Real Estate & Construction

Tall Tale

One of the world's tallest buildings is under construction in Kuala Lumpur. While it will serve as another symbol of the city, supertall structures are not the first and last word in economic development.

Kuala Lumpur, already home to the supertall Petronas Towers, will see another dizzying addition to its skyline open in 2021. The Merdeka Warisan, or PNB 118, will rise more than half a kilometer above the capital.

The 664-m building will open up 292,000sqm of office, retail, and hotel space in the growing metropolis. It will be the tallest building in Malaysia, eclipsing the nearby Petronas towers for the title, which held the rank of world’s tallest building when opened in 1998 until 2004. Those towers, still the tallest twin tower skyscrapers on Earth, became a symbol for the rapid economic development of Malaysia and Kuala Lumpur.

Permodalan Nasional Berhad (PNB), a Malaysian investment firm, is paying for the megaproject, estimated to cost MYR5 billion (USD1.19 billion). It will also be PNB’s headquarters when completed. The design and construction of Merdeka PNB118 is an international effort, with Australian and American architects and engineers involved in bringing the building into being. Depending on its completion date and the status of other projects, Merdeka PNB118 will be the third-tallest building in the world when it opens, according to the The New Straits Times.

“Flanked by smaller residential towers of varying form, along with a glass-domed covered retail mall, the building’s 118 stories will house purpose-built offices and a six-star hotel, topped by a dual-level observation deck and restaurant,” according to architect Fender Katsalidis, an Australian firm working on the project. “Seemingly cleft from solid stone, it comprises a lower lobby for hotel access at one end, and at the opposite end, an upper lobby for the offices and retail.”

Extremely tall buildings present a conundrum for growth markets. Presenting to the world an image of progress and dynamism is crucial to making progress and dynamism real, by attracting more FDI and boosting the confidence of current investors. Supertall buildings also signal the willingness of a city to transform itself.

But there is a flip side to all of that. It takes an enormous amount of energy to construct a supertall building, and finding buyers or renters for the real estate inside is not guaranteed for the builder. An oversupply of office space can also drag down the price of office space in a metropolitan real estate market, paradoxically discouraging future construction of office space.
PNB’s chairman Tan Sri Abdul Wahid Omar is not worried about such disruptions to the local real estate market. “With PNB filling up almost half of these towers, I see no glut of office space in Kuala Lumpur or competition from other skyscrapers, such as Tower 106, at Tun Razak Exchange,” he said, according to the New Straits Times.

Big construction projects with six-star luxury hotels and billion dollar price tags can also create resentment, especially if deeper social ills remain unsolved. “If they want to create more jobs, then we should welcome it. However, if it is just for the name, perhaps the money will be best used elsewhere,” Julian Sanjivan, a human resource manager, told local Malaysian newspaper The Star in 2010, before construction even began.

One can think of supertall buildings as being an initial public offerings for companies, just in physical form instead of as a line item on a balance sheet. The public has the opportunity to buy into the PNB 118, but it is not certain that they will do so. And while PNB is getting a headquarters, the rest of the building’s occupancy rate will be determined by factors that are out of PNB’s control, such as the state of the global economy in 2021 and beyond.

While PNB118 will surely stand as a symbol of pride for Malaysia, even the biggest skyscraper is just one small part of the puzzle of economic development.

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