Skyscraper Financing Practices

Financing skyscrapers is a huge undertaking, costing hundreds of millions and even billions of dollars. Many factors must be weighed which include not only interest rates, cost of supplies, labor and other construction costs, but environmental and social impacts of the area and economy surrounding the skyscraper. In addition, skyscrapers have structural and other engineering and logistical challenges that must be faced. Often design elements must be changed after wind tunnel and other tests, which can change the design and therefore the costs of the project.

Historically, skyscrapers have been funded by both consortiums of private investors and investment groups as well as governments. Building the tallest or one of the tallest buildings in the world can be seen to bring personal, civic and national pride. One well known case is the rivalry that occurred in New York to build the world's tallest building in the late 1920s. The competition between 40 Wall Street, the Chrysler Building and the Empire State Building involved the state politician Al Smith and General Motors Executive Jakob Raskob for the Empire State Building and Chrysler's Chairman Walter Chrysler for the Chrysler Building.

In the Middle East, and Dubai, United Arab Emirates in particular, there has been a huge skyscraper building boom fueled by rising oil prices and a post September 11, 2001 shift where many Middle Eastern investors shifted their investment funds away from North America to regional projects. The boom in Dubai has been fueled by the desire on the behalf of the government to lessen their dependence on oil revenues and diversify their economy. The building boom has helped to transform Dubai's economy and place a higher emphasis on business and financial service as well as tourism. The Burj Dubai, which will officially become the world's tallest building when it is complete in September 2009, helps to bring international attention and tourists as well as additional investment to Dubai.

Despite the global economic downturn where many skyscraper projects have been scrapped or put on hold, China is in the midst of a skyscraper building boom with new construction projects in Shenzhen, Beijing, Shanghai and other cities. Financing for these projects are backed by the Chinese government and a $586 billion stimulus plan. This makes the situation different than in most other parts of the world, where sources for financing are government funded and property developers also don't have to worry about finding tenants for the buildings once the construction is complete. Currently underway is the Shanghai Center, a 632-meter, $2.2 billion tower that will become the tallest building in China once it is completed in 2014. Other cities like Shenzhen, Nanjing and Chongquing have construction projects in the works, many vying to be the tallest buildings in their cities or regions.

In other parts of the world the global economic downturn has put a halt to many skyscraper construction projects. This includes projects in the United States and the Middle East, where oil revenues are down and credit has tightened. The Chicago Spire and new World Trade Center in New York have both run into funding problems as well. It remains to be seen if any of these projects will be revived once the economy improves.