According to the latest International Construction Market Survey (ICMS) from Turner & Townsend, Dublin is ranked as the 19th most expensive city in the world to build in, and the second most expensive in the EU, after being overtaken by Munich (17th), with an average cost per square metre of €3,409 and €3,482, respectively.
Construction Inflation
The ICMS states that construction businesses across Europe are reporting reduced activity, as confidence and private investment is hit by steeply rising construction costs, shortages of materials and labour, and difficult financing conditions due to higher interest rates.
However, Ireland is proving resilient and construction is set to grow in 2023, partly helped by relatively low labour costs. Construction wages in Dublin average €43.80 per hour, compared to €48.30 per hour in London, €74.80 in Munich, and €110.6 in Geneva.
Inflation across Europe is expected to cool significantly this year, with an average forecast of 6.4% for 2023 over the 16 European regions surveyed – down from 12.7% in 2022. Dublin’s is forecast to be lower than the average, at 5%, though still higher than targets.
Global construction slowdown
The picture across Europe comes in the context of a global construction slowdown, as appetite for real estate investment worldwide is being curbed by a combination of high inflation, labour shortages and rising interest rates that are acting as barriers to project finance.
Turner & Townsend’s latest ICMS shows construction sector confidence falling, with high costs starting to impact market appetite.
From a survey of 89 global cities, the US dominates the rankings of the most expensive places to build, with six US cities in the top 10. New York is the most expensive market, with an average build cost of US$5,451 (€5,451) per sq metre. San Francisco follows closely behind at US$5,200 (€4,781).
The strong US dollar has fueled these figures but also the impact of Bidenomics – a series of US policy interventions designed to stimulate growth in advanced manufacturing and green technology. The report points to the impact on the President’s Inflation Reduction Act, which focuses on supporting green industries, as driving investment in secondary markets across the US.
The ICMS data indicates falling sector confidence worldwide in the face of continued cost increases, fears of insufficient credit availability, and a persistent labour crisis. Overall, 74.2% of global markets show a ‘skills shortage’ in the report.
Philip Matthews, Managing Director Ireland, Turner & Townsend, commented, “The construction industry in Europe and beyond faces headwinds on multiple fronts. Against a backdrop of rising costs of construction, higher interest rates, and market uncertainty, Ireland is proving more resilient than many of its counterparts. But this must not make us complacent. Clients need to keep close to supply chains and work with them to highlight and mitigate any risks as early as possible and ensure delivery pipelines can be met.”
About the International Construction Market Survey
The International Construction Market Survey gives an in-depth analysis of construction costs – and what’s driving them – around the world. It measures input costs for materials and labour to calculate the average cost per square metre across 14 construction types, including advanced manufacturing sectors, residential development and commercial offices.
It measures input costs for materials and labour to calculate the average cost per m2 across 14 construction types, including advanced manufacturing sectors, residential development and commercial offices.