Global construction costs are set to rise by 3.5 percent in 2017, reflecting steady economic growth and increasing skills shortages in over half of the world’s markets, according to new research by professional services company Turner & Townsend.
- New York, San Francisco, Zurich, Hong Kong and London top league table of most expensive places to build
- Half of world’s construction markets suffering from skills shortages
- Labour costs in leading markets hit new highs, with construction workers in New York and Zurich paid nearly US$100 per hour
- Major data-led study of construction costs in 43 global markets conducted by Turner & Townsend
In the light of rising costs and a growing skills crisis, the International Construction Market Survey 2017 (ICMS) calls for increased investment in innovative technologies, new construction methods and better use of data to boost productivity in the sector.
The report analyses input costs – such as labour and materials – and charts the average construction cost per m2 for commercial and residential projects in 43 markets around the world.
New York has overtaken Zurich as the most expensive city in which to build, with an average cost of US$3,807 per m2 followed by San Francisco (US$3,549 per m2) and Zurich (US$3,528 per m2).
London, which ranked third in 2016’s report, has fallen to fifth place behind Hong Kong, despite costs in the city soaring by 5 percent over the last year. The fall in ranking reflects the depreciation of the UK pound against the US dollar since the UK referendum on European Union membership in June 2016.
58 percent of cities assessed by the study are identified as ‘warm, hot or overheating’ – where the market is characterised by a high number of projects and intense competition for physical resources and labour that drives up prices.
The number of cities considered to be hot in 2017 has almost doubled since last year and includes New York, Dublin, London, San Francisco, Tokyo, Amsterdam and Dar es Salaam. Seattle and Bogota are identified by Turner & Townsend to be overheating markets with costs in these cities expected to rise by 5 and 4.4 percent respectively.
The major exceptions to escalating costs are the commodity-reliant markets of Singapore, Muscat, Kuala Lumpur and Santiago, where the development market has cooled in light of falling global prices for raw materials.
Skills shortages continue to prevail across the world with over half (24) of the 43 markets analysed reporting labour shortages compared to 20 markets in 2016.
Extreme variations in the cost of labour between regions and skill levels are also prevalent with construction workers in Zurich and New York edging closer to US$100 per hour. By comparison, workers in Africa and India typically receive hourly wages of US$1-3.
Steve McGuckin, Managing Director. global real estate, Turner & Townsend, commented:
“This year’s survey indicates a slowly warming global construction industry suffering from increasing labour shortages in an improving global economy.
“As more markets report skills shortages than ever before in the history of this study, it is clear that construction is not doing nearly enough to tackle this issue, which in turn is contributing to higher costs.
“Against this backdrop, there is an urgent need for contractors and clients in many markets to boost productivity – embracing innovative technologies and new methods of construction, as well as using data analytics and better programme management to unlock efficiencies.”
Source: Turner & Townsend