London has been pushed out of the top 10 most expensive cities for construction, according to Turner & Townsend’s International Construction Market Survey for 2023. London does remain the most expensive UK city in which to build with an average cost of £3,136/m2, however, the capital has fallen to 14 in the global rankings. New York City comes in as the most expensive market to build (£4,287/m2), closely followed by San Francisco (£4,089/m2). In the 2022 survey, San Francisco was the most expensive market to build, while New York was ranked fourth. Boston (seventh), Los Angeles (eighth), Chicago (ninth) and Seattle (tenth) join New York and San Francisco in the top 10. According to Turner & Townsend, the strength of the US dollar “has played a part in propelling these well-established markets”, along with “a series of policy initiatives designed to attract investment, including the Biden administration’s Inflation Reduction Act (IRA)”. The remaining top 10 markets are more consistent, with Geneva and Zurich placed third and fourth in 2023, moving up from fifth and sixth position in 2022. In Asia, Tokyo and Osaka have moved into fifth and sixth place in 2023, down from second and third spots last year. The survey looks at conditions across nine key UK city regions – London, Manchester, Edinburgh, Bristol, Leeds, Birmingham, Glasgow, Newcastle and Belfast. The next two most expensive UK markets are Manchester and Edinburgh, ranked 30th and 32nd with average costs of £2,504/m2 and £2,425/m2, respectively. According to Turner & Townsend, conditions in the UK market remain “highly pressured”, with average construction cost escalation of 9.4% over the nine markets during 2022. This rate of inflation is expected to cool to 3.6% in 2023 as pressure on supply chains ease and demand falls, with higher interest rates increasing the cost of borrowing to finance projects.

Cost Inflation Is Being Sustained By a Persistent Skills.

shortage which pushes up labor costs, with total construction employment in Q1 2023 contracting by 1.9% on the previous quarter. The UK is the fourth most expensive global region for construction labor, with average wages across the nine markets of £36.50 per hour. The UK market has also seen a levelling up of inflation trends, with a relative slow-down in the capital matched by a growth in activity stretching capacity outside the capital. London’s 10% construction inflation in 2022 was matched in Newcastle, Manchester, and Bristol. Belfast outstripped London, with 11% inflation, and Leeds was not far behind on 9.5%. Turner & Townsend Cost Management UK managing director Martin Cudweeds said: “Exceptional growth in United States markets has seen a relative shift in the UK’s global ranking of the most expensive places to build. However, that shouldn’t be misinterpreted as a sign that the market has cooled. While the expectation is that the rate of cost inflation will ease in the next twelve months, the overall picture is one of high competition for labor and resources. “Real estate clients need to be braced for high costs to be sustained for the foreseeable future, and plan accordingly. Staying close to the supply chain, monitoring vulnerabilities, and working on productivity will be essential to keep projects moving ahead.”