Building costs in London now second highest in world

Aaron Morby 2 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%.

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

Plans in for 6,500 homes at Cambridge former RAF airfield

Waterbeach Barracks to become site of another Cambridge new town
5 hours ago

Phase One of £56bn HS2 gains Royal Assent

Full speed ahead for nine-year construction programme between London and Birmingham
1 day ago

Carillion set for Liverpool Princes Dock 34-storey tower

Liverpool Waterfront £80m Princes Reach tower gains planning
4 hours ago

Balfour bags £185m Channel Tunnel power cable

300 construction jobs created laying cable between UK and France
4 hours ago

Five jailed for running skills card “forgery factory”

East London raid discovers thousands of fake documents
5 hours ago

CH2M wins £10m Clyde footbridge bridge design

Govan bridge construction work planned for 2019.
6 hours ago

Platform collapses as four workers move air vent

Decorators' merchant fined £450,000 after quartet injured
5 hours ago

Betting Spy: Leicester bosses lose the plot

Sacking Claudio Ranieri is a sad day for football
13 hours ago

Morgan Sindall jumps back into the black

Chief John Morgan says outlook for 2017 now ahead of expectations
1 day ago

Engineering services contractors powering ahead

Three quarters of specialists report increasing or steady turnover
1 day ago

Ecobuild show sold for “nominal sum”

Former owner UBM makes £35m loss on disposal of trade show
2 days ago

Skanska to fight off Kier to retain Cambridgeshire roads deal

Council expected to shortly confirm winner of £60m-a-year highways race
1 day ago

Kier bags first £23m school deal through YORbuild2

Main construction work to start this summer in Sheffield
1 day ago

Plan for £33m Warwick University arts faculty

Architect Feilden Clegg Bradley Studios is working up detailed plans
1 day ago

First project go-ahead at £1bn Liverpool Paddington Village

13-storey Liverpool International College tower will kick-start wider regen plan
1 day ago

Government Free Schools building plan costs soar

Land crisis blows hole in Government's flagship school programme
2 days ago

“Skills gulf” could see construction wages double

Industry needs to recruit 400,000 people every year - one every 77 seconds
3 days ago

Unite to spend £300m building student rooms by 2019

Unite swoops on Manchester site for another regional student rooms project
2 days ago

Barratt builds fewer homes as profits rise

Shareholders to receive £1.4bn in dividends
2 days ago

Footballer’s eco homes business goes into administration

Administrators called in at timber frame specialist run by Garry Flitcroft
2 days ago

Briggs and Forrester rebrands resi MEP arm

Briggs and Forrester Living aims for £100m revenue by 2020
2 days ago

Buckingham Group wins £25m spec labs

MEPC to start largest spec project at Milton Park near Didcot
2 days ago

Kier team chosen to drive £200m Liverpool scheme

First phase at Pall Mall Exchange to boost office supply in city
3 days ago

Wates wins £21m Barrow submarine building training hub

BAE Systems’ Barrow shipyard facility will train around 1,000 apprentices
3 days ago

Former Bardsley trio return as workloads soar

Adrian Rooney rejoins as director after short spell with Sisk
3 days ago

TfL continues procurement shift towards subcontractors

Design consultants framework to drive down station upgrade costs
3 days ago

Galliford Try sets 2% construction margin target

Contractor more selective about work as legacy contracts continue to hit profits
3 days ago

Balfour Beatty offloads Middle East JVs

Stakes in Dutco Balfour Beatty and BK Gulf sold for £11m
3 days ago

Fusion21 launches £225m modular schools framework

Hunt begins for new suppliers under four lots
3 days ago

Ashe lands £22m Stevenage precinct revamp

Park Place Plaza in the heart of town will be transformed
3 days ago

Contractor services