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.

Tag: united states

  • Fashion nothingness

    Fashion, like architecture, says a lot. It is, according to Wikipedia, an “aesthetic expression at a particular time, place and in a specific context.” So it’s interesting to consider how fashion might translate, and not translate, around the world. This recent article by The Economist, called “The United Nations of Uniqlo,” offers up one comparison, albeit a generalized one, between Japanese and American clothing preferences. (It’s an article about the Japanese fashion label Uniqlo.)

    Japan:

    At first glance there seems nothing obviously Japanese about Uniqlo’s wares. But a strong strain of minimalism pervades Japanese culture. Buddhism remains an important influence on Japanese society even in an increasingly secular age, and among its core tenets are renunciation and detachment – concepts that mean being able to suppress one’s lust for the material elements of daily life. Mario Praz, an Italian critic, contrasts the Japanese style with the suffocating abundance of Victorian interiors in Europe and America which, he says, stemmed from horror vacui (fear of emptiness). More recently, young people in the West have also grown less enamoured with acquiring stuff, hence the widespread popularity of another Japanese export: Marie Kondo, a professional declutterer.

    America:

    The American market has proved harder to crack. The 56 Uniqlo stores in America fall far short of Yanai’s plan, in 2012, to open 200 there. They still operate at a loss. “When you think about the American market, you don’t always think of subtlety,” said Steve Rowen of Retail Systems Research, a consultancy. “This is a social-climber society. Even if you want to fly under the radar, there still has to be some indication that you’re fashion forward.” Once that urban millennial with a starter job begins to make real money, Rowen postulated, “they move past a brand like Uniqlo pretty quickly.” Americans are perhaps willing to embrace invisibility only until they are rich enough to want to be seen.

    You could probably also fashion a similar argument around housing preferences. The Japanese are known for their minimalist houses, as well for completely different views on housing in general. But we shouldn’t forget that good minimalism is expensive. Remember: “Only the rich can afford this much nothing.” Maybe that’s what Uniqlo needs to do in America. The problem is that its nothingness isn’t expensive enough.

  • Making giant ships

    This is an interesting New York Times photo essay about “how giant ships are built.” I wasn’t aware of some of these statistics, and maybe the same goes for you:

    • 90% of all traded goods are carried on ships
    • 90% of global shipbuilding happens in just three countries: China, South Korea, and Japan
    • There are 124 remaining and active shipyards in the United States, all supported by federal government contracts and the Jones Act, which requires that people and goods moving between American ports is done on ships that are owned/operated by US citizens and that were built domestically
    • US shipyards are believed to contribute about $37 billion in annual economic output and to support about 400,000 jobs
    • 88% of all food in the state of Hawaii is shipped in by boat — it is disproportionately reliant on trade (makes sense)
  • Spiky population density maps

    I rediscovered the maps and work of Alasdair Rae this morning. (He has appeared on this blog before in posts like this one here.) Alasdair works in the Department of Urban Studies and Planning at the University of Sheffield and is author of the blog, Stats, Maps n Pix. Recently, he’s been publishing maps showing population densities around the world. He also gets into the details of how they’re made. They are pretty cool to see.

    Here are the Great Lakes.

    And here is Brazil, as well as a map of the world (without any land shown). Canada and the United States barely register on this second one.

  • Toronto Regional Real Estate Board releases housing market statistics for April 2020

    The Wall Street Journal reported today that the median home price across the United States rose 8% year-over-year in March to $280,600. One explanation for this is that while, yes, demand did drop off, so too did supply and that has led to a shortage of available housing. The other possible explanation is that these March deals were papered earlier in the year (or late last year) when most of us were blissfully unaware of what was about to happen and so the real impact of this pandemic isn’t yet showing up in these numbers.

    Let’s drill down.

    The Toronto Regional Real Estate Board also released numbers today, but for the month of April. Not surprisingly, residential resales across the region are down by 67% compared to April 2019. The number of listings is also down by a similar amount (-64.1%). Overall though, pricing remained relatively flat (0.1% increase). And by overall I mean for all housing types and for all areas of the region. There are larger variances within specific areas and for certain types. See below.

    Drilling down even further, my friend and agent Christopher Bibby noted in his monthly newsletter over the weekend that transaction volumes in the central (resale) condominium market are down some 85-90%. So the market is effectively at a standstill. Those who do not need to sell or move are justifiably deciding not to right now. But just as Warren Buffet got on stage over the weekend — with some great flowy hair, I might add — and told us in Times New Roman never to bet against America, I am not about to bet against Toronto. This too shall pass.

  • Where renters want to move

    Every quarter, Apartment List publishes something that they call their Rental Migration Report. What they do is use search data from their website to determine where their (registered) users are hoping to move to and from. Their first report of 2020 is now out and below is their list of the most attractive US metros. It is based on search data from June to December, 2019.

    Now, it’s important to note that this is really only a form of intent — taken from one particular website. This list may not, and probably doesn’t, accurately mirror how and where people are actually migrating within the US. But it is still interesting to see what is top of mind for Apartment List’s users. (If there were multiple search inquiries during a visit to the site, they counted the first metro area.)

    Beautiful mountains. Great snowboarding/skiing. And a burgeoning tech ecosystem. I am not at all surprised to see Denver at the top of this list.

    Images: Apartment List

  • Trade patterns in global cuisine

    In 2017, the US restaurant industry generated about $560 billion in annual revenue. By comparison, the movie industry generates some $30 billion a year. Food, and eating out, is a big business.

    A recent paper by Joel Waldgogel of the University of Minnesota has tried to estimate the “implicit cuisine trade” associated with this industry. To do this, he used restaurant data from TripAdvisor and sales figures from Euromonitor.

    Domestic consumption of a foreign cuisine was considered an “import.” And foreign consumption of a domestic cuisine was considered an “export.” Here’s what he discovered (graph from the Economist):

    Italy is, by far, the biggest net “exporter.” And the US is the biggest net “importer.” If you exclude fast food, the US “deficit” balloons to approximately $140 billion.

    I guess everybody does really love Italian food. For the full paper, click here.

  • Australia lost 124,000 millionaires last year

    Global household wealth is currently estimated at about $360 trillion, according to Credit Suisse’s 2019 Global Wealth Report. This represents an increase of about $9 trillion (~2.6%) from 2018-2019.

    Over the last decade, much of this growth in household wealth has come from two countries: the United States and China. 40% of the world’s US dollar millionaires reside in the United States, and China now has the second highest number of dollar millionaires. (If there are any curious Canadians reading this, Canada represents 3% of the world’s total.)

    The number of ultra-high-net-worth individuals — individuals with a net worth greater than $50 million — exhibits a similar pecking order. The US is by far the most dominant.

    Of course, dollar millionaires represent a small percentage of the world’s total population. Credit Suisse estimates that there are about 5.1 billion adults in the world. About 56.6% have a net worth under $10,000 and about 0.9% (okay, 1%) are millionaires. This 1% controls/owns about 44% of global wealth. Thinking back to figure 7 (above), consider this math: 50% of the world’s millionaires are now in the US and China.

    Fluctuations do happen, however. Australia lost some 124,000 millionaires last year largely because of a (-6%) drop in home prices, which tends to correlate pretty closely to the real asset part of household balance sheets. Australia shed about $443 billion in household wealth since 2018, making it the biggest loser in Credit Suisse’s report.

    The other thing that you may find interesting from this report is the wealth/GDP ratio that they use. Household wealth and GDP tend to correlate. But the ratio of wealth to GDP also has a tendency to increase as a country develops. This makes sense because things like the rule of law and access to capital tend to increase people’s willingness to invest/borrow. But in developed countries, it could also be a signal for asset inflation.

    If you’d like to download a PDF of the full wealth report, click here.

    Note: Credit Suisse’s definition of household wealth is your typical net worth calculation: assets (financial assets and real assets) minus liabilities. For most people, the real asset part is principally housing.

    Charts: Credit Suisse Global Wealth Report 2019

  • Applications to US business schools are declining

    Applications to American business schools, including MBA programs, have fallen for five straight years according to this recent WSJ article.

    Compared to last year, business school applications to US schools are down about 9.1%; whereas they have been rising in other parts of the world. If you look at the change in applications from international students, the drop is even more significant — about 13.7%.

    Here are two charts from the WSJ:

    There are a couple of possible explanations for this. Tech is/has been hot. I would imagine that space has been absorbing many people who would have historically gone to do an MBA.

    But perhaps more significantly, stricter immigration policies are making it harder for international students to come to the US. At the same time, top tier alternatives are emerging around the world, such as in China.

    China exports more business school students than any other country and they are by far the largest international student base in the US. But the numbers are coming down. At the peak in 2015, the US issued nearly 275,000 student visas to people from China. By 2017, that number had more than halved to 112,817.

    Out of curiosity, I decided to look up the class profile for the most recent Rotman MBA cohort (my alma mater). 70% of the class was born outside of Canada. That’s not surprising.

    Charts: WSJ

  • Boom babies (of China)

    A few years ago I wrote a post talking about “depression babies.” In it, I cited a research paper that looked at the impact of macroeconomic shocks on people’s willingness to take on financial risk in the future. The term “depression babies” stems from the Great Depression and how it is believed to have impacted risk taking, savings rates, and probably many other things.

    I was reminded of this when I read this recent article in the WSJ talking about how the Chinese have started spending — and taking on the debt — like Americans, particularly among Chinese under 30. It is the inverse of the depression baby phenomenon. In this case, it is arguably years of economic expansion leading to greater comfort around financial risk.

    Here are a couple of figures from the article:

    JPMorgan estimates China’s ratio of household debt to gross domestic product will climb to 61% by 2020. That’s up from 26% in 2010 and higher than current levels in Italy and Greece.

    The level in the U.S. is about 76%, after falling from 98% in 2006, according to the International Monetary Fund.

    By another measure—the ratio of household debt to disposable income—China appears to have already surpassed the U.S. Its ratio reached 117.2% in 2018, up from 42.7% in 2008, according to calculations by Lei Ning, a researcher at the Institute for Advanced Research at Shanghai University of Finance and Economics. The U.S. peaked at 135% in 2007 and dropped to 101% in 2018.

    Not surprisingly, the article goes on to talk about how this dramatic increase in household debt might be something to worry about. Maybe. I’m not an economist. But I do think this is designed to boost the Chinese growth machine and I do think it makes them less reliant on other countries — such as, maybe, the United States.

  • Slate announces minority investment from Goldman Sachs

    On Monday, Slate Asset Management announced a minority investment from Goldman Sachs Asset Management’s Petershill Program. This is great news, so here’s a copy of the full press release that went out.


    Toronto, August 19, 2019 – Slate Asset Management L.P. (Slate), a leading alternative asset management platform with a focus on real estate and real assets, today announced a passive, non-voting minority equity investment from Goldman Sachs Asset Management’s Petershill program, creating a strategic relationship with one of the world’s leading investment managers and positioning Slate for future success. The transaction will have no impact on the control or decision making of Slate. The day-to-day operations and management of Slate will remain unchanged.

    The investment provides capital that Slate will use to enhance its platform and increase its GP investments in current and future businesses and investment vehicles, further strengthening the firm’s alignment with its clients and investing partners.

    The investment accelerates Slate’s goal to build the leading independent alternative investment platform in real estate and real assets. As part of the transaction, Slate Founders Blair and Brady Welch have made a long-term commitment to the business.

    To date Slate has completed over $11 billion of transactions across Canada, the U.S. and Europe, through multiple vehicles spanning co-investments with global institutional partners, private equity funds and publicly-traded Real Estate Investment Trusts.

    “This investment in our platform is an endorsement of our people, our strategy and our future,” said Brady Welch, co-founder of Slate. “For our investors and our team, this is excellent news; our strategy and model remain the same, and we can now benefit from our new relationship with Goldman.”

    Blair Welch, co-founder of Slate, added that: “Since we started Slate nearly 15 years ago, we have showed that we can build tremendous value by providing our investors with a unique perspective, focusing on the fundamentals of the assets we acquire and delivering hands-on management that is innovative and creative. With our new relationship with Goldman Sachs, Brady and I are enthusiastic about what all of us at Slate can accomplish together over the next decade and beyond.”

    “Slate Asset Management is an incredibly innovative, dynamic real-estate focused alternative asset management platform,” said Robert Hamilton Kelly, Managing Director, Goldman Sachs Asset Management Petershill program. “We are big believers in the strategy, the team and the model. We are excited to partner with Slate as they work to capture the opportunities before them.”

    About Slate Asset Management

    Slate Asset Management L.P. is a leading real-estate focused alternative investment platform with over $6 billion in assets under management. Slate is a value-oriented manager and a significant sponsor of all of its private and publicly-traded investment vehicles, which are tailored to the unique goals and objectives of its investors. The firm’s careful and selective investment approach creates long-term value with an emphasis on capital preservation and outsized returns. Slate is supported by exceptional people, flexible capital and a demonstrated ability to originate and execute on a wide range of compelling investment opportunities. Visit slateam.com to learn more.

    About Goldman Sachs Asset Management’s (GSAM) Petershill Program

    The Petershill program is managed by GSAM’s Alternative Investments & Manager Selection (AIMS) Group, which provides investors with investment and advisory solutions across leading private equity funds, hedge fund managers, real estate managers, public equity strategies and fixed income strategies. With investments in over 20 asset management firms, the Petershill program provides strategic capital to mid-sized asset management firms and has raised over $5 billion of commitments since inception. GSAM is one of the world’s leading investment managers with more than $1 trillion in assets under supervision globally as of June 30, 2019.

    For more information:

    Slate Asset Management
    Katie Fasken
    416-583-1785

    Goldman Sachs
    Patrick Scanlan
    212-902-5400