123 acres of space, straight up, rising from the dust.
Visible from 95kms away and tall enough to see the same sunset twice.
Burj Khalifa officially opened on January the 4th 2010.
It was a major feat of engineering and about a decade later, now about to be superseded by another building 20% taller.
Pop Quiz.
Do you think it is a good idea to open a new SkyScraper in the middle of a downturn?
Would that be part of your strategic business plan?
Perhaps not.
Yet, in every major downturn, a contingent of the worlds tallest buildings hold their opening day.
(The causes of this I will discuss later)
Following on from last week’s scribbles detailing the property cycle outlook for this year, I wanted to add this tongue-in-cheek indicator to the mix.
The SkyScraper index.
I didn’t create this index, it’s a real thing. The SkyScraper Index is all about charting the rise of high buildings past, present and future, specifically the worlds tallest buildings. Tallest tower, tallest office, tallest viewing platform etc.
It was created to prove a point; that point being, more ‘tallest’ buildings are opened in a downturn than in boom times.
A study was done about the SkyScraper index and the results found the index was not good at forecasting the size of the downturn based on the size of the buildings.
It did find, the index was good at predicting when a downturn may happen, due to completion dates on the ‘worlds tallest’ buildings under construction.
Pretty cool hey.
This week, I read about a ‘worlds tallest’ in our own home country, right in the heart of Melbourne, Australia.
As part of their $2 billion, 365-meter tower project in the Southbank, a developer is creating a 4-acre vertical garden and green space. The height will earn it the right to be called the ‘World’s Tallest Garden’.
This project has been fast tracked by the Victorian Government and due to start next year, with a completion timeframe of 5 years.
Meaning this project is scheduled to open 2027, right in the middle of the next major downturn (according to the property clock).
Now, I am not betting the farm on the SkyScraper Index, but I always laugh when I see announcements of these large projects that have open dates around the property cycle anticipated times.
Back to why this happens..
Money.
When boom times are happening, the demand for land increases dramatically. Pieces of dirt that once were uneconomical to utilise (too costly to buy or too costly to build upon), become affordable in the scheme of development projects and anticipated returns.
This demand on land pushes up prices, and therefor costs per square meter.
As this ‘crisis’ occurs, lawmakers are pressured into doing something. That ‘something’ is usually zoning changes that relax height and density restrictions, allowing more people to reside in a condensed location.
Developers are always looking for the highest and best use of a parcel of land, and the ability to go up, means more saleable floor area per ground square meter.
In short, if you can fit 100 stories on a site, why would you do 50?
The demand for land pushes up prices and building heights, both to stratospheric levels.
Planning / development lead times of these superstructures is very long, and therefor they are not finished in the same cycle they are started.
The Burj Khalifa started in 2005 boom time, and finished 5 years later in 2010 carnage, clean up, post GFC.
Melbourne Southbank towers aim to turn soil in 2022 taking 5 years to complete.
And that is why the World’s Tallest Gardens’ grand opening day, will be in the middle of the next property crash;
2027.
Since 2004, Scotty North has been helping people buy the best properties for their needs at prices that simply speak for themselves.
Scotty has been instrumental in bridging the gap between financial planning and traditional real estate transactions through his property advice model.
Scotty North is a Qualified Property Investment Advisor (QPIA), with accreditation’s in financial planning, mortgage broking and real estate.
By carefully considering his clients’ goals and planning for market changes via demographics and trends, Scotty designs a future proof outcome not only specific to the client’s needs but dynamic in its execution with performance indicators and exit strategies built in.