Harbour City Remains Most Expensive for Construction

Sydney is still the most costly Australia captial for construction, new data has found, but its a long way from the world’s most expensive.

That honour goes to London, according to the Arcadis 2024 International Construction Costs Report, with Sydney dropping 12 places compared to 2023.

And while construction costs across the nation have increased, all of Australia’s capital cities have dropped down the international rankings.

Sydney is now ranked 48th, with Brisbane, Melbourne and Perth each falling five places to 51st, 54th and 62nd place respectively.

Adelaide is the cheapest Australian capital city to build in according to the data. and fell four places globally to 67th place.

Arcadis cost and commercial management executive director Matthew Mackey said the change in rankings were not down to one or two reasons.

“The challenge of rising inflation levels above 5 per cent across Australia’s cities, juxtaposed with a weaker Australian dollar, meant our cities fell in the ICC ranking this year,” Mackey said.

“Rising insolvencies and diminishing capacity has fuelled further construction cost escalation, and while this has not been at the peak of 2022, it has continued to damage and reduce the margins for project viability.

“While the industry grapples with higher construction costs, projects have stalled amid damaging confidence levels.”

But, Mackey said, high construction costs may not persist.

“The strength of longer-term project pipelines suggests these challenges may be short-term,” Mackey said. 

The ICC Index examines 100 of the largest cities across six continents, looking at 20 different building types, construction costs surveys, and market conditions ,and uses the knowledge of its global team of experts.

Calculations are based in US dollars and indexed against the price range for each building relative to buildings in Arcadis’ base in Amsterdam. 

Australian capital city rankings for 2024

_{Source: Arcadis International Construction Costs Index report, 2024}  

In 2024, London topped the list as the most expensive city to build in, followed by Geneva, Zurich, Munich and New York City. 

London took the top spot in part due to new specifications around safety and sustainability pushing costs up, while Munich has suffered from double-digit price growth and rising costs.

While location-specific reasons have contributed to the rankings, a common factor is the push for data centres,  according to Arcadis.

Building data centres is complex and also at the larger end of the project scale, increasing financial risk and requiring constant finessing of design and construction even during construction, Arcadis industrial manufacturing global director Martijn Karrenbeld said. 

“The key priority for clients is delivering an operational facility on time, but in a resource-constrained market, existing supply chains and delivery models might not be adequate to provide the assurance needed to protect these investments,” Karrenbeld said.

“This will place a premium on productivity-led design, procurement, and construction to deliver projects at scale—and project teams need to be ready to adapt.” 

Data centres are only part of the problem with the industrial manufacturing and technology sector booming and increased government funding fuelling competition for both labour and materials. 

The report also said that 2023 had been a difficult year worldwide with high borrowing costs undermining the much needed impact of infrastructure investment in many countries. 

Australia is still seens as being in post-pandemic recovery, the report said. 

Top 10 most expensive cities to build in globally

_{Source: Arcadis' International Construction Cost Index report, 2024} 

A five-point framework to help build resilience to deal with setbacks, managing risk while scaling, program interdependency modeling, data investment and live project controls has been set out in the Arcadis report. 

Arcadis chief growth officer Edel Christie said using data for decision-making would be crucial moving forward.

“As conditions stabilise for construction sectors globally, the market for delivery is evolving at a rapid pace,” Christie said.

“Better use of data, insight and decision-making is critical—whether that’s to meet sustainability requirements, improve stakeholder management, attract more capacity, or better engage with the capabilities of a global supply chain.

“Delivering according to plan is critical and, even as construction programs become more complex and resources harder to secure, the need to effectively manage risk will be critical for start-ups and industry champions alike.”