It’s not just bankers’ ballooning bonuses that can forewarn of an impending financial disaster. It now appears that periodic global cravings for ever-taller buildings might also be harbingers of economic doom. If new research from Hong Kong is to be believed, China’s frenetic high-rise boom, with India in its wake, could reflect a “misallocation of capital, which may result in an economic correction for two of Asia’s largest economies in the next five years.”

Since launching its Skyscraper Index 13 years ago, Barclays Capital (BarCap) has revealed “an unhealthy correlation between construction of the next world’s tallest building and an impending financial crisis,” claims the new report by Andrew Lawrence, the Hong Kong-based director of BarCap's property research. Lawrence reached back to New York City’s eight-floor Equitable Life building in the 1870s to trace connections between skyscraper investments and economic recessions.

The 381-meter-tall Empire State Building, completed in 1931, and two other New York City skyscrapers “matched” the Great Depression following the 1929 Wall Street crash, records BarCap. The report makes a connection between Chicago’s 442-m-tall Sears Tower, currently named Willis Tower, and the 1970s OPEC-induced oil crisis and between the East Asia economic collapse of the 1990s with the construction of Malaysia’s 452-m-tall twin Petronas Towers and Taiwan's 508-m-tall Taipei 101. At 828 m, Dubai’s 163-floor Burj Khalifa opened its doors as the world’s tallest building in 2010 to the turmoil of today’s global crisis.

BarCap’s findings fail to convince fully Henry Overman, director of the Spatial Economics Research Centre at the London School of Economics. “Being generous, they at least provide food for thought,” he blogs. “Conceptually, it seems quite possible that there is something in this for the simple reason that most financial crashes follow booms, and booms are generally associated with overinvestment in capital assets—factories, inventories, housing—so why not building height?” he concedes. However, scanning the world’s 250 tallest buildings, “the correlation with financial crashes was far less obvious to me,” he adds.

U.S. free-market economist Mark Thornton, a senior resident fellow at the Ludwig von Mises Institute in Auburn, Ala., is more impressed with the study findings. “It would be very easy to dismiss the Skyscraper Index as a predictor of the business cycle, just as other indicators and indexes have been rightly rejected,” he wrote following an earlier edition of the index. “However, the skyscraper has many of the characteristic features that play critical roles in various business-cycle theories, [which makes]
skyscrapers, especially the construction of the world's tallest buildings, a salient marker of the 20^th century's business cycle.”

With all its historical scope, the index has never had a cluster of skyscrapers as large as the one now growing in China. BarCap counts 75 completed skyscrapers taller than 240 m, with heights increasing “as past liquidity fuels the construction boom.” More than 60 skyscrapers now under construction are due to open in the next six years, says the report. Furthermore, India is on the same ascending trajectory, with 14 skyscrapers scheduled for completion within the next five years.

“Investors should therefore pay particular attention to China—today’s biggest bubble builder,” cautions BarCap, which also casts a wary eye on India. But for the rest of the globe, already in a state of economic shock, Laurence is thankful that “there is not currently a skyscraper under construction that is planned to overtake the height of the Burj Khalifa.”

There may not be a record-breaker under construction now, but Saudi Arabia is actively planning the one-kilometer-plus Kingdom Tower in Jeddah. With the tower’s construction due to start soon, its impact on global economics is sure to figure largely in an upcoming Skyscraper Index.