Construction is set to resume in Saudi Arabia on what is set to be the world's tallest skyscraper.
And it begs the question: do these towering man-made structures make economic sense?
Kingdom Holding, the investment company controlled by Saudi Arabia's Prince Alwaleed bin Talal, on Wednesday said it had signed an agreement with Saudi Binladin Group to complete the 1,000-metre Jeddah Tower.
The value of the deal is 7.2 billion Saudi riyals ($1.92 billion), of which about 1.1 billion riyals have already been paid for works previously completed.
Construction of the skyscraper formally known as Jeddah Economic Company Tower – the first that would hit the 1km mark in height – is expected to take another three and a half years.
Dubai architect
Work was halted in 2018, with 63 of 157 floors complete. It will be part of the first phase of 1.3 million square metres of the total area of Jeddah Economic Company City, which is about 5.3 million square metres.
Jeddah Tower will be a "destination driver", with its potential to add value to the Arab world's biggest economy, said Taimur Khan, head of research for the Middle East and Africa at real estate advisory JLL.
"There's definitely good potential returns ... it's part of a wider development to expand the city to provide a new standard and quality of asset," he told The National.
Economic sense and sensibility
Skyscrapers are not cheap endeavours and require years of planning and construction. Along with that, one must consider whether they fit into a city's longer-term goals - and if developers have the financial capabilities to finish them.
"Developments of this magnitude are thoroughly vetted, with numerous checks and balances in place to ensure their financial feasibility before moving forward", said Siraj Ahmed, a partner at Dubai property consultancy Cavendish Maxwell.
To class as a skyscraper, modern definitions dictate the structure should be 150m tall. And advancements in the speed and scope of construction have spurred more of them.
But is there actually demand for such towering man-made structures? The short answer is yes - especially in the Middle East, Mr Ahmed said.
"As with any major project in the Middle East ... one of the most common questions we encounter is whether there is sufficient demand in the city to justify such large-scale infrastructure developments," he said.
"Projects of this calibre bring substantial economic benefits to a city. They drive tourism, create jobs, boost consumer spending and contribute to gross domestic product. For any thriving city, it is essential to maintain a balance between high-income and low-income households."
In the context of jobs, this is particularly seen in the staff that run skyscrapers and its occupants, such as hotels, restaurants, retail outlets and the building itself. For owners of spaces within these towers, additional revenue streams can be made through rent.
They are not without risk, though: investing in them can be tricky, as with any other asset, said Yasir Saeed, an architect working in Dubai.
"On one hand, it can offer substantial returns due to appreciation, but on the other hand, it is highly volatile, depending on market trends and timing. Location and demand play a crucial role in this regard," he told The National.
Financiers and property buyers may also encounter challenges such as high initial costs, economic fluctuations associated with Saudi Arabia’s dependence on oil and regulatory obstacles that may affect foreign investment, said Bas Kooijman, chief executive of Luxembourg-based asset management firm DHF Capital.
"While the project offers investment opportunities with government backing and infrastructure development, factors such as market volatility and competition from other projects present some risks," he told The National.
Jeddah Tower is also expected to "revitalise" the city before the 2034 Fifa World Cup, he added.
Squeezing more in
Building property is widely considered a sign of economic expansion, but as more projects come up, the real estate on which to build them narrows.
Skyscrapers offer vertical expansion, saving ground space, especially in urban areas, and providing a high density of usage per a given area of land, according to S3DA Design, a California-based structural and engineering firm.
"With cities becoming increasingly populated, the demand for space grows while available land remains constant. Skyscrapers address this challenge efficiently by extending the urban landscape vertically," it said.
Skyscrapers, which "utilise space to the maximum" are one way to meet practical demands, considering the current growth and urbanisation of cities worldwide, Mr Saeed said.
"Skyscrapers provide an efficient solution for meeting these needs and demands through vertical development. Economically speaking, it is much more financially beneficial to build vertically, given how expensive land prices are."
Aside from conserving valuable urban space and helping in sustainable city planning, they also serve as "pinnacles" of modern construction and architectural design, serving as symbols of innovation and progress, S3DA said.
The Middle East, the UAE in particular, has managed to create a reputation when it comes to skyscrapers.
Nineteen of the 100 completed tallest buildings in the world are in the Middle East, with 15 in the UAE alone – 13 in Dubai and two in Abu Dhabi – data from the Council on Tall Buildings and Urban Habitat shows. Asia has 62 entries on this list, mostly in China.
Ten more are under construction and 23 more are proposed, the latter of which includes the 234-floor Burj Mubarak Al Kabir in Kuwait City, which, if completed, would surpass Jeddah Tower by one metre, making it the world's tallest, the council said.
"There's certainly a placemaking element in and around them, but I think in the future they will be part of a much broader strategy," Mr Khan said.
Dubai already has the 828m Burj Khalifa, currently the world's tallest. Next up is the 725m Burj Azizi, which would be the world's second-tallest upon its completion in 2028.
For Jeddah Tower, aside from becoming a landmark within the coastal city, "significant interest" is expected from investors and end-users "seeking unique and exclusive experiences", Mr Ahmed said. That, however, will not mean it will be limited to the higher end of the spectrum.
"While Jeddah Tower will undoubtedly appeal to high-net-worth and ultra-high-net-worth individuals, Saudi Arabia’s Vision 2030, alongside the Ministry of Housing’s efforts, will ensure that adequate affordable housing is developed across the city to cater to a broader demographic," he added.
In addition, skyscrapers, which have already been established to maximise the use of land upwards, may also help allocate real estate for other critical infrastructure such as roads and bridges.
"The requirements for both skyscrapers and infrastructure go hand-in-hand and are directly related to population demand," said Mr Saeed, the Dubai architect.
"As demand increases, so does the need to build skyscrapers to accommodate this growth. Additionally, infrastructure must expand to provide connectivity and support for these skyscrapers. However, skyscrapers often cater primarily to the higher class, making it crucial to prioritise affordable housing."
That calls for a balanced approach that considers both luxury projects and community necessities to ensure sustainable urban growth, Mr Kooijman added.
