London back as most expensive place to build in world

Aaron Morby 1 month ago
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London has regained the dubious distinction of being the most expensive city in the world in which to build.

Enhanced safey and sustainability specifications drive up London costs
Enhanced safey and sustainability specifications drive up London costs

According to the latest Arcadis  International Construction Costs report, London has leapfrogged Geneva to once again claim top spot among 100 global cities.

Prices were pushed upwards because of enhanced specifications associated with safety and sustainability, as well as higher client expectations.

Another Swiss city Zurich ranked third with Munich taking fourth after rising costs and double-digit price growth propelled the Bavarian capital significantly up the rankings, this year surpassing New York and San Francisco in terms of relative cost to build.

On the whole, cities in the UK and Ireland are relatively expensive places to build. All sat within the top 25 most expensive construction locations in the world, except Belfast which ranked 28th.

100 global city construction cost rankings
UK and Ireland Most costly cities Least costly cities
London (1/100) London Buenos Aires
Bristol (10/100) Geneva Lagos
Manchester (12/100) Zurich Kuala Lumpur
Birmingham (14/100) Munich Nairobi
Edinburgh (15/100) New York City Bengaluru
Cardiff (16/100) San Francisco Johannesburg
Glasgow (18/100) Philadelphia Delhi
Dublin (19/100) Copenhagen Mumbai
Belfast (28/100) Hong Kong Chengdu
Bristol Hi Chi Min

 

At home, viability challenges have continued to affect projects, even as inflation has fallen.

Simon Rawlinson, Head of Research and Strategic Insight at Arcadis said: “With minimal GDP growth and high interest rates, many projects face viability challenges due to regulatory and election uncertainties.”

New regulations focused on low carbon emissions and improved building safety have fuelled uncertainty and added to project costs.

Rawlinson warned that this uncertainty would likely continue this year against the backdrop of local, mayoral and national elections.

Tight fiscal conditions will see increasing pressure on the public purse in 2024 and beyond, with real-terms cuts in government capital investment currently projected from 2025 until 2029.

While optimism as measured by the construction PMI has improved, the legacy of a weak order book from 2023 will delay recovery until late 2024, he forecasted.

Looking ahead Rawlinson said the infrastructure sector looked set to offer the greatest future opportunity, particularly investment in networks including energy transition projects and a large-scale, £96bn planned investment in the regulated water sector.

In both sectors, Arcadis warns capacity constraints would contribute to higher inflation and may impact the ability to deliver all projects and programmes in the period.

On a global level, Arcadis said markets were now stabilising and inflation beginning to ease, creating a pivotal moment in the recovery of the wider construction sector.

Increasing demand for labour, materials, and power mean that productivity is now becoming an increasingly critical factor in investment decisions and project viability.

Arcadis highlighted opportunities in the rapid acceleration of investment into the advanced manufacturing and technology sector, including data centers, pharmaceutical facilities, gigafactories and wafer-fabs.

The sheer scale and complexity of these end-date-critical projects inevitably results in more financial risk, meaning that clients need to evolve their design, procurement, and construction capabilities even as these multi-billion-dollar programs are being built.

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