Construction costs in the capital have gone up 5% in the past 12 months, but the falling pound has pushed London from third to fifth place in a global building cost ranking.
The International Construction Market Survey (ICMS) studies build costs for both residential and commercial projects throughout the world. Carried out by Turner & Townsend, it determines the average cost of building a variety of projects, from homebuilding costs to apartments to shopping malls to warehouses.
Fuelled by a combination of infrastructure work demand and skills shortages, London construction costs are looking to increase by 4.1% this year.
While the city ranked third in last year’s report, it has now plummeted to fifth place. The rankings drop is indicative of the UK pound’s depreciation compared to the US dollar since Brexit.
New York has surpassed Zurich as the most expensive city for new construction, with an average cost of $3,807 per square metre.
Although construction costs in London continue to climb, there are indications that for the rest of Britain, the traditional north-south difference in homebuilding costs and commercial building prices is beginning to get closer. This year, the construction market in the north of England is about to undergo the biggest price inflation outside of London.
The growth rate may be decreasing in parts of the UK but build costs are continuing to increase everywhere. When this reality is combined with a recent Mace assessment that there will be no major rise in tender prices this year, the conclusion is that contractors will be hard-pressed to realise any profits.