Competitive euro boosts investment attractiveness of Eurozone cities

Many European cities experience a growing attractiveness for construction and investment in the world in which to build, according to the International Construction Costs Index published today by Arcadis, the leading Design & Consultancy firm for natural and built assets. The gradual recovery in the Eurozone and subsequent increments in construction costs have been counterbalanced by a depreciating Euro and as a result the market has not been affected by high inflations as seen in the UK and the US.

John Atkins

Director Buildings Europe +31 (0) 88 426 1187 Ask me a question

The index, which analyzes the relative cost of construction across 44 major cities, finds that economic recovery and currency exchange rate fluctuations have triggered some big movements in the relative construction cost rankings. In addition the index points to very significant cost differentials throughout Europe with costs in locations including Athens and Lisbon at a 40% to 60% percent discount to that of south east England.

For the outlined cities London, Frankfurt and Amsterdam – although different local circumstances and dynamics -  the research concludes remarkable similarity in the urban trend. The growing attractiveness of cities drives the residential markets, which on its turn creates a revival of the construction industry and the cost of construction. The trend is urban focused with some spin off to the region, where the ability to benefit declines with distance from the city.

A rebound of European investment is expected throughout next year, exemplified by the EC’s Juncker Infrastructure Investment Plan worth €315bn. Recent GDP data has confirmed that the engines for the EU’s growth include Poland, the UK, Ireland, Spain and the Netherlands. France, Italy and Austria are showing signs of recovery. Over the next three years, the construction industry is expected to grow by an encouraging 2.3% per year in the EU.
The price inflation in the UK and the US comes at a cost, with the viability of important commercial and public sector schemes put at risk in these cities as prices continue to soar. Furthermore, rising costs and the falling value of currencies could restrict demand from emerging market investors in these areas, potentially triggering a shift in interest to alternative lower-cost cities in the longer term.

Meanwhile, throughout 2015, every construction market in the world saw the overall level of cost inflation restricted due to the well-publicized drops commodity prices. Particularly when it comes to oil, growing uncertainty over prices will inevitably have a long-term impact on the global construction industry.

“The European urban construction market is poised for growth due to the combination of several factors. Economic recovery, a relatively cheap Euro, EU investment plans all contribute to an interesting investment climate for international financial institutions looking for opportunities beyond traditional high cost inflation cities such as New York, London and Hong Kong,” states John Atkins, European Leader Buildings at Arcadis. “A city such as Amsterdam is likely to see costs rising steadily towards pre-crisis levels within three years. Frankfurt is supported by encouraging levels of growth in 2015. As mentioned before, it is interesting to see that the upwards construction cost trend is robust and predominantly urban, with some spin-off in the region.”

International Cost Comparison 2nd Quarter 2015

1.    New York
2.    London
3.    Hong Kong
4.    Geneva
5.    Macau
6.    Copenhagen
7.    Stockholm
8.    Frankfurt
9.    Paris
10.    Singapore
11.    Vienna
12.    Doha
13. Brussels
14. Milan
15. Melbourne
16. Jeddah
17. Auckland
18. Dubai
19. Tokyo
20. Seoul
21. Amsterdam
22. Kiev
23. Ankara
24. Sao Paulo
25. Riga
26. Madrid
27. Shanghai
28. Zagreb
29. Brunei
30. Manila
31. Lisbon
32. Warsaw
33. Athens
34. Belgrade
35. Jakarta
36. Sofia
37. Sarajevo
38. Prague
39. Bucharest
40. Ho Chi Minh
41. Kuala Lumpur
42. Bangkok
43. Bangalore
44. Taipei

Click here to download the full International Construction Costs Report.

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John Atkins

Director Buildings Europe +31 (0) 88 426 1187 Ask me a question

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Internationaler Baukostenindex 2016
International Construction Costs 2016

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