The Hegemonic Premium

In our financialised world, the investment value of a hegemonic building incorporates its symbolic value as well as its use value. The return on the symbolic capital invested in a hegemonic building can be described as the ‘hegemonic premium’. For the perceived benefits of owning a trophy building, investors and owner-occupiers will pay a premium on the purchase price or construction cost when compared to a similar building having little or no symbolic value. Similarly, leaseholders will pay a premium rent for residing in a trophy building when compared with a non-trophy building. The prestige derived from owning or occupying such a building can be monetised in higher business values. There is now fierce competition amongst global investors to own trophy buildings, with the office towers in the City and Docklands being prime targets. So competitive is their pursuit of the hegemonic premium that the investment demand to own prime properties is tending to exceed the occupier demand to reside in them. This means that the premium rents a prime building can command do not fully compensate for the premium price which investors must pay for it. In consequence the investment returns from a hegemonic building tend to be lower than those from a non-hegemonic building because they do not capture the return on its symbolic value. Driven by the lure of the hegemonic premium, the imbalance between investor and occupier demand creates a persistent tendency towards the over-supply of trophy buildings. This leads to the devaluation of building capital and the acceleration of obsolescence, as older buildings become obsolete long before they reach the end of their physical life. Obsolescence is both a technological and cultural phenomenon: technologies improve and styles change. Obsolescence in turn leads to demolition, freeing up sites to begin a new circuit of development. Over the past sixty years, the acceleration of obsolescence in the City office market has been dramatic. The first wave of post-war redevelopment in the 1950s and 1960s involved the demolition of buildings that were on average over one hundred years old; by the early 2000s the average age of the buildings being replaced had dropped to just over forty years. As investors, architects and developers vie for a share of the hegemonic premium, they are creating an unstoppable dynamic of accelerating obsolescence that is destroying the very symbolic value they are seeking to create. The permanence of hegemonic buildings is becoming increasingly illusory, their symbolic value melting ever faster into air.