May 16, 2020

Supertall Building Construction Moving East and Bringing New Challenges, says Allianz

Construction insurance
Supertall buil
4 min
Kingdom Tower rendering
With the latest generation of high-rise buildings reaching new heights of over 600 meters, the supertall construction boom is bringing new challenges as...

With the latest generation of high-rise buildings reaching new heights of over 600 meters, the supertall construction boom is bringing new challenges as new projects are built higher, faster and with increasing complexity, says insurance giant Allianz.

As the (re)insurer of a number of the tallest buildings around the world, including the next building to hold the title of “world’s tallest”, the one-kilometer high Kingdom Tower development in Jeddah, engineering insurer Allianz Global Corporate & Specialty  (AGCS) analysed the challenges of assessing and managing such exceptional risks in its latest Supertall Buildings Risk Bulletin.

The growth of the world’s tallest buildings continues to accelerate in the 21st century as demonstrated by Dubai’s 828m-high Burj Khalifa, towering more than 300 meters over the previous highest building, Taiwan’s Taipei 101 (509 meters).

As soon as 2019, these will in turn be dwarfed by Kingdom Tower which will be the first one-kilometre tall building, ensuring the size of the tallest building in the world will have doubled in just 10 years.

By 2020, the average total height of the tallest 20 buildings in the world is expected to be close to 600 meters, comparable to almost two Eiffel Towers, made possible by a combination of new technologies, innovative building materials and creative design elements.

Construction shifts east
Alongside the continuous race for record heights, a strong geographical construction shift east is taking place. While throughout the 20th century the US skyscraper dominance was undisputed, the vast majority of construction projects today are in China, South East Asia and the Middle East.

Dubai alone is already home to 20 percent of the world’s tallest 50 buildings, while China boasts 30 of the tallest 100 buildings across 15 cities. Indeed, this month China announced initial plans for its own one-kilometre tall building, the Phoenix Towers.

Ahmet Batmaz, Global Head of Engineering Risk Consulting at AGCS, said: “The eastward trend is set to stay, driven by rapid economic and demographic growth, urbanization, strong investor appetite for flagship real estate assets and lower labour costs than in the traditional Western markets.”

Elevators biggest obstacle to first mile-high building

Concepts for the first mile-high (1.6-kilometre) building already exist. However, they are unlikely to materialise for at least another 20 years– largely due to the fact that elevator technology is lagging behind building technology. Current technology limits elevator travel in today’s supertall and megatall buildings to around 600 meters, mainly due to challenges with braking and cabling, although this is expected to change in future.

Other limiting factors include the availability of building materials to potentially replace steel and concrete, but also safety measures for occupants and surrounding areas, damping systems to reduce the negative impact from wind or seismic activity, as well as financing such mega projects. 

“The foundations of a supertall or megatall building need to be strong enough to even withstand an earthquake or other natural catastrophe activity,” said Clive Trencher, Senior Risk Consultant at AGCS.

“In the initial building phase particularly, consideration also has to be given to potential exposures such as flash flooding, as there will be large excavations that could get filled with water.
“Significant technical issues to overcome include pumping and placing concrete at extreme heights, maintaining verticality as the building height increases, fire risk and even water and sewage disposal.”

Insuring billion-dollar buildings
Ground-breaking projects bring uniquely challenging risks for insurers, as well as for architects and contractors, which is why AGCS engineering risk experts underline that no two tall building projects are alike. These constructions are inherently highly-complex, as they can involve up to 10,000 workers and over 100 subcontractors each. Data availability and accuracy can be an additional challenge, principally in newly-developed economies.

All project phases – whether building construction or civil engineering – can be insured. Due to the extraordinary size and value of today’s largest buildings easily exceeding the US$1 billion mark, insurance for the complete project is generally granted by a consortium of (re-) insurers. In the case of the Kingdom Tower, AGCS is the leading reinsurer of this building which has an insured value of US$1.5 billion.

But beyond all risk building and construction protection, insurers such as AGCS also provide after construction coverage, known as Inherent Defects Insurance (IDI), to protect policyholders against damages arising from defects in design, materials or workmanship.

“Insurance plays a vital role in evaluating and managing the complex risks of these extraordinary projects. Claims and risk consulting services are particularly important on a construction site with close evaluation of past claims often essential in preventing future claims,” said Ahmet Batmaz, Global Head of Engineering Risk Consultants at AGCS.


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May 17, 2021

The pros and cons facing London's office sector

Dominic Ellis
4 min
Deloitte's Summer 2021 London Office Crane survey paints a positive picture but concerns over leasing demand and prospect of 'stranded assets' remain

London is a complex city at the best of times and the Summer 2021 Deloitte London Office Crane survey adds another layer. You could scroll through and find plenty to encourage the construction sector - and no shortage of alarm bells too.

On the bright side, the number of new starts exceeded the long-term average for the third survey in a row, and there was a 20% increase in the volume of new construction starts (both new-build and refurbishments) to 3.1m sq ft across central London in the six months to March 2021. In all, 32 separate new schemes commenced during the survey period - a higher figure than the long-term average of 25.

More than half (56%) of new starts involved an extensive upgrade to existing office stock in as many as 21 separate schemes. By transforming outdated buildings into COVID-safe high-quality workspace with improved sustainability credentials, asset owners are no doubt looking to improve the resilience of their offices in a market where demand from occupiers is more selective. The 13.7m sq ft of office space under construction in central London, while 9% less than in its previous survey, remains above the long-term average. 

The biggest new start in six months to March 2021 was the refurbishment and extension of 80 Strand. In this Grade II listed building (pictured), built in the 1930s as Shell Mex House, four office floors will be renovated, with exposed structure and services, new rooftop terraces as well as new bicycle storage, showers and changing facilities in the basement. This scheme will complete at the end of summer, providing 384,000 sq ft of Grade A office accommodation. The 303,000 sq ft Christchurch Court is another large scheme undergoing comprehensive refurbishment. Work on this former Goldman Sachs office in St Paul’s is expected to complete in April 2022.

"The shift towards refurbishments is gradually gaining momentum in the market, with several owners now opting to undergo retrofit and reuse of the existing space instead of demolition," the report notes. "BT’s former HQ at 81 Newgate Street is one such example, where the structural frame will be reused. This should speed up the development programme while helping to make the building ‘net zero carbon’ through the use of photovoltaics and air source heat pumps. This 729,000 sq ft project is expected to start in 2022 and complete in 2024."

The owners of the 170,000 sq ft Gresham St Pauls, which completed in February, opted for refurbishment rather than demolition and re-construction, on the grounds of sustainability. The refurbished office space will reduce CO2 emissions by 6,660 tonnes over its lifetime, compared to a new building. It will also reduce the building’s lifetime carbon emissions by 23% per person compared to keeping the existing building and saving 9% per person compared to building a brand-new office.

With lockdown measures easing today, optimism is returning across a number of sectors. Cynosure has opened its new Cynosure Experience Centre (above), complete with new research and training facilities, treatment demonstration rooms and operational commercial spaces, which will serve as a "collaborative workspace" for the company and its customers, partners and employees globally. Mondrian Shoreditch London will open its doors in July, with interior design studio Goddard Littlefair leading the design of its public spaces and food and beverage venues.

Second-hand supply and leasing demand concerns

On the downside, the availability of space in central London has increased considerably in the past 12 months, reaching its highest levels for more than a decade. The excess of second-hand supply is not expected to be absorbed even when the market recovers, as tenants look for accommodation that meets their more exacting standards post-pandemic, the report notes. "There are demonstrable trends among occupiers towards concern for ESG principles and staff wellbeing, leading to polarisation in the market. A new era of ‘stranded assets’ beckons."

The city and Canary Wharf are set to 'reinvent themselves'. The City of London Corporation is planning that a fifth of office tenants will be ‘new’ to the area by 2025 and is hoping to attract small businesses and sectors outside of its traditional financial services core.

The authority also wants half the journeys between railway stations and workplaces to be on foot or by cycle, with the development of pedestrian and cycle routes, and also a 50% increase in weekend and evening visitors. It is also planning to convert offices left vacant after the pandemic into hundreds of new homes. Canary Wharf Group is now considering scrapping its plans for 1m sq ft of office space and replacing it with a 60-storey apartment tower instead.

The appetite among flexible office providers for office space in London has inevitably diminished due to weaker tenant demand for short-term space as a result of the increase in homeworking.

Moreover, the level of confidence in demand for leasing continues to be "the biggest deterrent" to new office development. A large majority (85%) of developers pointed to the current weak demand from tenants for office space as a major concern in the London office market. Until there is more clarity about occupiers’ office plans, many developers will hesitate to embark on new projects.

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