If there were such a thing as a commercial property tarot card, what would a card showing a skyscraper image symbolise?
Andrew Lawrence, creator of the skyscraper index in 1999, may be able to shed a little light on this.
The skyscraper index is a theory involving the business cycle of boom and bust, and relating this cycle to the building of skyscrapers. It says that, during periods of economic boom, bullish development plans are drawn up to build record-breaking skyscrapers. The nature of the business cycle means that, by the time these skyscrapers are completed, the economy is already out of the boom times and into the next recession. It started out as a bit of research fun but, as time after time Lawrence discovered his index to be accurate, it became somewhat more serious in nature.
The index’s commercial property foundations were laid in the Panic of 1907, when a near 50% drop in the New York Stock Exchange triggered a monetary crisis across the US. Lawrence noticed that this occurred just as the Singer Building and then the Metropolitan Life Insurance Company Tower, both record-breakers of their time, were completed.
Lawrence then analysed the 1929 US crash, discovering another commercial property shadow falling over the country, cast by a group of newly built skyscrapers: 40 Wall St, the Chrysler Building and new record-holder the Empire State Building.
The World Trade Centre became the new record-holder in the early 1970s. At the same time, a sharp double-pronged fork of a stock market crash and oil crisis burst the commercial property bubble, tipping the US into another recession.
In 1997, the Petronas Twin Towers were completed in Malaysia – just as many Asian economies took a nosedive.
So does the index prove building a record-breaking skyscraper signals impending recession?
Critics of the index say no, pinpointing the 1937 crash and the 1980s recession as periods where no commercial property records were broken. They say this proves the unreliability of the index.
As the UK prepares to welcome the Walkie-Talkie, Cheesegrater and the record-breaking (in Europe) Shard, what would the skyscraper index say about the UK economy?
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