Brandon Donnelly — Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly. — Page 998

Dylan Reid recently wrote an interesting article about, what he calls, high low-rise infill buildings along Toronto’s main streets. 

He describes the typology in this way: “These are generally 4-storey mixed-use buildings built quickly on one or two lots, replacing smaller previous buildings. They are often inserted beside existing, attached buildings.“

Now, Reid acknowledges that this a challenging scale to develop at. He links to one of my articles in Urban Capital’s Site Magazine where I talk about exactly that: the diseconomies of scale associated with building small. (Though, I was talking about mid-rise, not high low-rise.)

Reid addresses these challenges with a number of potential cost savings, including no parking minimums and no rezoning process. He also suggests that these projects may be better suited to existing landowners (who may own the land free and clear of a mortgage).

Getting rid of parking minimums and streamlining approvals would certainly help, though I remain doubtful about overall feasibility. But what I wanted to comment on today was the last point about these projects being better suited to existing landowners.

One problem with this line of thinking is that if we’re talking about land on a street where greater densities such as mid-rise are also permissible, the land is going to get valued based on mid-rise and not high low-rise.

So when a prudent landowner thinks about developing their land, they may also consider the opportunity cost of simply selling their land based on its highest and best use.

That thought process might go something like this. I own a piece of land. If I were to sell this land today and take on no development risk, I could make $X. If I were to instead develop this land, I could make $Y.

If $Y is less than $X, then I’m obviously not going to develop. But if the spread between $Y and $X isn’t enough to compensate me for the risk of developing (and there’s lots of risk in developing), then I’m also not going to do it. (Developers run a similar test by marking the land cost in their pro forma to market.)

And if $X is based on greater densities than $Y ($X is based on mid-rise densities and $Y is based on high low-rise densities) and if $Y is also being challenged by further diseconomies of scale, then I’m sure you can start to see how the math may not pencil.

I say all of this not to shit on Reid’s article . It’s a good article. You should go read it. And we should all continue to think about ways to increase the supply of housing in this city and in others.

Last week I had something delivered from Amazon almost every single day. They weren’t necessarily big things though. One day it was a new corn broom for the patio. Another day it was a small set of hooks that I wanted to hang some lights. And the list goes on. 

This is what Amazon wants us to do. Order every little thing, instantly, as soon as you think about it. And it’s magically convenient.

Developers and architects are of course thinking about the implications of this shifting shopping habit on new residential developments. Usually it comes in the form of a large “Amazon room” and/or a parcel locker system. 

I recently measured the package room in my building (geeky, I know). It’s about 10′ x 6′ and it sometimes isn’t enough for the volume of daily packages generated by ~360 units. 

The other thing that happened last week is that my concierge said to me: “Brandon, we have become a full fledge post office with the amount of packages that come through here every day.” Every evening there’s a lineup of people waiting to collect their packages. 

That immediately signaled to me that simply providing a larger room probably isn’t enough. This trend is only going to continue. How could we better design and optimize for this shift?

I am sure that there many companies working on this problem. Hopefully they will surface in the comments and in my inbox following this post.

Photo by Maarten van den Heuvel on Unsplash

The Globe and Mail recently ran an article arguing that tech salaries in Toronto are significantly less than those in the US and that it is leading to “alarmingly high rates” of brain drain. The claim is that the average tech salary in 2017 was US$73,000 in Toronto, compared to US$140,000 in the Bay Area or US$129,000 in New York City. 

However, if you adjust these salaries for each city’s cost of living, the numbers look like this (chart taken from the same article ):

Now all of a sudden Toronto is lumped together with the Bay Area and New York City. It was adjacent to London even when you didn’t adjust the salaries. As  Tobi Lütke – CEO of Shopify – points out in his Twitter rebuttal of the article , housing is the determining factor in this adjustment: “Toronto is a very expensive city, and Austin isn’t.”

Lütke also points out, in case you’re in the market, that Canadian-based Shopify pays its tech employees well above market, provides stock compensation, and is currently “hiring like crazy”. But perhaps more importantly, he stresses the importance of Canadians building the economy of the country in which they are from. I feel exactly the same way.