London in top 10 most expensive cities to build
A new study of 91 construction markets around the world has found that London is among the 10 most expensive cities to build in globally. Zurich and Geneva are the only European cities where construction costs more, according to research from Turner & Townsend.
After falling into recession in the second half of 2023, the UK economy is showing signs of growth again. One of those key indicators is the construction industry, which is a traditional bellwether of economic health.
In April 2024, it was announced that UK construction activity beat expectations, growing at its fastest pace for more than a year, boosted commercial and civil engineering sectors. The S&P Global UK Construction Purchasing Managers’ Index rose to 53 in April, up from 50.2 in March and the highest reading since February in the previous year.
Amid this, however, prices for building in the nation’s capital have also spiralled. According to the study from Turner & Townsend, London has re-entered the world’s top 10 most expensive cities to build in.
The study suggested that appreciation of the UK pound sterling relative to the US dollar had contributed to this – as had the growing squeeze on construction capacity in the city.
As such, London sits 10th on the list, with a cost of $4,473 per square metre. That makes it more expensive than Munich, at $3,797 per square metre; Dublin at $3,775; and Vienna at $3,615, which are all ranked in the top 25 globally.
With an average cost of US$5,035 per square metre, Zurich has surpassed Geneva to claim third place in the ranking, both well above London as the most expensive places to build in Europe. Based on a global survey of 91 cities, meanwhile, the US continued to dominate the rankings of the most expensive places to build, with six US cities in the top ten. New York retained its position as the most expensive market to build in for the second year running, at an average cost of US$5,723 per square metre.
In spite of this, overall, the data pointed to lowering construction price inflationary pressure overall. Turner & Townsend has modestly reduced its 2024 construction cost inflation forecasts compared with last year’s predictions. Construction inflation in most markets is driven by a backlog of projects, which are gradually moving forward as construction costs stabilise.
Euan Reaper, a director at Turner & Townsend, commented, “Following several years of economic turbulence, and the sharp impact of the war in Ukraine, it is very encouraging to see so much opportunity across European construction. However, we need to be wary of the increasing price of labour across the continent, which, without a concerted effort to increase the skilled workforce, could raise prices and create labour bottlenecks. It’s also important to watch the impact of rising sustainability requirements for real estate portfolios, and how this will change investment patterns and asset values.”
