London no longer most expensive place to build, says new report

London drops to second place as most expensive construction location in the world, according to latest Arcadis report.

London has dropped from first place to second as the most expensive city in the world in which to build, according to the latest International Construction Costs report, published by Arcadis.

According to the study of comparative construction costs across 100 global cities, London ranked second behind Geneva and ahead of Copenhagen (3rd). The five least expensive cities are found in Asia and India.

Outside of London, UK cities did not record significant shifts in position and are well represented in the top 25, with Bristol (15th), Manchester (17th), Birmingham (22nd), Liverpool (23rd), Edinburgh (24th) and Cardiff (25th) place respectively for construction costs globally. 

Despite challenging economic conditions in 2020, the construction sector held quite strong. The British economy was hit most significantly among the G7 group in 2020 and recorded a contraction of almost 10%. This was due to high dependence of GDP on the hospitality and leisure services sector and equally high level of urbanization – both factors vulnerable to public health issues. 

The prognosis is for a 7.3% bounce back in 2021, which – similarly to other countries – will be underpinned with strong investment from the public sector.  

Construction decreased by approximately 13% in the UK and it is forecasted to recover to pre-Covid levels only in the beginning of 2022, supported by a dynamic growth in infrastructure, housing, and industrial sectors. 

While a trade deal between the EU and UK removed a significant portion of uncertainty, the private sector will still need some time to regain confidence, especially in the view of trends accelerated by Covid. In the short-term the construction market in the UK will remain competitive, with subdued inflation of 1-2% predicted for 2021, driven in part by the limited availability of materials. Current circumstances favour clients as contractors look to secure workload and are not yet busy with public sector projects.   

The 2021 Arcadis ICC Index covers 100 of the world’s large cities across six continents. The cost comparison was developed covering twenty building functions, based on a survey of construction costs, review of market conditions and the professional judgement from its global team of experts. 

The calculations are based in USD and indexed against the price range for each building type relative to Amsterdam. This year, coverage has been extended to cities such as Oslo, Vienna, Nice, Memphis, Ho Chi Minh City, and Kiev. The devaluation of the U.S. dollar is the main factor contributing to a fall in the ranking of US cities such as New York and San Francisco to sixth and seventh place, respectively.

In addition to providing a comparative index of global construction costs, this report also looks at construction around the world and the noteworthy changes and initiatives of the past year in numerous global markets amid the Covid-19 pandemic. 

As some governments prepare to launch various initiatives to boost their economies which includes investment spending on infrastructure, Arcadis highlights the opportunity to create long term value from the right investments especially around sustainability. A five-point plan is presented in the report to help guide clients and their project teams to define and deliver their project requirements in the context of a broader assessment of value.

Nilesh Parmar, deputy chief executive, UK and Ireland, Arcadis, said: “The UK construction sector managed the pandemic very well. Effective safety measures have enabled productivity levels to recover, and the construction sector has been singled out as a major contributor to the ‘Build back better’ initiative in the UK.  

“The residential market has been buoyant through the year, supported by government intervention and global investment into mid-market build-to-rent. By contrast, the focus for investment in public transport is likely to shift away from London to other UK cities in line with the government’s post-Brexit ‘levelling-up’ agenda.

“The last year has been focused on the global public health crisis but the challenge climate change brings is still very real. With construction contributing significantly toward carbon emissions it is crucial our industry increasingly embeds sustainability into its projects.”

10 most expensive cities

1. Geneva 
2. London
3. Copenhagen
4. Oslo
5. Zurich
6. New York City
7. San Francisco
8. Hong Kong
9. Dublin
10. Macau

10 least expensive cities

100. Bengaluru
99. New Delhi
98. Mumbai
97. Kuala Lumpur
96. Ho Chi Minh
95. Wuhan
94. Chengdu
93. Nairobi
92. Johannesburg
91. Guangzhou

Where do UK and Ireland cities rank?

Dublin: 10/100
Bristol: 15/100
Manchester: 17/100
Birmingham: 22/100
Liverpool: 23/100
Edinburgh: 24/100
Cardiff: 25/100
Glasgow: 26/100
Belfast: 28/100

Click here to download the Arcadis International Construction Costs 2021 report.

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