San Francisco, New York and London have world’s highest building costs

The most expensive cities to build in are now San Francisco, New York, London, Zurich and Hong Kong, according to the UK-based cost consultant Turner & Townsend (T&T). Last year’s top five, in order of unaffordability, contained the same five in a slightly different order: New York, San Francisco, Hong Kong, Zurich and London.

The difference between the cheapest and most expensive cities for construction is "remarkable and increasing", according to T&T. The lowest 10 cities have average construction costs that are 22% those of the highest 10, compared with 25% in the 2018 survey, and the cost of building in bottom-placed Bangalore is just 13% of that in San Francisco.

One of the main reasons for the differential, the report notes, is "the massive disparity between labour costs worldwide. China, India, and Africa have the lowest, whereas North America has the highest, with Europe and Australasia a little behind". The highest of all was Zurich, where a general labourer can cost as much as $99 an hour, and a skilled electrician $118.

The labour issue may drive the adoption of digital technology to increase productivity, but in markets where cost of labour is low, it is "cost-effective and efficient to employ more labour".

The report says the global construction market is maintaining its momentum despite the economic impact of trade wars and Brexit. Altogether 35 cities examined had markets that were "warm, hot or overheating", 23 were "warming up" and only five were "cooling".

Neil Bullen, T&T’s global managing director for real estate, commented: "In the past 12 months, the economic backdrop has shifted. The IMF has cut its forecast for global economic growth, stock markets have retreated, and house price inflation has slowed. Added to this, political turmoil and trade-war tensions have increased uncertainty and volatility within global markets, with tariffs directly affecting the construction sector.

"Despite these headwinds, the global construction sector entered this year with significant momentum, having seen growth of five percent in 2018."

The UK-based cost consultant compiled its results by looking at the average build costs for a number of generic building types, such as high-rise apartments, general hospitals, offices and shopping centres in 64 cities around the world.

Image: San Francisco, with Oakland in the background (Dicklyon/ CC BY-SA 4.0)

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