For the past few years, I’d look at the beautiful Sydney skyline and think that it looked basically the same as it did, say five years ago. The same buildings. The same towers. No new skyscrapers. But it’s that very sameness that may have helped Australia’s economy avoid the global recession that it looks like we’re about to see.
The guys over at Barclays Capital have noticed, what they’re calling, an unhealthy correlation between the construction of the world’s tallest towers and subsequent financial crises over the last 140 years.
Barclays says that easy credit, rising land prices and excessive optimism often leads to a rush of skyscraper building activity. It defines skyscrapers as buildings taller than 240 metres.
If we look back in time; the Great Depression hit just as the Empire State Building and Chrysler Building were virtually completed in the 1930s; the economic slowdown of the 1970s occurred after the New York World Trade Centre was built along with Chicago’s Sears Tower; Kuala Lumpur’s Petronas Towers were finished in 1997 when the Asian financial crisis loomed; the world’s tallest tower, Dubai’s Burj Khalifa was built last year as the city almost went bust and the whole globe started to slide into an economic slowdown led by Europe. (Incidentally, Europe’s tallest tower was built in 2010 in Russia. The City of Capitals stands at just over 300 metres tall.)
The good news, is that no other skyscrapers are currently being built around the world, that are set to be taller than Dubai’s Burj at 840 metres.
But, China is currently in the process of building more than 60 skyscrapers, more than half of the towers being built around the world right now.
One curious point, Australia’s tallest towers, the Q1 in Queensland and Eureka Tower in Melbourne were built in 2005 and 2006, and the peak of Australia’s sharemarket boom. Perth, which has been enjoying a boom thanks to demand for WA’s commodities, has just seen the competition of BHP City Square at 250 metres. Is Australia immune?
A final point, Sydney’s newest development, Barangaroo, which is hoped to make Australia’s biggest city, the financial hub for South-East Asia, will see a rush of development into the western part of the city’s CBD. At this stage the tallest buiding in the massive 22 hectare development will only be 205 metres tall, way below the 240 metres used to define a skyscraper.
Is Sydney playing it safe?