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.
Dave LeBlanc recently published an article in the Globe and Mail called, “How wide is your sidewalk?” And in it, he links to this sidewalk map of Toronto (pictured above), which uses open data from the city to plot sidewalk widths.
It was originally intended as a map of where social distancing is possible (oh, how far we’ve come), but today it serves as a really interesting way of looking at the city. What it makes clear to me is that we could use a lot more sidewalk, and that too many areas of the city have a discontinuous public realm.
Sometimes there’s very little that can be done until an adjacent property gets redeveloped. And when this does happen, the city will demand pedestrian widenings. But in other cases, there are solutions that could be implemented today, without private participation.
So I sure hope that someone is looking at a map like this and trying to come up with holistic solutions for making Toronto a more walkable and more pedestrian-friendly city.
Note: Sometimes a narrow sidewalk does not necessarily equal an inhospitable street. I mean, look at this example.
The market consensus right now is that this cycle of interest rate increases has come to an end, and that we should see rates start to come down next year. Having confidence that rates won’t go any higher in the near future is what markets need in order to start making more decisions. So this is, of course, positive. At the same time, I don’t think anyone should expect a return to ultra-low rates. Rates today are still low when viewed historically.
Lower rates are good for levered assets such as real estate, but I don’t think that our industry has fully felt and processed the impacts of higher rates. Unfortunately, I think that things will get worse (in 2024) before they get better (maybe toward the end of 2024 or perhaps in 2025). This is when a “risk-on” approach will return in commercial real estate. A year ago today, I thought 2023 would be the year for this, but as I said yesterday, I was overly optimistic in terms of my timing.
On the residential resale side, I think we will see greater optimism sooner, certainly for the most in-demand cities and areas. There is pent up demand waiting on the sidelines and, once we can get past the current bid-ask spreads and deadlock, I believe we’ll return to a more balanced market in 2024. To be clear, I’m not expecting bidding wars and the like. And because of our housing affordability crisis, I also think the Bank of Canada will be more resistant to lowering rates compared to other central banks. This will help the Canadian dollar.
If you’re a buyer of real estate, I generally believe that 2024 will turn out to be a pivotal year for you. Roughly speaking, you win acquisitions in one of two ways: either (1) you pay the most or (2) you believe in something that most other people in the market don’t. This second approach is harder to achieve in bull markets. But in slower markets, the door is open and history has taught us that it can be the foundation in which great fortunes are made.
As I mentioned yesterday, I agree with the prognostications that hard costs will soften further next year (perhaps even more than 5% on average). Obviously every market is different. But here in Toronto, I just don’t see us returning to the level of construction starts that we have seen over the last number of years.
Since 2021, I have used my hyper scientific Jimmy the Greek Reopening Index to keep tabs on office utilization and the overall return to office. And based on this, 2023 was a positive year. Initially, souvlaki consumption appeared dramatically lower on days like Monday. But I noticed discernible increases as the year went on. However, if you look at actual data, such as what we have from swipe cards, the great return to office seems to have stalled out at around 50%. I don’t think this will hold, though. I continue to believe that of the people who work in offices, most will spend > 50% of each week there. And we will see that in 2024.
2023 was the year of AI. But Fred Wilson makes an excellent point, here. AI is 40+ years in the making. Last year only became the year of AI because a consumer-facing app — ChatGPT — was revealed that captured everyone’s attention. Crypto will eventually have this moment, but it will likely need to marinate a bit longer. Instead, I think 2024 will be the year of augmented reality (AR) and a further blurring of our offline and online worlds. Think digital art, fashion, and other collectibles (such as NFTs).
Right now, autonomous vehicles feel like they’re in the trough of disillusionment (within the hype cycle). There were moments last year where it felt like we were finally moving beyond this phase. But then some very suboptimal things happened. I think AVs are our reality in the next 5+ years, which means that for next year we likely want to be focused on the inputs: vision/LIDAR, battery tech, etc.
Zooming out, we should be thinking about the above two trends in the context of a broader shift toward greater automation. I think it will feel more insidious than immediate (certainly in 2024), but the longer-term impacts are going to be profound for our society. The so-called gig economy is likely to be impacted first. Eventually the overall economy will create new jobs, but we are still going to need to manage this transition toward more automation.
TikTok Shop is where to look for the future of shopping. I think the platform will continue to see strong adoption and ultimately prove to be a dominant e-commerce platform throughout 2024. Amazon, Meta, and others will see this, and try their best to catch up and copy it.
At the time of writing this post, the total crypto market capitalization is about $1.74 trillion. This is down from nearly $3 trillion at the peak of the market in 2021. The recent gains suggest that the so-called “crypto winter” might be over, and so combined with lower interest rates and more real-world use cases, I think that 2024 will be another strong year for crypto. Total crypto market cap at the end of the year will exceed its 2021 peak.
And there you have it. My current thoughts for this upcoming year. I should note that I’m not an economist, analyst, or an expert on souvlaki demand for that matter. But I enjoy writing this post as an annual discipline. It forces me to think critically about the topics that interest me. And in the paraphrased words of Howard Lindzon, it gives me an archive that I can go back to and either cringe at or think to myself, “hey, I could have been a somebody!”
And with that, a big thanks to everyone who has read this daily blog over the last year. This year marked its 10th anniversary. I wish you much success and happiness in 2024. Happy new year!
The past week has felt more like a London winter, than a Toronto one. It has been mild, rainy, and gray. So right now feels like an opportune time to write about this solar-powered light/art piece called Sunne. Created by Marjan van Aubel, the light has been designed to hang right in front of a window using two simple cables. There’s no need for an external power source, because it has an integrated battery that harvests sun during the day. The light then automatically turns on at sunset, and has the ability to simulate some pretty stunning sun experiences.
Now, if you happen to live in a place with a roof that gets good sun exposure, I suppose you could just install a bunch of solar panels and use them to generate power for cool-looking things in your home. But if you don’t have the ability to do that — for instance, maybe you live in a multi-family building — then this feels like a clever and extremely beautiful way to harvest some amount of sun. I’m sure that, eventually, we’ll have building facades that can generate a meaningful amount of solar power, but until then, you’ve got devices like Sunne.
P.S. For what it’s worth, I’ll take cold, snowy and sunny, over mild, rainy and gray, any day of the week.
Many years ago I was in a community meeting talking about a proposal we had to add retail uses adjacent to a park. Residential was the highest and best use, but we were excited by what retail could do for the project and area. We were imagining something like a Parisian cafe where everyone would sit facing outward toward the park.
Much to our surprise, the community was vehemently opposed. And when we eventually asked who had been to Europe and sat outside in a nice cafe, the response we generally got was, “yeah, we have, and it’s obviously nice there, when on vacation. But that’s Europe. It won’t work here and it’s not appropriate for the area.”
Hmm. This raises all sorts of interesting questions. But for today, let’s ask this one here: Why is it that some people choose to live in places that are so different than the ones they visit when on vacation?
Is it because we, as humans, want fundamentally different experiences when we travel? i.e. We want to escape from our current reality. “Oh look how novel this is.” In this case, I guess you could say that our markets are fairly efficient and people are getting the kind of lifestyles that they truly want, both at home and abroad.
Or, is it because, for a variety of reasons, we’ve created rules and obstacles that force certain built form outcomes? We think the other ways won’t work. I often find myself in this latter camp, meaning that when I travel, I at some point end up thinking: “This is a good idea. I want to both move here immediately, and steal this idea and bring it back to Toronto.”
As a follow-up to yesterday’s post about infill housing and overall urban densities, let’s look at some basic math.
The City of Toronto has an estimated population of 3,025,647 (as of June 2023) and a land area of 630 square meters. That means that its average population density is about 4,803 people per km2. Obviously this number will be higher in some locations, and lower in others. But overall, this is the average.
Now let’s consider how many people we could actually fit within the existing boundaries of the city (city proper not the metro area) if we were to simply match the average population densities of some other global cities around the world.
Again, what this chart is saying is that if we took the same physical area (Toronto’s 630 square meters) and just increased the population density to that of, say, Paris, we would then have a total population of over 13 million people and we’d be housing an additional 10,011,573 humans on the same footprint.
I am not suggesting that this is exactly what should be done. (Though, you all know how much I love Paris.) What I’m suggesting is that calling a place “full” isn’t exactly accurate. How would you even measure that? What someone is really saying is that they are content with the status quo in terms of built form and density.
What I was getting at is that there’s lots of available room within our existing boundaries for infill housing. We are nowhere near full, despite what some people will tell you. In fact, most areas are not dense enough to properly support modes of transport that aren’t the car.
Of course, there are a number of ways that one could be offended by a statement like this.
One, you could argue that more density would make the city unlivable. Two, you could get into the chicken-and-egg game of whether a more expansive transit system is needed before allowing more density. Three, you could say that we already have enough zoned and unbuilt housing supply — so why do we need more? And I’m sure that there are many others that I’m not mentioning here.
Density can be a counterintuitive feature for cities. It can actually make a place more livable by encouraging more amenities adjacent to where people live and work, and it can also reduce traffic congestion by empowering alternative forms of mobility. If the only reasonable way to get around is by car, then of course most people will drive.
We also need to avoid the chicken-and-egg mental trap when it comes to mobility infrastructure. Land use and transportation always work hand in hand and need to be thought of and executed on simultaneously.
Finally, the objection of already having lots of sites zoned for new housing is an enticing one. But zoned and delivered are two vastly different things. And the unfortunate reality is that there are a lot of zoned sites that won’t be able to develop in the short and medium terms because the market isn’t there. But that doesn’t mean that other housing typologies couldn’t be built.
At the same time, we need move away from “cruise ships of urbanity.” Broadly speaking, Paris — to cite just one of many examples– is at least and on average about 4x denser than Toronto. And somehow, people still like living and visiting there.
One of the reasons why “new small-scale retail, service, and office uses” are now permitted in low-rise neighborhoods of Toronto — and why many are on to talking about these uses in our laneways — is because it’s a way to serve the “needs of residents” and “reduce local automobile trips”. But what are these needs exactly? And if you had to choose only one, what would it be?
Let me provide some further background.
According to this mapping, 94% of Parisians live within a 5-minute walk of a bakery. And according to this mapping, 94% of people in Mexico City live within a 5-minute walk of a taqueria. So in other words, these two cities seem to have the kind of “small-scale retail, service, and office uses” that satisfy at least some of the needs of their residents.
People in Paris need bread. And people in Mexico City need tacos. But what do people in Toronto need? I’m not sure we have a perfectly parallel thing. But according to Instacart, the top-selling grocery item last year across both the US and Canada was — bananas. One and four carts typically contain them, and apparently this number has remained fairly consistent.
So maybe this should be our small-scale retail and walkability test metric: What % of the population lives within a 5-minute walk of fresh bananas? (I’m open to other food suggestions here.)
Up until last year, non-residential uses within Toronto’s low-rise neighborhoods were typically legal non-confirming uses. Meaning, the use wasn’t technically allowed, but if it had been there for a long and continuous time, we would let it slide and say it’s legal.
Then we decided that small-scale retail, service, and office uses might be kind of good in our neighborhoods. Especially if they empower people to perform their daily necessities without a car. So we agreed to allow these sorts of uses provided they don’t annoy too many people.
But what about in Toronto’s laneways? Can and should they go there, too?
But we need to get out of the way and we need small and affordable spaces. Which is why it’s hard to imagine a more ideal place than in our laneways, especially considering that there’s a long history of these spaces being used for exactly this. (Read this recent article by John Lorinc.)
Fortunately, this idea continues to gain positive momentum, thanks to people like the late Michelle Senayah (co-founder of the Laneway Project) and Blair Scorgie (a partner at Sajecki Planning). So in my mind, it’s only a matter of time before we start getting out of the way.
Last week was “forum week” in Toronto. (That is, it was the Toronto Real Estate Forum.) And as is the case every year, Benjamin Tal, deputy chief economist of CIBC, opened up the event with his usual macro view of the world. For those of you who missed it (as I did), here are some of his key points (via RENX):
The Bank of Canada’s overnight rate will ultimately/likely settle into the 2.75-3% range (currently it sits at 5%). He expects rates to start coming down this summer.
Inflation is down, but we’re not yet at the 2% target. The “last mile” is always the toughest.
But as we know, the BofC will take a recession over high inflation, any day.
The mortgage market has fallen faster than in the early 90s recession. Tal said that the residential real estate market in Canada is right now facing “the biggest test” since then.
Canada is in what he calls a “per capita recession”. But for the million or so immigrants that the country accepted over the last year, we’d be in a full-blown official recession.
Finally, he called this correction in the housing market both “real” and “healthy”; he spoke about normalcy returning in 1-2 years; and he posited that the market will be “crazy” when it does return because of a supply deficit.
This last point is an important one. New housing supply is mostly shut off right now. I say mostly because there are obviously still projects under construction, and there have been and there will continue to be some successful launches. But by and large, most developers are waiting right now, principally because the absorption isn’t there. They have no other choice.
But Canada continues to grow. People from around the world continue to want to move here. And there continues to be a need for a lot more new housing. So when the market does return — and it, of course, will — there is going to be a supply-demand imbalance. And as is always the case in real estate, there will be a lag in responding to this imbalance.
There are many ways to describe one of the prevailing urban forms emerging across the Greater Toronto Area. You could call it spiky urbanism. You could call it a collection of peaks and plains. Or — as it is referred to in this recent article by Alex Bozikovic about “turning the suburb into the city” — you could call it cruise ship urbanity:
These megaprojects are where Toronto has chosen to cram much of its new growth – “cruise ships of urbanity,” as Mr. Giannone told me, in a sea of houses. As such they provide an opportunity to create citylike density and activity.
What we are talking about is a dichotomous form of urbanism: high-density mixed-use nodes surrounded by low-rise car-oriented communities. And on many levels, this makes a lot of sense, especially if the cruise ship happens to be docked on top of a transit station. This is where density needs to go. If you have a transit station without much density, that should be addressed immediately.
But it also presents a great challenge. If transportation planning is necessarily land use planning, then we are dealing with two very different kinds of land use patterns and, therefore, two very different kinds of mobility demands. You can address this by making the cruise ship as self-sufficient and pleasant as possible, but eventually someone will want or need to get off the ship.
Does that mean they will then need a car?
You don’t have this same problem with more consistent forms of urbanism. Consider, for example, cities like Paris and Barcelona. These are dense cities, but more importantly they are, for the most part, uniformly dense. Or at least, uniformly dense enough. Meaning that you can probably apply a more uniform transportation strategy. What works in one part of the city is likely to work in other parts too.
Of course, we could also apply a uniform transportation strategy to our urban cruise ships. Given that they exist in a sea of low-rise houses, we could simply say that each urban cruise ship resident should also have their own parking space (1:1 ratio). The solution: everyone drives! But this, to me, seems like an insane long-term solution.
In my view, the most impactful solution lies not in the ships themselves, but in the seas surrounding them. We need to look holistically at our entire city region and determine what it will take to turn suburb into city. And that likely means a whole host of things, ranging from leveraging the infrastructure we already have (i.e. upzoning around transit stations) to embracing autonomous vehicles.
In the end, I don’t think we want cruise ships of urbanity. We need more density, everywhere.
