NYC Tops New US Construction Cost Index

MONDAY, JUNE 26, 2023


According to the latest International Construction Cost Index by global design and consultant organization Arcadis, New York City, San Francisco, Boston and Philadelphia are among the top 10 most expensive cities in the world for construction.

Titled “New Horizons,” the annual index covers 100 of the world’s largest cities for cost comparison across 20 building functions, based on a survey of construction costs, a review of market conditions and professional judgment from Arcadis’ global team of experts.

Arcadis notes that, in addition to providing a comparative index of global construction costs, the report also looks at the various factors affecting the market, such as global inflation, net zero compliance and the impact of the Ukraine War, among others.

“The tough conditions facing the construction sector persisted throughout 2022. Our International Construction Costs 2023 report reveals how inflation, construction costs, finance costs and energy prices have all continued to rise, resulting in fewer transactions and tumbling asset values,” wrote Arcadis.

“The report explores how investors and owners can take advantage of the opportunities arising from the current downturn, including an actionable five-point plan to plan for future success as the market stabilizes.”

According to the report, the top 10 cities on the International Construction Costs Index for 2023 include:

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

“Even as markets stabilize in 2023, the challenges won’t go away. Prices will stay at a high level. Skills and resources will remain in short supply. Clients that understand and act on their own priorities and the ability of the market to respond will deliver highly successful investment programs in line with market expectations,” said Kathleen Abbott, Global Sales Director, Places at Arcadis.

“This report provides the insights needed to anticipate market conditions and latest thinking on asset optimization, equipping clients to ensure that investments in new and existing assets are delivered successfully, whatever the temperature of the market.”

The full report can be read here.

Last Year’s Report

Last July, Arcadis’ International Construction Cost Index found New York City and San Francisco to be among the report’s top 10 most costly cities in the U.S. for construction.

The data was allegedly compiled during the first quarter of 2022, and it is noted that the analysis was undertaken prior to the conflict in Ukraine, meaning that potential impacts of the invasion on the construction market were not included in the report.

Instead, Arcadis explained that costs used to calculate the index are based on buildings delivered to local specification standards, meeting both functional requirements and quality expectations. As a result, while the index compares the relative costs of delivering the same building functions in a city, it also reflects the different levels of quality expectation reflected in a specification.

The Top 10 most expensive cities, according to the report, included:

  1. London;
  2. Geneva;
  3. Oslo;
  4. New York City;
  5. Copenhagen;
  6. San Francisco;
  7. Zurich;
  8. Munich;
  9. Hong Kong; and
  10. Macau.

Released around the same time, multinational professional services company Turner & Townsend issued its own International Construction Market Survey, finding that San Francisco was the most expensive city in the world for construction.

Costing roughly $4,728.50 per square meter ($439.29 per square foot) to build as a result of inflation, the report also attributes supply chain issues and demand from tech companies such as Google, Apple and more as to why the prices have skyrocketed.

In total, the Turner & Townsend report found four American cities to make its Top 10, with San Francisco taking the top spot followed by New York City in fourth, Boston eighth and Los Angeles ninth, respectively.

The report went on to note that markets were driven primarily by the strengthening of the U.S. dollar, higher building material costs driven by supply chain disruptions and high labor costs.

NYC Construction Cost Increase

Last year, in August, construction consultant Rider Levett Bucknall (RLB) found that building and renovation project costs in New York City rose 8.2% over the past year—one of the largest increases witnessed by any city in the United States.

RLB attributed the increase to ongoing supply chain issues and labor shortages, which notably delayed projects throughout 2021. In addition, while the industry continues to watch activity related to the Infrastructure Investment and Jobs Act (IIJA) for improving these issues, project success will hinge on timing and impacted values in wake of inflation, which could ultimately affect the size, scope and number of actual construction projects being carried out.

According to RLB’s North America Quarterly Construction Cost Report, during the second quarter of 2022, construction costs rose about 2.4% nationwide. However, in several cities, those increases were even higher, rising 2.7% across five boroughs in New York City. In Denver and Chicago, costs for labor and materials increased by 4%.

To compile the results, RLB observes the comparative costs from 12 cities, indexing them to show how costs are changing in each city, and against the costs in the other 11 locations. The index tracks these costs by collecting the “true” bid cost of construction, which includes, in addition to costs of labor and materials, general contractor and sub-contractor overhead costs and fees (profit).

The index also includes applicable sales/use taxes that “standard” construction contracts attract.

As mentioned, the costs for building and renovation projects also witnessed an increase. In New York City, numbers grew by 8.2%, but Chicago, Boston and Seattle witnessed even larger surges, reporting 8.8%, 9% and 11.3%, respectively.

Costs also rose in Canada, with Calgary and Toronto reporting 10% and 14% year-over-year increases.

To view the full report, click here.

   

Tagged categories: Asia Pacific; Building materials; Construction; Economy; EMEA (Europe, Middle East and Africa); Good Technical Practice; Latin America; Market; Market data; Market forecasts; Market trends; North America; Program/Project Management; Project Management; Projects - Commercial; Z-Continents

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