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.
One of my arguments around return to office is that we have not yet reached a post-pandemic equilibrium. Meaning, we’re still in the process of coming back and it’s probably too early to say where exactly we will end up.
The latest data (above) from the Strategic Regional Research Alliance (which is for Toronto) seems to suggest exactly this. Office occupancy continues to steadily increase from its low point in the middle of COVID.
We are now seeing an average weekly occupancy of 63%, a low day occupancy (Friday) of 40%, and a peak day occupancy (Wednesday) of 73%. All of these figures are relative to the number of people working in offices prior to the pandemic.
It is, once again, hard to say where this will ultimately settle. But my gut tells me that this climb still has a ways to go.
This morning, I came across an FT article talking about how mainland Chinese people are right now flocking to Macau to receive western mRNA vaccines. Apparently the Special Administrative Region has a single hospital offering the western varietals to “tourists”, and lots of people now want them and presumably think they are more efficacious than the Chinese alternatives. This is not surprising.
So what actually stood out to me was the photo that FT chose for the article. It’s of the half-scale Eiffel Tower replica that was built as part of a $2.5 billion casino resort in Macau known as The Parisian Macao (pictured above). There’s even a faux Louvre-like building behind it and a “Jardin” in front of it so you can get that axial view of the tower. Welcome to Paris!
Of course, this is not the sort of thing that excites me in the least. I understand why it is done and that there is clearly a market for it, but I don’t get it. It feels totally empty. Have we really run out of new ideas? So I decided to tweet something out to this effect and, in it, I included the fun fact that Macau is a former Portuguese colony and currently a Special Administrative Region of China, just like Hong Kong.
But it turns out that you can’t say this on Twitter. I don’t know why, but my tweet was immediately filtered out of my feed — twice. Instead what you can say is “Macau is a SAR of a country that starts with C and ends with A.” Apparently, this is acceptable Twitter language. Hmm. This has never happened to me before.
Thankfully, I have my own domain (which you are now reading from) where things are much freer. And collectively, we have things like the Ethereum Name Service, which is trying to create an even more censorship-resistant version of the internet. So today I decided that it was time to cancel my Twitter Blue account and put some more money into ENS tokens. This feels more like the future.
It has become tradition around here that at the end of each year I write down my predictions for the following one. And in 2022, I did that here. The overarching point of writing something like this down publicly is not necessarily to be right (because you can do that through obvious predictions). The point is to dedicate time to thinking (which is oftentimes hard to do throughout the year), to search for non-obvious things, and to generally be okay with being wrong. So I plan to do this again in the coming weeks for 2023.
But first, let’s see how I did with my 2022 predictions:
COVID: I argued that 2022 would be the year that the pandemic becomes endemic and it reaches a point where it no longer factors into decision making in the same way that it has since 2020. Some of you may disagree whether this is a good thing, but I would still say that this happened, at least in this part of the world. I started the year in lockdown here in Toronto and I ended the year having taken multiple overseas trips where testing was no longer required. (Right)
Return to office: I was kind of close. I thought that the majority of people would be back in their offices by September. I didn’t say that hybrid/flex work was going to disappear, but that we would see a great return. That did happen, according to my super scientific Jimmy the Greek Reopening Index. But if you look at the latest swipe card data for the 10 largest US cities, average occupancy is hovering just below 50%, which is not a majority. (Wrong)
Recreational/fringe housing: I felt very strongly that we would see a pullback in residential real estate this year, specifically recreational properties and properties in tertiary markets. This 100% happened, but I’ll be honest in that I was not thinking about the interest rate hikes that we saw. I just saw it as a pandemic bubble. I also thought that apartment rents would do very well and surpass pre-pandemic levels. This happened in many markets. (Right)
Return of travel: Yup. (Right, but maybe too obvious?)
Intensification of single-family home neighborhoods: This continued to be an important topic in 2022. Did we see some a tipping point-like moment, like I had predicted? I think it depends on the market, but here in Toronto we did see things like Bill 23, as well as additional efforts on the part of Mayor John Tory. (Right)
Autonomous vehicles: Progress was made this year. You can now hail an autonomous taxi in places like San Francisco. But I also thought that this would be a fantastic year for Uber as the world reopened, and that they’d finally become profitable. As of Q3 of this year, that had not happened. (Wrong)
Public transit and micromobility: I got the public transit ridership piece correct. I assumed that ridership levels would remain depressed. Perhaps an obvious one. But I also figured that e-scooters would be one of the main beneficiaries. While it is true that e-scooters remain very popular, particularly with French people, we did see ridership decline in the US, as the availability of cheap capital waned. (Mostly right)
NFTs and augmented reality: There’s a lot happening in this digital world and I continue to be incredibly bullish. But we are certainly in a “crypto winter.” I also thought that Apple would announce something big related to augmented reality this year, but supposedly that has been pushed to next year. (Wrong)
Climate change and carbon prices: I thought that the price of carbon on the EU’s Emissions Trading System would surge this year. It did not. Right now it’s looking like it’ll end up being fairly flat for the year. Of course, I also had no idea that Russia would do terrible terrible things to Ukraine, which has had dramatic impact on energy markets. (Wrong)
More crypto (Ethereum, Bitcoin, and Solana): Well, I got this last one really wrong. ETH is down ~70% over the last year relative to the US dollar. I was not predicting a “crypto winter.” And I did not know that Sam Bankman-Fried was operating a weird cult-like ponzi scheme out of a penthouse in the Bahamas. None of this changes my views on crypto, but I was still wrong in 2022. (Wrong)
Looks like I’m somewhere around 5/10.
Stay tuned for my predictions for 2023. In the meantime, if any of you have predictions of your own, I would love to hear from you in the comment section below or on Twitter.
Past performance, we are often told, is not necessarily indicative of future results. At the same time, history has a funny way of repeating itself. I recently stumbled upon this research paper by Marc Francke (University of Amsterdam) and Matthijs Korevaar (Erasmus School of Economics) looking at the impact of pandemics on housing markets. More specifically, it looks at the impacts of the bubonic plague on 17th-century Amsterdam and of cholera on 19th-century Paris. Here’s an excerpt that summarizes what they found:
Our analyses for both cities point to substantial impacts of pandemics on property prices. We find that sales prices respond negatively to outbreaks, in particular in heavily affected areas, and that responses are short-lived, with the effects on sale prices being particularly significant in the first six months of an epidemic. Evidence from aggregate house and rent price indices suggests a smaller negative impact on rent prices. Amsterdam and Paris were very resilient to these outbreaks, with population and house price growth quickly reverting to prior trends.
This paper was first published at the beginning of 2021. A lot has changed since then and, in some ways, their findings now seem obvious. There was still a great deal of uncertainty in the market 12 months ago. While it seems like eons ago, I remember our team having discussions around when would be the right time to launch sales for One Delisle. Of course, 2021 turned out to be a record-setting year for housing and that includes the core/urban housing that the media was quick to write off at the onset of COVID.
This is not to say that certain things haven’t changed or that there won’t be further changes — both positive and negative — that come out of this. To give one just example, we all continue to hear anecdotal evidence that a lot of tech talent would now prefer to be in cities like Miami over San Francisco. (I’m not tech talent, but this would be my strong preference.) Did the pandemic help fuel this? Probably. It opened a door for the people who no longer wanted to live in a city with such a supply-constrained housing market. (I’m sure there were other reasons, too.)
These things, of course, happen. Cities are powerfully resilient, but they still need to compete. The bigger point is that cities continue to be our greatest centers of opportunity. And here we have centuries of data and housing records to support the fact that opportunity is both a powerful motivator and a centralizing force for urbanization. This is true even in the face of things like pestilence.
Happy new year, everyone. I think there’s a lot to look forward to in 2022, including far less talk about pandemics and hopefully far more talk of places like Miami.
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?
Paris just announced plans to become a “100% cycling city.” A follow-up to plan vélo 2015-2020, which saw a doubling of the city’s bike lanes, plan vélo 2021-2026 includes 130 km of new bike lanes and 52 km of pandemic bike lanes that will now be made permanent.
In addition to cycling lanes, the plans include new bike parking, new transit integrations, and a bunch of other things that are meant to strengthen the overall ecosystem in the city. The total budget for this second plan is about €100 million, which will bring the total cycling investment over the last 10-11 years to about €250 million. This is a serious commitment to cycling.
It’s also a good example of one of the things that we have been talking about on this blog. This pandemic forced us to rethink how we allocate urban space — everything from outdoor restaurant patios to bike lanes. And as we can see here, many of the positive changes are not surprisingly starting to stick.
I jus pre-ordered a copy of Edward Glaeser and David Cutler’s new book called, Survival of the City: Living and Thriving in an Age of Isolation. (I’m usually a hard copy kind of guy, but I decided to try this one out on Kindle / my iPad). The official release date is September 7, 2021, so if you’re reading this post in your inbox, the book is now available online.
I’m not familiar with the writing of David Cutler (he’s a public health expert), but I am a follower of Edward Glaeser and have written about his work on a number of occasions. Glaeser’s last book, Triumph of the City, was a kind of celebration of the wonders of urbanism. After reading it, you couldn’t help but feel that cities are our best chance at creating healthy, sustainable, and wealthy communities.
But in listening to Glaeser throughout this pandemic I have noticed that his commentary on the future of cities hasn’t been filled with unbridled optimism. You get the sense from him that cities are at a crossroads. This is not to say that city life will not persist, because it will. Cities are powerfully resilient. But not all cities are created equal. Some will continue to flourish in this new economy, but others will not.
This is one of the arguments that they make in this new book and I’m looking forward to reading it once it lands in my Kindle app.
Tourist visits to Venice last year were estimated to be about 1/5 of what they usually are
Short-term rental bookings as of December 2020 were down about 74% year-over-year
It is estimated that short-term rentals normally represent about 12% of homes in Venice (this is significantly higher than the “typical city” which is estimated to be about 1-2%)
Even before the pandemic, average property prices had declined from about €4,500 per square meter in 2018 to €4,341 in 2019 (2020 data is still coming)
Pre-pandemic, the population of the city was about 50,000, which is less than a third of what it was back in the 1950s
A 2018 study by Airbnb reported that for every local Venetian the city had 74 tourists on average (wow)
Being a dominant port city, the city has generally been disproportionately impacted by plagues and other health crises throughout its history
The Lazzaretto Vecchio, which still stands today, is a small island in the Venetian Lagoon that was founded in the 15th century as a hospital to care for plague victims; apparently it was the first of its kind in the world
During the 15th century, Venice saw its population drop by about two-thirds as a result of an epidemic
At the height of the Republic of Venice in the 1790s, the city had a population of about 170,000; after falling to Napoleon it halved to about 96,000
It’s worth pointing out that the “height of the republic” occurred after many great epidemics; the subsequent population decline was seemingly the result of a conquest and not pestilence
This morning I stumbled up on this conversation between Richard Florida and Ed Glaeser about the post-pandemic city. It’s from September 2020 and that is obvious in some of the comments. Richard Florida (who was in Toronto) remarked that it felt like the pandemic was mostly over at that time and that Canada had seemingly done a much better job than the US at tackling it. That no longer feels right. But I did find myself agreeing with some of their other points.
Here’s one from Ed Glaeser that looks back to previous health crises:
But pretty much since the 14th century, urbanization proceeded despite the reappearance of the Black Death in the 1350s. Urbanization proceeded despite the Great Plague of London in the 1660s. All of the great diseases that spread in 19th-century America, cholera, yellow fever, the urbanization just chugged along. Even the influenza pandemic of 1919-1920 was followed by a tremendous decade of city building. So, I think our cities have proven to be remarkably resilient.
Here are the results from a recent survey by The Harris Poll and the Chicago Council on Global Affairs, which asked 1,200 residents from the six largest metropolitan areas in the US how they were feeling about urban and suburban life during this pandemic. (The exact timing was last fall.)
The bar color indicates where the respondent current lives. So for example, of the respondents who currently reside in an outer suburb (blue bar), 73% said that they wouldn’t change where they live. They seem to be feeling pretty good about their life decisions right now.
But for respondents who live in an urban area (black bar), 50% also said that they wouldn’t change where they live. And interestingly enough, 25% of all respondents living in a city responded by saying that they were actually more likely to move to another urban area. (Perhaps Miami?)
For these urbanites, of which I would include myself, the city is far from dead.
