Pride and skyscrapers cometh before the fall: report

LONDON (Reuters) - An “unhealthy correlation” exists between the construction of skyscrapers and financial crashes, according to a new report from Barclays Capital.

A 2008 computer-generated image shows the planned Shanghai Tower (tallest) which will stand in Lujiazui financial district of Shanghai. REUTERS/Gensler/Handout

The construction of the Empire State building in New York in 1930, along with towers in Kuala Lumpur in 1997 and Dubai in 2010 have all been followed by economic crises, the report noted.

“Often the world’s tallest buildings are simply the edifice of a broader skyscraper building boom, reflecting a widespread misallocation of capital and an impending economic correction,” it said.

“The completion of Petronas Towers in Kuala Lumpur in 1997 was followed by a region-wide economic crisis and the collapse of Asian currencies,” it added.

Investors should pay special attention to China, the Skyscraper Index warns, as the “biggest bubble builder” is currently erecting 53 percent of the 124 skyscrapers planned over the next six years.

China currently has 75 completed buildings above 240 meters in height.

India has just completed two new skyscrapers, with 14 more already under construction.

The report’s findings may also prove worrying for Londoners, who are currently seeing a raft of new additions to the city’s skyline, including the construction of what will be Western’s Europe’s tallest building, the 310-metre (yards) high “Shard.”

The report noted that the world’s first skyscraper, the Equitable Life building in New York, was completed in 1873 and coincided with a five-year recession. It was demolished in 1912.

Other examples include Chicago’s Willis Tower, formerly known as the Sears Tower, built in 1974, just as a sharp rise in oil prices was shaking the economy and the U.S. dollar’s peg to gold was abandoned.

The world’s tallest building is the Burj Khalifa in Dubai at 828 meters, followed by Taipei 101 at 508 meters and the Shanghai World Financial Center at 492 meters.

Reporting by Li-mei Hoang; Editing by Paul Casciato