Building costs in London now second highest in world

Aaron Morby 1 year ago

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

london bridge

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

Manchester 52-floor skyscraper approved

St John's Place tower at former Granada Studios site gets green light
4 hours ago

Michelmersh calls end to brick price rises

Increased competition sees prices remain flat
4 hours ago

Pensioner killed at poorly managed roadworks

Tarmac hit with £1.3m safety fine
4 hours ago

Cleveland Bridge recruits large buildings team

Steelwork contractor set sights on large building market
1 hour ago

Murphy signs contract for £25m Blackpool outfall

Work to start on UK's longest and largest diameter outfall in March
4 hours ago

Prater nets £8m roofing deal at Wimbledon No. 1 Court

Contractor will start on cladding package in January
3 hours ago

Construction site gas leak causes chaos at King’s Cross

200 workers evacuated from North London site
19 hours ago

£28m Dudley rail centre gets green light

Very Light Rail innovation centre and test-bed track approved
18 hours ago

Wates confirms Paul Chandler as new construction boss

Former Skanska chief to take up the reins in January
1 day ago

Betting Spy: Contractors on a roll at awards night

Enquirer awards after party was a long night while favourites can land a 3/1 treble
13 hours ago

£20m road schemes backed for 3,300 south west homes

Quartet of road improvements will unlock 3,300 new homes
20 hours ago

Barratt boss arrested in contracts probe

London MD Alastair Baird suspended following major investigation
2 days ago

Laing O’Rourke to start St James Centre £1bn revamp

Demolition of old St James shopping centre in Edinburgh to take 18 months
1 day ago

Link Group names £280m Scottish new build partners

Keepmoat, Cruden, Graham and Esh secure places on central belt framewok
1 day ago

Dormant Scottish Tesco sites get £100m boost

London & Scottish Developments to start construction on ten sites
1 day ago

Civils firms slash carbon emissions in half over six years

Laing O'Rourke, Morgan Sindall and Carillion lead the low CO2 way in infrastructure
1 day ago

Plan unveiled for £48m resi tower in Liverpool

Latest 30-storey build-to-rent tower at Liverpool Waters
1 day ago

Clugston green light for £60m Sheffield IKEA

Project is the largest retail win in the region for Scunthorpe contractor
2 days ago

Travis Perkins to close over 30 branches

Builders' merchant in profit warning to the city
2 days ago

Mace tops September contracts league with London win

£450m One Crown Place project in Shoreditch lifts contractor
2 days ago

Costain tops best-paid Network Rail supplier rankings

Network Rail spending with Costain soars 75% to £377m
2 days ago

CH2M boss Roy Hill to lead HS2 construction

Consultant boss steps in while search continues to replace Simon Kirby
2 days ago

Search starts for construction’s best photographer

Enter your best pics now for Art of Building competition
2 days ago

Top Ten winners celebrate construction success

Industry enjoys top night out at inaugural Construction Enquirer awards
2 days ago

Bidding to start for £80m Nottingham shopping centre revamp

£80m Broadmarsh shopping centre expansion comes out to bid
2 days ago

Bouygues UK drops Thomas Vale brand

Dozen staff laid off as Midlands offices consolidated into new Birmingham base
3 days ago

Benniman bags first phase of £120m business park

Main construction to start this month on 90 acre Worcester site
3 days ago

Galliford Try confirmed for £68m Newcastle student village

Construction due due start shortly on Newcastle Uni student village
3 days ago

Balfour warns exodus of EU workers will hit HS2 and Hinkley

Contractor wants clarification from Government over post Brexit labour market
3 days ago

Bellway eyes 11,000 homes target after record year

Pre-tax profits soar to near £500m as turnover tops £2bn for first time
3 days ago