Brandon Donnelly — Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly. — Page 1135

I ordered a new lens for my Fuji X Series camera today. 

For those of you who are interested in photography, it’s a prime lens: 35mm (53mm equivalent) with a maximum aperture of F2.0. I wanted a fixed focal length because I suspect I’m going to enjoy shooting with it more than my current zoom lens. There’s something pure about it. I also wanted a lens that would be versatile enough for street photography, portraits, and so on. Also helpful is the fact that it’s compact and easy to carry around.

Since I picked up my Fuji camera last summer I’ve been slowly but surely returning to photography  as a hobby. Part of why I did that is because I felt like I needed to challenge myself creatively. I was also inspired by some of my creative friends, namely  Akbar and Evgeny . Both of them take great photos and are far more serious about photography than I am. I’m also an avid follower of Bijan Sabet’s blog . He’s a venture capitalist with an amazing passion and talent for photography.

But the other reason I have been drawn to photography – for my many years now – is that it’s a way to document the built environment. It’s for that reason that I love taking photos when I travel. Everything is new and I’m just trying to soak it all up.

I am mentioning all of this today for three reasons. First, I’d like to incorporate more of my photos into this blog. I’ve also been feeling like this blog needs a bit of a refresh. It’s been almost 4 years of daily writing and I think it’s important to continually try new things. Second, by being public about all of this, it holds me accountable. And third, I’m going to be in Miami this weekend. So expect some fresh photos on my Instagram .

In my BARED post with Michael Cooper he described real estate development as being one of the most creative things you can do because of all of the constraints that one has to deal with. This certainly feels true on many days.

A lot of these constraints also create competing tensions. One example is the tension between what landowners want and what the city may want.

The value of development land is dependent on what you can build on it. It is, in theory at least, the residual claimant once you factor in all of your other development costs. But in a competitive land market, owners will naturally have high expectations around what their land is worth. And telling them about the intricacies of your residual claimant Excel model will fall on deaf ears if the output doesn’t match their expectations. They see what other land is selling for – even if the land use policies are entirely different – and they want the same or more.

So to make the math work, it often becomes about density. In practice, many financial models are probably working in the opposite direction to what I described above: here’s how much money the landowner needs to sell; now let’s figure out if we can get enough density to make this work.

Of course, the challenge with this approach is that you naturally start to push up against a ceiling with respect to density. Landowner wants more density. City wants less density. If I ever ran a development model today where this wasn’t the case, I would instinctively worry that my model wasn’t working properly.

And therein lies the tension: how can I give this landowner the money that she/he wants, but at the same time satisfy the city and the community, and build enough density such that the project doesn’t lose money? For the time being, ignore the archaeological dig that will need to be done on the site and the creek running underneath it that is going to add $2 million to your underground costs.

This is where you have to get creative. One potential solution is try and make the price dependent on achieved density. But not all landowners will go for this and sometimes the price spread is so great that even a density bonus isn’t going to close the gap.

I like to believe that there’s always a creative solution to every problem. Try and make it work. Don’t give up. But the reality is that in many cases the land just isn’t worth the asking price and you’re going to need to walk away. That can be sad, but it can also be the smart thing to do.

It’s fine to talk about the importance of big cities in today’s world, but there’s another side of this coin to consider. What happens to the towns and smaller cities who aren’t guiding the global economy?

Here is an interesting snippet from the NY Times that recently caught my attention:

As one of my college professors recently told me about higher education, “The sociological role we play is to suck talent out of small towns and redistribute it to big cities.” There have always been regional and class inequalities in our society, but the data tells us that we’re living through a unique period of segregation.

If you combine the above with the fact that a significant number of jobs are likely to be automated in the near term, one has to wonder what the world is going to look like assuming the status quo continues.