Construction costs around the world in 2023: Nice, Paris and Lyon in the Top 50 cities where building is the most expensive

According to the latest global construction cost index published by Arcadis, the world leader in engineering and consultancy, London is the most expensive city in the world to build, narrowly dethroning Geneva.

London is the most expensive city in the world to build.
Nice, Paris and Lyon appear in the Top 50 cities where building is the most expensive, in 32nd, 35th and 42nd place respectively.
Strong disparities between sectors in France: real estate is hit hard by inflation and rising interest rates, while hotels, logistics, renewable energies, industry and data centers are resisting due to sustained demand.
Jobs under pressure: the rapid growth of the industrial and technology sectors and the expected recovery of the construction market could intensify the labor shortage.
Improving productivity through automation and standardization will be essential to address risks and secure projects.

According to this report, which carries out an annual comparative study of construction costs in 100 cities around the world, increasingly demanding construction standards in terms of sustainable development and safety have stimulated price increases. London thus overtakes Geneva (2nd place) in the ranking, followed closely by Zurich (3rd) and Munich (4th). Rising costs and double-digit inflation in Munich have propelled the Bavarian capital to the top of the rankings, ahead of major US cities like New York (5th) and San Francisco (6th) this year. As for French cities, Nice, Paris and Lyon are respectively in 32nd, 35th and 42nd place.

In the world

2023 has been a challenging year around the world with high borrowing costs, which have limited the positive effects of infrastructure investments in many countries. With the decline in inflation, the market is tending to stabilize and suggests a recovery in the global construction sector. However, in a context of high demand for labor, materials and energy, the report highlights the need to take productivity into account more in investment decisions to ensure the viability of projects.

Arcadis also highlights in its report the rapid growth of investments in the industrial and technology sectors, including data centers, pharmaceutical production sites, gigafactories (mega-factories) and wafer-fabs (factories of semiconductors). The scale and complexity of these critical projects inevitably leads to increased financial risk, hence the importance of upskilling, in design, supply chain and construction.

In France

In France, we observe a stabilization of the overall construction market in 2023, stimulated by a slowdown in inflation compared to the peaks recorded in 2022 and by investments linked to the Olympic Games and major public transport infrastructure projects such as the Grand Paris Express.

However, rising interest rates and inflation, still at a high level, continue to hamper investment and slow down new construction projects. This is the case of the real estate sector, which recorded a 50% drop in acquisition amounts in 2023: an unprecedented situation since the financial crisis of 2008. The phenomenon is mainly marked in the residential and commercial real estate market, offices in particular which have been in a situation of oversupply since the Covid-19 pandemic, particularly in peri-urban areas and non-central business districts.

Conversely, the hotel, logistics, renewable energy, industry and technology sectors stand out for their growing demand in France. This is particularly the case for data centers, whose demand is exploding with the exponential growth in data consumption.

For Hassen Naifer, Senior Cost Manager at Arcadis: “Data centers represent a typology of asset which serves as an exception in a real estate market in crisis. The demand is such that it is difficult to keep up, without forgetting that these are long, complex and technically difficult projects. Their operation is different from that of a traditional building and therefore requires particularly advanced technical skills in terms of planning, logistics and coordination of all specialties. »

In a context of economic slowdown in the French economy (0,9% GDP growth in 2023 compared to 2,5% in 2022 and 6,4% in 2021) and downward OECD projections with 0,8, 2024% in 2, the outlook remains uncertain. Hassen adds: “While we anticipate an improvement in the XNUMXnd half of this year with the stabilization of construction costs and the fall in interest rates, our customers will nevertheless have to continue to navigate in a climate of geopolitical uncertainties, but also of shortage of labor which could threaten project deliveries. In this context, they therefore have an interest in paying particular attention to improving productivity to secure investments. In reality, the entire construction sector needs to catch up in terms of automation and standardization. The industrialization of tasks and professions will be decisive in dealing with risks!”

For more information, you can download the full report via the following link: https://images.connect.arcadis.com/Web/Arcadis/%7B856573cb-2409-4448-96a6-852638aa24fd%7D_International-Construction-Costs-2024.pdf

The Arcadis report includes a practical five-point guide, which provides a comprehensive approach to delivering complex projects. Applicable to all sectors of activity, this guide offers advice for building resilience in the face of an incident, for measuring and managing risks, for visualizing interdependencies between projects and for investing in data and project monitoring in real time, in order to secure projects.