As the world screams ‘recession’, inflation spirals out of control and real estate markets plunge across the globe, some of the most ambitious construction projects are underway in some of the world’s biggest cities. Some label these projects as reckless and believe they are doomed to fail, or at least to be completed years beyond schedule with billions of dollars over budget. Others believe that there are projects that predict an increase in confidence in the housing market in general and are indicative of a strong belief in consumer confidence.
In an article for The Wall Street Journal Online, Alex Frangos discusses some of these large-scale projects and the implications for the world at large, as well as the companies directly involved in the efforts. The five biggest construction projects are planned for New York City, London, Milan, South Korea and Los Angeles and cost a total of $64.8bn (£32.63bn or R490.8bn). ).
The cheapest of the projects is Garden Avenue in Los Angeles, at $3 billion. It is intended to revitalize the downtown area and includes a 16-acre park, residences, and a hotel. Phase one of the project is expected to be completed in 2011. Next up is Porta Nuova in Milan at $3.6 billion. The “New Gate” will be built in the vicinity of the Garibaldi Train Station. The project was designed by 25 architects and will include a cultural center, a park, offices, homes and shops. Completion is scheduled for 2012.
Stratford City in London will cost an estimated $7.9 billion. It was initially planned for the 2012 Olympics, but completion of all phases is only expected in 2020. It will consist of 180 acres, of which 5 million square feet will be dedicated to offices; there will also be space for 5,000 homes. Hudson Yards in New York City is designed to optimize the limited space within the city by building a platform over the trains on the Hudson River. The platform will occupy 45 million square feet and will be given over to offices, residential towers, and a “green space,” presumably so people won’t go crazy surrounded by all that concrete. The project is estimated to cost $20 billion and is expected to be completed in 2020.
The most ambitious project, the city of Songdo in South Korea, has been under construction since 2005 and is expected to be completed in 2014. 1,500 acres of land near Incheon International Airport will be built into the world’s first city dedicated to being a business district. It is expected to house 300,000 workers, 65,000 residents and has a budget of 30,000 million dollars.
One reason for the skepticism surrounding these projects is that banks are cutting back on commercial real estate lending, meaning capital-rich large-scale projects will struggle to find the cash to keep construction going. But most companies that bid for mega projects like these are well aware of the inherent risks and are willing to go ahead anyway, because if they succeed, their reputation within the construction industry will come true.
At a time when many construction projects are being abandoned due to flooded economies and various belt-tightening initiatives, it is reassuring to know that there are still people who are willing to gamble billions of dollars on the hope of an economic turnaround. Maybe the real estate market isn’t in such dire straits after all.
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http://www.realestatejournal.com/buysell/markettrends/20071227-frangos.html