Review
| SATURDAY, NOVEMBER 16, 2013
The Skyscraper Index: Edifice Complex
By ROBIN GOLDWYN BLUMENTHAL | MORE ARTICLES BY AUTHOR
The U.S. has a new tallest building—One World Trade Center in New York—and that has conjured up some novel reading of economic tea leaves.
To some, a new skyscraper is a sign that hubris has again swept the land. The announcement last week that the U.S. has a new tallest building—the 1,776-foot-high World Trade Center, according to the Council on Tall Buildings and Urban Habitat—conjured up a novel reading of economic tea leaves.
The reason: a theory loosely known as the Skyscraper Index, developed in 1999 by Andrew Lawrence, then research director at Dresdner Kleinwort Wasserstein. The index argues that record-tall buildings are evidence of a business cycle peaking out and thus predict economic distress. The index has seemingly been on the mark at times. Lawrence claims record buildings foreshadowed the Panic of 1907 (New York’s Singer and Met Life towers), the Great Depression (the Empire State Building), the Asia Crisis (Malaysia’s Petronas Twin Towers) and Great Recession (Dubai’s Burj Khalifa).
Too Tall: The index argues that record-tall buildings are a sign of a business cycle peaking out.
One fan is Mark Thornton, a senior fellow at the Ludwig von Mises Institute in Auburn, Ala., who recently penned a paper titled “Skyscraper Curse to Hit New York.” Thornton applies Austrian business-cycle theory to big buildings. “You’re seeing these symbolic points of information coming out,” he says.
Still, the index should be treated with caution. One World Trade has been in the works for over a decade, spanning several cycles. And New York’s office-building market is “beginning to see some positive momentum,” says Laurel Durkay, a REIT analyst at Cohen & Steers. Last year, when asked about the index, Lawrence called it “an anecdotal guide to the cycle,” according to the Council on Tall Buildings. A grain of salt, maybe two, is in order.
– Lawrence C. Strauss
