Building the Skyline

The Birth & Growth of Manhattan's Skyscrapers

by Jason Barr 6 Comments

Skyscrapers and Shadows: The Value of Sunshine in the City

Jason M. Barr         March 13, 2019

Almost none of the land use regulations that cities have ardently adopted for over a century have been justified by any serious quantitative work.   The existence of even the smallest externality, such as a shadow, has been seen as justification for massive interventions in the housing market. – Edward Glaeser

The sun is the mother of life. Humans, like all biological lifeforms, need sunlight to survive and thrive. From it, they extract vitamin D; warmth for their furless bodies; and a general sense of well-being. Sunlight, however, is a scarce commodity; and even more so in the modern city. And as such, cities produce something of a paradox: we create them to satisfy our needs and wants—to provide jobs, housing, access to amenities, etc.—and, in the process, they generate some undesired outcomes or externalities. There is no free lunch in the urban world. One person’s “agglomeration economies” is another person’s traffic congestion. One woman’s fabulous views are another one’s shadows. One man’s trumpet makes music; to another it makes noise. And so on.

The ultimate—and age-old question—is: how do we create efficient cities—ones that provide the maximum flexibility and benefit, while minimizing the negative externalities?

The Dark Side

Today, one of the biggest controversies in the real estate world is the construction of superslim, supertall towers around New York’s Central Park. It seems that when one is announced there is an instant knee-jerk reaction against it.  Critics present a laundry list of reasons about why they are “bad.” One item that dominates is that of the shadows they are likely to cause. Graphics of their effects on Central Park exacerbate the perceptions of darkness, by giving snap-shop depictions of the longest shadows likely to be cast at any time.

But are city shadows all bad? The answer is no, as they can provide both costs and benefits, which need to be fully measured and understood before we can draw conclusions and consider policies that are directly aimed at limiting real estate in the name of the almighty sun.

The new crop of supertall, superslim skyscrapers in Manhattan–presented with shadows at their worst. Source: Vanity Fair.

The Good

Why might shadows be good? First, is that in hot summers, shadows provide shade, not just to the people who are walking around, but also for the neighborhood to protect against the heat island effect. Plus, shadows can reduce electricity bills from air conditioning.

In Manhattan, real estate brokers try to peddle north-facing apartments—which get less sunlight—as the exposure allegedly preferred by painters, who apparently need softer, indirect light for creating their masterpieces. Residents in south-facing units—with less shade—are subject to oven-like temperatures from the direct beams of the sun.[1] Sunlight reflecting off buildings can become “death rays,” attacking the random pedestrian (arguably, the exact opposite of the shadows problem).

Finally, a building in a shadow might be more affordable to someone who would prefer living in the central city near employment opportunities rather than paying for a higher cost, sunnier unit. Access to sunlight might not be all that important to someone who spends most of the day away from home.

The Bad

But, of course, people, in general, enjoy access to sunlight. It seems to have a calming effect and improve mood and health. Companies prefer locating in glass box skyscrapers because their workers like sunnier offices with more natural light. Shadows might also hamper the ability of trees and plants to grow and can block light on rooftops that might otherwise be useful for solar panels. Shadows on the streets may increase the likelihood of crime and may, more broadly, diminish the quality of urban life. In cold winter months, shadows can increase heating costs.

The Ugly

But perhaps the key problem of shadows is that there is little understanding of their true impacts throughout the day and year. Shadows in the peak of the summer can be helpful for cooling and energy costs, while perhaps can negatively affect moods or well-being. During cold winter, shadows can make the city colder and require more heating, but don’t affect people on the street as much because it’s too cold to spend much time outdoors. And throughout the day, the sun’s position in the sky is changing; one person’s shadow in the morning becomes clear sunshine in the afternoon and vice versa for someone else.

In essence, the shadows problem is quite complex with its impacts on individuals varying throughout the day, the season, the climate, the topography, the location within the city and across the planet, and based on the nature of the built environment.

The Emerging Science of Shadowology

Until recently there have been very few, if any, systematic measurements of the amount of shadows and their impacts. Rather their effects on the city have been left to our imaginations or to simple snap-shot representations. But this is starting to change. Thanks to advances in data collection and computer science, the ability to measure the quantity of shadows in cities is, so to speak, coming out of the shadows. If we can measure the degree of “shadowification,” we can then see how it correlates with well-being and other important variables.

Shadow Accrual Maps

A recent paper by a team of computer scientists attempts to get closer to comprehensive measurement of shadows throughout the day and across the city. “Shadow Accrual Maps: Efficient Accumulation of City-Scale Shadows over Time” (2018), by Miranda et al,. presents newly-developed algorithms to measure the total accrual of shadows using computationally efficient methods. Part of the analysis includes creating net shadow scores, which include both the positive and negative effects.

So what do they find? Using Manhattan as their case study, they analyze the new superslim buildings rising along Central Park South. They find that the total contribution of these structure is relatively modest. They write,

We see that these shadows behave as expected – a lower angle of the sun in winter causes shadows to cover the entire analysis area, while a higher angle in summer results in a tighter shadow area. Note that even though buildings, whether tall or short, cast long shadows at low sun angles (mornings and evenings), its contribution to the overall accumulation is small as reflected in the visualization (p. 10).

Again, it’s worth stressing that the shadows that would fall on Central Park from these new structures is the worst in the winter afternoons, the very time when the park is least likely to be used.  Furthermore, when they compare the slim towers to hypothetical alternatives of shorter but bulkier versions, they find that the latter have a greater negative impact than the former.

Source: “Shadow Accrual Maps.”

What’s a Shadow Worth?

But given the ability to generate more precise shadow maps, this begs the question: what’s the cost to city dwellers? For this, we need to look at the net effect of shadows on things that we care about, such as happiness or the value of real estate. To this end, a recent study, called, “Valuing Sunshine,” provides some first estimates to this question. In particular, the authors measured the average number of hours of sunshlight that fall on some 5,000 houses in Wellington, New Zealand. They then investigated the relationship between average hours of annual sunlight and housing prices, controlling for a host of other things that might determine the value of the property, including the views.

The key problem to measurement here is that, ideally, all non-sun-related factors need to be held constant or controlled for, while variation in sunlight access across the city should be as large as possible, in other to better separate out the signal from the noise, as it were.

GIS Maps of Shadows on Housings in Wellington, NZ. Source: “Valuing Sunshine.”

Ceteris Paribus

Their focus on Wellington to isolate a pure “sunlight effect” had advantages. First, the city is small, and homes are relatively homogeneous, which helps reduce some sources of variation which might mask or confound the sun’s impact. Second, Wellington’s economy and housing market has been relatively stable over the last decade or so—again, reducing noise in measurement that might have come from the global bubble and collapse in the 2000s.

Third, Wellington’s climate is rather moderate.  In summer, its average maximum temperature hits only 69°F (20.5°C), while in winter, the maximum average temperature is 52°F (11.1°C). This helps diminish the effect of shadows on energy costs. Lastly, the geographical topography of the city contains several hills and valleys, creating large variation in sunlight exposure for the houses in the sample. As the authors say, “Thus, it is not difficult to find houses that, located in the same narrowly defined neighborhood, have very different exposure to direct sunlight due to the effects of hills, valleys and nearby buildings” (p 270).

In short, they find that, on average, a house that receives an extra hour of sunlight per day throughout the year has a 2.6% higher price. For the average house in Wellington that additional hour of sunlight is worth about $NZ16,000 ($US11,000).[2] Or, on the flipside, a neighbor who is suddenly put in shadows for an extra hour per day due to a new building next door can expect to lose about 2.6% of the value of the house, on average.

Policies for the Shadows Problem

The Pigouvian Tax

Given the ability to measure the total additional hours of shadows from new construction, it seems a relatively straightforward exercise to “plug in” the shape of a proposed structure and estimate the average reduction in sunlight per hour per day on surrounding buildings and parks. Then a Pigouvian tax could be imposed of say 2.6% of the market value of the structure for each lost hour of direct sun (again an actual tax value would need to be determined from more research). If the levy is worth it to the developer, he goes ahead with the project, pays the tax, and the money is disturbed to the harmed parties. If not, he has the option to redesign the project to reduce the shadows and the tax. This policy has the advantage of being relatively simple and straightforward, and the tax burden will fall heavier on those building taller or bulkier structures.

But what’s to be done with the tax money given to owners of a park (the City)? Here the government would need to come up with ways to improve the quality of parks to offset the loss in user-value; this might come from adding trees or other amenities within the parks, or by providing more green space elsewhere in the neighborhood.

Market Value Insurance

The problem with the tax, however, (aside from the fact that it might be hard sell within today’s political climate) is that new construction provides both costs and benefits to surrounding properties. On one hand, it might increase foot traffic to stores or improve the general desirability of the areas and thus raise land values. On the other hand, it might create more traffic congestion, noise, and shadows.

This create something of a problem for Pigovan taxes in the city, since there are many negative externalities that would have to be taxed, while at the same time the positive externalities should be subsidized. What’s the right tax policy? Unlike, say a carbon tax on property owners to reduce C02 emissions, in case of new construction, the right policy is less clear.

A more generalized and easier-to-implement policy might be some form of market value insurance. The idea is that property owners pay a small annual premium against the loss of value to their properties due to changes in the value of the neighborhood itself or due to the actions of neighbors (and not due to market fluctuations or the actions of the owner). The point is that in a dynamic, growing city, new construction is necessary and inevitable, and can have both positive and negative effects on the surrounding structures. If owners had some means of being compensated, those harmed by shadows will get their due, and will hopefully avoid employing the NIMBYism that seeks to stop the city dead in its tracks.[3]

Seeing the Light?

The problem of city shadows perfectly illustrates the paradox of cities: they are both the solution to, and cause of, many problems with which humans must contend. But fundamentally cities are engines of growth and well-being. In the 21st century, large metropolises, like New York, are increasingly important in our lives. But who gets to define what they will look like in the 21st century–those who want to keep it in a form a status, or those who want to accommodate all who want to call it home?

The success of humanity over the long run has always been based in fostering increased trade and human interactions. The key to the efficient—well-functioning city—is to identify the negative externalities that arise from dense living and devise policies that alter the incentives to better balance the good with the bad. Simply saying “no” to growth and change may feel right, but in the long run, its rarely been a winning policy. Let’s not be afraid of our own shadows.

 

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[1] Manhattan is an interesting case-study in regard to the direction of its streets. In 1811, the Grid Plan Commissioners created blocks in an east-west direction, orthogonal to the two rivers (and no one really knows why). This had the effect of creating a kind of two-tired city. South-facing units get direct access to the sun. North-facing units do not. Throughout the rest of the city, housing units have more variation in their directionality and access to sunlight. (It seems there’s an economics paper to be written here by looking at how the block directions in the various boroughs affect access to sunlight and how that might affect housing prices. Contact me if you want to work on this project. GIS skills are a must.)

[2] Their sample includes transactions from 2008 – 2014. During this time, the average exchange rate was 1NZD = 0.76USD. Today the rate is 1NZD=0.68USD. Also note, the average house in their sample gets 6.7 hours of sunlight in winter and 10.7 hours in summer.

[3] A city might also consider a Pigovian tax for shadows just in parks, especially if the units remain empty for much of the year.

by Jason Barr 6 Comments

The Economics of Skyscraper Height (Part III)

Jason M. Barr     January 28, 2019

Note this is Part III of a series on the economics of skyscrapers. The rest of the series can be read here.

When we look at the world’s tallest buildings, we can’t but help think they are too tall—the product of greed and vanity. But this is too simplistic. In a previous post, I proposed nine different theories as to why supertall buildings might rise so high (though there certainly may be more). I would argue, however, that these theories can be categorized into one of four groups. First can be called “good economics”; the second “bad economics”; the third is “selfish motives”; and the last is “urban growth strategy.”

Theories of “Too-tall” Height

Let’s start with “good economics.” By this I mean that the constructed height of a supertall building reflects the best balance of the revenues and costs. That is, a supertall building may simply be the result of matching supply with demand at a particular location.  However, at times, forces may be at work to artificially raise the price of building space, or artificially lower the cost of construction—hence “bad economics.” Developers are maximizing profits, but the income or costs deviate from the correct values because of illegal or unsustainable reasons.

The “selfish motives” theories include many of the typical beliefs about supertall buildings—they are built by greedy developers eager to show off or claim an “ego prize,” or they are built by dictators seeking to legitimize their rule. In this case, developers are adding floors above the (good or bad) economic height for non-economic purposes.  Lastly, supertall buildings are often built as a means of sparking urban growth or to put a city on the “economic map.” By building a landmark, governments or developers seek to increase foreign direct investment, tourism, or employment opportunities.

From Left to Right: Bank of Manhattan Trust Building, Chrysler Building, Empire State Building. Source: CTBUH.

The Evidence for Record-Breaking Skyscrapers

But the question remains: what is the evidence for the various theories? Regarding the world’s record-breaking buildings, a key problem is the very small sample size—only 12 buildings since 1890 have held the record. Thus, a case-study approach that looks at the historical record, including from books, newspapers, and trade publications, seems reasonable.[1] While case studies do not prove things conclusively, they do suggest some theories over others.

The Bank of Manhattan Trust Building

The Bank of Manhattan Trust Building, at 40 Wall Street, was the first of three Manhattan skyscrapers to break the world record during the Roaring Twenties. At 927 feet (283 meters) it surpassed the Woolworth Building (792 feet, 214 meters), which held the record since 1912. It was a speculative venture by the Starrett Brothers (who were also the general contractors), an investment group lead by G. L. Ohrstrom and the Bank of Manhattan itself, who was to occupy seven floors.  Evidently, the original designs in 1929 called for a 47-story structure; but were then changed to 60 stories, and finally, architect H. Crain Severance drew up plans for 67 stories.

Denial

Even though the height changed over the course of the project, it’s worth pointing out that in 1929, a 47-story skyscraper was deemed appropriate. That is to say, without any competition in mind, the economic height was nearly 50 stories. Even in 1930, the bank saw rising profits from the year before. But the reasons surrounding the changes in height are a bit unclear. Architectural historian, Christopher Gray suggests that the plans were changed after Walter Chrysler announced his building, designed by William Van Alen. Yet two other bits of evidence also suggest that the team lacked the fortitude to go all the way. Gray writes,

Van Alen was the subject of many interviews and articles, but no one, it seems, interviewed Severance, the second-place finisher, as to his thoughts….Faith Hackl Steward, Severance’s daughter, says he “never made any remark about it,” except to say that “there really wasn’t any race.”

On October 20, 1929 (some seven months before the opening of the Chrysler Building), the New York Times reported,

When his attention was called to the suggestion that the 40 Wall Street Corporation, in which Starrett Brothers and G. L. Ohrstrom, investment bankers, have a large interest, was engaged with the Chrysler Corporation in a race to erect the world’s tallest building, Mr. Starrett said his company was not competing for height supremacy in building and added that he thought the Bank of Manhattan Building was “too high now.”

What seems to have happened was that some of the investors were pushing for a taller building, but there were only certain lengths to which they willing to go.

The Chrysler Building

It is clear, however, that Walter Chrysler wanted the world’s tallest building, when, in 1928, he announced his intention to build a 68-story skyscraper (but eventually topped out at 77 stories). But again, it’s important to keep in mind that the economics were in Chrysler’s favor. His building was a block away from the hypothetical project of Clark and Kingston, who, after crunching the real estate development numbers, determined that, in 1929, a 63-story structure was the profit maximizing one.  Chrysler’s speculative project was in the heart of the booming midtown district near Grand Central Station.  For Chrysler and Van Alen, grabbing the record after adding the chrome spire amounts to a cheap (that is, low-cost) trick.

In short, the cases of Bank of Manhattan Trust and the Chrysler Buildings show that multiple motives are supported: Economics, Competition, and Ego. But economics needed to be present to pay for the ego.

The Empire State Building

The evidence also supports the idea that the developers of the Empire State Building—John J. Raskob and Al Smith—wanted the world’s tallest building because Raskob considered Chrysler a business rival.[2] But the story, of course, is more complex. First, the Empire State Building sits on a lot that is about 91,000 square feet. This is an even larger lot than the one Clark and Kingston used for their exercise, which was about 84,000 square feet. The bigger the lot, the more favorable are the skyscraper economics.

Second, while the neighborhood was mostly retail, warehousing, and loft buildings, Raskob and Smith  intended their project to also be used for “placemaking.” They were betting on the fact that their iconic structure would lure more Class A office space to their area. In short, the Empire State Building offers support for several theories: Economics, Placemaking, and Ego.

Left: Twin Towers. Right: Sears (Willis) Tower. Source: CTBUH.

The Twin Towers

In the 1960s, business leaders were worried about lower Manhattan’s future, as the district and port had fallen on hard times. Thus was born a plan to create the World Trade Center site to revitalize the neighborhood.[3] Ultimately the project was led by the Port Authority of New York & New Jersey (PA), an independent, interstate government agency established in 1921 to oversee and rationalize port operations in the region.

For the first time in the city’s history, the world’s tallest building would be financed and built by a governmental organization. During the 1960s, slum clearance and urban renewal were all the rage. The Word Trade Center project fit right into that mold. Evidently, once the PA took control, the marketing team suggested that constructing the world’s tallest buildings would be good advertising for the site.

In short, the evidence suggests multiple theories: Placemaking, Urban Growth Strategy, Advertising (though I can’t rule out the ego of PA president, Austin Tobin).

The Sears Tower

Today, Sears is on the brink of failure; yet another victim of internet commerce. But in the early 1970s, Sears, Roebuck and Company, headquartered in Chicago, was the largest retailer in the world (like Woolworths before it). In 1969, it enjoyed profits of $441 million from $8.9 billion of revenue. Sears had more than 355,00 employees worldwide.

The Sears (today the Willis) Tower was announced 1970, and completed in 1973. At 110 stories it beat out the Twin Towers to become the world’s tallest building. But we can’t say for sure that Sears and its CEO, Gordon M. Metcalf, were engaged in direct competition with the Port Authority. What we can say is that Metcalf was eager to have a new headquarters to consolidate Sears’ staff, which were scattered throughout the city. The company estimated that it would eventually require two million square feet of building space. Sears was able to acquire a large lot of 129,000 square feet on the west side of Chicago’s central business district. An iconic structure would likely draw more companies and workers to the neighborhood. As reported in the New York Times,

The area is one that is experiencing what real estate men like to call a renaissance. New office buildings are shooting up on and around Wacker Driver. “Wacker Drive is becoming the Park Avenue of Chicago,” Mr. Rubensten [a real estate broker] said enthusiastically.

Denial

Not unlike the Bank of Manhattan Building, Sears downplayed the idea of height competition.

“The question then was whether to shorten the building or reshape it and maintain the height,” Mr. Dunlap [an architect at SOM] said. “We kept the height, for reasons of proportion, and aesthetics. There was some mention that it would be nice to have the world’s tallest building. But the idea of a space race is silly.” (NY Times, Oct. 18, 1970).

Theories supported: Economics and Placemaking.

Left to Right: Petronas Towers, Taipei 101, Burj Khalifa. Source: CTBUH.

The Petronas Towers

The Petronas Towers, headquarters of Malaysia’s state oil company, were completed in 1998, as the centerpiece of Kuala Lumpur City Center, a 100-acre, government sponsored project. The neighborhood and towers were part of a larger program of infrastructure investments, initiated by Prime Minister Mahathir Bin Mohamad.  The government was seeking to diversify and modernize the economy, which  was dependent on the sale of commodities, such as palm oil, rubber, tin, and crude oil.

Again, the boundary between the ego, economics, and urban growth strategy is not clear. But the goal was to put the city of two million people “on the map.” Of course, critics complained the buildings were too tall. But many saw them as a source of local pride. As the New York Times wrote in 1996,

But supporters say the symbolism itself is worth the cost of construction. “The twin towers are a symbol of Asia’s dynamism and growth,” said Razak Baginda, executive director of the Malaysian Strategic Research Center. “The towers will do wonders for Asia’s self-esteem and confidence, which I think is very important, and which I think at this moment are as the point of takeoff.”

The structures were also designed to lure high-tech firms. In 2003, the New York Times reported,

The Petronas towers have also been designated a distant spur of the Multimedia Super Corridor, Malaysia’s answer to Silicon Valley…Not surprisingly, the list of tenants in Tower 2 includes some of the biggest names in technology…Microsoft occupies two floors, the 29th and 30th….The towers’ biggest draw, however, is not fiber optics, tax incentives or discount cappuccino. “The best thing about working here is status,” said Mr. Kuhan from Asia Telecom. “People look at you differently.”

Theories supported: Economics, Urban Growth Strategy, and Placemaking.

The Taipei 101

National pride is another element of skyscrapers. Residents are eager to use them to convey their independence and command over resources. The Taipei 101 appears to be a combined case of economics, urban pride, perhaps with some ego thrown in. Completed in 2004, the structure was promoted by Chen Shui-bian, the mayor of Taipei in the 1990s, and who went on to be Taiwan’s president. He was eager to have a skyscraper built in a newly-planned neighborhood close to City Hall. Working with one of Taiwan’s wealthiest developers, the two conceived of, and developed, the project. Evidently, the first plans had the building only at 66-stories, but then the election of Chen to the presidency drove them to increase the height. The New York Times reported in 2004,

As with other very tall buildings in Asia, the construction of this one is as much about politics and pride as commerce. “As the world’s highest building, Taipei 101 will attract attention to Taiwan’s excellence, and carve ‘Taiwan first’ in the minds of people around the globe,” President Chen Shui-bian said….

Theories supported: Economics, National Pride, Ego.

Burj Khalifa

Finally, is the Burj Khalifa, which opened in 2010 at 828 meters high. It too was part of a larger planned neighborhood within Dubai. By constructing the world’s tallest building, the UAE. government was seeking to promote its strategy of economic diversification, away from its dependence on oil. In the words of Mohamed Ali Alabbar, Chairman of Emaar Properties:

When we developed Burj Khalifa, we had a clearly articulated vision of not just delivering an icon that underlines the ambitions and spirit of global collaboration that defines Dubai, but also to maximize the value of the land by creating a truly “vertical city.” Burj Khalifa is at the heart of Downtown Dubai, our 202-hectare megadevelopment, and it adds incremental value to the destination.
New York on the Gulf
Dubai has embraced skyscraper construction since the late 1990s. In one respect, the Burj Khalifi is an extension of the desire to build up its skyline more broadly. As reported in the Los Angeles Times in 2005:

Bigger. Brighter. More outlandish. Construction-fevered Dubai is almost Gatsby-esque in its audacious thirst for reinvention. This once-sleepy port of pearl traders and pirates is gunning to turn itself into one of the great capitals of the postmodern world.

If Americans pushed west to manifest destiny, the Emirates are pushing into the sky. There is a vague consensus here that great cities arrange themselves around ambitious architecture, and Dubai is determined to outdo them all. You feel it when you drive down the highway, eyes assaulted by a string of quixotic slogans: “The earth has a new center.” “History rising.” “Impossible is nothing.”

Theories supported: Urban Growth Strategy, Placemaking, Ego.

What Does It All Mean?

Based on these case studies, what can we conclude? First, we see evidence for several theories, from pure economics, to urban growth strategies, to pride–both personal and civic–to ego and competition. Second is that money must be available for these large projects. But where the money comes from varies over time and space. Early projects were privately financed, while more recent projects are financed or subsidized by governments. Nonetheless, all these skyscrapers were built in major global metropolises with rapid economic and population growth.

Since the Twin Towers (but excluding the Sears Tower), the norm has been for the world’s tallest buildings to be part of a larger urban and national economic development plan. The buildings are centers of newly-created neighborhoods, and meant to enhance feelings of national pride and create iconic structures that advertise the city. The extent to which the world’s tallest buildings are built by autocrats is not clear. The United States, Malaysia, and Taiwan and are democracies; while the UAE and Saudi Arabia (which is constructing the next record breaker) are not.

Spillovers

Whether the structures directly pay a reasonable return on investment is often beside the point if they succeed in generating wider forms of economic growth and well-being. To my knowledge, no study has tried to measure the spillover benefits that accrue from these soaring towers.

And there is something else to consider. By building the world’s tallest building, it extends the limits of human technological knowledge, which can generate unintended benefits applicable in other areas of our lives more broadly. This will be the subject of a future post.

Continue reading. The rest of the series can be read here.

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[1] Another method is to collect a larger data set on skyscrapers more broadly and perform a statistical (regression) analysis that looks at the effects of one or more variables on skyscraper heights or counts, holding other important variables constant. For this post, since I’m focusing only on the record-breakers, I will use the case-study method and leave a discussion of statistical results for a future post.

[2] My understanding of the history of the Empire State Building is based on John Tauranac’s book, The Empire State Building: The Making of a Landmark.

[3] My sources for this section are Eric Darton’s (1999) book, Divided We Stand: A Biography of New York’s World Trade Center, and Angus Gillespie’s (1999) book, Twin Towers: The Life of New York City’s World Trade Center.

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Skyscrapers and Cities: A Q&A Interview with Edward Glaeser (Part I)

by Jason M. Barr    September 5, 2018

[Author’s Note: This is Part I of a two-part Q&A interview with Professor Edward Glaeser. You can read Part II here.]

 

Edward Glaeser is the Fred and Eleanor Glimp Professor of Economics in the Department of Economics at Harvard University. He one of the world’s leading experts on the economics of cities. He is the author of Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier, and Happier.

On Skyscraper Research in Economics

JB: While there are a handful of research papers in economics on investigating the causes and consequences of skyscrapers, such as by Helsley and Strange (2008) and Ahlfeldt and McMillen (2017), it seems that, by and large, even for urban economists, this topic is not a significant area of research. Do you think economists have ignored studying the economics of skyscrapers?  And if yes, what kinds of research questions might be of interest to economists?

EG: I would go further and suggest that economists have spent too little time on the technology of building more broadly.  Building technologies have shaped our cities and suburbs for centuries.   They provide important sources of exogenous variation and are intrinsically interesting.  For example, one of the unfortunate side effects of excessive land use controls is that building often occurs on a one-off basis.   Mass production becomes impossible and there are large costs savings from building multiple units at once.   Consequently, land use controls increase effective housing prices both by restricting the number of new units and by pushing construction into an inefficiently small scale.   Perhaps, this helps explain why productivity advances have been so limited in construction in recent years.  That weak productivity growth is itself an important topic for economic research.

Skyscrapers are themselves a particularly fascinating technology.  The origin of the skyscraper is itself a fascinating story showing the ways in which ideas flit from sector to sector.  I tend to give early credit to Joseph Paxton, the English gardener who had used metal frame structures for greenhouses.  His inexpensive plan was chosen for the Crystal Palace exhibition in London and this then inspired Napoleon III and the French architect Victor Baltard.  Baltard then used metal frames for Les Halles and for St. Augustine’s church in Paris.  It would take another decade for William LeBaron Jenney to start using steel frame for a skyscraper: Chicago’s Home Insurance Building. Jenney performed the crucial combination of connecting metal frames with Otis’ safety elevators.  His idea spread like wild fire in Chicago and was then adopted and improved by Louis Sullivan, Daniel Burnham and many others.  This provides a classic model of how ideas spread across dense urban areas.

The skyscraper has two effects on the price of land.  First, they allow more usable space on the same spot of land which should push land prices up.  Second, they allow more usable space overall in the city which should push down the price of usable space and indirectly the price of land.   One hypothesis is that rising urban land prices in the late 19th century were driven by the first effect, while declining land prices during the early 20th century were driven by the second effect. The connection between new building technologies and urban real estate cycles is a particularly pressing topic for future research.

Tallest Skyscrapers around the world. Source.

On the Economics of Skyscrapers

JB: Do you have any thoughts about the debate about whether skyscrapers are economically too tall? The common perception is that the world’s (or region’s) tallest buildings are driven by the desire to claim an “ego-prize” (such as discussed in Helsley and Strange (2008)). Yet, in principal, one can think of a host of other rational reasons for excessive height—such as place-making or inducing agglomeration benefits by attracting high-skilled workers. How do you view this? And do you think “too tall” construction is good or bad for cities?

EG: I don’t have that much new to say about this question.  The usual stylized fact is that building exhibits roughly constant returns to scale up to about 50 stories, but then costs rise dramatically after that point.  This suggests that some skyscrapers (under 50 stories) are too short while others (over 100 stories) are too tall, except in conditions of extreme demand.  I think both phenomena are worth more study.

The too small phenomenon is important for cities because if there is some force that artificially restrains the ability to build up, then the supply of usable space will be too small and prices will be too high.   One candidate explanation for skyscrapers being too small is land use regulations.  Yet developers often speak about their unwillingness to build up because of their limited appetite for risk.  Credit restraints may also be important.

“Too tall” skyscrapers presumably reflect exaggerated expectations about future price growth, or the egos of their builders.  Both phenomena were on display in New York’s great skyscraper race of the late 1920s.  Both phenomena may also have been on display in Dubai a decade ago as well.

The issue of externalities from height is particularly fascinating.   The original New York City zoning ordinance of 1916 was motivated by the excessive shadow allegedly cast by the Equitable Building on 120 Broadway.  There are still complaints about shadows and views to this day.  On the upside, large towers help agglomeration economies to flow and potentially reduce traffic congestion.  A city in which people ride elevators and walk from tower to tower can be much more functional than a city that is mired in cars.

On Luxury Highrise Apartment Buildings and Regulations

JB: One of the vigorous current debates about tall building construction is regarding supertall luxury apartment buildings in places like New York, San Francisco, London, and Vancouver. Detractors argue they exacerbate gentrification and income inequality, while harming the quality of street life, and throwing shadows on the street and in parks. What is your view of the effect of tall luxury apartment buildings on cities? Should they be taxed or regulated? Or should they be encouraged? 

EG: I think that the starting point has to be a serious quantification of the externalities that I just mentioned.  Almost none of the land use regulations that cities have ardently adopted for over a century have been justified by any serious quantitative work.   The existence of even the smallest externality, such as a shadow, has been seen as justification for massive interventions in the housing market.

My own belief is that we have almost surely limited skywards construction excessively in our most successful cities.  I think that the externalities from height are real, but that they are overwhelmed by the pure economic benefit of building, which can be quantified by comparing construction costs with the current price of usable spice.  More than a decade ago, I estimated that the cost of building another story (which is the marginal cost of extra space) was less than one half of the market value of that space in Manhattan.   Prices are even higher today.  I can’t imagine that the negative externalities from building are anywhere near high enough to justify such a massive implicit tax.

One of the reasons to be skeptical about these negative externalities is that if people don’t live in an urban skyscraper, they will live somewhere else, and there are also externalities from other forms of building.  Suburban homes lead to more driving which generates congestion and pollution externalities.   Restricting construction in America’s more temperate cities, which include Seattle, San Francisco and Los Angeles, induces more construction in hotter places like Houston.  The impact of that rerouting of construction is more air conditioning and more carbon use.

Planned and Completed Luxury Apartment Buildings in Manhattan along “Billionaire’s Row.” Source.

On NIMBYism

JB: One of the main arguments in Chapter 6 of Triumph of the City is that landmarking, historic preservation, and zoning are driving higher housing prices, and that places like Paris and New York should allow residential building height to increase according to the demand. But this raises several important questions. How can a city realistically make such a plan? It seems that nearly every large city in the West is prevented from allowing the housing market to operate more closely to match supply with demand for all income brackets. What might be some realistic ways that governments can prevent the NIMBYists from vetoing housing market reform? Do you see any good examples of denser older cities that have been able to overcome the NIMBY problem?

EG: I think that there are two reasonable political paths against NIMBYism.  The first is top down.  Strong mayors often like building up, because of the construction jobs, property tax revenues and agglomeration effects.   Consequently, leaders like Michael Bloomberg, Richard Daley and Boston’s Marty Walsh have all fought for more permissive construction environments.   Generally, the smaller the jurisdiction, the less likely will political leadership see the upside in construction.  Part of the problem is that restrictions benefit current home owners at the expense of prospective external resident, and the smaller the jurisdiction the larger this problem will be.

The second path is the new YIMBY movement, which is a ground up swell supporting new development.  In a sense, that movement recognizes that incumbents, typically an older generation, has enriched itself through land use regulations at the expense of a younger generation.  We have yet to see the YIMBYists achieve significant change, but the movement is a really welcome addition in urban political discourse.

In terms of policies, the question becomes what level of polity is implementing the change.  At the local level, the easiest change is just to allow more as-of-right high-rise building rules.    As-of-right means less regulatory uncertainty.  If there are real externalities, we can certainly impose impact fees, but these should be a replacement for a lengthy permitting process.

At the state level, the government needs to encourage lower levels of government to permit more housing.  One approach, typified by Massachusetts, Chapter 40B is just to over-rule local land use controls and impose a more permissive state level building code.   A second approach, since in New Jersey’s post-Mt. Laurel system or Massachusetts 40R or 40S, is to provide financial incentives for localities to encourage more building.  State transfers, for example, could be tied to the level of local building.

***

[Continue reading part two here.]

by Jason Barr 4 Comments

The “Parabox”: Glass Skyscrapers and the City

Jason M. Barr     July 25, 2018

From my eighth-floor office in Newark, New Jersey, I have a view of the Manhattan skyline. On a clear day, I can see One World Trade Center and the Empire State Building. I can also see much of downtown Newark, which, in many respects, is a typical central business district in a mid-size city.

A few years ago, Prudential Insurance Company began building a new office building a few blocks from the Rutgers-Newark campus. Prudential has been a vital business to Newark since its founding in 1875. It remained in the city long after other companies fled in the 1960s and 1970s. Their decision to build a second headquarters closer to the campus has helped spur the neighborhood.

But, I found their architectural decision a bit curious. The company erected the plainest of plain glass boxes. Looking east from the Rutgers side, the structure sits like a massive greenhouse (or rather two greenhouses) thrust down amidst old brick townhouses and low-rise buildings. From Broad Street—the business district side—it looks like another generic office building, in a long row of towers.

To me, it sparked the question of why, in the 21st century, companies continue to build glass boxes. The common perception is that they are bad for the city. They dampen the feel of the streets, and are cold and monotonous. And, by turning office space into hothouses, they suck up enormous quantities of energy, increasing greenhouse gas emissions.

The new Prudential headquarters in Newark, New Jersey, near the Rutgers-Newark campus. Photo by Jason Barr.

Invasive Species?

Justin Davidson, the architecture critic at New York magazine, has recently voiced this complaint. In his TED talk, “Why Glass Towers are Bad for City Life,” he says,

New downtowns sprout towers that are almost always made of concrete and steel and covered in glass. You can look at skylines all over the world—Houston, Guangzhou, Frankfurt—and you see the same army of high-gloss robots marching over the horizon. Now, just think of everything we lose when architects stop using the full range of available materials. When we reject granite and limestone and sandstone and wood and copper and terra-cotta and brick and wattle and plaster, we simplify architecture and we impoverish cities. It’s as if you reduced all of the world’s cuisines down to airline food.

Shiny towers are an invasive species and they are choking our cities and killing off public space. We tend to think of a facade as being like makeup, a decorative layer applied at the end to a building that’s effectively complete. But just because a facade is superficial doesn’t mean it’s not also deep.

The Demand for Glass

According to the National Wildlife Federation an invasive species

can be any kind of living organism…that is not native to an ecosystem and causes harm. They can harm the environment, the economy, or even human health. Species that grow and reproduce quickly, and spread aggressively, with potential to cause harm, are given the label “invasive.”

But if glass boxes are, in fact, bad for cities, why are they still being built? The short answer: the demand from tenants–especially businesses. Glass buildings have many appealing features to the occupants; this appeal appears to be getting stronger as both the nature of work and office culture evolve.

Thus, “invasive species,” a provocative term to be sure, doesn’t quite categorize them. The workers in the buildings are part of the larger economy of cities, and they help benefit the rest of us by increasing economic growth. The glass box is contributing to the health of the broader urban ecosystem, though with negative side effects.

Why are They so Popular?

Glass walls provide an abundance of natural light and views that are pleasing to people. The buildings feel more open, and, visually speaking, they allow for greater connections with the outside world. In short, those who work inside glass boxes seem to be happier and more productive.

While Davidson complains about how isolating it is from the outside, on the inside, glass makes people more equal. The large supply of light and views make them relatively abundant resources, which then, likely, means fewer “battles” among workers to get access to them. Glass is the ultimate democratic material.

According to Bob Chodos of Newmark Knight Frank in Chicago, today’s buildings are designed to maximize the amount of light on every part of the floor—even in the interior. He says,

Some architects used to design buildings from the outside in, with stone on the exterior with punched windows as opposed to spandrel windows.  That is the old school building.  Today, floor plate geometry with rectangular floors of 25,000 to 30,000 square feet, 45 feet from glass to central core, and column-free spaces with floor-to-ceiling glass curtain walls are the norm.  Inside out design is the key.  Glass walls on the fronts of offices is the trend today so that light and views go through to all.   This also includes setting up furniture in the offices so that the desks do not block the view to the interior.

This is the crux of the glass box paradox (or “parabox”)—inside the buildings people feel more connected to the outside world, but residents of the city, who walk (or drive) past them, may feel more isolated and separated. What is good for one group seems bad for another.

Recent glass office skyscrapers. From left to right: 4 World Trade Center (New York, 2014),  Wells Fargo Tower (Miami, 2010), Salesforce Tower (San Francisco, 2018), River Point (Chicago, 2017). Source: CTBUH Skyscraper Center.

The Changing Nature of Work

Just as important is the changing nature of work. The rise of the intangible economy and the rapid pace of innovation means that office layouts have become more open. Companies provide these spaces for groups to brainstorm and hash out new ideas, which generate knowledge spillovers and promote economic growth (although there is some debate if open floor plans create new, unintended problems).

When Prudential had is official opening in September 2015, John Strangfeld, Chairman and CEO, implied as much when he said, “We concluded what we needed to do was to build a new building to accommodate more than 2,000 of our employees in a new physical setting; in an environment where they can more actively collaborate in some of the new avenues of business we are pursuing.”

Design is the key to this. Mr. Chodos says that, “The collaboration spaces are often in the corners of the floors, shared by all, so that those who collaborate get rewarded with the best spaces.”

How to Resolve the Parabox?

Davidson’s argument is, essentially, that there are negative externalities from the glass box—while  they are beneficial to the occupants (and the larger economy), they may harm, in some way, the city and its residents (not to mention the erstwhile “death ray” melting cars).

His response is a call for architects to think more creatively about the materials they use, and to consider the building’s impact on the neighborhood and the aesthetics of the city. These are certainly reasonable goals, but, I would argue, it won’t have much impact. At the end of the day, architects are responding to the requests of the developers, who are responding to the requests of the building occupants. If the people demand glass, then glass it is. And there might not be much one can do up high, where light and views are so highly prized.

Solutions would likely need to come in the form of city policies, which can, perhaps, help improve life at the street level and the urban fabric more broadly. For example, the aim of zoning regulations, in theory (but not always in practice), is to create incentives that get developers to “internalize” the harm they cause to others; that is, to create buildings that better balance the needs of all affected.

The first goal should be to foster streets that draw pedestrians, and who come throughout the entire day. The second goal should be to nudge or incentivize developers to provide street-level spaces that are inviting to these pedestrians; and move developers away from erecting isolated towers-in-the-park. In this case, I would offer three possible solutions.

Mixed-Uses

First is that neighborhoods should be allowed or encouraged to have mixed-uses—with very few restrictions on the types of businesses on the block. One of the problems with the glass box office is that the ground floor facade is part of the curtain wall, with very little to draw or welcome the average pedestrian.

The parabox exists because, ironically, the glass acts as a kind of medieval city wall keeping out the “strangers.” If cities let offices and residential buildings exist side-by-side, then the restaurants, bars, and retail will follow. The street itself will be more dynamic, even if glass is the predominant wall material.

Setbacks

But this, in and of itself, might not cure the problem.  I would suggest two possible adjustments to zoning rules. The first is that cities should consider a return to the kind of zoning used in New York City from 1916 to 1961. During this time, tall building were mandated to be set back after they reached a particular height. The setbacks were determined, in part, by how wide the street was, so that on narrower streets the buildings were set back at a lower height. These rules gave us the Art Deco “wedding cake” style of buildings during the Roaring Twenties.

The original intention of these setback requirements were to make buildings thinner at the top to allow more sunlight on the streets. However, they also helped make streets a bit less claustrophobic and canyon-like. These rules can help return something of a human scale to the streets.

Floor Area Bonuses

Another strategy is to provide floor area bonuses. The idea is that cities can nudge developers to include street level amenities that engage pedestrians and make them feel welcome. If developers provide design or building features that encourage mixed-use, pedestrian-friendly neighborhoods, than they can build taller than would otherwise be allowed by the law.

The goal would be to incentivize the provision of small-scale retail, public libraries or arts spaces, or open atria or malls that eliminate the boundaries between the inside and outside of the office building. The point is that developers need to better integrate the ground floors of their office buildings into the city fabric; building bonuses can help make that happen.

A word of caution, however. This type of incentive zoning has been tried since the mid-20th century. In New York City, for example, the rules implemented in 1961 gave developers floor area bonuses for plazas. But, a thorough review of these spaces showed they were often underutilized and under-maintained. The point is that if incentive zoning is going to be used to eliminate the “invasive species” feeling of glass buildings, then cities need to learn from past mistakes.

Carbon Dioxide Emissions

Another criticism of the glass boxes is that they are energy inefficient—that they require massive amounts of energy to heat in winter and cool in summer. While this is true, the market is responding to the problem. Today, glazing systems are much more efficient at blocking thermal radiation, helping to reduce greenhouse gas emissions.

However, given the dire consequences of climate change, cities need to implement policies that get the producers of CO2 to more directly pay for their harm. As I have argued in another post, a relatively simple (and palatable) way to do this is to implement a kind of “cap and trade” system for building owners.

The plan is that each owner is given an annual benchmark for CO2 emissions levels (per square foot of building space). Emissions above the benchmark are taxed; while emissions below that are rewarded with a cash bonus. Over time, the benchmarks gets lowered. The worst polluters are incentivized to invest in efficiency or buy clean energy.

The Future of the Box?

The glass box is a much a response to globalization as it is to the needs of the work environment. Cities build these structures to lure business and be a part of the international web of finance, production, and commerce. This is driving a kind of commodification of tall buildings—they are becoming supranational real estate for the global human community. The glass box might just be the lingua franca of office buildings.

While developers are also eager to build iconic structures that stand out and provide some distinction, the market forces of universality place limits on this. Likely the need to distinguish a structure drives developers to go taller instead.

Whether the commodification of the office building is good or bad for humanity more broadly will be taken up in a future post.  But at the local level, to the extent that policies can promote urban diversity and pedestrian-friendly places, while allowing developers to cater to needs of the modern workforce, then cities can continue to be living and breathing entities, with a robust and healthy ecosystem.

 

Sameera Jhunjhunwala provided valuable research assistance.

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Credits

The New Amsterdam map on this page was sourced here, and the atlas image is from the 1891 Atlas of City of New York by GW Bromley & Co.

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