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.
Our first shoring rig was delivered and setup today at Junction House. A second one is on the way shortly.
It will take a couple of months to complete all of our caisson piles. If you’d like to learn about how shoring is constructed, check out this “explainer” from UrbanToronto.
It was also an absolutely beautiful day here in Toronto — not a cloud in the sky. So here are a few photos from site.
Fred Wilson’s latest blog post about “grinding” tells the story of how Twitter solved the infamous “fail whale” problem that plagued its platform in the early days. I remember that whale, as I’m sure many of you do as well. It was a problem and, according to Fred, it was a real threat to the business. The solution wasn’t all that sexy; though sexy solutions were attempted. The team just rebuilt everything, piece by piece. And eventually the fail whale problem went away.
The lessons here go well beyond just this Twitter example (or at least, it triggers something for me). Here’s how Fred ends his post:
If given a choice between a flashy operator or a grinder, I will take a grinder every time. It is a much higher percentage bet. It requires faith and patience and the results are sometimes hard to see. But if you look at the results from grinding it out over a long enough time frame, you can see the power of that approach.
This kind of long-term patient thinking can be difficult, especially in an increasingly instantaneous world. We are all drawn to magic solutions, hot stock tips, and new condos that are destined to double in value over the next year. I suppose that’s partially why so many people enjoy playing the lottery, even though the odds of winning big can be as low as 1 in a million.
Being a grinder is largely a higher percentage bet because you’re taking a longer, more disciplined, view. Warren Buffet has, admittedly, no idea how stocks will behave over the next week or year, just as I have no idea how condo prices in Toronto will behave over the next week or year. Instead, Warren chooses to bet on “The American Tailwind” and I choose to bet on the role of Toronto as a global city.
Warren first invested in an American business in 1942. He was 11. Over the next 77 years, the S&P 500 would go on to return an average of 11.8% annually. Had he invested in a no-fee index fund and reinvested all dividends, his gain would have been 5,288 for 1. In other words, a $1 million investment would have grown to $5.3 billion on a pre-tax basis. (See: The compound effect.)
77 years is, of course, a long time. But I am sure you get the point: faith. patience, and tenacity — even when, sometimes, the results can be hard to see. Real estate development is very much that kind of business.
Last year Jaco Joubert set out to estimate the number of condos in Toronto that are potentially sitting vacant. It was a response to the ongoing speculation that too many investor-owned condos are sitting empty across the city and thereby limiting the supply of housing.
To accomplish this, he photographed 15 different buildings at night (and at different times of the year) and monitored who had their lights on. He then turned these photographs into heat maps and compared the lighting pattern to the floor plans of each building in order to determine the unit demising.
This month Jaco published his findings. All in all, he estimates that he surveyed some 1,362 units. And of these units, 76 are believed to be vacant (when in doubt he erred on the side of occupied). So a vacancy of 5.6%. Is that more or less than what you were expecting?
Now, the buildings he “surveyed” are all located downtown and they are all roughly the same vintage. So you could easily argue that these aren’t necessarily representative of the city’s broader condo stock, assuming that’s where you want to take this. Still, an interesting study.
BNN Bloomberg just published this article on the Toronto condo market. It is based on a roundtable discussion that was held at their Toronto office last week with Jim Ritchie of Tridel, Jared Menkes of Menkes Developments, Shamez Virani of CentreCourt, and Jane Renwick of Diamond Kilmer Developments.
The overarching theme is that, after a couple of frenetic record setting years, the market should settle down in 2019, which is likely a good thing. Hopefully that will also temper construction cost inflation. We have been seeing double digit increases over the last few years (hence some of the cancelled projects).
But as Jared points out, the fundamentals here are still strong and there are a number of supply constraints creating upward pressure on pricing:
Jared Menkes, executive vice president of high-rise residential at Menkes Developments was unwavering for the future. “There’s a lot of red tape that’s slowing down bringing more product to market,” Menkes said. “I promise you, pricing is going up.”
For the rest of the article, click here.
Urbanation released its Q3-2018 condo market results for the Greater Toronto Area earlier this month.
Here are a few highlights:
– The unsold inventory of new condos in development is currently 33% below the 10-year average of 14,806 units.
– Year-to-date sales of new condominiums decreased to 14,055 units from 25,839 units (same period last year). 2017 was a record year.
– The average price per square foot for new project launches in Q3-2018 was $1,044 psf. This is the first time the average has broken the $1,000 psf mark.
– This is a significant price increase from last year and it is being driven by low supply, stable demand, and rising development/construction costs (my opinion).
– The average unit size for project launches in Q3-2018 was 714 sf.
– The average opening quarter absorption rate remains above 55%. It has been this way since Q1-2016.
For the full press release, click here.
This past week we opened the doors to the presentation center for Kingston&Co Condominiums. It was pretty chaotic leading up to the opening, but everything worked out and I think our party was a great success.
These early events are an opportunity for the media to see the project and the presentation center, and for the project team to enjoy some of the fruits of their hard work. I think those times are important. When everyone is moving quickly to meet deadlines, sometimes it’s easy for things to get impersonal. So it’s nice to be able to sit back, have a glass of wine, and tell someone that you appreciate all of their hard work.
Below is another photo from the event. I’m the second from the right, wearing a sweaty pink shirt. I had planned to go home and change before the event, but I instead got wrapped up moving things around and getting the presentation center ready. On a related note, there’s a tree trunk beside the sofa in the reception area that weighs almost 400 pounds. If you can lift it on your own, or even just move it on your own, I’ll buy you a round of drinks.
If you’d like to learn more about Kingston&Co, click here. And if you get a chance to check out the presentation center, make sure you tweet me and let me know what you think.
Images: BuzzBuzzHome
