Against the backdrop of the last few years of recession, we’re getting used to financial analysts predicting the future of the economy – and often getting it wrong. However, Andrew Lawrence’s Skyscraper Index puts forward an economic theory that’s firmly rooted in architecture, and could allow us to predict recession based on the projects that are being built around us.
The Index is a fairly simple theory: skyscrapers are planned and developed during the peak period of growth, meaning that recession usually hits either just before or during construction. This particularly affects supertall scrapers that are attempting to break records. Lawrence’s theory was further developed by Mark Thornton, an American economist, who found that declining interest rates at the onset of a boom period leads to land prices rising, growth in firm sizes and investment in new construction technologies. All three together mean that skyscrapers offer an economic way to develop costly land with the maximum amount of profit from rent and sales – and plenty of free marketing from attempting a record-breaking project. Famous examples include the Empire State Building, once dubbed the ‘Empty State Building’ as its opening coincided with the Great Depression, leaving the building in the strange situation of making as much money from charging visitors to access the observation deck as it did from renting out office space. In more recent years, the Burj Khalifa has become a notorious example of the theory after Dubai’s spectacular construction boom during the 1990s and 2000s, with more completed or topped out skyscrapers higher than 1400 metres than anywhere else in the world. However, the economic boom led to overbuilding and Dubai’s downfall came when recession hit, resulting in neighbouring Abu Dhabi having to bail out many projects from foreclosures and huge amounts of debt. To show their thanks, the world’s tallest tower was renamed from the Burj Dubai to the Burj Khalifa, after UAE President and emir of Abu Dhabi of the same name. In these cases, overbuilding and a wish to break records, combined with vast market speculation, grew from boom period optimism that sadly could not last. Rather than building to demand, developers become swept up in a ‘building fever’, leading to vanity projects and record-breaking attempts with a kind of ‘build it and they will come’ attitude.
The Sears Tower (Matthew Knott), the Petronas Twin Tower (Michael McDonagh) and the Empire State Building (C Kelley) all coincided with economic collapse
Critics have argued that this is an unreliable theory; three recessions of the 20th century have not been preceded by any record-breaking projects. Further studies of this phenomenon are currently in progress. Still, it can clearly be seen that when normal building practices are overruled by irrational speculation during boom periods, there is trouble brewing. Advocates of the Index are now looking with concern towards India and China, who both seemingly escaped the effects of the recent global recession. India, which currently has just two skyscrapers, has fourteen planned or in the process of being built, and China is currently home to half of the world’s skyscrapers that are classed as under construction. Whilst none of these currently rival the tallest tower in the world, the Burj Khalifa, all eyes are focusing on the East to see what will happen next.