Getting Taller All the Time: Maybe the Sky Isn’t the Limit | American Funds

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Investment Insights: The Long View

August 2015

Getting Taller All the Time: Maybe the Sky Isn’t the Limit

“The companies that make elevators and escalators are in a wonderful business. They install it, and then they maintain it for years on end. Very high returns on capital.”

— Jody Jonsson

Jody Jonsson
Joanna F. Jonsson Portfolio Manager Los Angeles office 28 years of experience (as of 12/31/16)
The 3,281–foot Kingdom Tower in Saudi Arabia will be the world’s first kilometer–tall building

2014 Was the “Tallest Year Ever,” With the Completion of a Record 97 Buildings Above 200 Meters

Sources: CTBUH Year in Review: Tall Trends of 2014, and Forecasts for 2015, Council on Tall Buildings and Urban Habitat; KONE Primer, CS European Capital Goods, May 2015, Credit Suisse. The total number of buildings completed for each year includes tall (600+ feet/200+ meters), supertall (900+ feet/300+ meters) and megatall (1,900+ feet/600+ meters) buildings; projected data for 2015 and 2016 represent expected, not possible, completions. The data for elevators and escalators are Credit Suisse estimates, based on company data as of fiscal year 2014, for new installations and maintenance.

Elisha Otis founded The Otis Elevator Company in 1853, but it was the company’s 1903 innovation called the gearless traction elevator that set in motion a remarkable change in the urban landscape. The invention made very tall buildings practical for the first time and ushered in the era of the modern skyscraper. Things have been going up ever since. In fact, 28 buildings over 1,312 feet in height are due for completion by the end of 2018, compared with just 15 in the previous 15 years.

That’s good news for Otis Elevator, the world’s largest manufacturer and maintainer of people-moving products, including elevators, escalators and moving walkways. Otis is a part of UTC Building & Industrial Systems, a unit of United Technologies Corp.

Otis elevator systems are used in many of the world’s most iconic buildings, including eight of the last 10 to have held the title of the world’s tallest building. The current record holder, the 2,716-foot (163 floors) Burj Khalifa in Dubai, relies on Otis systems, as does the 2,165-foot Ping’An Financial Center in Shenzhen, which will be China’s tallest upon completion in 2016. Otis received about $36 million for its work on Burj Khalifa. The elevators in the kilometer-high Kingdom Tower in Saudi Arabia, however, will be installed by rival KONE Corporation, founded in Finland in 1910.

For comparison, the 102-story Empire State Building, which stood as the world’s tallest for 40 years after its completion in 1931, is 1,250 feet tall. Today, it’s the 25th tallest building in the world. Otis installed the elevators in 1931.

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Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and not to be comprehensive or to provide advice.