Tokyo 'most expensive city' for construction
Tokyo has picked up an unenviable gold medal after being classified the most expensive city for construction.
As the Japanese city prepares a subdued opening to the Olympic Games on Friday, the International Construction Market Survey 2021 by Turner & Townsend found it was the most costly for building, with an average cost of $4,002 per sqm, followed by Hong Kong ($3,894 per sqm) and San Francisco ($3,720 per sqm). New York and Geneva were ranked fourth and fifth respectively.
The survey forecasts that rising prices being seen in the global construction sector will be sustained through 2022 and into 2023.
The widespread disruption to global supply chains witnessed through the pandemic is also being sustained by high demand and competition for key materials between global markets including the US, Europe and Asia.
Globally, demand for steel, softwood and copper piping have seen prices rise sharply over the year, with increases of up to 40 percent seen in some international cities including Tokyo, Sydney, San Francisco, Los Angeles, Chicago, Mexico City, Sao Paulo, Birmingham, Glasgow and Dublin.
As activity accelerates, supply chain constraints are increasing and skills shortages are worsening, resulting in substantial construction cost inflation in many markets.
Neil Bullen, Global Managing Director, Real Estate Turner & Townsend said material shortages have undoubtedly recast the client and supplier dynamic and there is currently a shift in power from client to supplier in many markets around the world.
"Companies need to work closely with their supply chains to guard against these risks – moving from a ‘just in time’ to a ‘just in case’ approach to delivery," he said. “Beyond material and skills shortages, public and private sector clients across the world are juggling multiple, competing goals and priorities. From accommodating hybrid working patterns, to embedding social value into their operations and taking concrete steps towards net zero, success is no longer judged by the old mantra of ‘better faster, cheaper’.”
London ($3,203 per sqm), which ranked third in 2019’s report, fell to eighth place behind Geneva, Zurich, and Boston. The fall in ranking reflects the buoyancy of other construction markets and the combined effects of Brexit and COVID-19, which placed many projects on hold, restricting demand for new work in 2020.
According to the research, the most buoyant construction sector across all 90 markets are data centres, driven by the unabated growth in technology and digitalisation. It is the first year that data centres have topped the ranking moving up from sixth position in 2019.
US construction expenditure to grow around 5% in 2021
US construction expenditures are forecast to advance 3.9% annually in nominal terms through 2025, according to Construction: United States, a report recently released by Freedonia Focus Reports.
Construction contractors stand to benefit from continued gains in the number of households; consumer incomes; and business, nonprofit organization, and government investment following tight pandemic conditions. Faster growth will be limited by the high cost of new construction, particularly due to the high labour and land costs in many densely populated areas.
This year construction expenditures are projected to rise 4.8%. Growth will partly represent a rebound from a challenging 2020, particularly for the commercial building segment. Businesses dependent upon consumer foot traffic – such as lodging and restaurants, which saw depressed revenues due to the pandemic – cancelled or postponed construction projects.
However, US construction spending fell 0.3% in May as growth in housing, the economy's standout performer, slowed while activity in areas most directly impacted by the pandemic showed further weakness, according to an AP report.
A rebound in commercial building construction is projected to begin in 2021 on rising demand for goods and services, as vaccination rates increase and consumers return to normal routines. Residential building construction is forecast to continue growing at a strong pace this year. Rising sales of existing homes will support growth, as improvements are commonly undertaken as a home changes ownership.
Healthcare remains a prime sector for investment and key projects include:
- US$1.79 billion Ohio State's Wexner Medical Center in Columbus
- US$1.74 billion Harborview Medical Center in Seattle
- US$1.6 billion Indiana University Health in Indianapolis
- US$1.2 billion UCSF Helen Diller Medical Center in San Francisco
- US$1 billion Brooklyn Hospital Center in New York City
- US$1 billion City of Hope National Medical Center in California
- and US$1 billion Mount Sinai Beth Israel in New York City
The Children's Hospital of Philadelphia is planning to spend US$3.4 billion building a 22-story inpatient tower, adding 300 beds and around 200 rooms if required. The inpatient tower is expected to cost US$1.7 billion and is likely to be operational by 2027.
To build its Cybertruck plant, Tesla recently bought 381 acres of land in Austin, Texas. Construction activities of its US$1.1 billion manufacturing project will offer much-needed assistance for the growth of the industrial buildings sector.
Ferrero North America has announced plans to build a new $75 million chocolate manufacturing unit in Illinois, marking the company's first production plant in the US.