International Construction Costs 2017

Cost certainty in an uncertain world

How can smart investments be made in an increasingly uncertain world?

Ultimately the challenge remains how to make smart investments in an increasingly uncertain world. Having access to high quality data and current, relevant market insight is one tool that will help clients to successfully navigate these challenges.

The latest Arcadis International Construction Costs report details the relative cost of construction in 44 of the world’s major cities. The regional spotlights in the report identify some of the ways the changing costs have impacted these cities, and shares insights about how cost certainty through digitally enabled techniques can help this.

International Construction Costs Report 2017

Which cities are most expensive for construction?

Dense cities with high cost building locations, such as New York and Hong Kong, continue to prosper and see significant development activity thanks to their attractiveness as desirable global cities for commerce and people. In this year’s rankings our assessment is based on typical developments in city locations, illustrating the significant product quality, supply chain and cost differential factors specific to these locations.

Find out more about some of the cities profiled using the interactive graph, or download the full International Cost Comparison chart.

The top ten most expensive cities to build in are:

1. New York 6. Copenhagen
2. Hong Kong 7. Stockholm
3. Geneva 8. Frankfurt
4. London 9. Paris
5. Macau 10. Vienna

Doha - #11

Qatar continues to race towards the delivery of the 2022 FIFA World Cup™, and it could be argued that the wider slowdown in the Gulf Cooperation Council (GCC) construction market has been beneficial, given the scale of the program still to be delivered. Despite the wider fall in energy prices, Qatar continues to experience positive GDP growth although at a slower rate than before, and expects a ~3.9% rise in the economy in 2017.

Dubai - #19

Recent developments in the UAE have demonstrated the wider impact of uncertainty associated with falling commodity markets on the local construction industry. Despite the significant levels of investment needed to help deliver Expo 2020 and to boost wider transport inter-connectivity, the development pipeline has taken a hit as a result of greater caution by local investors. Projects are now being initiated, but many of these will not be procured until mid-2017 at the earliest, and could result in further weakness in construction inflation in early 2017.

Frankfurt - #8

Also known as ‘the City of Banks’, Frankfurt is expected to emerge on the winning side in the coming years as a result of Brexit. Although the banking industry is still concerned about the effects of the financial crisis and low interest rates, we expect Frankfurt to see a rise in speculative property purchases and construction activities due to relocation of companies from London to Frankfurt. Whether in residential construction or commercial real estate, the demand for land and buildings in Frankfurt and the surrounding area is likely to rise further in the coming years.

Hong Kong - #2

At number two in the global ranking, Hong Kong is the most expensive city in Asia in which to build. The city’s markets are currently stabilizing at peak levels of activity, which have seen projects affected by significant resourcing challenges. Output in 2015 reached yet another record – up by 100% compared with 2010. While big projects such as the Zhuhai Macau bridge link and the Guangzhou-Shenzhen High Speed Rail link are well advanced, new programs like the third runway at Chek Lap Kok, are expected to sustain workload at current levels.

London - #4

Despite falling two places since 2016, largely due to the devaluation of the pound following the UK’s Brexit vote, London is one of the costliest cities in the world for construction. Key commercial sectors including offices and prime residential are seeing a slowdown due to Brexit related uncertainty impacting some developers’ investment decisions. Development activity in infrastructure remains strong, evidenced by projects like Crossrail 2, one of the 10 highest value construction projects globally in 2017.

Melbourne - #14

Construction markets in Australia continue to be impacted by a big overhang caused by the slowdown in commodity markets, but infrastructure and housing markets remain strong in New South Wales and Victoria in particular. Melbourne sits in the top third of the most expensive cities to build in globally, yet the city has significant public and private construction planned in the coming years, largely driven by the Victorian State Government's commitment to infrastructure spend and addressing the needs of Melbourne as a global city.

New York - #1

New York is almost 50% more expensive in construction costs than the national average in the US, and more than 20% higher than other major cities like Chicago, Los Angeles, Seattle or Boston. In this environment, owners, developers and builders must be smart about how they construct in this tough market and constantly look for ways to save on costs and do more with less. 

Paris - #9

In a European Union dominated by austerity and strict budgetary rules, examples of innovative investments in construction are scarce. However, in Paris a number of such investments are underway - in recognition of the fact that a well-performing infrastructure is the lifeblood of a country’s and a city’s economic prospects. This is all the more important in a Eurozone with significant construction cost differences; the 2017 report shows that Lisbon and Athens are at an almost 50% discount to Paris.

Singapore - #15

Singapore’s construction market has seen a continuing correction since 2014 triggered by over-supply and a slowing economy. 2017 is currently forecast to be between US$ 27bn and US$32bn. Sustained workload in the public sector has supported the industry during the correction, and as a result, prices have remained broadly stable. However, Singapore also faces a labor shortage, an issue that it’s seeking to overcome by charging wage levies for overseas workers.

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Edel Christie

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Simon Rawlinson

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