I was in New York recently and noticed new additions the the skyline: super skinny skyscrapers. They are beautiful and fascinating, but they struck me as making no sense economically. With a bit of research I found that while NYC is a leader in these slender skyscrapers, and a few other cities, notably Melbourne, Australia, have joined the trend. This IFOD is about the economics of skyscrapers and these new, slender buildings.
The Economics of High Rises
There are a number of factors which go into what is an optimal height is for a building with the primary ones being (1) the cost of the land, (2) size of the building’s footprint, (3) cost and time to build, all compared to (4) expected revenue stream. Thus, the combination of these factors (and others) means that the optimal height of a building in economic terms will vary by location and time period of construction.
A single story building is more expensive than a two story because a two story building shares the same roof and foundation as a one story, so foundation and roof costs are saved. The same is true of a three story. After about three stories, however, the foundation needs additional buttressing. As buildings get taller, each story of height becomes more and more expensive.
There are a few rules of thumb in terms of building height that developers follow to maximize the economics:
1. Maximize the floor-plate size. The goal is to minimize the “wall-to-floor” ratio which is calculated by dividing the external wall area by the gross internal floor area. This indicates the proportion of external wall required to enclose a given floor area. The cost of building a wall with all it’s fixtures and finishes is much more expensive than the cost of floors. The most efficient design with respect to wall-to-floor ratio is a circular building. You don’t see many circular buildings, however, because of the other costs associated with building a circular building. The wall-to-floor ratio is a critical measure of cost efficiency and means that you want as much floor area as possible for each unit of wall used.
2. Minimize the Core. The “core” of a building usually consists of area for the elevators as well as physical plant including ventilation systems and running of electrical. The core is minimized by having larger floor-plate sizes. Here’s a handy chart from the design firm AECOM depicting the percentage of building’s floors which are rent-able at given sizes.
As the above chart shows, as you move up in height, less of the building is rentable because the core has to be bigger due to additional elevator shafts and larger ventillation shafts and the like. Additionally, the higher the building, the greater the core strength needed for resisting the wind, which also adds to the size of the core.
One factor that affects the core size is how high elevators can go. Super tall buildings need multiple banks of elevators. See: Up and Down
What these and other factors result in is the rule of thumb that after a certain height, it gets more and more expensive to build higher. The below chart shows the percentage change in construction costs in relation to building heights.
3. The more expensive the land, the higher the optimum height of a building. This makes sense and why we see higher buildings in NYC than St. Louis, for example.
4. Another factor is that higher floors generally command higher rents, largely due to better views and prestige. Note that residential high rises command a higher rent premium for the higher floors than do commercial buildings (businesses must be less prone to vanity).
how skinny are these slender skyscrapers?
The slenderness of buildings is judged by a ratio of the building’s base to its height. The World Trade Center North Tower, built in 1973 had a height of 1,368 feet and a base of 209 feet a side. That’s a base:height ratio of about 1:7. By comparison, 432 Park Avenue is 1,396 feet tall with a base of just 93 feet a side, for a ratio of 1:15. Even skinnier, Steinway Tower at 111 W 57th has a ratio of 1:24 with a height of 1,428 feet with a base of just 60×80 feet. Crazy.
Here’s what the designer of Steinway Tower had to say about building slimness: “Any time it’s 1-to-10 or more that’s considered a slender building; 1-to-15 or more is considered exotic and really difficult to do. The most slender buildings in the world are mostly in Hong Kong, and they’re around 17- or 18-to-1.” So Steinway at 24-to-1 is really slim!
Here’s a gallery of some of NYC’s slender towers:
Economics of Super Skinny Skyscrapers
Given the above, why would developers build super-tall, small floor plan high rises? It seems to make no sense economically. Some reasons:
1. They are beautiful.
2. Because the land is super expensive.
3. They can. Developers discovered they can do this due to a quirk in zoning law in NYC whereby you can buy up air-rights of surrounding plots of land and build a very tall building without running afoul of zoning laws. Additionally, advancements in materials and design have made super slender towers possible.
4. The super-rich are willing to pay up for the views from the top floors, making it possible for these buildings to be profitable. The penthouse of One57 sold for $100.5 Million. From Forbes: “I believe that everyone wants to be at the top of every building … because of the view,” says Kevin Maloney, chief executive of PMG. “As you go up in the building, apartments get more expensive so we are trying to get as much of the space as possible out of the base that is locked in and has no view corridor and move it up to the top where it has more value.”
5. It’s possible these skinny skyscrapers are signaling the top of the market? See: The Skyscraper Index