Edinburgh has been ranked as the third most expensive city in the UK to build in by Turner & Townsend.
Globally, it was the 32nd most expensive city in the world to build in, while Glasgow has been placed seventh nationally and 37th internationally.
The professional services firm warned of sustained pressure on UK construction for the next 12 months, as the industry faces a combination of pressures from ongoing inflation, skills shortages and high interest rates.
Its market survey has London remaining the most expensive UK city in which to build, with an average cost of £3,136 per square metre. However, the capital has fallen down the global rankings and now lies outside of the report’s international top 10 at 14th place.
This trend is reflected across the UK, with the next two most expensive UK markets, Manchester and Edinburgh, only ranked 30th and 32nd, with average costs of £2,504 and £2,425 per sq m, respectively.
UK markets have been overtaken by exceptional growth in secondary US cities such as Atlanta and Tampa, reflecting a strong US dollar and the impact of green government subsidies.
Conditions in the UK market nonetheless remain highly pressured, with average construction cost escalation of 9.4% over the nine markets during 2022. This rate of inflation is expected to cool to 3.6% in 2023 as pressure on supply chains ease and demand falls, with higher interest rates increasing the cost of borrowing to finance projects.
Cost inflation is being sustained by a persistent skills shortage which pushes up labour costs, with total construction employment in the first quarter of this year contracting by 1.9% the previous quarter.
The UK is the fourth most expensive global region for construction labour, with average wages across the nine markets of £36.50 per hour.
The report also pointed to pockets of opportunity, with government spending - particularly on healthcare, education and infrastructure - helping to secure the future pipeline of work and unlock opportunities for property development.
Martin Sudweeks, UK managing director for cost management at Turner & Townsend, said: “Exceptional growth in US markets has seen a relative shift in the UK’s global ranking of the most expensive places to build.
“However, that shouldn’t be misinterpreted as a sign that the market has cooled - while the expectation is that the rate of cost inflation will ease in the next 12 months, the overall picture is one of high competition for labour and resources.
“Real estate clients need to be braced for high costs to be sustained for the foreseeable future, and plan accordingly,“ he continued, adding: “Staying close to the supply chain, monitoring vulnerabilities, and working on productivity will be essential to keep projects moving ahead.”
Ranking (/89 markets) |
Cost per sq m (£) |
2022 inflation (%) |
2023 inflation (%) |
Wages / hour (£) |
|
London |
14 |
3,137 |
10 |
4.0 |
42.47 |
Manchester |
30 |
2,504 |
10 |
4.0 |
37.50 |
Edinburgh |
32 |
2,425 |
8 |
3.5 |
35.97 |
Bristol |
33 |
2,410 |
10 |
4.0 |
34.50 |
Leeds |
35 |
2,350 |
9.5 |
3.5 |
38.25 |
Birmingham |
37 |
2,336 |
8.0 |
3.5 |
36.75 |
Glasgow |
38 |
2,309 |
8.0 |
3.5 |
34.25 |
Newcastle |
40 |
2,275 |
10.0 |
4.0 |
34.75 |
Belfast |
42 |
2,259 |
11.0 |
2.0 |
33.83 |
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