- While construction costs across Australia increased, Australian capital cities have dropped down the rankings of the most expensive cities to build in.
- Sydney saw the most significant decline in international comparison, dropping 12 places, while Brisbane and Melbourne each fell five places.
- London returned as the most expensive city for construction globally, followed by Geneva, Zurich, Munich, and New York City.
- Rapid growth in industrial manufacturing and technology and a robust pipeline of government investment area driving competition for labor and materials; local scarcity could follow as construction recovery picks up pace.
- A focus on improving productivity in design, procurement, and construction will be essential to overcome risk, assure viability and deliver projects at scale.
16 April 2024 - Sydney continues to be the most expensive city in Australia in which to build, according to Arcadis’ 2024 International Construction Costs (ICC) report, released by the global design and engineering consultancy today.
The 2024 Arcadis ICC Index covers 100 of the world’s large cities across six continents. The cost comparison was developed covering 20 different building types, including residential, commercial, and public sector developments, and is based on a survey of construction costs, a review of market conditions and the professional judgement of Arcadis’ global team of experts.
Calculations are based in USD and indexed against the price range for each building type relative to Amsterdam, where Arcadis has its headquarters.
The latest report confirmed 2023 was a difficult year globally, with high borrowing costs undercutting the positive impact of infrastructure investment in many countries. However, with markets stabilizing and inflation beginning to ease, the report suggests the recovery of the global construction sector is at a pivotal moment, with heightened demand for labor, materials, and energy placing a premium on productivity as critical factor in investment decisions and project viability.
According to the Arcadis study, Australia, as with other global construction markets, is still in recovery from the disruption of the post-pandemic period.
While Sydney remained Australia’s most expensive city, it ranked at number 48, down 12 places from the previous year. Brisbane ranked at 51, Melbourne at 54, Perth at 62 (all down five places respectively from 2023), and Adelaide at 67 (down four places from last year).
On the shift in Australian city rankings this year, Arcadis’ Executive Director of Cost & Commercial Management, Matthew Mackey, explained: “The challenge of rising inflation levels above 5% across Australia’s cities, juxtaposed with a weaker Australian dollar, saw our cities fall in the ICC ranking this year.
“Rising insolvencies and diminishing capacity has fuelled further construction cost escalation, and while this has not been at the peak of 2022, it has continued to damage and reduce the margins for project viability. While the industry grapples with higher construction costs, projects have stalled amidst damaging confidence levels,” he said.
“However, the strength of longer-term project pipelines suggests these challenges may be short-term. 2024 presents the Australian construction industry with an opportunity to reset and collaborate more closely to bring about an improved approach to project delivery,” Mr Mackey said.
According to the study of comparative construction costs across 100 global cities, enhanced specifications associated with safety and sustainability have been pushing prices upwards, causing London to overtake Geneva (2nd) in the rankings, closely followed by Zurich (3rd) and Munich (4th). Rising costs and double-digit price growth in Munich have propelled the Bavarian capital significantly up the rankings, this year surpassing major US cities like New York (5th) and San Francisco (6th) in terms of relative cost to build.
The Arcadis report calls out rapid acceleration of investment in the advanced manufacturing and technology sector, including data centres. It says the scale and complexity of these end-date-critical projects has sharpened financial risk, meaning that clients need to evolve their design, procurement, and construction capabilities even as these major projects are being built.
Martijn Karrenbeld, Global Director for Industrial Manufacturing at Arcadis, explained:
“The key priority for clients is delivering an operational facility on time, but in a resource-constrained market, existing supply chains and delivery models might not be adequate to provide the assurance needed to protect these investments. This will place a premium on productivity-led design, procurement, and construction to deliver projects at scale – and project teams need to be ready to adapt.”
The Arcadis report sets out a practical five-point framework for delivering fast, complex programs. Applicable to all markets and sectors, the framework offers prompts to help build in resilience to deal with setbacks, scale and manage risk, model program interdependencies, and invest in data and live project controls to increase confidence and assurance.
Edel Christie, Chief Growth Officer at Arcadis, said: “As conditions stabilise for construction sectors globally, the market for delivery is evolving at a rapid pace. Better use of data, insight and decision-making is critical – whether that’s to meet sustainability requirements, improve stakeholder management, attract more capacity, or better engage with the capabilities of a global supply chain. Delivering according to plan is critical and, even as construction programs become more complex and resources harder to secure, the need to effectively manage risk will be critical for start-ups and industry champions alike.”
For more information, the full report can be downloaded here.
10 most expensive cities
1. London
2. Geneva
3. Zurich
4. Munich
5. New York City
6. San Francisco
7. Philadelphia
8. Copenhagen
9. Hong Kong
10. Bristol
Australian cities rankings
48. Sydney
51. Brisbane
54. Melbourne
62. Perth
67. Adelaide
