The Real Deal New York

Record-breaking skyscrapers a sign of economic doom?

40 Wall Street, Empire State Building construction coincided with onset of financial downturns

April 28, 2014 03:00PM
By Business Insider

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Saudi Arabia is expected to begin work on the Kingdom Tower next week.

The building in Jeddah is likely to cost $1.23 billion and stand 3,280 feet tall, according to the Saudi Gazette.

That’s 568 feet taller than Dubai’s Burj Khalifa.

Construction is also underway on Sky City in China, projected to be 2,749 feet tall. Sky City is expected to finish before the Kingdom Tower and will, for a very brief period, hold the title of the world’s tallest building.

Two years ago, Barclays introduced its Skyscraper Index, which suggests that construction booms, highlighted by record-breaking skyscrapers, coincide with the beginning of economic downturns.

In his 2012 report, Barclays’ Andrew Lawrence and his team wrote that this is because “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.”

But it isn’t just the world’s tallest building we should be looking at. Lawrence said it’s also important to look at the number of skyscrapers being built and their geographic profile. This is because the tallest buildings “rarely stand alone.”

From left: 40 Wall Street, former Twin Towers at 1 and 2 World Trade Center and the Empire State Building 350 Fifth Avenue

Record-breaking New York skyscrapers in their day: 40 Wall Street, former Twin Towers at 1 and 2 World Trade Center and the Empire State Building 350 Fifth Avenue

With this in mind, investors should watch the building booms in China, India, and Saudi Arabia.

Here’s a look at the Skyscraper Index from Barclays (click the image to enlarge it). Basically, what you see is a series of famous skyscrapers associated with subsequent busts. The most recent one is Dubai’s Burg Khalifa. Another notable recent one is Malaysia’s Petronas Towers, which presaged the Asian economic crisis of the late ’90s.

Source: Skyscraper Source Media, Barclays Capital (Click to enlarge)

Source: Skyscraper Source Media, Barclays Capital (Click to enlarge)

Drawing on Barclays’ Skyscraper Index, we pulled 10 skyscrapers whose construction coincided with the financial crises of their times.

Click here to see the skyscrapers »

  • Sillyboys

    This is silly. Since the advent of the modern elevator, taller and taller buildings have been planned and/or constructed year after year. This index uses any geographically located tall building as some sort of evidence of market tops across different economies. Of course there will buildings connected to downturns much as they are with upturns. Surprised there are not more critical thinkers at Barclays….but after all they are only brits

  • awake

    of course. the crashes are controlled anyway

  • Steven Kovex

    Castle Brands Inc.
    OPKO Healthcare Inc.
    are taking 800,00sq.ft. in a Related Cos.

  • Steven Kovex

    Richard Fuld is a Girl

  • Steven Kovex

    We love Howard Appel, the wizard of micro-cap stocks.

  • ralphpetrillo

    Said Arabia needs the building to store all of its gold, and cash.

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