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Central London Named World’s Most Expensive Place to Build

Written by: Keith Tully

Reviewed: Thursday 15th January, 2015

There is no location in the world more expensive to build than Central London, according to a new report outlining the average costs of construction in cities and nations across the globe.London

High labour and land costs, as well as complex planning laws and challenging design criteria, are all believed to have contributed to making Central London such an expensive place to carry out construction projects on any scale.

According to the global design, engineering and management consultancy Arcadis, the various factors at play in Central London have made the city 5 per cent more expensive to build in than anywhere else in the world, with Switzerland rated second in that regard.

Indeed, Arcadis’ figures suggest that when it comes to construction projects, the UK capital is 10 per cent more expensive than Hong Kong and 36 per cent costlier on average than the rest of Britain when compared on a common currency basis. 

“Central London, when viewed in isolation as a global city ranks top in our relative cost league. This reflects the very high specification levels seen in many London developments and the fact that the UK construction industry has never been as productive as its US and European peers,” Arcadis’ report on the subject claims.

The consultancy company behind the study, which is based in the Netherlands, also pointed out that client demand for properties of different sorts is unusually high in Central London. Prime residential property in particular is in very high demand throughout central parts of London.

“High costs of development in London are also the result of an acceleration of client demand in assets, such as prime residential, which are reaching a capacity ceiling, and has led to significant cost inflation over the past year,” the report explains. 

“This is very much a London prime residential market phenomenon and very different from other UK markets outside of the capital.”

According to Arcadis, the prime residential property boom in Central London could result in the already exceptionally expensive cost of construction in the city rising by between 5 and 7 per cent for the next two to three years.

Speaking to the Financial Times in response to the Arcadis report, Alexander Jan from the engineering consultancy Arup explained that even if all other costs were as they are elsewhere, London would still be an expensive place to build because the price of land and existing properties are so high.

“Whenever you need to build a new railway or Underground line you have to acquire certain pieces of land or property just to put a shaft or substation in for tunnelling and ventilation or a substation for power,” Jan said. “It’s inevitably top dollar because it is in Central London.”

Simon Rawlinson, head of strategic research at Arcadis, also explained to the FT that costs of construction in London are increased because city planners set such a high bar for potential building designs. 

Keith Tully

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Keith has been involved in Business Rescue since 1992, during which time he’s worked for both independent and national firms. His specialties include company restructuring matters and negotiating with HMRC on his clients behalf.

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