“Construction must rapidly adapt,” says Arcadis, as soaring costs and rising uncertainty take their toll

• London returns to being the most expensive construction location in the world, according to latest Arcadis report
  
• Many cities in North America and Europe show double-digit cost increases, including Chicago, New York, Munich, Berlin, and Barcelona 
• Melbourne and Sydney drop down the rankings, as higher costs get absorbed by the supply chain
• Doing ‘more with less’ will be critical to long term success, as inflationary pressures and geo-political uncertainty take their toll

7 April, 2022 – London has returned to first place as the most expensive city in the world in which to build, according to the latest International Construction Costs (ICC) report, published by Arcadis. According to the study of comparative construction costs across 100 global cities, London ranked first, followed by Geneva (2^nd) and Oslo (3^rd). The five least expensive cities are found in Asia and India.

Due to a combination of cost drivers – including rising energy costs, materials shortages and labor availability – along with high sector-specific demand, particularly residential and industrial, markets in North America and many European cities recorded double-digit cost increases. As a result, American cities moved significantly up the ranking. This upward trend was also helped by the US dollar appreciating on average by 5% against most currencies. Cities in the UK and Germany also moved up the index.  

Across Asia, the picture has been mixed, with costs remaining largely stable. One exception is Singapore, where difficulties in accessing labor triggered high levels of inflation. In Australia and the Middle East, on the other hand, demand levels did not quite meet expectations, leading to a more competitive market and a more significant portion of costs being absorbed by the supply chain. This has resulted in locations such as Melbourne and Sydney dropping as much as 10 places in the ranking in 2022.    

The 2022 Arcadis ICC Index covers 100 of the world’s large cities across six continents. The cost comparison was developed covering twenty building functions, based on a survey of construction costs, review of market conditions and the professional judgement from its global team of experts. The calculations are based in USD and indexed against the price range for each building type relative to Amsterdam. Analysis was undertaken prior to the conflict in Ukraine,  which is set to exacerbate material and hydrocarbon shortages, bringing significant repercussions for global commodity and energy markets, and increased global uncertainty.   

In addition to providing a comparative index of global construction costs, this report also looks at construction around the world and notes that differing government COVID-19 strategies have resulted in varying paces of recovery. With the impact of materials shortages and rising costs being felt across the supply chain, businesses are looking towards tackling pressing and persistent problems such as low productivity, staff retention and project resilience. Sustainability is equally high on the agenda, with the economic pressure of resource scarcity and net-zero goals increasing the importance of doing more with less. The use of digital products and solutions to tackle resource scarcity and reduce waste are key, along with a focus on the full project lifecycle, rather than the cost of short-term returns. 

A five-point ‘Practical Guide’ is presented in the report to provide a pragmatic guide to dealing with the challenges ahead, demonstrating how clients can rationalize, standardize, automate, and use digital processes to be more cost-effective, and meet essential sustainability goals. 

Andy Beard, Global Head of Cost and Commercial Management at Arcadis, said:

“Construction has proved itself extremely robust during the last year in adapting to the most difficult of circumstances. Sustained delivery of housing and infrastructure, better use of data, and increasing investment in technological solutions such as modern methods of construction can both improve efficiency and aid the drive to net-zero. 

“This adaptability will prove vital as businesses ready themselves for the uncertain and inflationary environment ahead. While on the surface the looming market conditions sound unfavourable, we believe these challenges more than ever present our industry with a great opportunity to drive forward innovation and cement a mentality of doing more with less to reduce our own impact on resource use and the environment.”

10 most expensive cities
1. London                                                                   
2. Geneva                                                                              
3. Oslo                                                                        
4. New York City                                            
5. Copenhagen
6. San Francisco        
7. Zurich         
8. Munich       
9. Hong Kong
10. Macau

10 least expensive cities
100. Kuala Lumpur                                                    
99. Delhi                                                                     
98. Mumbai                                                                
97. Ho Chi Minh                                                         
96. Johannesburg
95. Nairobi     
94. Wuhan     
93. Jakarta     
92. Chengdu              
91. Guangzhou

Download the full report here.

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• “Construction must rapidly adapt,” says Arcadis, as soaring costs and rising uncertainty take their toll