Opinion – Claudio Bernardes: Economic and urban effects of verticalization

In the general population’s assessment of urban development models, there is often some confusion between verticalization and densification, which are actually quite distinct concepts, although somehow interconnected.

Making an analysis from a strictly economic point of view, it is worth noting that in high urban densities, the cost savings resulting from verticalization are responsible for the economic balance resulting from the effects generated by the scales of agglomeration. Thus, the matrix of construction costs related to the increase in the height of buildings can be a determining factor for the definition of economically viable densities.

In order to avoid the hyperconcentration of economic activity in specific points of the cities, the urban economy models require forms of occupation that allow certain levels of dispersion. Soil supply tends to be inelastic and, therefore, this phenomenon becomes the natural source of this dispersion. Thus, verticalization becomes a relevant aspect in this context, since beyond a certain level of density, increases in densification can only be achieved by increasing the height of the building.

Several factors, in addition to the cost itself, must be considered when evaluating the economic efficiency of tall buildings. A researcher at the Moscow State University of Civil Engineering, in Russia, raises some of these aspects.

Consumer behavior is changing. A new generation, who grew up with access to all kinds of information, enters the real estate market, giving much more importance to quality of life, technological innovations and living close to their daily activities. This generates greater demand for verticalization.

To assess the economic efficiency of tall buildings, like any other real estate asset, it is necessary to consider their entire life cycle. Modern building construction and operation technologies, combined with the economy of scale of high-rise buildings, allow savings of up to 30% of the building’s life cycle cost. Lower operating costs save not only money but also time. Technological innovations solve a critical mass of technical problems associated with the verticalization of buildings, such as the problem of vertical transport, water supply, energy, parking spaces, etc.

From an economic point of view, the common approach to assessing the life-cycle cost of property is based on an understanding of aggregate costs, in this case with reference to high-rise buildings in general. These are the design, construction, operation and disposal costs. Note that the costs in the operation phase reach 75% of the total. Those in the construction phase sometimes reach 20%. Thus, the main cost savings reserve is in operating costs. The innovative context of verticalization presupposes the construction of energy efficient and environmentally friendly buildings. When using new technologies, studies have shown that the average resource savings reach 30%.

Improving the environmental quality of future cities is a reality observed throughout the world. The cost estimate of respecting the environment is known, and property buyers are already willing to pay more to live in areas close to parks and with clean air. Verticalization allows not only to increase the number of people who can enjoy these benefits, but in its development process, it allows more free spaces to be occupied with green areas.

However, the analysis of the economic effects of verticalization cannot be dissociated from the urban effects and the understanding of how the urban environment will react or which impacts, positive or negative, will occur, arising from the implementation of this model. Everything indicates that the result of the verticalization effects is in line with the trend of dynamic change in social needs and preferences, mainly in terms of way and quality of life.