Dive Brief:
- Design and consultancy firm Arcadis has published its International Construction Costs Index, which revealed the cities of New York, London and Hong Kong have the most expensive construction costs — up to 60% higher than many cities in Europe. The index, which calculates construction costs in 44 major cities, chalks up high prices to strong currency and resource constraints.
- The report also found that as inflation rises, the ability to construct public and commercial projects decreases. In addition, these rising costs combined with falling currency in emerging markets could drive investors to less costly markets.
- Drops in commodity prices kept cost inflation at bay in all construction markets, but heightened uncertainty over prices, especially oil, will have an eventual impact on the industry, according to Arcadis. Low labor costs in Dubai and Doha, Qatar stabilized the Middle East region.
Dive Insight:
Arcadis said that the high pricing found in the U.S. and U.K. is not affecting development in the Eurozone, but the economic slowdown in China will limit growth in Asian markets into 2016.
"As we enter 2016, the trend of 40% of international real estate investment being in the Americas, looks set to continue," Kevin Herron, Arcadis vice president and director of cost consultancy, said in a release. "The impacts of the Chinese economic slowdown will need to be monitored, as this has potential to both increase and decrease investment into the US, while at the same time continuing the downward pressure on commodities pricing."
It comes as no surprise that New York is the priciest city to build in. The city’s construction boom has seen the cost to build office space skyrocket to $500-$550 per square foot, not including an extra 30%-40% for indirect costs such as professional fees, administration marketing, financing and tenant improvements. In addition, overall, the city is expected to pass the $40 billion mark in construction spending next year for the first time in the city’s history.
Arcadis’ Top 10 most expensive building markets are:
1. New York
2. London
3. Hong Kong
4. Geneva
5. Macau
6. Copenhagen
7. Stockholm
8. Frankfurt
9. Paris
10. Singapore
The 10 least expensive cities to build on Arcadis’ 44-city list are:
35. Jakarta
36. Sofia
37. Sarajevo
38. Prague
39. Bucharest
40. Ho Chi Min
41. Kuala Lumpur
42. Bangkok
43. Bangalore
44. Taipei