London back in the top spot as most expensive city for construction

London is the most expensive city in which to build, according to a new report from design and engineering consultancy Arcadis. 

The Arcadis 2024 International Construction Costs (ICC) report shows the capital has narrowly overtaken Geneva to top the rankings once again.

According to the study of comparative construction costs across 100 global cities, enhanced specifications associated with safety and sustainability have been pushing prices upwards.

The report places by Zurich in third place followed Munich where rising costs and double-digit price growth have propelled the Bavarian capital significantly up the rankings.

The first US city to feature in the list is New York, in fifth place. 

Nine UK and Ireland cities feature in the listings – all within the top 30 - with Bristol entering the top 10 for the first time.

The ICC 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.

The calculations are based in USD and indexed against the price range for each building type relative to Amsterdam. 

Arcadis says 2023 was a difficult year across the world, with high borrowing costs undercutting the positive impact of infrastructure investment in many countries. 

However, with markets stabilising and inflation beginning to ease, it says it is now a pivotal moment in the recovery of the global construction sector. 

Increasing demand for labour, materials and power mean productivity is now becoming an increasingly critical factor in investment decisions and project viability.

Although levels of inflation were moderate in the UK, specification enhancements related to building safety, sustainability and client expectation pushed prices up further than most other locations. 

Viability challenges have continued to affect projects, even as inflation has fallen. 

New regulations focused on low carbon emissions and improved building safety also created uncertainty and added to project costs. 

Uncertainty could continue in 2024, given local, mayoral and national elections are due in the coming months, says Arcadis. 

It adds tight fiscal conditions will see increasing pressure on the public purse in 2024 and beyond, with real-terms cuts in government capital investment currently projected from 2025 until 2029. 

It says while optimism as measured by the construction PMI has improved, the legacy of a weak order book from 2023 will delay recovery until late 2024 before the positive sentiment is realised. 

Peter Hogg, UK cities director at Arcadis, said: “London finds itself back in the number one spot in the ICC 100 index for 2024, reflecting the capital's resilience in the face of challenging conditions. 

“Despite a 10% year-on-year decline in construction output and a significant 20% drop in housing, the commercial sub-sector experienced a notable 24% rise, largely attributed to retrofit activity. 

“However, the capital has faced declining orders for new work since 2022, exacerbated by high interest rates impacting scheme viability and regulatory changes causing design and planning delays and cost escalations."

The 10 most expensive cities in the world for construction are:

1. London 
2. Geneva
3. Zurich
4. Munich 
5. New York City 
6. San Francisco 
7. Philadelphia 
8. Copenhagen
9. Hong Kong 
10. Bristol 

Where do UK and Ireland cities rank? 

• London (1/100)
• Bristol (10/100)
• Manchester (12/100)
• Birmingham (14/100)
• Edinburgh (15/100)
• Cardiff (16/100)
• Glasgow (18/100)
• Dublin (19/100)
• Belfast (28/100)

The 10 least expensive cities are:

• Buenos Aires - at 100 in the rankings
• Lagos
• Kuala Lumpur
• Nairobi 
• Bengaluru
• Johannesburg 
• Delhi
• Mumbai 
• Chengdu 
• Hi Chi Minh

Click here to read the full report.