22 JUN 2018
One of the keynotes at the RICS Summit of the Americas 2018, was entitled: “What price is the height of excellence? Valuing the CN Tower.” For this intriguing and complex question, several approaches were proposed and the final values of each of them were then compared.
Interestingly enough, the final values from the first and more objective approaches were very similar, and made more sense from the perspective of a construction management student like me. On the other hand, the following methodologies were also very interesting because some of them took into account aspects that are very hard to put a price on, like the brand value or economic impact of having an iconic landmark in a city.
The starting point of the discussion was understanding were The Canada National Tower stands in comparison to other high-rise structures around the globe. The CN Tower is considered a 'free standing tower' which means a tall structure that allows regular access by humans, not primarily intend for living nor working, having no guy wires. This hybrid nature of the CN tower sets it in a different category from the Burj Kalifa, the tallest skyscraper, and Warsaw Radio Mast, the tallest antenna (until its collapse in 1991), for example. It is actually in the same category as the Tokyo Skytree (tallest in the world) and the Canton Tower (second tallest), and this similarity allowed their use as reference for the first evaluation approach of the CN Tower that was proposed.
The Canton Tower, built in 2009, had a total building cost of $450 million US, while the Tokyo Skytree, built in 2011, had a building cost of $600 US. Using their gross floor area, bringing it to today’s value by adding three per cent a year, and finally converting it to Canadian Dollars, the cost per square foot of these two towers are: $237,000 per square foot for the Canton Tower and $293,000 per square foot for Tokyo Skytree. Using the average between these two for the total area of the CN Tower would amount to approximately $600 million. Considering the current value of the land in the downtown core as $40 million per acre, the total value of the land would be $200 million, resulting in an estimate $800 million for the property value.
The second approach was based on the current unit prices and quantity of materials added to a bid factor, that corresponds to all the work done by the contractor and especially the mitigation of the risks involved in building a very large freestanding tower. The stats used were for reinforced steel, concrete and rebars which were added and multiplied by two. It was done as an assumption that these three materials accounted for half of the total material – $280 million. With a bid factor of 2.5 the total cost of building the CN Tower today would be around $700 million, which added to $200 million in land costs, would result in $900 million for the value of the CN Tower.
It is also important to note that even though the gap between the two answers seems expressive in absolute numbers, they were based on high level information for a project that deals with extremely high levels of uncertainty. Therefore, even though other intangible elements would still need to be considered, these two cost-based approaches were able to provide a solid order of magnitude for the current value of this Canadian landmark.