Global construction costs continue to evolve in what seems like one of the biggest turning points in recent few decades, resulting in a complex landscape shaped by labour, materials, regulation, and financing. The Arcadis International Construction Costs 2025 report provides an in-depth look at where building is most expensive, what drives costs, and the trends shaping the industry. For engineers and construction professionals, this is a treasure trove to get broad view insights critical to planning projects, managing budgets, and making strategic design decisions.

How Expensive Is It To Build in Your City?

• Most expensive cities: Geneva tops the global ranking, overtaking London. Other high-cost cities include Zurich, Munich, and New York. High labour costs, strict regulations, and strong local currencies contribute to these positions.
• Most affordable cities: Emerging markets in Asia, Africa, and South America remain significantly cheaper for construction projects. The cost gap between the most and least expensive cities can be up to five or six times.

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The Methodology: The Arcadis International Construction Costs Index covers 100 cities. The index is based on a survey of construction costs which covers 20 building functions. This data is supplemented by a review of market conditions in each city combined with the professional judgment of a global network of experts. We collect indicative cost ranges for each building function foreach city. The low and high range costs for each building type are converted into US dollars. The data was collected in the first quarter of 2025.

What is Driving Construction Costs?

1. Labour shortages and productivity gaps: Limited skilled labour in many regions pushes wages higher and can cause delays.
2. Material and supply chain volatility: Prices fluctuate due to global disruptions, trade barriers, and currency shifts.
3. Regulatory and sustainability requirements: Cities with strict codes and sustainability mandates (e.g., energy efficiency, resilience) see higher costs.
4. Financing pressures: Increased borrowing costs impact overall project budgets and design decisions.

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What Building -Type Is Most Impacted?

• Data centres and highly serviced buildings show less variation in costs internationally due to standardised specifications.
• Residential, commercial, and public sector projects are more sensitive to local labour, material, and regulatory factors.

Trends to Watch in 2025

• Inflation: Construction price inflation has eased but remains “sticky” in most markets. Rapid increases are unlikely, but costs are not expected to drop significantly.
• High-demand sectors: Data centres, social infrastructure, and life sciences projects continue to influence construction trends.
• Global perspective: Understanding international cost trends helps engineers anticipate challenges, even for projects based locally.

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Actionable Takeaways for Engineers

• Use AI where it helps manage key cost drivers: Leverage co-pilots that help reduce errors, automating repetitive tasks, quality control, etc.‍
• Early-stage planning: Collaborate with contractors and project managers to identify potential cost drivers before design finalisation.
• ‍Optimise specifications: Use standard materials or modular solutions where possible without compromising performance.‍
• Improve construct-ability: Simplify design geometry and leverage prefabrication to save time and labour.‍
• Leverage digital tools: BIM, parametric design, and cost estimation software help model costs early and reduce surprises.‍
• Plan for variability: Design systems to accommodate material substitutions and schedule changes to manage risk.

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The Arcadis International Construction Costs 2025 report highlights the complexity and variability of construction costs globally. For engineers, staying informed about labour trends, material volatility, regulatory requirements, and sector-specific demand is crucial. By planning strategically, optimising design, and leveraging technology, engineers can deliver projects that are both high-quality and cost-efficient in an increasingly dynamic construction market.

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