New York City is no longer the most expensive place in the world to build, according to a new report.
San Francisco has usurped the New York market with an average building cost of $417 per square foot, according Turner & Townsend’s latest International Construction Market Survey. Those costs are expected to increase 6 percent in the next year. In New York, the average building cost was $368 per square foot, up slightly from last year’s $362 per square foot. This year, those costs are expected to increase 3 percent.
Still, New York has the highest labor costs of the U.S. markets surveyed at an average $101.30 per hour. The city was second only to Zurich, which has an average rate of $110.70 per hour, according to the report. San Francisco was just below New York with $90 per hour, followed by Seattle at $75.50 per hour and Chicago with $69.60.
In terms of overall costs, Seattle ranked sixth with an average of $338 per square foot, and Chicago was eighth place at $290 per square foot.
Several markets are struggling to find enough skilled labor for their projects, while overall costs are also being driven up by tariffs on materials, especially steel and aluminum. According to the report, owners can expect the cost of overall core and shell construction for tall and supertall steel-framed buildings to increase by 5 to 10 percent. In the past year, steel costs in the U.S. have jumped 22.4 percent, according to the report.
“The big challenge for the San Francisco Bay Area and wider U.S. construction market is meeting this demand in the face of import tariff talks, escalating materials costs, and a shrinking skilled labor force,” John Robbins, Turner & Townsend’s managing director U.S. and North America head of real estate, said in a statement. “Simply turning to local supply isn’t solving the problem… clients are considering other strategies to develop their real estate – from alternate and more unique construction methods, to reductions of their build programs.”