Towers foreshadow economic ruin

Towers foreshadow economic ruin

A series of new mega-towers are on the way for both Dubai and Saudi. But according to one theory, that could herald yet another economic slowdown. Kipp takes a closer look.

October 25, 2010 10:39 by Eva Fernandes

This week the National carried reports of the construction of The Pentominium in Dubai Marina. The Pentominium, if it is completed to reach its height of 516 meters, will become the world’s second tallest tower. The building as planned will consist of 120 one floor apartments, each marketed as a penthouse, and will be built in a corner of Dubai Marina ingeniously called the “tallest block.” The “Tallest block” will contain a number of buildings that will be some of the world’s tallest. The buildings including the Princess Tower, 23 Marina and Elite Residence; if completed to their original height they will be in the list of 20 tallest buildings on the planet.

News of the Pentominium came just after last week’s reports that Saudi Arabia plans to start building the world’s tallest building. The Dh73.45 billion tower, to be built in Jeddah, will stretch over 3.5 million square meters of land and is estimated to be just over a kilometer high (compared to the Burj Khalifa’s mere 828 metres).

This recently refreshed enthusiasm for skyscrapers has Kipp a little worried. Combine it with global economists’ worries about a “double dip” recession and we make can’t help but get a little reminiscent (not to mention apprehensive) of The Skyscrapper Index.

If you aren’t familiar with the theory, the Skyscrapper Index was formulated in 1999 by economist Andrew Lawrence. He spotted a correlation between the construction of the world’s tallest building and the onset of an economic crisis.

Lawrence points to several instances in the past century which show a direct correlation between the two, including: the construction of the Singer Building and the Metropolitan, which preceded the economic panic of 1907; the completion of the Empire State Building just after the onset of the Great Depression; the construction of the World Trade Center in 1972 and the stagflation of the 70′s; and finally, the erection of the Petronas Towers and the Asia Crisis of the late 90s.

Extending his theory, we can add the construction of the Burj Khalifa and the recent/current financial crisis to the list.

The Lawrence argument is that plans to build the world’s tallest skyscraper are announced at the peak of the boom in the business cycle but end up getting completed in the period that follows of the boom – the economic recession or the depression.

With many economists fearing an increased chance of double dip recession, Kipp wonders if the reports of plans for the next tallest building (not to mention Dubai’s “Tallest Block”) mean we are in the calm before yet another storm.