London no longer world’s most expensive construction market, Arcadis finds

London has dropped from first place to second as the most expensive city in the world in which to build, according to the latest international construction costs report published by Arcadis. 

According to the study, which looks at comparative construction costs across 100 global cities, London ranked second behind Geneva and ahead of Copenhagen, which ranked third.

London ranked as the most expensive city in last year’s study, up from sixth place in 2019. The five least expensive cities are all in Asia.

Outside of London, UK cities did not record significant shifts in position and were well represented in the top 25 with Bristol the highest placed at 15th.

The report said that despite challenging economic conditions in 2020, the UK construction sector had held up well, which had led to costs staying firm.

It added that in the short-term, the construction market in the UK would remain competitive, with subdued inflation of 1% to 2% predicted for 2021, driven in part by the limited availability of materials.

It said current circumstances favour clients as contractors are looking to secure workloads and are not yet busy with public sector projects. 

Nilesh Parmar, Arcadis’s deputy chief executive for the UK and Ireland, said: “The UK construction sector managed the pandemic very well. Effective safety measures have enabled productivity levels to recover, and the construction sector has been singled out as a major contributor to the ‘Build back better’ initiative in the UK. 

“The residential market has been buoyant through the year, supported by Government intervention and global investment into mid-market build-to-rent. By contrast, the focus for investment in public transport is likely to shift away from London to other UK cities in line with the government’s post-Brexit ‘levelling-up’ agenda.”

The 2021 Arcadis ICC Index covers 100 of the world’s large cities across six continents.

The cost comparison was developed covering 20 building functions, based on a survey of construction costs, review of market conditions and professional judgement from a global team.