Are emerging markets obsessed with Skyscrapers?

By Bea Patel, TLE Property Editor and Director of Shop for an Agent

In the past 15 years, London has seen the rise of 23 new skyscrapers (buildings over 350 feet high). New York saw the construction of four towers in 2014 alone, including its iconic One World Trade Center. Impressive as it sounds, in comparison, Shanghai built over 90 skyscrapers and Dubai built 190.

What’s interesting is the enthusiasm for building skyscrapers – for city status, increasing residential properties and staff retention. According to Knight Frank’s Skyscrapers 2015 report, skyscrapers are one way for firms to create better working environments – making offices exciting and inspirational. It also allows cities to deliver housing, office units and retail space in one building.

Popularity of urban living is increasing. Industry professionals recognise the desire for workers to live closer to their offices. By increasing residential spaces nearer to offices, skyscrapers can cut commuting times and improve quality of life.

The report also revealed that by the end of next year, there would be roughly 800 buildings above 152 meters tall completed in China, while FMG estimates the country will build enough skyscrapers by 2025 to fill ten cities the size of New York.

Data from the Skyscraper Center reveals Jakarta has over 160 buildings taller than 100 meters. Last month, a deal was confirmed to build the world’s tallest tower in Saudi Arabia.

So why are emerging markets encouraging so many high-rise construction projects?

The report refers to skyscrapers as “the optimum means of addressing major economic and geographic challenges facing cities today”. Many cities in the emerging markets are experiencing rapid development, in terms of economic, industrial and population growth, and infrastructural improvements.

Many bigger cities in these developing countries, such as Jakarta, Metro Manila, Mexico City and Colombo are experiencing rapid urbanisation. This, along with extreme population growth results in a major gap between the supply and demand of residential real estate and commercial units. As the number of people living in cities grows, the amount of available land is decreasing and prices are rising.

Paul Philipp Hermann, co-founder and managing director of emerging markets-focused real estate platform Lamudi Global, says: “Skyscrapers are increasingly popular in the emerging markets, not just for house-hunters looking for residential housing, but for real estate investors too. These developments address the issue of land shortages, overcrowding, supply versus demand and lacking business space, all in one building.

“Not only are more people moving into emerging cities, so are businesses. More companies than ever are operating worldwide, leading to increased demand for office units. As a result, we are seeing a rise in mixed-use developments. Skyscrapers provide the perfect solution for these large-scale projects, which require a large amount of space in cities that do not necessarily have much land available.”

To date, the five tallest buildings in the world are: