Few things are as associated with New York—bagels, the subway, Woody Allen—as skyscrapers, from the Empire State Building to the World Trade Center. They are increasingly becoming defining icons in other world cities, as well, from Dubai to Shanghai, a fact that may well auger a coming economic crisis for a few eastern economies, according to a new study by Barclays Capital.
“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,” Barclays analyists declared earlier this week.
Indeed, both the Empire State Building and the World Trade Center were built into the headwinds of a down economy. And look at all the towers dotting the skyline during the most recent building boom. The Brooklyn waterfront barely existed a decade ago, and look at it now.
This is not to say that skyscrapers cause recessions, they are simply the strongest sign of hedonistic times, and the fact that China and India are building so much should give investors pause, argues Barclays.
Professor Skyscraper himself Vishaan Chakrabarti argued in an email to The Observer that the worst thing we could do is get scared off from building big.
Real estate is a lagging indicator, so often skyscrapers finish up as a bubble bursts. But skyscrapers in places where there is demand (high populous places with demand like NYC, Shanghai, Mumbai) vs anomolous locations like Dubai, are about much more than one cycle. Often those same buildings that finish as a bubble is bursting also end up being very valuable investments in the long term, and very important for those cities and their tax bases.
Time to break ground again.