London ranks among the top 10 most expensive cities in the world for construction

London is among the world’s top ten most expensive cities to build in, according to the latest International Construction Costs report, published by Arcadis. According to the study of comparative construction costs across 100 global cities, London is the 6th most expensive city in the world for construction, beaten only by international mega cities like New York (1st), San Francisco (2nd) and Hong Kong (3rd). In contrast, the 10 least expensive cities for construction are situated predominantly in Asia.

Of the twelve UK cities studied in the report, London unsurprisingly ranks at the top of the list. In contrast, many of our key regional cities represent much better value for money. Manchester and Birmingham, in 22nd and 23rd place respectively for construction costs globally, are both examples of thriving regional economies where increased activity across sectors including offices, hotels, retail, education and student housing are all indications of a booming local construction market. Meanwhile, Edinburgh’s position in 29th place globally places it well outside the UK’s top five most expensive cities but cements its place as a global powerhouse for attracting investment. Belfast ranks as the least expensive UK city in the index for construction, and with significant investment being made in delivering transformation projects like the Belfast Transport Hub, is well on the way to achieving its vision as a modern European city.

Construction demand is more buoyant in times of positive economic growth and, despite the headwinds of Brexit, 2018 was a good year for the UK construction industry. GDP grew by 1.4% in 2018 and is similarly forecast to rise another 1.4% in 2019. The completion of major schemes such as the new Tottenham Stadium in London, the continuation of work on Edinburgh’s largest speculative office development at Capital Square, and the latest phase of development on the £800m NOMA masterplan in Manchester are all positive indications of strength.

However, this has perpetuated ongoing capacity constraints – both of materials and labour – and there is a risk that construction demand and the rate of growth will slow unless investors, owners and operators can make significant improvements in productivity to help reduce costs and increase efficiency.

Edel Christie, UK Managing Director for Buildings at Arcadis, said:

“In 2019 and beyond, smart investment in three key areas is going to be crucial for future success. Technological innovation and digitization present an opportunity for construction companies to increase efficiency, lower costs and raise productivity, while simultaneously improving the end product for customers and communities alike. Secondly, in order to create long term value there needs to be a much stronger focus on how the buildings we construct can work for and meet the changing requirements of the people who actually live in or use them.

“Finally, constructing and operating buildings has a significant impact on the environment, in terms of water and energy use, carbon emissions and waste. As a consequence, clients are looking to incorporate resiliency and sustainability into building design and use as part of their business and growth strategy. These key areas all require the whole supply chain to collaborate more deeply to deliver the potential value in the investments being made.”