The world’s most expensive construction markets have been unveiled.

(above image: aerial view of Geneva taken in 2015 by Alexey M. and published on Wikipedia. Image republished under Creative Commons licence 4.0)

International built asset consultancy Arcadis has released the 2025 edition of its International Construction Cost report.

The report explores construction cost trends across 100 cities worldwide based on 20 building types in US dollar equivalent terms.

According to the report, the most expensive construction market is Geneva, which reclaimed the top spot as London slipped back to second place.

This was followed by Zurich, Munich and New York City.

Geneva overtook London during the year as the relative strength of the Swiss Franc led to higher costs when converted into US dollar terms.

This occurred despite London experiencing a higher level of cost escalation in local terms on account of specification enhancements and new process requirements.

Over the longer term, Simon Rawlinson, Head of Strategic Research at Arcadis, said that Geneva’s position as an expensive construction market reflects Switzerland’s status as:

• a nation with high-quality building specifications; and
• an expensive destination more broadly, which is reflected in terms of wages and prices for building materials.

(Note: the index measures the construction component of building only. Costs associated with land, demolition, external works, services, risk allowances, professional fees and local sales taxes are not included.)

In its report, Arcadis said that a previously anticipated recovery in global construction markets which had been anticipated in 2024 did not materialise. This occurred amid more persistent levels of inflation and higher borrowing costs compared with what had been expected.

Turning to construction costs, it says that the rate of escalation has been predominately driven by the availability of labour. This led to greater levels of variability at the level of regional markets.

This can be seen in the US, where the rate of cost escalation ranged from around 1 percent in low-demand locations such as New York and San Francisco to over 5 percent in Florida where residential and commercial markets are more buoyant.

Even greater price pressures have been observed where large projects such as data centres have been delivered in remote, small-state markets where the supply of labour has been restricted.

Going forward into 2025 and 2026, Arcadis says that public spending in areas such as defence, housing and infrastructure will play an increasingly important role in many construction markets.

In addition, growth opportunities will remain in key sectors. These include data centres and social infrastructure such as education and healthcare.

However, it cautions that private sector activity remains in retreat.

As a result, development markets are likely to continue to face headwinds in terms of viability and affordability.

This applies particularly to Europe where confidence remains low as well as in Asian markets such as China where an oversupply of residential properties remains.

What impact Trump’s tariffs?

Overall, Arcadis suggests that the impact from tariffs in terms of material prices and supply is likely to be less severe in construction relative to the effect which is experienced in some other sectors.

This is because many construction markets mostly rely on domestic supply chains.

However, the outcome will vary across localities according to the relative degree of import dependence that exists across each market.

In some cases, the effect could be limited overall but significant for some product lines.

In the US, for example, research published by the National Association of Home Builders in December found that only 7 percent of goods that were associated with house building are imported.

This suggests that the overall impact of tariffs on US construction is likely to be limited.

However, cost pressures may emerge with regard to timber or lumber, where Canada currently supplies around 23 percent of overall US construction requirements.

Particularly impacted could be markets in the country’s north and northeast. This is the case as most of the nation’s spare capacity lies in the south and west.

Outside the US, meanwhile, a deflationary force could emerge as materials that were previously directed to the US are redirected elsewhere.

With products such as steel and aluminium, both the UK and EU have been forced to act to protect local producers from unfair competition as producers in Asia pivot toward these markets.

(London has lost its top spot as the world’s most expensive construction market. Image: Dronepicr via Wikipedia. Republished under Creative Commons 3.0 licence)

Discipline needed

In its report, Arcadis says that rewarding development opportunities are still available.

But it stresses the need for a proactive approach to design, specification, construction risk management and project value maximisation.

Considerations should include:

• designing for long-term value with a focus on buildings that are adaptable, energy-efficient, and designed for evolving user needs
• designing for certainty by leveraging knowledge of the asset, the location and its market to ensure that a scheme represents the best development that can be delivered
• designing for delivery to ensure buildability and certainty of budget by working with integrated teams who manage end-to-end project details using coordinated digital platforms and proven delivery frameworks; and
• design in collaboration by recognising that no-one can do it alone and that high-performing, cross-disciplinary teams with strong leadership and a culture of shared accountability are essential to unlock project potential.

Juud Tempelman, Global President of Places at Arcadis, says that opportunities are available for those who adopt a disciplined approach.

“Change drives opportunity and, in a world of rising complexity and constrained capital, the most successful projects are those that combine visionary ideas with robust planning and adaptable design.,” Tempelman said.

“Even in challenging times, construction markets are diverse, and some areas can be expected to boom. From advanced manufacturing in the US, to energy transition programs in the UK and Europe, we are seeing the reallocation of resources to meet shifting demand. With the right brief, aligned to real market needs and supported by collaborative design and digital maturity, we can unlock viability and deliver lasting success.”

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