Cass Gilbert’s Woolworth Building. CC image from Wiki.

Cass Gilbert famously defined a skyscraper as “a machine that makes the land pay,” the kind of structure justified (and often required) by high land values. Gilbert’s distillation of the logic behind these buildings is inherently economic (hat tip to Kazys Varnelis):

Speaking of such enterprises from the financial aspect it is a rule that holds almost invariably that where the building costs less than the land, if properly managed, it is a success and where its costs more than the land it is usually a failure. The land value is established by its location and desirability from a renter’s standpoint hence high rentals make high land values and conversely. The building is merely the machine that makes the land pay. The more economical the machine both in construction and operation provided it fulfills the needs the more profitable the land. At the same time one must not lose sight of the fact that the machine is none the less a useful one because it has a measure of beauty and that architectural beauty judged even from the economic standpoint has an income bearing value.

The economic logic still holds. For private development, you need a building that can make the land pay. The challenge, however, is when such a building isn’t feasible – or isn’t allowed. Consider the dilemma of high land prices, high construction costs, and zoning that constrains the allowable building space. Payton Chung raises this issue, investigating why DC doesn’t see more affordable mid-rise construction:

The Height Act limit for construction in outlying parts of Washington, DC, enacted back in 1899, is 90′ — effectively 7-8 stories. This particular height poses a particularly vexing cost conundrum for developers seeking to build workforce housing in DC’s neighborhoods, since it’s just beyond one of the key cost thresholds in development: that between buildings supported with light frames vs. heavy frames…

In most other cities, the obvious solution is to go ever higher. Once a building crosses into high-rise construction, the sky’s ostensibly the limit. In theory, density can be increased until the additional space brings in enough revenue to more than offset the higher costs. As Linsey Isaacs writes in Multifamily Executive: ”Let’s say you have a property on an urban infill site that costs $100 per square foot of land. Wood may cost 10 percent less than its counterpart materials, but by doing a high-rise on the site, you get double the density and the land cost is cut in half.”

In other words, the cost of building taller is not linear. Once you enter the realm of Type I construction, the marginal cost of an additional floor is relatively low. However, Type I construction is substantially more expensive in DC than the mid-rise methods; and many of the 7-9 story buildings ubiqitous in DC fall into the range that require more expensive construction methods, yet do not allow for the kind of height/density those structures can achieve.

The challenge, Payton notes, is where land is pricey enough to justify high-rise densities, but rents in that area cannot support the construction cost. It’s DC’s version of ‘the viability trap.‘

There are a few options to break the logjam: lowering construction costs, and adjusting policies. Payton makes the case for new building technology to lower construction costs – prefabrication, new materails, and so on. Each holds the promise of decreasing construction costs. In the policy realm, reducing the required parking can also substantially reduce costs, providing a pathway out of the viability trap.

For real-world examples, consider Metro’s recent request for development proposals for station-adjacent land the agency owns. Metro’s requirement that the developer replace 422 parking spaces at Fort Totten (in addition to parking required by zoning and/or demanded by the market) likely pushed any development proposal beyond feasibility. That parcel didn’t get any bids. In practice, this isn’t any different from a large minimum parking requirement via the zoning code.

Another policy change is increasing the allowed height and density. In DC’s consideration of altering the city’s height limit, the benefits of scale with taller construction become apparent:

Per square foot construction costs for new office and apartment buildings at 130, 160, 200 and 250 feet peak at 200 feet but begin to decrease at 250 feet due to cost efficiencies that occur at taller heights. Beyond the cost of construction, other conditions need to be in place to make it financially attractive for a developer or property owner to be willing to tear down an existing building with tenants and build new and taller. These conditions include a substantial increase in rentable space due to taller height; the potential for higher rents; major leases expiring or the opportunity to attract a new anchor tenant; or the need for major investment into an obsolete building. There are also a number of constraints that affect new construction, such as the need to pre-lease a major portion of a new building to obtain financing and the inadequacies of existing transportation and utility infrastructure.

A few feet of height can make a big difference.