According to a new survey by Turner & Townsend, global construction costs are predicted to rise by 4.3% this year, with New York remaining the world’s most expensive place to build
Almost half of the 46 cities studied are home to a large number of projects that are pushing up prices. Labour costs rocketed 10% In New York and the other top five most expensive cities to build in. New York’s construction workers command an average of US $98.30 (~£72.67) per hour.
Turner & Townsend’s International Construction Market Survey is a study of construction costs for both commercial and residential projects in 46 global markets. San Francisco remains in second place, with Hong Kong and Zurich, Switzerland switching places from last year, to be third and fourth, respectively. London comes in fifth.
Globally, Turner & Townsend’s International Construction Market Survey forecasts that construction costs will rise by 4.3% as economic growth unlocks new projects in key markets – placing pressure on labour and resources.
According to the report, 46% of the markets surveyed are shown to be heating up, compared to 33% in 2017. Warming markets are typically characterised by a large number of projects that are pushing up prices.
In New York City, the average cost of construction in the city climbed 3.5% to US $3,900 per m2 (£2,787) in 2018.
Skills shortages have been a major force behind cost escalation. The top five cities within the report have seen labour rates increase by 10% in the last year. Overall, 58.7% of markets within the survey report a skills shortage, with only three markets – Houston, Muscat and Sao Paolo – reporting a surplus of labour.
The global trend towards higher construction costs has been offset only by Perth, Australia, and Muscat in Oman, where prices fell by 1% in 2017. Both cities have continued to see limited investment in new projects on the back of low commodity prices.
The survey analyses input costs – such as labour and materials – and charts the average construction cost per m2 for commercial and residential projects in 46 markets around the world. In recognition of the growing importance of Asian markets, the 2018 report includes Shanghai, Jakarta and Ho Chi Minh City for the first time.
Steve McGuckin, Global Head of Client Programmes at Turner & Townsend said that fundamental changes were needed to the UK and global industry model to control costs: “Global GDP growth of 3.9% is driving a resurgence in construction activity across international markets. While this uptick will inevitably push up costs, inflation is being exacerbated by skills shortages: put simply, we need to do more work with fewer workers.”