London construction costs are the highest in Europe, says Arcadis

London construction costs are the highest in Europe, says Arcadis

London is the most expensive city in Europe in which to build, according to a new report by Arcadis, the design and consultancy firm for natural and built assets.

The company’s latest International Construction Costs Index, which examines relative construction costs across 44 major cities, also ranks London second place in the world for construction costs, with New York placed first and Hong Kong third. Cost premiums in these three most expensive cities range from 40% to 60% compared with many European cities, the index found.

London faces a “severe construction market imbalance”, Arcadis commented, with a mix of limited bidding resource and opportunistic contractors inflating London’s construction prices, and strong demand from domestic and international investors powering growth in bidding opportunities.

“Unpredictable patterns of high inflation” affecting labour cost and profit margins are threatening the viability of building projects such as residential developments, Arcadis added.

But spiralling costs in the capital have not deterred international investors, the report found. At the same time, Arcadis’ index showed that demand was moving into sub-prime areas in London in response to the costly centre of town. This also applied to other UK cities, “where the potential for long term development value is greater”.

Simon Light, Arcadis UK client development director, said: “The global cities in this year’s index are crucial engines of growth, reliant on the investment and stability that construction can bring to deliver a sustainable economic future.”

“In London, the synchronised recovery is losing momentum. With inflated construction costs and high land values threatening the viability of commercial and residential development, workloads look to be losing steam even before the capital’s infrastructure boom really takes flight.”

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