Who would have thunk

I admit, it never would have occurred to me that this housing development in Turkey was not destined for success:

Burj Al Babas Turkey

From Curbed:

Nestled into the beautiful rolling hills of central Turkey, there’s a housing development of apocalyptic proportions. Rows of identical faux chateaux sit empty at the Burj Al Babas complex after its developer, Sarot Group, recently filed for bankruptcy.

When construction started in 2014, the Burj Al Babas was supposed to be a luxury residential retreat for wealthy investors from the Middle East. The $200 million complex called for 732 identical homes in the style of the French chateaux, each with an ornate facade, Juliet balconies, and a round turret fit for a princess. The interiors could be customized to the buyer’s desires.

The cookie-cutter mini-castles were going for anywhere from $370,000 and $530,000, and according to Bloomberg, plenty of people were already buying them. Just not enough, apparently. By the time the developer filed for bankruptcy, they had completed 587 homes and were $27 million in debt.

At first glance, I assumed it was in China.

Mingtiandi cited in the Chicago Tribune

CNice to have an article of mine cited in the Chicago Tribune (emphasis added):

A Chicago developer said construction of the 98-story Vista Tower, which will be the third-tallest building in the city once completed, is unaffected despite major changes to the Chinese company that is backing the condominium and hotel project.

Magellan Development Group’s $1 billion East Wacker Drive skyscraper is one of several commercial real estate properties caught up in a Chinese government crackdown on high-leverage investments overseas.

Billionaire Wang Jianlin’s Dalian Wanda Group, Magellan’s equity investor in the Chicago tower, is in the midst of a major company restructuring as the result of heavy pressure from the Chinese government over its investments in the U.S. and other countries.

On Wednesday, Wanda Hotel Development Co. — which is publicly traded in Hong Kong — disclosed that it is selling stakes in real estate projects including the Chicago tower to a privately held company controlled by Wang’s family. That company is called Dalian Wanda Commercial Properties Co.

While the sale simply amounts to shifting ownership stakes from one Wanda Group affiliate to another, it could signal more changes are ahead. Mingtiandi, a newsletter and website that covers the Asian commercial real estate market, said it could be a step toward Wanda eventually selling ownership stakes of properties in cities including Chicago, London and Sydney.

But Magellan President David Carlins said he’s had no discussions about a potential sale from Wanda Group.

“We have not heard anything about (a sale), and there would have to be conversations about that, because it would require our consent,” Carlins said.

Wanda Group representatives did not immediately respond to a request for comment.

Here’s the Mingtiandi article referred to above:

Dalian Wanda Group is selling stakes in nearly $4.5 billion in real estate projects across the UK, US, China and Australia to a privately held company controlled by its chairman Wang Jianlin, according to an announcement to the Hong Kong stock exchange on Thursday.

The asset sale is part of what the company says is a $1 billion restructuring after the property and entertainment conglomerate became a focal point for a Chinese government crackdown on cross-border deals and excessive leverage over the past few months.

Analysts believe that the restructuring is likely to be an intermediate step in Wanda ultimately selling off its interests in property projects in London, Chicago, Sydney and other locations, that made it into one of China’s best known players during the country’s 2012 to 2016 “go global” spree.

Brutal architecture

As if brutalist architecture weren’t enough, now we have architecture that’s literally brutal:

The controversial Walkie Talkie tower in the City of London has commanded a record-breaking price for a single building in the UK – £1.3bn in a sale to a Hong Kong manufacturer of oyster sauce. […]

Designed by New York-based Uruguayan architect Rafael Viñoly, the Walkie Talkie made headlines in 2013 before it had even opened, when its concave glass facade was found to channel the sun into a scorching beam of heat on to the street below. Repeating exactly the same mistake he made with his similarly concave Vdara hotel in Las Vegas, Viñoly’s “death ray” succeeded in melting the bumper of a Jaguar, blistering painted shopfronts and singeing carpets, with temperatures proving hot enough to fry an egg on the pavement. Nor was it much safer when the sun went in: the tower’s glacial cliff-face was accused of channelling winds so strong that pedestrians were in danger of being blown into the road.

And some gentle mockery from another article:

The incidents earned the building new nicknames, including the Walkie Scorchie and Fryscraper, and the builders were forced to apply sun shading to resolve the issue. […]

But its bulbous shape, which looms over nearby buildings, is not universally appreciated. In 2015 it won the Carbuncle Cup, an annual award for the ugliest building of the year presented by architecture magazine Building Design. One judge called it “a gratuitous glass gargoyle graffitied on to the skyline of London”, while another described it as a “Bond villain tower”.



Shenzhen built more skyscrapers than the US in 2016

Because it can:

Skyscraper construction saw another year of superlatives in 2016, according to the latest annual report from the Council on Tall Buildings and Urban Habitat. An unprecedented 128 buildings of 200 meters’ height or more (656 feet) were completed around the globe last year (some of which are pictured in this article), a new record that comes on the heels of two previous record-setting years. Since 2000, 903 such buildings have been constructed, a 441 percent increase.

And, no surprise, China is the world leader by a wide margin, with 84 percent of the total stock of new, 200-meter-plus structures going up in that country, including the 111-floor Guangzhou CTF Finance Centre. The city of Shenzhen saw 11 of these towers completed last year. For comparison, seven such structures were built in the entire United States in 2016.

According to CTBUH, there are 328 skyscrapers at least 200 meters tall under construction across China. Wow.

Shenzhen CFC Changfu Center (completed 2016)

China’s ghost cities are filling up

As expected:

A half-decade ago, China counted perhaps three dozen ghost towns like Tianducheng, places author Wade Shepard called “the stillborn carcasses of cities that never knew life” in his book, Ghost Cities of China.

Littered across the landscape, they were warning signs pointing to the excesses in China’s building boom, an era of unconstrained growth that was the biggest the world has ever seen. But today, they are looking less like epic mistakes and more like temporary disasters.

“There’s not a single one in the country that isn’t in the process of filling up,” said Mr. Shepard.

Or look at Ordos Kangbashi, the Inner Mongolia city built in the desert and so famous for its desolation that tourists flocked to the bizarre site of its Genghis Khan sculpture soaring over emptiness.

The joke used to be that the only people walking the streets of Ordos were BBC reporters.

Now, its population is nearing 100,000, about a third of what it was built to accommodate, and the local government is handing out housing exchange certificates to nearby residents to encourage them to move in.

Ghost towns, it turns out, are easier to fix than the masses of empty apartment towers wedged into the corners of urban centres across the country.

Also, don’t count on the filling-up trend to continue indefinitely. The Chinese government announced a plan in 2013 to steer the movement of some 250 million people from the countryside to the cities over the following dozen years; this was downgraded in 2014 to the more “modest” goal of 100 million people by 2020. This endless supply of people would presumably soak up much of the empty housing inventory in the burgeoning cities.

But life doesn’t always work out according to the plans of Chinese bureaucrats. About 9 million people moved to the cities per year in the 2000s. However, this epic migration has dramatically slowed. In 2015, it appeared to reverse itself, as the migrant population shrank for the first time in three decades, by 5.68 million.

Check out the quoted article for some great images of Tianducheng, a former ghost town with a 354-foot-tall replica of the Eiffel Tower, along with a surreal music video filmed there.

The mother of all bubbles?

Real estate developer Wang Jianlin, China’s richest man, has warned that the country’s real estate market is “the biggest bubble in history.” Home purchase prices in Shanghai rose 31.2% in the 12 months ending August, according to figures cited by Mingtiandi, while Shenzhen saw a 36.8% increase.

One gauge of this extraordinary situation is that housing in Shanghai is nearly as expensive as in New York City, despite the vast gap in earnings between the two cities. The average price to buy an apartment in the center of New York City (presumably Manhattan) is $1,330.61 per square foot, only around 14% higher than in the center of Shanghai where it is $1,161.78, according to the crowdsourced data site Numbeo.com. By contrast, the average monthly disposable salary in New York City is nearly three times as high, at $3,866.18 vs. $1,407.01 in Shanghai.

In case you’re wondering how ordinary Chinese people can afford housing in a country where home prices are so absurdly out of sync with personal income, Wade Shepard explained it well in Forbes back in March.

The short answer is two-fold:

  1. China’s housing market was conjured out of thin air via policy reforms barely 20 years ago, whereby the government privatized the country’s urban housing stock, allowing residents to buy their homes at subsidized rates and thereby creating a vast cohort of new homeowners.
  2. Home buyers in China typically draw on financial support from their parents and other family members, unlike in the West.