San Francisco ranked the world’s most expensive city for construction

Dive Brief:

  • A new report by Turner & Townsend quantifies what contractors who work in San Francisco already know: Doing business there is expensive.
  • The report, published on July 5, found that construction in San Francisco costs $4,728.50 per square meter ($439.29 per square foot) due to a perfect storm of inflation, supply chain issues and demand from tech companies such as Google, Apple and more. Last year’s top city, Tokyo, fell to the No. 2 spot on the list, followed by Osaka, Japan, which was included on the list for the first time this year.
  • In total, North America had four markets in the top 10. Aside from San Francisco, New York City ranked fourth, Boston ranked eighth and Los Angeles ranked ninth, per the report. Large shifts in North American markets were driven primarily by the strengthening of the U.S. dollar, higher building material costs driven by supply chain disruptions and high labor costs, according to a press release.

Dive Insight:

Amid several major disruptions to the world economy such as the war in Ukraine and COVID-19 related lockdowns in China, construction markets around the world are feeling the heat. In addition, high demand is putting more pressure on already strained supply chains, leading to material issues and higher prices.

The report noted that 38.6% of markets surveyed were classified as “hot” (28.4%) or “overheating” (10.2%), where conditions are deemed at risk of acting as a brake on development, according to the release.  This is up from 10% in 2021, while the number of “cold” markets fell from six to only one. 

See the full top 10 below, with cost converted from price per square meter.

Ranking City Price per sq. ft.
1 San Francisco $439.29
2 Tokyo $433.37
3 Osaka, Japan $423.49
4 New York City $419.67
5 Geneva $402.47
6 Zurich $398.16
7 Hong Kong $393.58
8 Boston $371.46
9 Los Angeles $369.92
10 London $363.23

SOURCE: Turner & Townsend

Per region, North America had the largest rebound, according to the release, and had seven overheating markets, up from zero in 2021. The markets are:

  • Austin.
  • Houston.
  • Phoenix.
  • San Francisco.
  • Montreal.
  • Ottawa.
  • Toronto.

Phoenix was also a newcomer to the list this year, despite reaching this status in its first iteration.

A worldwide skilled labor shortage has bottlenecked development and forced contractors into delays and project disruptions. In this year’s survey, 79.6% of markets were experiencing skills shortages and 15.9% markets were in balance. Only 4.5% of markets had a surplus in construction labor, according to the release.

The report comes as the U.S. construction industry battles wage and employment issues, with wages expected to beat projections even as hiring is slowing.

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