Saudi Arabia is expected to begin work on the Kingdom Tower next week.
The building in Jeddah is expected to cost $US1.23 billion and stand 3,280 feet tall, according to the Saudi Gazette.
That’s 568 feet taller than Dubai’s Burj Khalifa.
Construction is also underway on Sky City in China, which is projected to be 2,749 feet tall. Sky City is expected to finish before the Kingdom Tower and will for a very brief period hold the title of the world’s tallest building.
Two years ago, Barclays introduced its Skyscraper Index, which suggests that construction booms, highlighted by record-breaking skyscrapers, coincide with the beginning of economic downturns.
In his 2012 report, Barclays’ Andrew Lawrence and his team wrote that this is because “the world’s tallest buildings are simply the edifice of a broader skyscraper building boom, reflecting a widespread misallocation of capital and an impending economic correction.”
But it isn’t just the world’s tallest building we should be looking at. Lawrence said it’s also important to look at the number of skyscrapers being built and their geographic profile. This is because the tallest buildings “rarely stand alone.”
With this in mind, investors should watch the building booms in China, India, and Saudi Arabia.
The Long Depression, 1873 - 1878
The pervasive U.S. economic recession with bank failures that came to be known as the Long Depression coincided with the construction of the Equitable Life Building in New York in 1873. At the time the building was the first skyscraper at a height of 142 feet.
The Bankers' Panic and U.S. economic crisis, 1907 - 1910
The construction of New York's 612-foot tall Singer building, and the 700-foot tall Metropolitan life building corresponded with the panic of 1907. The Bankers' Panic was a financial crisis that occurred after the NYSE fell nearly 50% from its peak, and reflected a monetary expansion brought about by the establishment of trust companies.
The Great Depression, 1929 - 1933
The construction of three record-breaking buildings coincided with the onset of the Great Depression. 40 Wall Street, which on completion in 1929 reached 927 feet, followed by the 1,046-foot tall Chrysler building in 1930, and the Empire State building in 1931, which towered over the others at 1,250 feet.
U.S. and worldwide economic crisis, 1973 - 1975
The 1972 construction of One World Trade Center, the 1973 completion of Two World Trade Center, and the 1974 construction of the Sears Tower in Chicago, coincided with a period of speculation in monetary expansion from foreign lending.
It also coincided with the collapse of the Bretton Woods system, a rise in oil prices that caused a global economic crisis, and speculation in stocks, property, ships, and aircrafts.
Asian economic crisis, 1997 - 1998
The Asian economic crisis, currency devaluation, and speculation in stock and property coincided with the completion of the Petronas Towers in 1997. At 1,483 feet, the Petronas Towers were the tallest buildings in the world and heralded a crisis in that region.
The Great Recession, 2007 - 2010
The 2010 completion of the tallest building in the world, the Burj Khalifa, which towers at 2,717 feet, coincided with the current global financial crisis. The building surpassed Taipei 101's height on July 21, 2007.
Sky City, outside of Changsha, China, is expected to rise to 2,749 feet. The 220-story building is expected to take seven months to build at a cost of $US628 million. It is also expected to house 30,000 people.
This construction comes as concerns of a Chinese hard landing have returned. 'The housing sector now poses the biggest downside risk to the Chinese economy,' wrote Societe Generale's Wei Yao. And after its first corporate bond default many began to wonder if China's Minsky moment had arrived.
Of course in China's case we won't know for a few years if this recording breaking skyscraper coincided with an economic bust.