Report Names London World’s Most Expensive Building Location

Tuesday, February 10, 2015

Renowned global consultancy company Arcadis just released their 2014 International Construction Costs Report, where they take a look at the current state of construction markets around the world and the trends that will steer their course in 2015.

The report uses the average cost of UK construction as a baseline to compare markets from around the globe. Switzerland, Denmark and Hong Kong take the top three by quite a margin – a position they’ve maintained since 2012 – with the UK joining the cluster of other developed countries such as France, Germany and Australia that fill out the upper half.

It’s the UK market that receives special attention, having shot up the rankings due to a recovering construction industry and strength of the sterling. Globally, commodity prices stayed steady in 2014 but a strong pound meant they dropped in the UK while European and emerging economies were hard hit.

London is of particular interest. Prime and super prime development are what push construction costs into the top tiers, which is why traditional hotspots like Switzerland, Denmark and Hong Kong have been jostling for position of most expensive location for so long. All you need to do is look at the number of cranes punctuating the London skyline to see a similar situation emerging here.

If taken in isolation as its own market, Central London rockets to the top of the global rankings, leaving the rest of the UK in its dust. This acceleration has been led by keen interest in the city from international investors looking to build healthy portfolios, leading to super prime developments with price tags far in excess anything else in the UK or the rest of the city.

If you’ve been paying attention to London’s inflation issue, this won’t be news to you. Back in October, we addressed the concerns in the Ask an Architect feature, when prices jumping by as much as 20% in some boroughs hitting the headlines.

The report sees the trend continuing, with London prices forecasted to escalate by 5-7% for the next 2-3 years. Outside of Central London, where there aren’t prime developments distorting the averages, prices will likely remain more steady, hopefully continuing the UK construction industry’s general good health.

Our advice now, as it was in October, is to inform your budget with a projected cash flow forecast, taking into account inflation and fluctuations in material and labour costs. By understanding what your money can get you in a year or two as well as today, you can build your perfect home without worrying about your funds running dry.

It’s a service that’s central to how we do things at DGA and why we’re always keeping a close eye on the markets. By combining our this insight with efficient design principles and knowledge of materials, we can get the most out of your money at every stage of the project, saving you money and removing unnecessary risk.

If you want to learn how construction costs are faring in the rest of the world, you can click here to read the full report for free, courtesy of Arcadis. It will be interesting to see where the UK stands this time next year and how the inflation issue is treated in this year’s election.

By John Dyer-Grimes