London Named Most Expensive Global City To Build New Real Estate
London has been named as the most expensive city in the world to build new real estate, according to a new report by consultant Arcadis.
The International Construction Costs report found that London took first place, followed by Geneva and Oslo, as the most expensive cities globally for construction. New York took fourth place and San Francisco, sixth.
The rankings, which cover 100 global cities, had nine entries from the UK and Ireland, with Bristol sitting just outside the top 10 in 11th place, Dublin was 12th and Manchester 14th.
The U.S. and Canada had 17 entries in the top 100.
The ranking system compares different cities globally to Amsterdam, which is assessed to have an average cost to build. London was found to cost between 140% and 200% more than Amsterdam for construction of new developments.
Five of the least expensive cities to develop new buildings were found in East Asia and India.
The Arcadis report draws on a number of factors, including availability of materials and energy costs, and takes into account inflation over the past 12 months.
It found demand for materials had been exacerbated by the post-pandemic disruption in supply chains, contributing to double-digit price increases in construction costs in North American and European cities.
“UK construction completed its recovery from Covid-19 by late 2021, but had changed shape significantly, with dynamic growth in both large-scale infrastructure and small-scale domestic home improvements," the report stated.
“The UK’s building contracting sector has seen mixed fortunes. The logistics and industrial sub-sectors are booming despite long lead times for critical steel products, whereas commercial and public sector building development is slow, helping to keep construction markets competitive.”
The ICC report found that energy costs accounted for 38% of some construction materials, such as steel and cement, and that construction materials rose by an average of about 25% in 2021. It also noted that materials such as bricks and plasterboard, which had so far escaped high inflation, are seeing their prices accelerate.
The upward trend in the cost to develop in U.S. cities was spurred by the strengthening dollar, which rose by around 5% compared to most currencies globally.
“This adaptability will prove vital as businesses ready themselves for the uncertain and inflationary environment ahead," Arcadis Global Head of Cost and Commercial Management Andrew Beard said. “While on the surface the looming market conditions sound unfavourable, we believe these challenges more than ever present our industry with a great opportunity to drive forward innovation and cement a mentality of doing more with less to reduce our own impact on resource use and the environment.”
