Understanding the economics of supertall buildings

Dr. Andy Davids

Dr. Andy Davids

29 October 2015 - Cutting edge built environment technologies, rapid urbanisation and visionary developers have led to buildings becoming taller and taller. 

The 828 m supertall Burj Khalifa in Dubai, United Arab Emirates, was the defining tall building project for many years, but this title will soon be eclipsed by many other planned tall buildings, such as the 850 m Sky City in China and the 1001 m Kingdom Tower in Jeddah, Saudi Arabia.

Aurecon’s Tall Buildings Leader, Dr Andy Davids, explains that “Overall, supertall buildings are an efficient use of space and they also free up ground space for roads and farms, as well as parks and other public spaces. In many markets, this is what is needed and why tall buildings make sense. The most compelling business case however, is that iconic buildings such as supertall towers mark a place and increase the value of all assets surrounding that place. This is a very powerful driver in the business case for such projects where a master developer owns the land within the circle of influence of the supertall marker. Tall buildings aren’t just status symbols, they’re physically and economically needed in today’s cities,” asserts Davids.

”Another key feature of the current generation of supertall buildings is that they are no longer ‘single use’ buildings. Most projects over 100 levels provide a mix of uses, including hotel, serviced apartments, residential, office and observation experiences all in the one building. This is essentially a physical manifestation of today’s complex business case, and the provision of such a variety of spaces poses significant technical challenges,” says Davids.

Tall buildings need to be built quickly to be financially feasible

The lure of a supertall structure lies in its ability to mark a time and a space. To be financially viable, however, a supertall building must be designed so that it can be built quickly.

“Engineering consultancies should keep asking themselves how long the owner and their bankers will wait for a return on investment. It took seven years to build the 828 m tall Burj Khalifa, and all future supertall buildings will be looking at a similar timeframe. Even if engineering advances can shorten that time, it is unlikely to be a dramatic shortening,” says Davids.

Sky City, China
 An artist impression of 
Sky City in China

“Engineers need to pick up the pace in order for the economics of a supertall building to make sense for the owner. For this reason, building designs often favour simple floor formwork and rapid wall formwork. Construction crews are then able to repeat the same job on every floor. Once they achieve a level of familiarity with their tasks, the labour cost will plateau and, more importantly, the speed of construction per floor will increase,” explains Davids.

Another way we might see faster construction times on supertall buildings is by having construction work take place on two levels, as was achieved for the Emirates Towers in Dubai. Lower levels tend to be more complex than those higher up, so if we can create two construction ’fronts’ in the form of a secondary base level above the lower levels, then work on the upper construction front can continue, while work simultaneously occurs on the more difficult podium levels.

Prefabricated and modular solutions can also pose a possible solution when it comes to reducing the time and cost of traditional techniques. The construction of the Sky City in Changsha, south-central China, has stalled but the planned skyscraper is intended to be constructed using prefabricated pieces.

“Sky City uses an Ikea-like assembly method where parts of the building are fabricated in factories off site, transported to the job and then assembled on site. Considerable time is still spent preparing and storing the pieces in order to deliver a very short completion time for assembly on site,” says Davids.

While the beginning-to-end construction time is certainly reduced compared with more conventional techniques, Davids says that it’s important to recognise that it’s not as dramatic as simply comparing the shortened erection phase with a more traditional alternative.

“Preparation of components under factory conditions should deliver consistent material quality and also lead to a significant reduction in material wastage. As with all prefabricated systems, considerable investment in a factory is required while the architectural design of prefabricated structures can be a little limited. But, all things considered, the idea is credible and feasible, although it probably won’t be suited to all markets,” says Davids.

Tall buildings require a business case

Owners aren’t always able to wait over a decade to start seeing a return on their investment. What many people don’t realise about some of the world’s tallest buildings, including the Burj Khalifa, is that the owners had to think outside of the box to find a good business case for the project.

“Few people will be aware of the business case around the creation of the Burj Khalifa. The real magic of this building is that its owners also own the land and properties around it. The owners can charge a premium for these buildings, in addition to the income derived from the Burj Khalifa, because people are willing to pay for the prestige and views associated with being so close to the landmark. Also, the Y-shaped design of the Burj Khalifa ensures that occupants are never more than one room away from the stunning view, making tenancy more attractive,” says Davids.

As the number of supertall buildings continues to grow, engineering consultancies are in the prime position to create a business case for the developer and the developer’s clients.

“Being able to craft a financial model where the increase in the land value and the benefit to the citizens as well as tenants is clear, will enable owners to invest in these magnificent structures,” concludes Davids.

To top