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Skynomics: The economics of the London skyline

Skyscraper, London, Tall buildings

With an increasing number of skyscrapers being developed in London, the skynomics of London is becoming more important. Source:

The skyline development is an economic phenomenon. Skynomics – a word coined by Jason Barr, investigates this economic perspective of a skyscraper development. The skyline is the identity of a global city, a true representation of its wealth and development. The evolution of a skyline tells the story of a city, showcasing the dynamics of human development and the changing perspectives. Furthermore, the image of every global city, today, is either the tallest building or the collection of tall buildings that make up the skyline.

Is London a skyscraper attractor?

The city of London is one of the most influential cities in the world; a centre of excellence and one of the command centres for the global economy. Apart from being a global financial centre, the rich history of London is reflected in its architecture, wherein buildings from different epochs co-exist in harmony. With over 2000 years of development, the city today attracts the best talents from across the globe, making it truly, the world’s global city.  However, as compared to the other major cities of the world (refer figure 1), the number of skyscrapers in London is almost insignificant, as exhibited by the presence of concentrated groundscrapers. Though the skyscrapers in London don’t compete with the tallest in the world on height, the development costs for buildings are among the highest per unit area, challenging the basic skynomics as compared to other global cities.

Skyscrapers in London, Shanghai, Tokyo, New York, Hong Kong, Output of skynomics, building density

Fig. 1: Number of Skyscrapers in major cities (developed from CTBUH)

Nonetheless, High-Rise Buildings (HRB)[1] in London have attracted a lot of debate lately, owing to the increasing number of planning applications. There is a sudden urge among developers to build taller in almost all localities in London. The development of Spire London, Western Europe’s Tallest residential tower, and the global shift towards real estate investment in the capital emphasises the growing trend in skyscrapers.

History of London skyline:

The story of tall buildings in London starts with the new St. Paul’s Cathedral, built in 1710. The renovated cathedral stands at 111m and was the tallest structure for over two centuries. The construction of HRBs in London started around 1960’s. The first building to tower over the cathedral was the Empress State Building, completed in 1961. Multiple buildings held the position of London’s tallest since 1961 and the figure below illustrate the changing factors for skynomics in London.

History of London's tallest towers, Shard,, ! Canada Square, Tower 42, Euston Tower, Millbank Tower, Empress State Building

Fig. 2: The history of London’s tallest building (developed from CTBUH)

Skyscraper building cycles:

However, similar to global economic cycles, the cyclic nature of the development of tall buildings can be seen by the number of HRBs completed in the past. As can be seen from the figure below, there have been 3 major cycles since 1959, each lasting almost two decades. The prime factors influencing the skynomics since 1960 include are discussed below.

Skyscraper cycles in London, explained by skynomics

Fig. 3: The number of tall buildings constructed in London
(developed from

Contrasting to the large number of tall developments in the 1960’s, HRBs in the new millennium are significantly taller. The construction of One Canada Square in 1991 has triggered the development of multitudes of skyscrapers (taller than 100m) in the capital. The scatter plot of height and construction of tall buildings illustrated in figure 4 shows that the development of One Canada Square was a catalyst in the development of the London skynomics.

Time series scatter plot for skyscrapers in London, changing skynomics from 1991

Fig 4: Scatter Plot of Height and Construction completion of tall buildings (developed from

London Skynomics:

The primary cost drivers for the development of tall buildings in London are land costs, construction costs, Regulatory Tax and building efficiency. Additionally, house price, rent, FOREX, employment in Finance, Insurance and Real Estate (FIRE) industries and global economic trends drive the revenue from skyscrapers, completing the skynomics equation. Though an increasing land cost incentivises developers to build taller to derive maximum utility, the location-specific nature of London adds multitudes of other factors to the economic decision-making matrix.

Firstly, the regulations in the city – the height restrictions, the green belt, protected views and the conservation areas directly influences the developments in the capital. The high land costs are driven primarily by regulations and restrictions in building taller within the square mile. The city has adopted its policies in the past to cater to the demand by favouring medium density developments. However, with an ever-increasing demand, the capital strives for new urban space. This has resulted in developers applying for an increased number of tall building planning permissions in the capital, which has already overtaken Manhattan in the number of skyscrapers built since the millennium.

Secondly, the increasing marginal costs and working timing restrictions combined with a reduction in usable floor area at higher levels are further challenges facing the developers. Nonetheless, the global economic factors play a pivotal role in the skyscraper market. Sectors such as Finance, Insurance and Media are driving demand for the high-end commercial real estate. At the same time, foreign investors are investing in luxurious residences owing to the reduced returns from government bonds elsewhere in the world.

The demand for the premium spaces provided by HRBs in London can, therefore, be attributed as be a function of global economic trends. The economics and the factors leading to the development of a skyscraper in London are as summarised below.

Economics of skyscrapers in London, Influences on investment decisions for Skyscraper development, skynomics model, drivers for skyscrapers, London skyscrapers

Fig 5: London Skynomics model – the factors and their influences.

The skyline of London is growing, with the number of skyscrapers in the capital expected to double by 2020. However, the ancient nature of the city has also resulted in regulations playing a substantial role alongside the economic factors identified elsewhere in the world. Furthermore, the global economics is the key cost and demand driver as compared to construction cost and local economics in New York, Singapore, and the Middle East. It can, therefore, be concluded that the London skynomics is a result of dynamics between local planning regulations and global economic trends.

[1] The definition of a high-rise building (HRB) is ambiguous. The classification of buildings into low-rise, high-rise, skyscraper and the super-tall tower has evolved over time. The impression of heights depends much on the surroundings of a building making it difficult to establish a global standard.

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Sree Vinayak

Sree Vinayak is an experienced engineer who believes in the systematic use of data and technology in creating value through construction. Vinayak joined Invennt as an Intern whilst pursuing his MSc. in Construction Economics and Management from the Bartlett School at University College London. As a Business Analyst at Invennt, Vinayak uses data to enable effective decision making for our clients and helps in developing and implementing systems and processes for sustained profitability and growth.

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