Figure: Total Height and the Skyscraper Profit Index, 1963-2013.

Figure: Total Height and the Skyscraper Profit Index, 1963-2013.

The Skyscraper Profit Index is created by dividing average midtown asking office rents by the Turner Construction Cost Index. It is a measure of the relative profitability of office construction in Manhattan. The figure shows a two-year moving average of the value for two years prior. The reason is that there are long lags between when a project is started and when it’s completed. Also presented is the total height of all skyscrapers completed each year (of all types, not just offices). As the graph shows, total height is strongly correlated with the Profit Index, suggesting that builders begin construction when the economic environment is favorable.