business current affairs economics

The Shard and the curse of the skyscraper

In six months time London will be the proud possessor of the tallest building in Europe. The Shard, currently splintering skywards on the South Bank, will stand over 1,000 feet tall on completion. If the architects are to be believed, it will be a glorious monument to London’s ambition. But the ‘tallest building’ game is a dangerous one. Looking back at previous record breaking skyscrapers, one might be forgiven for seeing the Shard as an omen of impending economic doom: the towering cranes of the world’s tallest building sites have an uncanny knack of foreshadowing recession.

Dubai currently has the world’s tallest building. Ground was broken on the site in 2004 and the foundations were started for the Burj Dubai, the crown jewel in the Emirate’s already glittering collection of show-off architecture. By the time the building had been topped out in 2009 the money had ran out, and Dubai had to cadge $10 billion off Abu Dhabi to finish the job. A year after it opened it was barely occupied, and rent rates had to be cut by up to 90% to entice residents in.

Dubai’s tower seized the crown from Taiwan, who had the tallest building record for just five years. Taiwan’s economy has been remarkably resilient, a near interrupted upward growth curve until the recent global crisis. That one interruption just happens to come in 2001, halfway through construction of the 101 storey Taipei 101.

Before Taipei 101, Malaysia’s Petronas Towers were holders of the curse of the world’s tallest building. When they were commissioned, Malaysia’s economy was soaring, an enviable tiger economy success story. By the time they were complete, the Asian crisis had knocked $30 billion off the economy.

Willis Tower, best known by its previous moniker the Sears Tower, is the tallest in America and was the tallest in the world until Malaysia usurped them. (Controversially in fact – Willis has more storeys, but the Petronas towers have big spiky spires that reach higher. Spires count towards the record, Willis’ antennae don’t.) Chicago’s giant was commissioned in 1969 by Sears, as a headquarters befitting a company that was the world’s biggest retailer at the time. By the time it was completed in 1974, the US was in recession and a fuel crisis, and Sears’ dominance was over. The tower stood half empty for a decade. The twin towers of the World Trade Centre opened a year earlier and were similarly affected.

Before the Willis Tower, the noble art-deco masterpiece of the Empire State Building was the world’s tallest building, a record it held for an impressive 41 years. It was completed in 1931. Anyone remember what the economy was doing then? The Great Depression saw locals rename the building the Empty State Building, and it was 20 years before the owners turned a profit.

It’s pretty obvious why big ego buildings are harbingers of economic doom. It takes a booming market in commercial property to make such buildings worthwhile. Since it takes an enormous amount of speculative capital to finance a skyscraper, they’re only ever greenlit under conditions of irrational optimism. Given the length of construction, the market has plenty of time to overheat and collapse before they are completed.

Economist Andrew Lawrence has even suggested that a ‘Skyscraper Index’ might be a good way of predicting a downturn. Mark Thornton has examined the correlation between skyscraper building and the business cycle and concluded that it’s a better predictor than one might expect, although he cautions that “this does not suggest that building heights should be used as a guide to fiscal and monetary policy or that skyscraper heights should be limited to prevent economic crisis.”

Perhaps not, but the planning commission should still have taken one look at the Shard application and got straight on the phone to the Bank of England: “They’re planning Europe’s tallest building – quick, raise interest rates.”

It’s too late to heed the warning now – the Shard is already built. But there are places where we can heed the flashing red of the Skyscraper Index. The US is building a new tallest building at Ground Zero, but since it’s as much a national monument as a commercial property ego project perhaps it doesn’t fit the usual paradigm.

In a somewhat bizarre echo, Saudi Arabia is planning the world’s tallest tower (yawn), funded by Prince Alwaheed bin Talal and the Bin Laden Group of all people. Saudi Arabia can afford to do what it likes, so I don’t think that’s cause for alarm either. Ditto Kuwait and Bahrain, who have been batting around ideas for mega-towers.

Of more concern is China. As has been widely reported, the country has been gripped by a runaway construction boom. Cities and regions have been playing a game of mine’s-bigger-than-yours with glamorous new buildings and developments. There are no fewer than 200 skyscrapers under construction in China this summer, including monsters that will take the number two and three spots in the architectural hubris league. By 2015, China will have seven of the top ten tallest buildings in the world. By 2015, if the Skyscraper Index holds true, then China is also likely to have experienced its first recession in modern times.


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