video of one of the immersive installations (click here if you can’t see it embedded above). This one is by the Japanese art collective teamLab and what you’re seeing is a whole year’s worth of seasonal flowers coming to life and then dying off.
It’s meant to show you the continuous change and cycle of life and death that we all live through every day, and you certainly feel that as you go through the space. The installation itself also responds to how you move and interact with it, with some actions encouraging more blossoms.
It’s, of course, all very Instagrammable.
But I think this descriptor is old news and doesn’t do the work justice. Superblue is a serious cultural experience. One of the other works on display right now is a piece by light and space artist James Turrell. And for this one, there were no photos and talking allowed. The timed experience was meant to be more meditative.
It was the first time that I had seen something by James Turrell in real life and it didn’t disappoint. It made me feel things, as did the entire Superblue experience. So again, a top experience that I would highly recommend.
On a related real estate note, the 50,000 sf Superblue space is located in an area of Miami called Allapattah (which is west of Wynwood and 5 miles east of MIA). I’m an outsider to the city building undercurrents of this city, but I keep hearing people talk about the area as the next Wynwood.
The other cultural institution in Allapattah is the Rubell Museum, which I wrote about in 2019 as it was moving over from its original home in Wynwood. Supposedly the family now has the largest private collection of contemporary art in North America. So that’s something.
Maybe these two anchors will be what does it for Allapattah. When we walked around the area there didn’t seem to be much else going on. But we all know how quickly that can change.
Here is an example of retail signage on Lincoln Road in Miami Beach. The interior signage (behind the glass above the doors) is specific to the brand Osklen (which is a great sustainable fashion company from Brazil). And the exterior soffit signage is specific to the property in that the same design and typeface is used for all of the retail tenants.
I think that this consistency creates a more elevated feel for the overall property, but the obvious downside is that the retailers don’t get to express their unique brands and identities in quite the same way. Still, I think the above approach is a pretty good compromise. What do you think?
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.
Back in 2006, Paul Graham penned an essay about how to be Silicon Valley. Since then, it seems like every city on the planet has tried to replicate the successes of the Valley. At the time, his argument was pretty simple. Geography used to be destiny when it came to cities. New York City, for example, is arguably what it is today because of its geography and its deep harbor, which created a natural competitive advantage compared to other east coast cities such as Boston and Philadelphia. But this, he argues, has become far less relevant. Now, you can create a great city pretty much anywhere. So what are the necessary ingredients?
Paul argued that you only really need two kinds of people to create a technology hub: rich people and nerds. You need people creating new things and you need rich people to fund those new ideas. That’s it. So in theory, if you could just dump a bunch of these kinds of people in one place — Nunavut? — you’d perhaps get unicorns coming out the other end. He goes on to say that Miami is a perfect example of a city that has lots of the former, but very few of the latter. It has lots of rich people, but, in his words, it’s not the kind of place that nerds like. So it is/was not a good startup city. (I’m a nerd and I like Miami.)
But the year is now 2021 and a global pandemic seems to be helping to change this dynamic. Every tech entrepreneur and/or investor now seems to want to move to either Austin or Miami. To that end, SoftBank recently announced that it has earmarked $100 million for startups that are based in Miami or that plan to be based in Miami in the near future. It’s perhaps a good testament to the momentum that seems to be developing around the startup scene in the city, which is something that their mayor has been incredibly vocal about.
But here’s something to consider. Was Paul right about the two requisite ingredients for a successful startup hub? And if so, does Miami now have enough nerds? Maybe this recent influx of people was just what it was missing.
The Globe and Mail published this headline today: “Developers building more small condos, despite people clamoring for more space.” It’s behind a paywall and so some of you may not have read it. But the data looks something like this. Of all the new condo project launches that happened this year in Toronto, studios and one-bedroom suites accounted for 61% of all new inventory, according to Urbanation. This is a higher percentage than what the market saw in 2019 and 2018, and this is despite the fact that many/most people are still working from home and would probably appreciate a bit more space.
The short answer as to why this is happening is affordability. For years I have been clamoring for a dual aspect oceanfront penthouse on Miami Beach, but that time hasn’t come for me yet. Things cost money. And the downward pressure on unit sizes is a direct result of developers trying to ensure that their inventory is within the reach reach of buyers (there’s a sweet spot somewhere in the range of $500-700k right now). Developers are heavily incentivized to build what sells and rents, both quickly and at the highest price. That tends to be smaller units, especially early on.
Where this goes in the future is anybody’s guess. But with the dramatic price increases that we have seen on the low-rise side of the market, I suspect that we’ll see a subsequent surge in demand for condos — maybe even larger condos.
