Brandon Donnelly — Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly. — Page 1080

Recently I’ve heard a few people say that condos are not for families. Some of this was on Twitter and some of it was to me directly in person.

If you’re a regular reader of the blog, you’ll know that I disagree with the title of this post. My neighbors two doors down from me in my condo building have a young child and a big part of our focus with Junction House (hence the “House”) is to make better and higher density family housing.

So I would like to unpack this topic today on the blog.

One argument is that developers simply aren’t building the right kind of family housing (supply). Profit maximization is leading us to smaller units.

Sales velocity

One area that arguably does create a bias toward smaller units is HST. I’ve written about this before on the blog and I continue to believe that this needs to be revisited as our condo market matures and it’s no longer just about serving first-time buyers on their way to a low-rise house.

In many cities around the world, 

 and I’m going to structure it from two perspectives: the supply side and the demand side. 

Because on the one hand, I think there’s a belief that developers aren’t building the right kind of family housing (supply). At the same time, there are folks who simply believe that no child should be raised in a condo, irrespective of suite size and how they’re designed (demand).

Most recently, at least in Toronto, it’s true that the demand hasn’t really been there for larger suites, such as 3 bedrooms. They didn’t sell well and so developers didn’t design around this use case. To get the right kind of sales velocity you wanted smaller suites.

But I believe this is starting to changing for certain project types and you see evidence of that with average unit sizes starting to creep upward across the Greater Toronto Area. More on this when we talk about demand.

With respect to profit maximization, there are a number of things to consider: sales velocity, per square foot pricing, HST implications, construction costs, and so on. 

But one thing that I’m starting to notice is a “U” shaped price curve, where it’s both the smaller and larger units that are seeing a premium on a per square foot basis. My sense is that this is being driven by both empty nesters exiting large homes and families who need more space.

From the developer’s perspective, fewer larger units in a project also means fewer kitchens, fewer entry doors, less suites to coordinate, etc. 

Moving onto demand, I think 

Developers and designers will adapt. 

I just came across the below talk by Tony Seba about the coming “clean disruption” of energy and transportation. The talk follows his book of the same name. Click here if you can’t see it below. It runs about an hour, but I would encourage you to give it a watch. 

[youtube https://www.youtube.com/watch?v=2b3ttqYDwF0?rel=0&w=560&h=315]

The first few minutes will be things I’m sure many of you have heard before, such as the failure of Kodak to embrace digital cameras (film business considered too valuable), Moore’s Law , and so on. But he then moves on to cost curves, battery storage, solar power, and autonomous electric vehicles (A-EVs).

You all know that I am fascinated by these topics, so here’s one piece that stood out for me: 2021 is his prediction for the year in which A-EVs become real and disrupt both internal combustion engine (ICE) vehicles and individual car ownership.

Obviously this won’t happen overnight, but Tony’s belief is that 2021 will be the year that the economics of A-EVs become so compelling (10x) that it will crush our current business models.

The argument is that on-demand ride hailing/sharing and A-EVs will converge and that Transportation as a Service (TaaS) will provide our mobility needs at a fraction of today’s costs. We’ve talked about this prediction before on the blog, but never has a timeline been attached to it.

All of this reinforces two thoughts that I’ve been having over the past few years. One, I will probably never buy another combustion engine vehicle. And two, I should probably avoid buying another vehicle, period, until the next wave of business models becomes clearer. Leasing likely makes more sense at this stage if you need a car.

In fact, Tony believes that with the collapse of individual car ownership, the resale value of cars could become negative. That is, you’d have to pay people to take a car off of your hands, because everyone will recognize the cost advantage of just using TaaS.

We are doing everything we can to future proof our development projects so that they are ready for electric vehicles. But if A-EVs and TaaS completely erase individual car ownership within the next 5 years, then all of us in the industry are going to need to do much more to ready our buildings and cities.

Today it was announced that Amazon is planning to launch its “ Prime Now ” service in Vancouver and Toronto this November and January, respectively. 

The pilot program will offer two-hour deliveries for members and, according to the Wall Street Journal , will be be heavily focused on groceries. 

It’s worth noting that most of Whole Foods’ stores in Canada  (now owned by Amazon) are in and around Vancouver and Toronto. And that Amazon has already started lowering prices to make those stores more competitive.

Right now a “Prime” membership in Canada costs CAD$79 per year. I’m not sure if the price will change at all for “Prime Now ”, but let’s assume for the sake of argument that it won’t. 

If this service was available to you today (or if you’re in a city that currently has it), would you (do you) use it? I would love to hear your thoughts in the comment section below.

Two common objections around online grocery shopping are that many people want to touch and feel the goods before they buy and that perishable deliveries are a challenging thing to coordinate.

I think I can work around those objections and would certainly try this today if it was available in Toronto. What about you?