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

London concrete specialist soars to record profit

JRL quadruples profit on strong concrete frames and crane hire trading
7 hours ago

Graham bags £50m Kew Gardens revamp

Firm to refurbish historic Grade I and Grade II listed buildings over five years
7 hours ago

Firms sentenced after four killed in site excavation tragedy

Companies fined £700,000 after disaster in Norfolk
4 days ago

BAM books in £35.5m refurb deal at listed castle

Studley Castle will become hotel owned by Butlin's group
4 days ago

Carillion plans job losses as rail spending cuts bite

Union vows to fight against redundancies as renewal spending falls
5 days ago

Ardmac wins fit-out deal at Kirkstall Forge

Work to start next month on new offices for vehicle leasing specialist
4 days ago

McLaren lands £38m Brighton College sports and science centre

Contractor bags third major deal in five years with college
5 days ago

CITB to sell awarding body

Cskills Awards to have new owners
4 days ago

Balfour to close seven offices in Scotland

All operations north of the border to be directed from one new main office
5 days ago

Cemex drivers call off strike plans

Fear of disruption to site materials deliveries subsides as pay deal struck
5 days ago

Nine firms win places on £225m modular framework

Fusion 21 picks winners for education authorities to use
6 days ago

Winners revealed for LHC modular buildings deal

Big week for offsite as another major framework agreed
5 days ago

Helical bullish about London office market

Developer focuses on London, Manchester and logistics sites
5 days ago

Tarmac poaches director from FM Conway

Surfacing boss Toby Pyper to join Tarmac next month
5 days ago

Private rented sector fund raises £250m

Investors pile-in to new PRS fund looking for stakes in new schemes across the country
5 days ago

Race starts for first £15m Brent Cross infrastructure deal

Roads and utilities work to pave way for £1.4bn shopping centre revamp
5 days ago

Developers scale down plans for Wylfa nuclear plant

Number of construction workers needed falls to 8,500 from 10,000
6 days ago

Facebook snub prompts refurb rethink on Oxford Street

Great Portland Estates considers more extensive revamp at Oxford House
6 days ago

McLaren lands deal to fit-out new home of the FT

Newspaper staff will have a running track on the roof of New Bracken House
7 days ago

Skanska appoints new head of building business

Katy Dowding promoted as contractor unveils management reshuffle
7 days ago

Bid race begins for £20m mega car park

Port of Southampton plans largest car storage facility yet
6 days ago

MVS Group lands mechanical deal at new Spurs stadium

Midlands specialist boosts turnover and opens new North West office
6 days ago

BAM wins £20m Sheffield school

Mercia secondary school will open late next year
7 days ago

Sparks down tools on Skanska Crossrail sites

Electricians "cabin-up" in row over bonus pay and union recognition
7 days ago

Renew pulls out of low pressure gas mains work

Forefront Utilities business to focus on medium pressure replacement schemes
7 days ago

Wonky crane gets Multiplex out of a tight fix

Ingenious crane design at London's tallest tower site
7 days ago

200 Quadrant Construction staff face restructure

L&Q to close Quadrant Construction brand in big shake-up of development activities
7 days ago

Construction to start on £100m Bath resi scheme

Investment fund buys former Bath Press site
7 days ago

Three bosses jailed after fatal roof fall

Court hears how safety measures were ignored to save money
1 week ago

Property firm merges with main contractor

Wigley Building and Development will target projects up to £12m
1 week ago

Contractor services