Building costs in London now second highest in world

Aaron Morby 6 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

Interserve resurrects Tilbury Douglas name in rebrand

New Tilbury Douglas branded business targets £500m revenue this year
13 hours ago

Utility contractor Falco sold to staff

London contractor becomes the latest to be sold to Employee Ownership Trust
9 hours ago

Keltbray lands first major roads package

Specialist bags £14.1m bridges deal from Costain/Jacobs as it targets highways sector
9 hours ago

Lee Marley Brickwork launches Scottish scaffolding division

Industry veteran Billy Dolan to lead latest brickwork and scaffolding offering

Taylor Wimpey pledges £125m for cladding and fire safety retrofits

Pre-tax profit slumps two-thirds to £264m as margin halved to just over 10%
14 hours ago

Fusion21 names line-up for £1.1bn FM framework

Successful firms include BAM, Bouygues, Galliford Try and Eric Wright
14 hours ago

Major pharma HQ in London’s King’s Cross approved

Work could start on 220,000 sq ft research facility before the end of 2021
1 day ago

Union fears over plan to house site workers on cruise ships

2,000 builders could live on ships during construction of London Resort in Kent
1 day ago

Another ISG director joins Structure Tone

Justin Fahy joins former ISG colleagues as Commercial Director at fit-out specialist
14 hours ago

Stoke lines up Bowmer & Kirkland for new urban quarter

Goods Yard plan includes 180 homes, 150-bed hotel and workspace
1 day ago

£60m London Stratford student complex approved

Work to start later this year on 282-room student complex near the Olympic Park
14 hours ago

D-day for VAT plan cutting cash flow across construction

Reverse charge scheme is now active despite industry lobbying
2 days ago

Project SPEED aims to slash costs and halve time of rail upgrades

Rail minister urges industry to pioneer faster, smarter and more efficient projects.
2 days ago

Hinkley bosses halt plans to “deskill” electricians

Controversial plans to introduce a new grade of electrical operative put on hold
2 days ago

WWII bomb detonated in huge blast on Exeter project

Local contractor Urbn Construction uncovered 1,000kg bomb on £14m student hall job
2 days ago

Bidders day for £120m Tomatin to Moy A9 dualling

Most northerly section of £3bn A9 upgrade plan coming out to tender
2 days ago

Race starts for £60m Gloucester Kings Quarter Phase 2

Council hopes to start work by October
2 days ago

Caledonian Modular wins 20-storey Canary Wharf aparthotel

£74m 20-storey aparthotel project to be built at Wood Wharf
2 days ago

Structural steelwork firm buys crane plant

J & D Pierce to continue production at Konecranes East Kilbride site
2 days ago

Severfield buys fabricator Dam Structures in £27m deal

Acquisition allows Severfield to get involved earlier in the construction process
5 days ago

Contractors trial 3D smartphone ‘X-ray vision’ of buried services

New augmented reality visualisation prevents dangerous or time-consuming cable and pipeline strikes
5 days ago

Quartet wins £65m Natural Resources Wales deal

Alun Griffiths, Jones Bros Ruthin, Walters UK, William Hughes win spots on four-year framework
5 days ago

Self-employed worker numbers 13% down on pre-Covid level

Freelance wages in January still down on a year ago despite labour shortages
5 days ago

Graham starts £56m Nottingham PRS project

10 storey Queens Street project will provide 348 rental flats
5 days ago

HSE restores dissolved roofing firm ahead of £160k fine

Safety body acts after contractor folds between accident and court hearing
5 days ago

Hire boss leads plant thieves police chase

Nine police cars were involved in the pursuit of a stolen micro-excavator
5 days ago

French contractor lands Liverpool full-fibre hook-up

£30m Liverpool backhaul project will see 212km super-fast broadband network installed over two years
6 days ago

Morgan Sindall builds up cash despite 31% profit fall

Construction and Infrastructure division paying subcontractors in 27 days
6 days ago

Hinkley site hit by “deskilling” row over electricians

Rank-and-file electricians stage first demonstrations outside EDF offices
6 days ago

Go-ahead for London Broadgate twin towers

McAlpine is in line to build 37 and 22-storey towers at 2 Finsbury Avenue
6 days ago

Contractor services