Brandon Donnelly — Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly. — Page 277

This is the sort of housing project that you'd fully expect to find in Tokyo. Seven homes built on a small urban lot measuring only 11 feet wide by 93 feet deep. But in this case, it's not Tokyo; it's Chinatown, Philadelphia, where a residual lot that was created when the sunken Vine Street Expressway was carved through the middle of the city in the 1950s.

Designed by Philadelphia-based Interface Studio Architects (ISA), the project contains 7 levels of livable space. What's interesting, though, is that from a building code perspective this is still a 4-story building. There are two mezzanine levels that don't get counted (and that create some great double-height spaces). This also seems to be what allowed them to get away with a single egress stair in the middle of the building.

The other technique that was used to maximum density is facade projections. Philadelphia's zoning code allows for projections up to 3 feet in the horizontal dimension. And if you look at the above plans, you'll see that these were used to "top up" or extend the site's 11 foot width to 14 feet, when it made sense to do so from a programming standpoint. The result is some very livable spaces.

I am endlessly fascinated by these sorts of projects because they demand creativity and because you ultimately end up unlocking something that the market had been overlooking. Here is an example of a small leftover urban parcel that was previously used as surface parking for two cars. Now it's seven beautiful homes.

Photos/drawings: ISA

Over the years, we have spoken a lot about the role that investors play in Toronto's pre-construction condominium market. In the media, they are often spoken about pejoratively. They are seen as being a well-capitalized group that outbids end-users for a limited supply of new housing.

But on the other hand, we know that (1) they have been a major contributor to new rental housing in this city (they filled the gap after we decided in the 1970s that we didn't like purpose-built rentals ) and that (2) they play an important function in getting new housing financed.

For better or for worse, we know that, without an investor market, there would have been far fewer new homes constructed over the last cycle. Pre-sales are generally always a prerequisite for a construction loan. And the fastest, and therefore safest, way to get pre-sales is/was to target investors.

But the world has changed since then. Investor demand has diminished . So much so that you could argue that the opposite is now true.

I was speaking to my friend Christopher Bibby this morning and he reminded me that end-users, who are passionate about specific projects and neighborhoods, are the more resilient demand base during a downturn. Because if you need a place to live, you need a place to live.

Perhaps it's no coincidence that every single sale that we have had at Junction House this year has been to an end-user who moved in.

This week, Urbanation released its condominium market update for Q1-2024. And I'd like to point out two data points. Firstly, across the Greater Toronto & Hamilton Area (GTHA), there were 1,461 new condominium sales for the quarter.

This is the lowest quarterly total since Q1-2009 (the global financial crisis) and the second lowest total since the mid-1990s. (Remember when we spoke about right now being the toughest market since the early 90s?)

Secondly, during this same time period, 2,361 new condominiums began construction across the region. This represents a 52% annual decrease. So all in all, fewer people are buying new homes and fewer new homes are starting construction.

What is obvious is that the market is slow right now. What is not obvious is what happens next. It's unknowable. There’s risk . My gut is that the market will come back more slowly than many people are expecting, or perhaps hoping. There’s inventory that needs to work its way through the system first.

But ultimately it will come back. Toronto is one of the greatest cities in the world and there remains a need for more homes. Which is why I continue to believe that, if you are in the market for a new one, now is arguably a wonderful time. You get to buy when most others aren’t.