Type to search

The machine that makes land pay


Above, Chadstone Shopping Centre, once Melbourne’s first self contained shopping centre, still being developed today. Image courtesy of Bates Smart.

Article by Clare Snowden.

‘The skyscraper is a machine that makes land pay,’ according to Cass Gilbert, the architect of the Woolworth Building in 1913 – an early New York City skyscraper. Yet despite Gilbert’s enunciation and the Woolworth Building being known as the ‘cathedral of commerce’ it was not a commercial success, as stated in Carol Willis’ Form Follows Finance: Skyscrapers and Skylines in New York and Chicago. Indeed, it was critic George Hill who explained the relationship between margin and program in ‘The Economy of the Office Building’, published in Architectural Record from 1904, stating: ‘an office building’s prime and only object is to earn the greatest possible return for its owners, which means that it must present the maximum of rentable space possible on the lot.’ In short, he believed the only measure of a building’s success was the return derived from the land. In his opinion any unnecessary ornamentation was perverting the course of someone else’s money.


Melbourne GPO, looking west, image courtesy GPO.


Utilising capital for investment in property is not new, although contemporary sources of capital are sometimes less direct. Interestingly, at the 19th AsRES Annual Conference (Gold Coast, Australia, 14-16 July 2014), RMIT University’s Wejendra Reddy presented ‘How Asset Consultants Influence Institutional Property Allocation Decisions: An Australian Study’, suggesting that everyone is bound to the mechanisms of speculation through the superannuation system, with 10 percent of capital from most superannuation funds allocated to the real estate sector. Australian superannuation funds are the country’s major institutional property investors, with the benefits and downside risks of market fluctuations in fact borne by the populace itself – collectively, the population are the primary investors in the built environment, not just the consumers.

Thus, the superannuation system and investment choices connect the populace with the business of speculation. In turn, speculative development has always been intertwined with the business of architecture. In his address to the American Institute of Architects in 1923 architectural historian, Barr Ferree, said that there was: ‘… no greater evil in architectural study than isolation [that a] building represents a coordination of events, each of which is essential to its proper understanding. A building requires a full knowledge of the events of the time in which they were built for their complete understanding, just as a biography of a man must include the events of his lifetime.’

The analysis of the economic and financial paradigms impacting on the procurement of architecture projects remains as relevant today as has been the case previously; however, it could be argued that much architectural discourse has buried such analysis under rhetoric on style, method and aesthetic heroes. For example, architectural histories of the skyscrapers oft detail the planning, design and material advances that gave rise to vertical construction and neglect to detail the commercial and financial histories that underlie the events and times in which the typology arose.



Orange, New Jersey, 2011. Images used in Foreclosed: Rehousing the American Dream, Museum of Modern Art as part of MOS’s Thoughts on a Walking City. Images courtesy Christopher Woebken.


The machine that makes land pay is not just the skyscraper; all types of buildings are devices for generating revenue from once idle plots of pasture. Be it on the green fringes of cities to the once wholesome bastion of public land, revenue can now be sought from all types of land. Even governments who once relied on an expanding tax base for increases to revenue now seek to unleash capital from ‘lazy’ real estate assets. It seems land must be made to pay and everyone is involved.

In order for any speculator to reap a return from their investment they must at some point in the cycle endeavour to employ, converse or lunch with an architect. The architect is intrinsically linked in the process of maximising one’s return from their plot. The machine is no good without a professional who knows how to play it, knows its rules, its idiosyncrasies and, ultimately, someone who knows how to pull the handle. As it is upon pulling the handle of the machine that the plot becomes real, that the profit is created. The architect metaphorically draws forth for the speculator the sounds of the Queen of the Nile poker machine and the physical manifestation of what the plot can become.

Architecture’s relationship to economics and capital is oft portrayed as complex, yet like most transactional services it can be understood in simple terms. In 1893 Barr Ferree – again addressing the American Institute of Architects – observed: ‘American architecture is not a matter of art, but of business. A building must pay or there will be no investor ready with the money to meet its cost.’

The business of architecture and the business of speculative development are transactional and their relationship can be understood in direct terms. Yet the trading of real estate in its more abstract form on markets, in portfolios and as financial instruments, forms a more esoteric reality.


Melbourne’s GPO today.


Parlay these ideas forward to 2008 and the subprime housing crisis – more commonly referred to as the Global Financial Crisis – brought to light the trading of abstracted value of housing and debt through derivative instruments.

The repackaging of financial products and the link to architecture were explored in the exhibition House Housing: An Untimely History of Architecture and Real Estate in Nineteen Episodes – an ongoing, multi-year research project conducted by the Temple Hoyne Buell Centre for the Study of American Architecture at Columbia University. The research most recently appeared in Casa Muraro in Venice, in response to Fundamentals, the 2014 Venice Architecture Biennale, curated by Rem Koolhaas, with the most salient example of the relationship of housing, debt and the economy outlining the foreclosure crisis of 2008 in the episode, ‘Housing as a Matter of Life and Debt’. In this, the mortgage (debt to equity) equation is explored and financial credit is pronounced a matter of ‘life and debt’; where even after death, one cannot escape one’s debt. The exhibition sought to use a domestic sphere and devices to illustrate and ‘consider architecture’s economic fundamentals, which locate housing at the centre of the current economic regime’.

In addition to the exhibition, a panel discussion opened up a critical conversation on the roles played by finance, real estate and their imaginaries, architecture. The discussion was titled ‘Fundamental #13’ and was intended as a supplement to Koolhaas’ #12 Fundamentals, focusing on the shift in funding for housing from public sources into a tradeable, securitisable asset and its recirculation in markets as real estate. The panel recognised that real estate is the machine that allows for substance to be converted into capital and back again.

Interestingly, it was the physicality of real estate assets that initially drew investors due to their tangible nature, as Richard Ely, known as the father of land economics, stated: ‘the prudent purchase of land is a better investment for the ordinary man than stocks or bonds as in land he does not pit his judgement against a Board.’

The paradigm of real estate and thus cities, however, is immaterial, as real estate is commoditised and can be traded on markets, packaged up in portfolios and financial instruments and sold on with its most discerning characteristic – its yield and return on investment. The conversion of the physical (architecture) into the immaterial (financial instruments) and back again, through the machine of real estate transactions, is intrinsically and inextricably linked, with the subprime crisis of 2008, highlighting how the machine that makes land pay encompasses us all.

As featured in Architectural Review Asia Pacific. 


You Might also Like

Leave a Comment

Your email address will not be published. Required fields are marked *