Brandon Donnelly — Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly. — Page 1205

What happens when wages and real estate prices become too high in a city? Companies start growing in lower cost locations. We’ve all seen this before. 

Fred Wilson recently blogged about this “ spillover effect ”, citing a New York Times article  talking about the growth of tech offices in Phoenix. As someone who sits on the board of many technology companies, he was noticing a thematic trend:

“A big theme of board meetings I’ve been in over the past year is the crazy high cost of talent in the big tech centers (SF, NYC, LA, Boston, Seattle) and the need to grow headcount in lower cost locations.”

We talk a lot about housing prices on this blog, and so I think it’s useful to see how this, along with high wages, also impacts companies. The two are interrelated.

Below is a chart from the NY Times article showing the US cities with the highest number of technology jobs and the most growth from 2010 to 2015. 

San Francisco is in a league of its own. But overall, the growth is in tech and many cities are adding lots of technology jobs. Look at Detroit and Boston right beside each other (Detroit obviously has a smaller starting base). And look at how Miami is nowhere to be found.

Of course, one interesting question is whether these new outposts – such as Phoenix – can truly come into their own and carve out a niche:

“We don’t want to be San Francisco’s back office — we need more creators here,” said Scott Salkin, a founder and the chief executive of Allbound, which is based in Phoenix, makes sales software and has offices down the hall from Gainsight’s.

Even with the high cost of living, it’s hard to supplant the coastal hegemony. That’s where people go to chase riches. As comedian Daniel Tosh likes to say, “the middle of the country is for people who gave up on their dreams.”

Though for some, living in a place like Denver or Salt Lake City and snowboarding every weekend is a better outcome than living in a studio apartment and commuting an hour to work.

Jones Lang LaSalle recently asked: Is there still room for the buccaneer property developer?

But in the contemporary world of real-estate – corporatized, institutionalized and massively capitalized – is there any longer room for the swashbuckling “merchant developers” or are they doomed to go the way of the wildly-gesticulating floor traders in colourful blazers that once symbolized financial markets?

“There is always room for the entrepreneur,” says Richard Bloxam, JLL’s head of capital markets, Europe, the Middle East and Africa. “It is, however, fair to say that real estate has been on a journey away from total reliance on the entrepreneurial model.”

I’ve written about the institutionalization of the business before. And it’s something I’ve been asking developers that I interview for my BARED blog series . Are the days of the eccentric and larger than life developer behind us?

The consensus appears to be no. 

All that has changed is the capital source / stack. The skills that make for a successful developer haven’t changed. You still need to be creative and look for opportunities that others don’t see. You still have to navigate through all of the various constraints – of which there is probably more of today. You still need to be entrepreneurial in spirit.

What I wonder though is if this change hasn’t undemocratized the business to a certain extent. It seems to me that it’s harder, today, to fly by the seat of your pants with just an idea (and no capital). The barriers to entry feel more significant. But as Richard says, “there is always room for the entrepreneur.” And I believe that.

I would be curious to hear your thoughts. 

Also, the next BARED post will be up shortly. Stay tuned.

How do you self-identify in terms of ethnicity?

I was having a discussion last night with a few friends about ethnic self-identification. In a multicultural city like Toronto where more than half of the population was born elsewhere, it’s an interesting topic.

For new immigrants, I can understand that there often remains a strong connection to the home country and culture. 

However, for subsequent generations, the attachment seems to manifest itself and wane (which I think is a natural tendency) in a variety of different ways. I am sure it partially depends on how determined the parents are to preserve the lineage vs. fully assimilate. In any event, it’s a somewhat subjective phenomenon.

The best data I could find  on this is from the 2006 Canadian census (I couldn’t find anything similar from the 2011 census). However, the question on the census was not about ethnic self-identification, per se, but rather how each respondent would classify the ancestry of their parents .

There were a total of 31,241,030 responses . Some people gave a single response and some people selected multiple ethnic origins, which was allowed.

In total, 10,066,290 people selected “Canadian.” Roughly 1/3 of the country. However, only 5,748,725 selected it as a single response. So only about 18.4% of respondents identified their parents as being only Canadian. The remaining group of people who selected Canadian also selected some other ethnic origin.

The reason I pick out this stat is because – to answer my own question at the beginning of this post – I would self-identify as being only Canadian. I feel no emotional attachment to any other country.

I would never support any other country at the Olympics and I would never fight for any other country.

In terms of my background, my father wasn’t born here and so I am 1st/2nd generation on that side, depending on how you define 1st generation . However, on my mother’s side, I would be 3rd/4th generation Canadian.

How do you self-identify? There’s no right or wrong answer here.