Brandon Donnelly

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.

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Tag: urbanism

  • Anxious urbanism

    One of the first things that I noticed when I visited Rio de Janeiro a few years ago was the clear fixation on safety and security. There are gates and cameras everywhere. And the guidance you tend to receive from the locals usually resolves around how to stay safe. Don’t wander around at night. Be careful when you take out your phone. Be mindful of certain areas. You know, those sorts of things.

    Of course, you never really know how dangerous a city is because it’s one of those things that’s impractical to test. You’re not going to wander around dark places just to see what the probability of being robbed is. The more sensible thing to do is simply believe what people are telling you and you observe the cues scattered around the built environment.

    The result is a general sense of anxiety. You’re not quite sure if all the gates and cameras are truly necessary, but their mere presence makes you believe that they might be. I mean, why else would they be so pervasive? Or, could it be that people are overshooting with their investments in safety and security because, well, fear and paranoia are strong motivators?

    I was reminded of all of this as I read through Ed Chartlon’s recent book review of, Panic City: Crime and Fear Industries in Johannesburg. The title of his review is Anxious Urbanisms, and I think that’s a good way of describing some of these phenomenons. It’s an urbanism of uncertainty. I haven’t read the book (yet), but it’s an interesting topic.

    So I will leave you all with this excerpt from the review:

    Ultimately, what we might take from Panic City, then, is less a comprehensive sociology of crime in the city and more a method of affective analysis. What the book provides is a sense of the ways in which the emotional sphere organises space, how feelings like anxiety or fear or panic, currently widely distributed across the world, materialise themselves, architecturally and politically. If immunity is anything like security, Murray offers us a cautionary tale. For wherever uncertainty thrives, so does the tendency towards paranoid thinking—which is to say, a contagion of a different sort, one that licences regimes of suspicion, self-protection and individual security, and all at the eventual cost of collective wellbeing and interdependence. 

  • Building great mid-rise buildings

    Alex Bozikovic is right to praise Gairloch’s upcoming development in the Junction. It’s a beautiful project and it’s exciting to see so many architecturally significant projects in one neighborhood — either completed or to be completed. I’m thinking specifically of DUKE Condos (TAS and Quadrangle), our Junction House project (currently under construction), and now Gairloch’s.

    But Alex (as well as Jeremiah Shamess) is also right to point out some of the tensions and contradictions that are inherent to building at this scale. We want European-type mid-rise buildings all along our avenues, but we also want our housing to be more affordable. Problem is, mid-rise buildings are the most expensive way to build.

    The approvals process also tends to privilege urban design considerations over things like livability and construction costs. We talk about the shadow impacts that the project might have on the surrounding community, but not about how well the suites will layout when it’s all said and done — not to mention how expensive they will be to build.

    The cynics will tell you that it doesn’t matter what it costs to build because developers will always profit maximize (as is the case with every other for-profit business). But that’s an oversimplification that ignores a bunch of factors.

    One, it’s not as simple as just price. You also have to consider sales velocity. Price and sales velocity tend to be inversely correlated. In other words, as prices increase, sales velocity tends to naturally slow. You then begin to trade-off higher prices for increased time (which has a cost) and more market risk.

    As I’ve said many times before on the blog, development happens on the margin. Usually the way this plays out is that you create a development pro forma, you look at all of your project costs, and then you say, “oh shit.” You’re then stretching to figure out how you’re going to make the math work.

    Two, there are usually always parts of a city where development isn’t feasible (in some unfortunate cases, it might be the entire city). The potential revenues simply don’t support the costs. And as costs continue the rise, any areas that have not seen a corresponding increase in prices and/or rents will also become undevelopable.

    So there’s price, and there’s also a question of where great buildings are even possible. As many have already pointed out, it’s certainly not everywhere.

  • What would you like to know about real estate development? (Also, inclusionary zoning)

    I asked this question on Twitter this morning because I am planning to write more development-related posts. It’s a topic that seems to be of interest to a lot of people. One question that I received was about the kind of profit margins that Toronto developers have been making over the past few decades. More specifically: How much have they increased? My response was that they haven’t increased. In fact, if anything, they’ve been compressing as a result of rising/additional costs. (I’ve touched on this before in posts like this one about cost-plus pricing.) I think a lot of developers are actually wondering how much elasticity is left in the market to continue absorbing these cost increases.

    Follow-up question to my response: Why then does this report by Steve Pomeroy claim that developers could still make a 15% margin even if they earmarked 30-40% of their units as affordable? Well, this was news to me so I went through the report and committed to responding on this blog. To be more precise, the report finds that there’s room in as-of-right developments to dedicate 10% affordable in medium-cost areas and 25% affordable in high-cost areas. For rezoned sites, the numbers are 30% affordable in high-cost areas and 15% affordable in medium-cost areas. These are a potentially dangerous set of takeaways for a few reasons.

    Very little mid-rise and high-rise development happens as-of-right in the City of Toronto. I don’t know what the exact percentage is, but I suspect it’s low. It would be very difficult to buy land if you were valuing it on this basis. And when you are valuing it — that is, running a development pro forma — it’s not enough to pull averages from a cost guide and run high-level numbers. You can start there, but ultimately you’re going to have to get more granular. Are you factoring the hundreds of thousands of dollars (more for bigger projects) that the City will charge you to occupy any public right-of-ways? What about your public contribution monies? This has historically been hard to estimate because the math that is used is akin to a secret recipe.

    In this particular report, they assume a 100-unit building with 88,750 square feet of gross floor area. Since GFA typically factors some allowable deductions, the gross construction area for the project is going to be greater. Let’s assume it’s 5% more — so about 93,190 square feet. This is how your construction manager will think about and do take-offs for the project. In the report, they peg total construction costs at $23,208,480. That works out to just shy of $250 per square foot (costs divided by above grade GCA). You cannot build a reinforced concrete residential building with below-grade parking for this number in Toronto. In today’s market, and at this small of a scale, you might be looking at $350 to 400 psf.

    On the low end of this range, that would mean your costs have just gone up by $9.4 million — which just so happens to be the expected developer/builder profit in this model. Except now you’re underwater and you won’t be able to finance and build your project. It’s probably time to look at your revenues and see if you can increase your projected rents at all. This is what I was getting at with cost-plus pricing. I would also add that I/we typically shy away from projects of this scale. There isn’t a lot of margin for error. One or two surprises and you might be cooked. So with or without inclusionary zoning, these can be challenging projects that many developers won’t even look at.

    My point with all of this is twofold: development pro formas are delicate and margins aren’t as generous and locked-in as most people seem to think. More often than not we end up passing on sites because we simply can’t make the numbers work. The land is just too expensive. Development happens on the margin. So talking about developers “absorbing” the costs of inclusionary zoning is perhaps the wrong way to frame this discussion. A more appropriate set of questions might be: Who is going to pay for the cost of inclusionary zoning? Are landowners going to suddenly drop their prices? Is the City going to reduce their development charges/impact fees? Or will developers wait until market prices and rents increase so that they can cover these new costs? This latter scenario is how it has worked so far.

    If you have other questions about development that you would like me to take a stab at answering, please leave a comment below or tweet at me.

  • The many forces shaping our cities

    Richard Florida has a three-part essay over on Bloomberg CityLab about the forces that are currently shaping American cities. In part three, he argues that this pandemic will likely accelerate many of the trends that were already underway — families will continue to like the suburbs and young people and businesses will continue to cluster in dominant global cities. At the same time, he argues that we will see a kind of “urban reset.” A window of opportunity where we just might be able to rebuild our cities to be more affordable, more inclusive, and more productive. Could this be the moment where we commit to transforming our suburbs into more walkable mixed-use communities? Could this crisis actually strengthen our cities, as I have argued before on the blog? At this point in time, the only thing I really know for sure is that most of our predictions will be wrong.

  • The problem of Erie Terrace (and why Craven Road has one really long fence)

    On the east side of Toronto is a north-south street called Craven Road. It runs from Queen Street in the south to Danforth Avenue in the north. It’s an odd street in that there are only homes on one side of it — the east side. The west side is fenced off. No garages. No laneway suites. Just one long fence separating Craven Road from the backyards belonging to the homes on neighboring Ashdale Avenue. Given that Craven Road is a real city street with things like services and a name, you might be wondering, as I did, why this condition exits. Surely the people on Ashdale Avenue would be better off if they took proper advantage of their “through lots.”

    What gives?

    Turns out there is a reason for this and it dates back to the beginning of the 20th century. Before 1923, Craven Road was actually called Erie Terrace. It began its life as a smaller laneway outside of the city and was initially home to a “shacktown.” The street was a kind of linear slum, housing new immigrants and providing a place for people to cheaply throw up whatever they could afford to build.

    For a variety of reasons, Erie Terrace eventually became a problem and the City decided that it would be best to widen the street from its varying 18 foot width to the then standard 33 feet. The widening work was authorized in 1911. But as is always the case, there were a few problems. Who would pay for it? The City would pay for a bit of it, but the expectation was that the residents along Erie Terrace would also chip in. And since Erie Terrace was technically a one-sided street, they were in effect being asked to pay double what was typical at the time. Usually the burden would get split across both sides of the street.

    There was also a socioeconomic question. The residents on Ashdale Avenue were thought to be wealthier than those on Erie Terrace and so they supposedly wanted the squalor out of their backyards. The City also had concerns that residents along Ashdale would use this double frontage to do wild and crazy things, such as build garages, sheds, and backyard cottages. Clearly there would be no room for such oddities after the widening.

    I’m not sure which problem proved to be the thorniest, but ultimately a solution was found. Erie Terrace would be widened, but the City would retain a small sliver of land on the west side of it and erect a wooden fence in perpetuity. This would keep both groups separate and ensure that the folks on Ashdale — who had contributed some of their land, but not any money — didn’t get use of the road. And it has remained this way for over a century.

    If you ask me, it seems silly to keep this fence up. This is an ideal street to infill with laneway suites and other missing middle-type housing. But I’m sure I’m not the first person to stumble upon this east end anachronism. For a more detailed history lesson on the Craven Road fence, click here.

  • How honest do buildings really need to be?

    What is the right way to do heritage preservation? How should you approach an addition to an existing building? I was reminded of this topic this week, which then reminded me of a post I wrote last summer when this issued flared up in Ottawa because of the “Chateau Laurier battle.” The takeaway from last year’s post was this: “We cannot recreate the past, only parody it.” Indeed, the Province of Ontario maintains that “legibility” is an important principle in the conservation of built heritage properties. People should be able to distinguish the new from the old. Don’t blur the distinction.

    I will also say that in architecture school they instil in you the ideas that buildings should be honest, they should reflect the current milieu, and that materials should be truthful. What this loosely means is that you want to use materials where they are most appropriate and you want to reveal their true nature. Don’t pretend that things are something they are not. i.e. Don’t be fake. At the same time, I very early on learned that most people don’t give a shit about the kind of nuanced and theoretical discussions that happen within architecture schools. They like what they like.

    And there’s a big segment of the market that wants buildings to look as they did a long time ago. They want tradition. They want historic. Or they at least want some sort of “transitional” style that sits somewhere between old and kind of new. They want architects like Robert A.M. Stern and Richard Wengle, both of which are extremely popular and talented. So really, who am I to judge? As most of you will know, I’m a modernist. I am more interested in the future than I am in the past. But I recognize that the past is important and should not be forgotten. How best to do that is up for debate.

  • Long live the megacity

    Azeem Azhar’s recent newsletter, titled “Don’t call time on the megacity: cities will learn and adapt,” is a reminder of the tensions that cities face. There are forces of attraction. And there are also forces of repulsion.

    Cities all around the world continue to create wealth and lift people out of poverty. But they also repulse people through traffic congestion, housing supply shortages, and overcrowding (which is distinct from density). Generally though, the forces of attraction have tended to outweigh the forces of repulsion, which is why the world continues to urbanize.

    As Azeem points out, the first city believed to have reached 1 million inhabitants was Rome. It happened some 2,000 years ago. In the 1930s, New York then became the first city to reach 10 million inhabitants. And today, the 10 largest urban agglomerations in the world look something like this:

    Outside of Japan, all of these city regions are expected to add many more people by 2030. Missing from this chart, however, are cities such as Lagos, Nigeria. Between 2018 and 2050, the UN estimates that 35% of the growth in the world’s urban population will come from just three countries: India (+416 million), China (+255 million), and Nigeria (+189 million).

    Long live the megacity.

  • Us versus them — the reallocation of public space

    On Saturday, Toronto closed a few of its major roads, including Lake Shore Boulevard West, to provide more space for outdoor activities and social distancing. A number of “quiet streets” were also created last week. These now only allow local vehicular traffic. This, of course, isn’t anything novel. Most cities around the world have been reallocating their public space in the wake of this pandemic, with many hoping that some of these changes will stick.

    I rode my bike out to the Humber Bay Shores on the weekend (where I took the above photo) and it was clearly the fix that we needed. Our current waterfront trails simply cannot safely accommodate the volume of people who are out right now on the weekends. I reckon that, under normal circumstances, a good percentage of these runners, cyclists, and rollerbladers would probably be on a patio drinking. That’s not possible right now, so demand for outdoor activities is way up. (Entirely unproven theory.)

    But as is always the case, changes like this make a lot of people grumpy. Traffic got backed up on Lake Shore and the regular “war against the car” narrative flared up. I’m not sure where all these cars were going, but they were out in the sunshine trying to go places. So we have a situation where the reallocation of public space has flipped the supply and demand imbalance to another user — drivers. Now it’s us versus them: “Isn’t there already more than enough room on those big bike trails?”

    I’m frankly tired of this never ending debate, which is why I have argued before that we could use better data and better metrics. How many people are we moving with the decisions we are making? How many people are we accommodating per square meter of space? Where are users of this public space coming from? What performance standards are we trying to meet and/or maintain? What is the most equitable allocation of a finite amount of space?

    But perhaps I’m naive to think that people might listen to facts.

  • Sidewalk Labs, Uber, Lime, and the demise of urban density

    Today I am going to talk about 3 things that recently happened and/or that are on my mind.

    Sidewalk Labs pulled out of Toronto. I think this is sad. A lot of people have said that they’re surprised, but not surprised. The official reason is that this unprecedented environment has made it financially infeasible for them to develop the 12-acre site, while still adhering to their core principles. I don’t have any inside knowledge of the situation, but I can’t help but think that this is probably just an opportune excuse. They were getting beat up pretty badly by Toronto on all fronts, even though they had put forward an incredibly ambitious development proposal. As I said before, I can’t imagine many (or any) “conventional” developers coming forward with something like this. The last plan I saw was 1/3 non-residential, and 40% of the residential component was to be priced below market. And never mind all of the other innovations that were being contemplated.

    In other tech news, Uber just led a $170 million investment in Lime (the micromobility scooter company). I think this is smart — both from an overall mobility standpoint and, selfishly, as a shareowner of $UBER. It is being reported that this round of investment values Lime at about $510 million. This is a 79% decline from April 2019 when it raised its last round. So presumably, Uber is getting a pretty good deal here. The bet is that the urban landscape demands multi-modal transportation solutions, everything from bikes and scooters to cars and public transit. There is also an argument to be made that in the short-term, our post-pandemic world is going to gravitate toward individual mobility and away from things like public transit. I’ve heard a few people say that, as we re-open the global economy and try to maintain social distancing, we’re going to face two major mobility bottlenecks: transit and elevators. Sounds like more testing would be a prudent idea.

    Above, I was very careful to say “in the short-term” because I think the narrative that is emerging around the demise of urban density is entirely overblown. Few of us are clamoring to jump back into a mosh pit right now (perhaps a metaphorical mosh pit), but I also don’t believe that we will suddenly look to sprawling Brasilia as a source of urban inspiration. While it is true that “disease did shape architecture in the 20th century” (Alex Bozikovic wrote a good piece on this over the weekend) and that there have been oscillations in terms of how we view urbanity, I also know that this isn’t the first pandemic that our cities have lived through. The Hong Kong flu of 1968 is thought to have killed one million people around the world after, allegedly, emerging in one of the densest cities ever created. Hong Kong’s relationship with Beijing is a tenuous one right now, but it still remains one of the world’s most important global cities.

    Perhaps cities are more resilient than we give them credit for.

    Photo by Touann Gatouillat Vergos on Unsplash

  • What’s next for cities? Probably more of the same.

    I am surprised, although maybe I shouldn’t be, by how quickly many seem to be allegedly turning their back on cities. According to the New York Times, cities were “losing their allure” well before this pandemic, and this might just be the tipping point. The underlying argument: Density is bad. We should probably all move somewhere bucolic, where the cost of housing is less and work isn’t so stressful. Zoom only when necessary.

    But as the chief economist for Indeed, Jed Kolko, rightly points out in the article, how people behave (and think) during a global pandemic is probably not a great indicator for how they will want to live their lives when this is all over. It’s also not clear that urban density is really the contributor of spread. Hyper-dense cities such as Seoul and Hong Kong have been performing relatively well. (Joe Cortright has some thoughts on this.)

    Once we get to the other side, we will see the data and we will get a better understanding of this current situation. And then in hindsight, we will find ways to rationalize the outcomes to ourselves. In the interim, I’m not about to bet against cities. Here’s how Paul Romer, professor at New York University, put it in this recent interview in City Journal:

    “I think the underlying economic reality is that there is tremendous economic value in interacting with people and sharing ideas. There’s still a lot to be gained from interaction in close physical proximity because such interaction is a large part of how we establish trust. So I think that, for the rest of my life, cities are going to continue to be where the action is.”

    Photo by bady qb on Unsplash