Survey Shows U.S. Construction Costs are World’s Highest

Renovation work being performed on an office tower in midtown Manhattan in New York City, where construction costs are now the highest in the world.

Photo courtesy of Richard Korman via Engineering News-Record

The U.S. is the most expensive country for construction, said the latest global cost analysis by U.K. professional services consultant Turner & Townsend, with six American cities now among the list’s top 10 — dislodging London and Hong Kong for the first time, Alisa Zevin of Engineering News-Record reported.

“These figures have been fueled by the strong U.S. dollar but also the impact of Bidenomics,” the consultant said. Related to the latter, it noted impact of the federal Inflation Reduction Act and CHIPS Act, both enacted in 2022, “as driving investment in secondary markets across the U.S.,” particularly in manufacturing.

“What we’ve seen is this demand really reshaping the global picture of investment,” said John Robbins, USA managing director and North America head of real estate at Turner & Townsend. “More construction activity is driving up competition and bidding conditions, and now more than half of the top 10 most expensive cities to build in being found in the States.”

New York City ranks highest on the list, with an average building cost of $5,451 per square meter, and San Francisco is closely behind at $5,200 per square meter. Boston, Los Angeles, Chicago and Seattle also make the top 10, according to the survey. Geneva and Zurich remain in that group from last year but in higher places, while Tokyo and Osaka, Japan, have moved down.

Labor shortages and supply chain issues continue to drive prices up as well. “The competition for skills to deliver a pipeline of contending programs across sectors and state boundaries is compounding the escalation of labor costs,” Robbins said. “Another component in rising prices is the trend to de-risk supply chains with a near-shoring of material procurement. While reducing disruption on one hand, we’ve seen a knock-on impact on costs and availability due to capacity constraints in the chain.”

Going forward, “we’re expecting costs to remain sticky this year, although inflation is easing,” Robbins said. Turner & Townsend, which was acquired by U.S.-based real estate firm CBRE in 2021, expects inflation in North America to reach 5.7 percent this year, down from 10.6 percent in 2022.

The survey sees India, Indonesia and Vietnam as “emerging hotspots for construction activity.”