Is there a skyscraper curse?

In 2009, the Burj Khalifa in Dubai became the tallest structure ever constructed at 828 meters. This building marked a significant step change in height. The previous tallest structure, the CN Tower in Toronto, was only 553 meters high, and the tallest structure before that, the Warsaw Radio Mast, which collapsed in 1991, was 646 meters high (Parker, 2015). The Jeddah Tower (previously known as the Kingdom Tower) in Jeddah, Saudi Arabia, is under construction. It will reach one kilometer high, making it the world’s tallest structure, doubling the height of One World Trade Center in New York, the tallest building in the USA. According to the Council on Tall Buildings and Urban Habitat, over half of the skyscrapers completed in recent years, i.e., buildings taller than 200 meters, were in China. China has been experiencing a dramatic skyscraper boom since the early 2000s (Li and Wang, 2020).

Skyscraper Curse

Andrew Lawrence (1999), then with the investment bank Dresdner Kleinwort Benson, identified and coined the phrase "skyscraper curse." This concept links the completion of the world’s tallest buildings to the onset of global economic crises (Economist, 2015). Also known as "the skyscraper effect" or "the skyscraper index," Lawrence's theory suggests that building booms result from easy credit conditions and expansionary monetary policy. He based his index on historical data from the United States, focusing solely on record-breaking projects while dismissing overall construction and investment statistics.

Lawrence's first notable example was the Panic of 1907, coinciding with the unveiling of the Singer Building (186.6 meters) and the Metropolitan Life Insurance Company Tower (213 meters) in New York in 1908 and 1909, respectively. Another example is the trio of super-tall towers built during the 1930s: 40 Wall Street (283 meters), the Chrysler Building (319 meters), and the Empire State Building (381 meters), which were completed during the Great Depression. The Empire State Building was the tallest building from 1931 to 1970 until the first tower of the World Trade Center was topped out.

The World Trade Center towers (417 meters and 415 meters) in New York and the Sears Tower (now Willis Tower) in Chicago (442 meters) opened in 1974 amid the 1973–1974 stock market crash and the 1973 oil crisis. The Petronas Twin Towers in Kuala Lumpur (451.9 meters) opened in 1999 during the aftermath of the 1997 Asian Financial Crisis. Taipei 101 (508 meters) in Taiwan, completed in 2004, surpassed the Petronas Twin Towers and held the title until the Burj Khalifa's completion in 2010. Shortly after the Burj Khalifa's exterior was completed in October 2009, the Dubai government nearly defaulted on its loans, indicating a financial crisis.

In November 2000, Time Warner began constructing its $1.8 billion headquarters, the most costly single-building project in U.S. history. Two months later, Time Warner announced its infamous merger with AOL, resulting in significant financial losses.

Lawrence argued that building booms were due to over-investment, monetary expansion, and speculation. When these patterns become unsustainable, economic crises follow.

Criticism of the Skyscraper Curse

Economists from Rutgers University researched to examine the correlation between skyscraper heights and the business cycle (Barr et al., 2015). They found no significant relationship between the timing of record-tall buildings and the business cycle. During economic booms, developers built super-tall buildings to capitalize on rising incomes and increased demand for office space.

Their analysis of the relationship between skyscraper height and real per capita GDP in the United States, Canada, China, and Hong Kong revealed that while there is a long-term correlation between GDP growth and building height, skyscraper height is not a reliable predictor of economic cycles. Instead, GDP growth predicts changes in building height.

Conclusion

While the Skyscraper Curse offers an intriguing perspective on the relationship between constructing super-tall buildings and economic cycles, it remains a debated topic. Critics argue that correlation does not imply causation, and the construction of skyscrapers is more a symptom of economic conditions than a cause of downturns. Additionally, many skyscrapers have been built without preceding economic crises, suggesting other factors are at play.

References:

1.????? Baker, T. (2009). “When Skyscrapers Signal a Downturn.” Guardian.co.uk, Oct. 13, www.guardian.co.uk/artanddesign/2009/oct/13/skyscraperssignal-downturn

2.????? Barr, J., Mizrach, B. and Mundra, K. (2015) "Skyscraper Height and the Business Cycle: Separating Myth from Reality", Applied Economics, Vol. 47 No.2, pp.148-160. https://kmundra.newark.rutgers.edu/files/2014/10/bmm_skyscraper_appliedeconfinal22sept14.pdf

3.????? Boyle, E., Engelhardt, L. M. and Thornton, M. (2016) "Is There Such a Thing as a Skyscraper Curse", The Quarterly Journal of Austrian Economics, Vol. 19, No.2, pp. 149-168.

4.????? Economist (2015) “Is There Such a Thing as the Skyscraper Curse?” March 28, p.80.

5.????? Honorée, A., Morgan, Y.-C.T. and Krenn, K. (2018) "Heights of privilege: economic and cultural determinants of skyscraper height across the world", International Journal of Construction Management, Vol. 20, No.7, pp.761-774.

6.????? Lawrence, A. (1999) The Curse Bites: Skyscraper Index Strikes, Property Report, Dresdner Kelinwort Benson Research.

7.????? Li,Q., and? Wang, L. (2020) "Is the Chinese skyscraper boom excessive?", Journal of Urban Affairs, Vol. 44, No.8, pp.1117-1135.

8.????? Mansharamani, V. (2011) “Skyscrapers Are A Great Bubble Indicator” www.forbes.com/2011/03/10/skyscrapers-burj-dubaileadership-leaders-bubbles.html

9.????? Parker, M. (2015) "Vertical capitalism: Skyscrapers and organization", Culture and Organization, Vol. 21, No.3, pp. 217-234.

10.? Reina, P. (2012) “Study Claims Correlation Between Super-tower Construction and Economic Busts”, Engineering News-Record, Feb.6.

11. Subramanian, N. (2023) “Managing Cost and Time Overruns of Megaprojects”, New Building Materials & Construction World (NBM & CW), Vol. 29, No.2, Aug. 2023, pp.2-7.

12.? Thornton, M. (2005) “Skyscrapers and Business Cycles.” Quarterly Journal of Austrian Economics, Vol. 8, No. 1, pp. 51–74

13.? Thornton, M., (2018) The Skyscraper Curse: And How Austrian Economists Predicted Every Major Economic Crisis of the Last Century, Mises Institute, Auburn, Alabama, 278 pp. https://cdn.mises.org/The%20Skyscraper%20Curse.pdf

14.? Voigt, K. (2011) “China Skyscraper Boom Portend a Property Crash?” https://business.blogs.cnn.com, Jan. 5th.

15.? www.investopedia.com/terms/s/skyscraper-effect.asp

16.? Interview with Andrew Lawrence-Talking Tall: The Skyscraper Index, https://global.ctbuh.org/resources/papers/51-Journal2012_IssueII_InterviewX.pdf

17.? https://en.wikipedia.org/wiki/Skyscraper_Index

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