Talking Tall: the Skyscraper Index
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Interview Talking Tall: The Skyscraper Index “We took the index as far as back as the late 1800s and found that even going back that dis- tance we could still find correlations between economic crises and completion of the world’s Andrew Lawrence tallest building.” Author Andrew Lawrence, Director An interview with Andrew Lawrence (Barclays Capital Hong Kong) with Kevin Brass, CTBUH Barclays Capital Hong Kong Public Affairs Manager/Journal Editor 41/F Cheung Kong Center 2 Queen’s Road Central Hong Kong For 13 years Andrew Lawrence has generated international headlines with the Skyscraper t: +852 2903 3319 Index, which links tall building construction to economic cycles (see Figure 1). The Index, f: +852 2903 2999 developed by Mr. Lawrence, the head of property research for Barclays Capital in Hong Kong, e: [email protected] www.barcap.com is based on a relatively simple thesis – the completion of the world’s tallest building is inevitably a marker for the start of a global economic crisis. The Empire State Building was Andrew Lawrence completed on the eve of the Great Depression, in the same way Burj Khalifa was finished at Andrew Lawrence, originator of the Skyscraper Index, the height of the market collapse in Dubai, Mr. Lawrence notes in his report. is a director at Barclays Capital Hong Kong and is responsible for regional property sector research in If nothing else, the Skyscraper Index is media catnip. Publications gobble it up. But is the Asia, excluding Japan. Based in Hong Kong, Mr. Lawrence joined Barclays Capital in August 2010 from Index accurate – or relevant? Some critics would argue that there are some notable Samsung Securities where he was regional head of exceptions to the connection between the tallest buildings and economic collapse. There was property research. Prior to that he was head of regional property research in Asia for Deutsche Bank. no widespread economic downturn when the Woolworth Building was unveiled in New York Mr. Lawrence tracks many of the biggest property in 1913, for example. And doesn’t it simply make sense that a surge in tall building companies and funds in Asia, including Henderson construction would be fueled by a strong economic client and readily available credit? Land Development, the Champion REIT and Sun Hung Kai Properties. 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The Skyscraper Index © Barclays Capital, with CTBUH building silhouettes 42 | Talking Tall: The Skyscraper Index CTBUH Journal | 2012 Issue II You use the term “misallocation” in the 25 5790 6000 23 report. Do these towers represent a Total Number (Total = 88) 5000 “misallocation” of funds? 20 Sum of Heights (Total = 21,642 m) 4243 Note: One tall building 200 m+ in height also completed Not so much a misallocation into property – 16 during 2011 in these countries: France, Germany, Mexico, 4000 ) Russia, Saudi Arabia, United Kingdom we can argue that many of these tall buildings 15 (m s certainly leased up at the time, although ht er 2875 3000 mb some have clearly struggled in the past. So I 11 Heig Nu 2407 of 10 10 think it tends to be a misallocation of timing, m 8 2000 Su 1726 as well. 5 1000 3 688 3 653 22468 2 2 430 424 421 Are you saying that skyscrapers are bad 0 0 investments? a E a e A in re m ma or US na Ch UA Ko na ap t I think they tend to reflect a number of things Qatar Kuwait ie Pa ng V Canada Si Philippines going on in the economy at the time – such Figure 2. Tall Buildings 200 meters or Taller Completed in 2011: by Country © CTBUH as very high land prices. They tend to come through and be a reflection of those sort of What are the origins of the Index? I think probably what surprised us at first is situations in the cycle. I inaugurated it in 1999. I was working for how far back it went. We took the index as far Kleinwort Benson and I came up with the as back as the late 1800s and found that even Index, just by looking at various tall buildings going back that distance we could still find Does anything going on now suggest a that were being built, especially in Hong correlations between economic crises and change in the cycle? completion of the world’s tallest building. Kong. Then I broadened it out to look globally Not at the moment. Top of our list has been to see if the Index might be a good guide as What was interesting as well was the China, in terms of building boom. And I think to whether we would see peak in economic geographic change taking place, in particular what we see is a change in the geographic cycle. The Index obviously played out very coming out of North America and going to distribution of tall buildings. Having been in well against major economic cycles and Asia in 1997 and Dubai being the last one. North America for most of 1900s it now has completion of the world’s tallest building. moved to Asia and China, more particularly (see Figure 2). Do you see the concentration of You talk of an “unhealthy correlation.” What construction as more telling than the overall is the unhealthy part? number of towers constructed? Does that suggest that China and India In the sense that skyscrapers seem to mark a When you look at Japan, obviously it doesn’t might be due for tough economic times? very large economic boom that typically ends tend to build large skyscrapers. But if you go I think at the moment we are seeing a big in large recession. And they tend to be back and look at it in a building boom building boom in China. Certainly we have associated with bigger economic cycles. They context, Japan had its own building boom in given that the correlation. It is certainly [skyscrapers] seem to start in upswing and the late ‘80s, early ‘90s. So you can find finish the recession. The unhealthy part is they underlying these skyscrapers very strong tend to mark the top of the cycle. building bubbles which are associated with the credit cycle ...$500 How do you respond to those who say this is nothing more than a gimmick? Is it always readily available credit, or are I would say the correlation has lasted for such there other factors fueling these cycles? Only in New York can a long time and just from a general economic There is certainly always an element of people you sell air for $500 a concept it would make sense to think that wanting to put down a monument to the square“ foot. funding and construction of world’s tallest building boom going on and the growth in buildings really do come at the top of cycles the city. So it always comes through a Writer Annie” Karni, New York Post, when people are most optimistic. willingness on the political side to see large explaining the city’s program for selling air buildings built, and the opportunity of rights around buildings. From “The Sky’s the Limit,” New York Post, March 5, 2012.