International Construction Costs: How do building costs vary worldwide?

The global construction sector is on the cusp of significant changes and challenges as it emerges from the post-pandemic era. Despite weak growth rates in many markets during 2023, the future looks more promising, with lower borrowing costs and moderate construction price increases combining to improve prospects for development in many markets. 

What does this mean for construction costs globally?

Our International Construction Costs report is being released at a critical stage, as economic cycles across the developed world return to growth. The report highlights that sectors that are sensitive to growth rates and finance costs - including housing and commercial development - contracted in many markets during 2023. And with demand for construction falling, markets were relatively calm in 2023, as supply chains returned to an equilibrium state.

Our upcoming report compares construction costs across 100 cities, providing an invaluable insight into current market dynamics. We provide an update on market conditions in 10 major markets, highlighting continuing headwinds and sources of growth that will support construction market recovery. Critically however, the variation of construction costs across markets including the US, Europe, and Australia remains wide. Differential inflation and exchange rates add complexity to the problem, as does the impact of regulation and client expectation.

Even if the days of double-digit construction inflation are over, this does not mean that the industry's challenges have been resolved. Viability remains an issue in many sectors. Not only will the costs of finance remain high, but specification enhancements linked to low-carbon performance will also result in increased costs – even if markets remain stable.

One area where demand is soaring is in the technology and advanced manufacturing sector. This is a trend driven by the energy transition and AI's demand for high-end processors and data centre capacity. The surge is reshaping local construction markets, particularly in the US and Northern Europe, placing significant additional demands on labour, materials, and power.

The clients behind these programmes face huge challenges in meeting their scheduled Day One completion date. We will examine how the high level of risk exposure on these programmes is being compounded by their sheer scale, speed, and complexity. 

So how can we overcome these challenges?

Our view is that future global construction inflation trends will be on an upward ratchet. And in resource constrained markets, the industry’s collective focus must be on designing and delivering projects to market efficiently - on time, and on budget. This will place a premium on productivity-led design, procurement, and construction to meet endemic affordability challenges. 

The question is; how?

With our upcoming International Construction Cost report, our goal is to equip industry professionals with the data and knowledge needed to navigate these challenges effectively. Drawing on the breadth and depth of our sector knowledge, our upcoming report will provide fresh insights into these dynamic markets, along with practical advice and solutions that will help to assure the delivery of fast, complex programmes.

As the construction industry braces for significant changes in 2024, our report will equip professionals with the necessary insights and construction project delivery strategies to navigate construction market recovery successfully.