The Three Economic Drivers Behind the Rise of Supertall Towers

PLAY OF THE LAND

The skyline in Dubai in 2000 was, for all intents and purposes, relatively tame. This is not to say it was entirely skyscraper-less. The Emirates Towers building complex had just reached completion, with the 1,165-foot Emirates Office Tower and the 1,014-foot Jumeriah Emirates Tower Hotel having the distinction of being among tallest of buildings in the world.

Today, the city is synonymous with supertall skyscrapers. The Burj Khalifa, the 2,717-foot office-hotel-residential supertall that was finished in 2010, remains the tallest building in the world. Since 2000, 17 towers standing above 300 meters, or roughly 984 feet, have been built in Dubai, per the Skyscraper Center, the Global Tall Building Database of the Council on Tall Buildings and Urban Habitat (CTBUH).

The skyscraper itself reflects a city’s wealth and its global competitiveness. In many cases, it can serve as a city’s calling card that it has, indeed, arrived as a global city.

A city that is growing has the motivation to reinvent itself by putting up a supertall tower.

“You see these towers rising in these newly wealthy cities that can develop with few constraints. They really want to create a statement, and civic pride tends to get expressed in these supertall buildings,” notes Richard Barkham, global chief economist at CBRE.

Barkham says the emergence of supertall skyscrapers like the Burj Khalifa and others in global cities can be explained by three key economic factors: the prosperity of the city, the status of the city within the global hierarchy, and the available land area for the city.

In the case of Dubai, which has been one of the world’s fastest growing economies, its GDP growth is one of the drivers of skyscraper development, says Barkham, who co-authored the recent CTBUH research paper, “Reaching for the Sky: The Determinants of Tall Office Development in Global Gateway Cities.”

Here are three economic drivers behind the rise of supertalls in cities around the world.

1. GDP Growth

While skyscraper development in a city is both the cause and consequence of skyscraper development, Barkham, who co-wrote “Reaching for the Sky” with Dennis Schoenmaker, a global economist at CBRE, Global Research, and Michiel Daams, a postdoctoral researcher at the University of Groningen in the Netherlands, adds that there is more to this correlation between GDP growth and skyscrapers.

“The larger the stream of profits in absolute terms from participating in a city’s economy, the greater will be the capital deployed and the labor utilized to generate those profits,” says Barkham.

The report also found that the higher a city’s GDP, the greater the amount of floor space, on average, in skyscrapers. The report’s authors discovered that a 10 percent increase in GDP led to a 2.8 percent increase in skyscrapers.

“A city that is growing has the motivation to reinvent itself by putting up a supertall tower,” says Barkham. “And you can’t embark on these big capital projects without having the motivation and confidence of being a city with long-term profitability.”

A supertall skyscraper that stands higher than 300 meters may be more the consequence of a city’s global competitiveness with other cities that boast similar supertalls, per the report.

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Dubai’s rapid GDP growth is one of the drivers behind its skyscraper development.

2. The Size of a City

The size of a city is another key driver in the development in skyscrapers. For instance, the larger a city is in geographical terms, the more space there will be from the fringe of that city to its central district. Traveling this distance will involve more time and money as a result.

In larger cities, land at the center is more expensive relative to the periphery because of the premium paid for access.

“In urban economics, the bigger the city, the greater the premium of accessibility and the more valuable it is to be situated in the downtown area,” says Barkham. “It is because of this that people develop land more intensively.”

The report found that a 10 percent increase in land area led to a 2.9 percent increase in skyscrapers.

3.Global Connectivity

A third economic driver is the city’s standing in the global hierarchy of cities. A city’s “connectivity” can, in part, be determined by the number of global and regional company headquarter functions that are based in the city.

In urban economics, the bigger the city, the greater the premium of accessibility and the more valuable it is to be situated in the downtown area.

The more it does have, the “greater that city’s connectivity with, and influence within, the global economy,” according to the report.

“Companies with headquarter functions in these cities need to project an image of global connectivity while also competing with one another by building the flashiest headquarters in these supertalls,” says Barkham.

Barkham and team found that a 10 percent increase in a city’s connectivity was associated with a 11.2 percent increase in skyscraper floor space.

One noneconomic driver is land-use planning, something that is more common in Europe because of the continent’s “concern for the preservation of ‘heritage,’” the authors write. For instance, European cities like Milan, Munich, Rome and Amsterdam have “historic core” areas. Europe, the authors found, have 69 percent fewer skyscraper floors in office buildings over 100 meters than other cities elsewhere.

“Civic pride and a sense of place are important as well. In Europe, sense of place is bound to a historic infrastructure that gives these cities a very special feel,” says Barkham. “These are systems that mitigate against tall buildings.”

Towers Rise in New York, Shanghai and Dubai

Highly connected cities like Dubai, New York and Shanghai have all experienced marked growth in skyscraper development between 2000 and 2015. In that time span, New York added 1,263 office skyscraper floors, while Shanghai added 2,564.

In the graphic below, all three cities have shown different geographical patterns in terms of where they concentrate these new developments. For instance, in New York, between 2000 and 2015, floors were added primarily within the middle and lower parts of Manhattan.

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Shanghai, which has grown over the course of the past few decades as a globally connected business center, has spread out its development across the city’s core. Dubai’s supply of skyscraper floors jumped up from low to a handsome supply.

An estimated 3,059 office skyscraper floors were added between 2000 and 2015, a development that underlines “the lasting and rapid character of changes in skylines and urban patterns that can be brought about by global connectivity,” Barkham and team write.

Barkam says, “Cities today are looking to create a brand image of success by developing supertall buildings, and these are the cities that are likely to get highly mobile global capital.”

You can read “Reaching for the Sky: The Determinants of Tall Office Development in Global Gateway Cities” by clicking on this link.

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