The World’s Most Premium Construction Market.
The World’s Most Premium Construction Market
The city that never sleeps is now also the priciest city in the world for real estate development. New York City has surpassed Zurich, London, Tokyo and Hong Kong as the world’s priciest construction market, according to the 2017 International Construction Market Survey.
Average total expenditures in The Big Apple have skyrocketed to $354 per foot; compared to $328 in Zurich (The proportions combine residential and commercial high-rises, schools, shopping centers and hospitals). A jaw-dropping number, which also reveals why more than $3 billion are needed to construct the 57-story One Vanderbilt that is scheduled to finish by 2020.
The cost per foot is partially boosted by NYC’s average $100 an hour construction-worker wage rate (inclusive of insurance, pensions and other perks) compared to $28 in most of the countries. The rising cost of skilled labor is attributed to its insufficient supply against a huge demand in the wake of all the ongoing construction projects.
Moreover, the consistently growing density of buildings is also making big construction projects more expensive and difficult to construct. Therefore, the cumulative effect of setting up sites in tight spaces and dealing with complex construction regulations is that a significant portion of costs is needed to be set aside for preliminary expenses.
In addition to labor, NYC is also facing a dearth of material which is ever-increasing its eventual price. For example, steel beams cost $2,359 per ton for a structure needing 100 tons of steel. Also, the average price is $116 per square foot for the requirements of concrete at construction sites.
San Francisco, closely matches the exuberant cost of development in NYC at $330 per foot. The other American cities to make the global top ten are Seattle and Houston, at $280 and $233 per foot respectively. The industry experts are blaming the power of the U.S. dollar and labor rates for shooting up the US construction expenditures.
More significantly, local developers are not expecting a price drop, and another 3.5% hike is projected for 2017, after a 3.7% growth last year. In 2016, an all-time high of $43 billion was spent on construction in New York. Foreign investors made more than one-third of that real estate expenditure.
However, the survey also cautions that Donald Trump’s protectionist policies may hamper the confidence of foreign investors and shall lead to instability and slower growth. Alternatively, the findings also predict The U.S. President’s pledged deregulations spurring more financial capital and his infrastructure spending creating major construction avenues in the United States.