According to the 2014 International Construction Costs Report, the cost of construction within Central London is the highest in the world.
Construction consultant Arcadis has compared building costs in a total of 43 countries and discovered that the strength of sterling, relative to the Euro, and accelerating price inflation have led to increases in the cost of building anywhere in the UK.
Central London comes out on top, due to high specification levels. Meanwhile, in terms of productivity, UK construction lacks compared to mainland Europe and the USA.
Simon Rawlinson, head of strategic research at Arcadis, said “The cost of construction in London has been heavily impacted by high specification levels in many of the city’s developments, topped off by the fact that its prime residential property is reaching a capacity ceiling, leading to significant cost inflation over the past year.
“This is bolstered by the UK construction industry being much less productive than its US and European peers and the fluctuation in global currencies, especially the strength of the Sterling relative to the Euro. Given that this is unlikely to cease, the UK is forecast to grow around three per cent in 2015”.
Deloitte also highlights the rising cost of construction in its Real Estate Predictions for 2015. As a result contractors will increasingly turn to prefabrication methods to reduce costs, Deloitte says. They will also be forced to look overseas for cheaper manufacturing solutions.
Meanwhile, there is very little Central London office space due to emerge from the development pipeline this year, at a time when availability is at a five year low.
Story: Chris Grigorovsky
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