Comparative study of construction costs in 100 cities around the world

According to the latest Global Construction Cost Index published by Arcadis, a global engineering and consulting firm, Geneva is the most expensive city in the world to build, dethroning London (2nd place) in the ranking, closely followed by Zurich (3rd), Munich (4th), and New York (5th). Nice, Paris, Marseille, and Lyon rank 29th, 32nd, 37th, and 38th respectively.

In the world

According to the Arcadis report, which annually compares construction costs in 100 cities around the world, increasingly demanding construction standards, particularly in terms of sustainable development, and labor shortages continue to put pressure on construction costs in major urban centers in Europe and North America.

Although inflation has declined in some regions, particularly in major US cities like New York and San Francisco, long-term borrowing costs, geopolitical uncertainty, and trade policies are having a direct impact on investments. Yet, even in this period of great uncertainty, Arcadis emphasizes in its report that a proactive approach based on data analysis can generate value.

Arcadis also highlights growth opportunities in the data center and social infrastructure sectors such as hospitals and schools, despite persistent inflation in certain geographies such as Australia, Eastern Europe and parts of Asia.

In France

In 2024, the French economy grew by 1,1%, driven by public investment. However, the latest forecasts indicate a significant slowdown in the coming years. The construction sector's contribution to GDP was expected to decline by 2,3% in 2024, after growing by 0,2% in 2023. This is mainly attributed to high interest rates, eroding confidence amid political uncertainty, and high construction material prices.

Still-high interest rates, even if the trend is downward, continue to hamper investment. Current order book levels remain low, and residential and commercial real estate are likely to face further difficulties in 2025. The latest INSEE data shows that the number of building permits for residential properties fell by 12% in 2024. Vacancy rates for commercial real estate continue to climb. With a sluggish real estate market, however, the hotel industry stands out as an exception, with investment volumes on the rise in 2024, thus reinforcing France's position as the world's leading tourist destination.

For Hassen Naifer, Senior Cost Manager at Arcadis: "More generally, in the real estate sector, the real problem is the unstable environment we are experiencing, which does not encourage investors to launch new projects. And when projects are not stopped or postponed, we see particular attention paid to cost optimization. The general trend is towards financial restraint."

Outside of hospitality, other sectors are also standing out. This is the case in the technology sector, which offers new development opportunities, particularly in terms of Artificial Intelligence (AI) infrastructure, as evidenced by the United Arab Emirates' investment of up to €50 billion to build Europe's largest AI campus in France and Brookfield's investment of around €20 billion in data centers in France. Not to mention the €109 billion in investments announced by the Government for AI development projects in the coming years.

For Hassen Naifer: "France is counting on the technology and artificial intelligence sector to grow. It has become one of Europe's leading destinations for data center locations and has risen to become a European leader in AI thanks to its extremely dynamic startup ecosystem and excellent training. But trade wars and China's progress in AI could have negative effects and create a climate of uncertainty in the coming year."

Beyond new technologies, other key sectors shaping the country's future, such as energy, industry, and the pharmaceutical sector, are also showing a certain dynamism. This is reflected in significant investments in renewable energy and the energy transition, with numerous infrastructure projects and factories for the production of equipment and offshore wind power or batteries for electric vehicles.

Despite the challenges, France remains attractive for investment. It boasts strong assets such as carbon-free energy and a geographical position that makes it a strategic hub for electricity. It also benefits from a renewed international image thanks to the resounding success of the Olympic Games and the restoration of Notre-Dame de Paris in less than six years.

For Hassen Naifer: "The constraints on projects remain regulatory in nature: building permit procedures take time and sustainable development requirements are significant. This is why it is important to plan your projects in advance."

Although construction costs showed signs of stabilization in 2024, the sector remains sensitive to fluctuations in material prices, labor costs, and economic policies. Careful attention is needed to anticipate future market trends.

For Hassen Naifer: "To navigate this unstable economic and political environment, it is important to have support. Strategic planning and proactive cost management are essential to ensure project viability and create long-term value."

For more information, you can download the full report via this link.