Do tall buildings get us into an economic scrape?

They say pride comes before a fall, but this is ridiculous: a report suggests new skyscrapers often precede an economic crash.

by Emma Haslett
Last Updated: 03 Sep 2013
They’re thought of as shining symbols of wealth and economic success, but a new report by Barclays Capital has suggested that skyscrapers are more often the precursor to a financial crash. According to this year’s Skyscraper Index, there is an ‘unhealthy correlation’ between upsurges in the number of skyscrapers being built, and impending economic disasters.

The report gives a number of examples, including the world’s first skyscraper, New York’s Equitable Life building, which was completed in 1873 – just as a five-year recession took hold. The 1,450ft Willis (née Sears) Tower in Chicago is another one: it was completed in 1973 – at the same time as a spike in oil prices caused the US to stop pegging the dollar to the price of gold. More modern examples include Dubai’s Burj Khalifa (at 2,716ft, currently the tallest building in the world), which was completed just before Dubai nearly went bust, and the 1,482ft Petronas Tower, built in 1997, just as a financial crisis raged in Asia.

What’s going on? Barcap reckons it’s to do with investors feeling flush, and putting their cash in the wrong places. ‘Often the world’s tallest buildings are simply the edifice of a broader skyscraper building boom, reflecting a widespread misallocation of capital and an impending economic correction.’ We think that means empty demonstrations of wealth and excess, a la the decline of the Roman empire…

Obviously, this is all with the benefit of hindsight – and doesn’t provide much help with calling the top of the market. But perhaps the people of China should be worried: according to Barcap, the country’s building 53% of the world’s tallest buildings. And separate report by JP Morgan agrees: apparently, while an upsurge in lending during 2008 pushed up prices in the country, prices in China’s property market are expected to drop by 20% over the next 12 to 18 months. India is another concern: over the next five years, 14 skyscrapers will be completed in the country. And we’re not immune over here, either: London’s Shard is expected to be completed this year – which, at 1,017ft, will be the tallest building in Western Europe. So we’d better watch out…

- Image credit: Flickr/chusico

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