No end to China’s impractical skyscraper craze
October 2, 2013 Leave a comment
No end to China’s impractical skyscraper craze
Staff Reporter
2013-10-02
Andrew Lawrence, a securities analyst at Deutsche Bank, put forward the Skyscraper Index in 1999, which expounded the theory that investment in skyscrapers peaks when a business cycle is close to a downturn —in other words, when buildings go up, the market goes down. Based 2010 figures, China has seven out of the world’s 10 tallest buildings. The figure did not include those under construction, however, with the total number of buildings over 300 meters tall in China coming to 77. Among the 77, there are 14 in northern China’s Tianjin alone, followed by Chongqing in southwest China with seven.Some analysts used Lawrence’s theory to correctly predict the 2008 global financial crisis as cities around the world raced each other to erect higher buildings. But why has the theory had no impact on China?
In other countries, a skyscraper is a capital-intensive commodity, and only when the capital is extremely cheap can businesses be induced to build tall buildings. In comparison, state-owned businesses across China are backing the construction of skyscrapers. For example, the Goldin Finance 117 Tower in Tianjin is backed by the Tianjin Hi-tech Holding Group, while one of the shareholders of the Greenland Square Zifeng Tower in Nanjing is the state-owned Assets Investment Management Holdings.
It is well known that high rent-paying clients are limited and not every skyscraper can bear the daily operational costs running into millions of dollars. Insiders said that there must be other reasons that drive developers and local governments in China to jump onto the bandwagon of building skyscrapers; otherwise it does not make sense for them to do so.
Some local developers know beforehand that they will not get returns on their investment, but they are still enthusiastic, mainly because of deals with local governments to develop land in other areas, and sometimes the developers are able to acquire large tracts of land elsewhere at minimal costs.
A lot of five-star hotels in China do not make money, and the developers are eying the offices or apartments built around them. According to a developer, the builders of skyscapers do not end up profiting from them, added that a tall building is like a luxury item, which is not something that can be owned by everyone. Once you have it, you look different, even if it doesn’t seem to be practical, he said
About bambooinnovator
Bamboo Innovator 