Reach for the Sky: The Great Skyscraper Bubble Is Ready to Pop!

Reach for the Sky:
The Great Skyscraper Bubble Is Ready to Pop!

By Harry S. Dent Jr., Senior Editor, Economy & Markets

In 1928, construction on the world’s tallest building began in New York: the Bank of Manhattan Trust Building at 40 Wall Street. Today, it’s “The Trump Building.”

When its developers learned that the Chrysler Building would be even taller, they added three stories to the Manhattan Building to secure the title of “world’s tallest.” Then the Chrysler Building came along and added a giant spire, beating it by just over a hundred feet.

Of course, that didn’t last long either. Each of these buildings held the title for less than a year before the Empire State Building topped out at 1,454 feet, more than 400 feet taller than the other two.

And then: the economy collapsed.

The Great Depression hit.

And it took decades for the global economy to recover – and it wasn’t until the 1970s before a taller building emerged.

Those buildings were the Twin Towers in the early 1970s, and the Sears Tower in Chicago in ’73. And then, right on cue, another major recession hit in the middle of the decade.

Notice a pattern?

It is no coincidence that in both cases, the construction of major buildings coincided with long-term economic peaks. It happened in the 1930s and again in the 1970s.

Historically, there have been clear peaks in skyscrapers when the economy is at a high. It’s like when the party’s raging and the whole world thinks the economy will never go down, these mammoth hunks of steel pop out of the ground as if to say the high will go on forever!

And I haven’t even said a word about where we are today…

That’s how many skyscrapers popped up around the world in 2015. It’s the largest number that finished construction in a single year on record. Before this decade, it was usually around 20 or 30. Now it’s up to five times that!

Oh, but it gets better!

The Council on Tall Buildings and Urban Habitat expects 135 skyscrapers to be finished in 2016, and another 140 in 2017.

And get this: the Council says the number of “supertall” skyscrapers (300 meters or higher) has doubled from 50 in 2010… to 100 in 2015 – just five years in the most artificial global bubble in human history. No coincidence there, either!

It should be pretty obvious: the more the global economy expands, the higher and greater the number of major buildings that go up. And they concentrate in the leading countries and regions of the world at the time.

So it’s probably no surprise that China – a country that has overbuilt its infrastructure over a decade into the future, indebting themselves with tens of trillions of dollars – is dominating the current race for who will build the next tallest skyscraper in the world.

Right now, that title belongs to the Burj Khalifa in Dubai, standing at 2,717 feet. It was completed in 2010. The second highest – the Shanghai Tower in China, at 2,073 feet – finished last year.

But now China has plans to complete another project in 2017 – the Phoenix Towers in Wuhan, south-central China. The tallest will be the first ever to stand one kilometer high, or 3,280 feet. Oh, and it’s going to be pink!

China’s not the only one in the current race. Saudi Arabia has plans to complete their own 3,280-foot Kingdom Tower by 2019 – just as oil has been crashing and its government deficits are swelling. It’s just a big ego game to these up-and-coming countries!

Frankly, I don’t give that one much chance of happening. If the global economy slows as much as I expect, some of these building slated for 2017 or later will get postponed, if not canceled.

So, here is another major sign, among many, that this is not just another stock and economic peak.

Instead, this is a sign that we’re heading into another major long-term downturn – like the 1930s, and 1970s.


Harry

P.S. Even though the building opened in 1931, the Empire State Building didn’t become profitable until the 1950s. For a while, they called it the “Empty State Building.”