Building costs in London now second highest in world

Aaron Morby 4 years ago
Share

Construction costs in London have soared to become the second highest in the world after New York, and are set to rise another 5%.

Demand in residential and commercial sectors in particular is keeping a strained supply chain at full stretch, according to new research by the global programme managers Turner & Townsend.

The most expensive place to build in the world is New York, which has significantly higher labour costs.

Despite having a workforce nearly 70% cheaper than New York’s, London’s overall cost of construction is just 4% lower.

But cost consultants warn that with a real risk of further price escalation as demand levels outstrip capacity in key trades London may soon eclipse the US city.

The International Construction Market Survey 2015 analysing input costs – such as labour and materials – charts the average construction cost per m2 for both commercial and residential projects in 35 markets around the world.

At £2,283 per m2, London’s average construction cost is second only to New York’s – which at £2,372 per m2 is the world’s highest.

Both cities are enjoying similar property booms. £70bn is forecast to be spent on construction in New York during the next three years, compared to £62bn in London.

But there is a wide gap in the cost of labour, with New York’s construction workers earning an average of £53 per hour – nearly 70% more than the £32 earned by builders in London, where a ready supply of workers from other EU countries has helped to limit wage increases.

Despite its high cost, New York’s labour force is highly productive, says the report, with weekend working more commonplace and contractors taking a more efficient approach to logistics.

The research also found that construction costs are moving at different speeds across the UK.

While inflation is highest in London, costs are predicted to rise on average by 4% in the south and 3% in the north of England over the next year.

Several areas of the market, including parts of London, are experiencing far greater increases as capacity and contractor appetite for risk becomes an issue.

Jon White, UK managing director, Turner & Townsend, said: “Input costs are key, with labour accounting for around 40% of the total cost in London.

“The comparison between London and New York is a tale of two booms. Both cities have powerful financial sectors and are seeing steady price inflation amid intense development in both commercial and residential property.

“But despite its enormous labour cost advantage, London’s overall construction costs are barely any lower than New York’s. The UK construction industry has made great strides in expanding its capacity to meet booming demand, but there continue to be skills shortages in several UK regions. The sector as a whole has more work to do to improve efficiency and productivity.”

“Our research shows that demand is outstripping supply in the UK and tender pricing is likely to remain volatile as a result,” he warned.

Building costs

 

Latest news

Muse clinches developer role on £650m Slough regeneration

North West Quadrant scheme involves building 1,400 homes, offices, retail and leisure in the heart of Slough
8 hours ago

Scape starts race for £1bn consultancy framework

Bids now invited for national four year deal
6 hours ago

London office starts slump by nearly half

Contractors use of non-UK labour in Capital falls from a third to a quarter of workforce
20 hours ago

Kier suffers shareholder revolt over chief’s pay

Almost 54% of shareholders vote against board pay
3 days ago

Cladding probe after Bolton student block blaze

Latest fire raises more questions over cladding
21 hours ago

Weston and Tesco submit plan to turn store site into 1,280 homes

Major mixed-use scheme planned for Goodmayes in East London
12 hours ago

Kingspan UK insulation sales fall 15%

Building products giant expects weak sales to continue next year
12 hours ago

Goldbeck lands £31m Gatwick car park deal

Latest win adds to recent successes in aviation sector
13 hours ago

String of M&E wins sees HE Simm touch £100m turnover

Repeat business for satisfied clients boosts results at specialist
13 hours ago

Interserve restructure paves way for possible break-up

Chief executive Debbie White to step down by end of December
4 days ago

Kier Chief Operating Officer leaves as cost cuts continue

Claudio Veritiero joins 1,200 staff set to go by next June
4 days ago

Eurovia trials robo-cars to ferry tools to highways sites

Driverless delivery vehicles will also survey road conditions as they go
4 days ago

PDR Construction starts Arco HQ in Hull

£16m project marks major milestone in £80m waterfront regeneration
4 days ago

Crossrail traffic marshall threatens passer-by and kids

Bond Street station subcontractor sacked after confrontation with public
4 days ago

Multiplex Europe chief Ashley Muldoon exits

Muldoon steps down after 22 years in top management shake-up
4 days ago

New-build housing completions top 200,000

Completions rise to the highest level since the 1980’s
4 days ago

Interserve chalks up 15th school project this year

Specialist needs school to be built in Oldham
4 days ago

Styles & Wood chiefs leave the business

CEO Tony Lenehan and finance boss Phil Lanigan depart
4 days ago

Commonwealth Games aquatic centre cost soars by 20%

Wates to start building work in January after £73m budget sign-off next week
5 days ago

New safety template in fight to prevent falls on site

New industry-standard guide launched: Download free now
5 days ago

Plan in for £365m Salford Cotton Quay scheme

Cotton Quays will include 37 and 48-storey buildings
4 days ago

Carillion liquidator to clawback £510m

Financial watchdog to consider whether to take action over conduct of directors in March
5 days ago

Graham wins £26m Poynton relief road

Main works on 3km Cheshire road to start next May
4 days ago

Interserve hires new construction commercial director

Ben Edwards takes up new role after seven years in Middle East
5 days ago

Developer fined £600,000 for white finger outbreak

Groundworkers suffer Hand Arm Vibration Syndrome on Places for People sites
5 days ago

British Land makes £200m profit on luxury Mayfair flats

Developer hails "highly successful" Clarges scheme
6 days ago

Network Rail plans Dragons’ Den to drive SME innovation

Rail infrastructure on track to deliver a third of spending via SMEs by 2022
5 days ago

Balfour tops October contracts league after road win

Morgan Sindall unseats Kier with the highest value of orders over last 12 months
6 days ago

Plans go in for 20-storey Bolton tower

Seddon lined-up as main contractor for major mixed-use scheme
6 days ago

Galliard to start luxury apartments above Crossrail station

Go-ahead for £140m residential scheme above delayed station
6 days ago

Contractor services