North American markets are the most expensive places in the world to build in, according to Turner & Townsend’s latest International Construction Market Survey (ICMS).
The ICMS provides an in-depth analysis of construction costs and what’s driving them around the globe.
U.S. cities top the list as the most expensive to build in, making up six of the top 10.
This is the second year in a row urban hubs across the U.S. have dominated the top 20 in the international ranking, with New York and San Francisco taking first and second place.
The U.S.’s economic resilience, strong construction activity and stretched labour supply have led to “stubborn cost escalation and this is predicted to average 4.2 per cent across North America in 2024,” the report states, adding political uncertainty threatens to curb output.
In Canada, the report found sustained investment in major infrastructure projects is squeezing already-tight labour supply and adding to concerns over the construction sector’s capacity to undertake new work. That’s leading to rising costs and areas outside major metropolitan hubs are seeing the biggest spike in demand.
Six Canadian markets including Vancouver, Ottawa, Toronto, Montreal, Edmonton and Calgary range from 39th to 53rd in terms of the most expensive cities in the world to build.
According to the report, Canada is also seeing robust investment in manufacturing facilities and data centres, with firms leveraging competitive rates on land outside of major metropolitan areas. This pipeline of work is also adding to growing concerns over reduced labour capacity across the Canadian construction sector. Major infrastructure projects are competing for scarce resource and insolvencies are impacting overall supply chain capacity.
North America is also the world’s most expensive region for construction labour at an average of $75 per hour.
Report finds North American markets are resilient
Despite high prices and interest rates, economies across North America are resilient and future opportunities for construction are plentiful particularly in America and Mexico, said Lisa Woodruff, executive vice-president and North America head of real estate, Turner & Townsend.
“The region is set to be a beneficiary of the global shift towards nearshoring and key growth areas, including advanced manufacturing, life sciences, health care and data centres, are fuelling construction pipelines across North America,” she said in a statement.
“Yet, labour is very stretched — and increasingly so, given this strong demand. As an industry, we need to address this capacity crunch to ensure we enable continued growth. For clients, it will be vital to be positioned as an attractive partner for those in the supply chain, and to invest in greater efficiency, such as through digital tools. In the medium to long-term, it will also be important to bring new talent into the industry and build the capacity and specific skills we need to meet the demands of the future.”
New York has retained its position as the most expensive market to build in at an average cost of US$5,723 per m2, up 5.0 per cent compared with 2023.
Cost escalation in the city is being partly driven by buoyed demand in residential and commercial property — the cost of a highrise, premium office block has reached an average of US$10,660 per m2.
San Francisco is close behind with Los Angeles, Boston, Seattle and Chicago rounding out the top 10.
The survey also shows the worldwide shift towards deglobalization and nearshoring of manufacturing is particularly impacting North American markets.
U.S. policy-makers are seeking to take advantage of this trend to boost the production of technology such as batteries and semi-conductors, with subsidies and federal funding strengthening demand in advanced manufacturing, especially in the South East and Midwest states.
Construction markets around the world
The report found:
- Manufacturing facilities in Atlanta and Nashville now cost an average $7,414 and $7,560 per m2 to build, respectively.
- In Mexico, the promise of increasing demand for components in the U.S. and Canada is resulting in heightened investment in manufacturing and, as a result, high cost escalation, including 10 per cent for Mexico City and 11.5 per cent for Monterrey.
- Outside North America, Switzerland also remains an expensive country to build in. Zurich surpassed Geneva and places third in the global ranking, with an average cost of US$5,035 per m2, up 8.2 per cent on the year. Geneva averages US$5,022 per m2.
- London has re-entered the top 10 in tenth position, with an average cost of US$4,473 per m2. High costs in the U.K. are being driven by a persistent and growing capacity squeeze and skills shortages in the sector.
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