According to an Arcadis report, construction costs rise due to inflation and carbon neutrality requirements


Barcelona, ​​Malaga and Madrid are, in this order, the most expensive large Spanish cities to build, according to the ‘International Construction Costs (ICC) 2023’ report, which analyzes one hundred of the largest cities in the world on six continents and places the top of the list to Geneva (Switzerland), followed by London and New York.

The following positions in the ‘ranking’ are held by San Francisco (United States), Munich (Germany), Hong Kong (China), Copenhagen (Denmark), Boston (United States), Zurich (Switzerland) and Philadelphia (United States).

Barcelona, ​​Malaga and Madrid appear in positions 73, 76 and 79, while the Portuguese Lisbon and Porto are in positions 68 and 74 of the ‘ranking’ included in the report, entitled ‘New horizons’.

This index, published by Arcadis –consulting, engineering and sustainable design solutions company for natural and built assets– classifies cities according to construction costs and the complexity of the projects being developed by region.

This analysis, which covers twenty different building types, including residential, commercial and public sector infrastructure, is based on a survey of construction costs, a review of market conditions and the professional experience of Arcadis experts.

The cost data behind the ICC classifications also takes into account changes in the technical specifications of buildings and carbon neutral design, which the company says has a major impact on construction prices. .

“Short-term cost increases in Europe can range from 5% to 7% for new homes and 7% to 10% for commercial buildings. However, with the need to mitigate climate change and in a context where As carbon reduction targets become increasingly important, sustainable buildings in prime locations are increasingly in high demand,” he explained.

The results of the study indicate that, despite rising costs, investors in long-lived assets need to take a long-term view to preserve asset value and mitigate exposure to climate change, especially as it accelerates. the demand for carbon neutrality requirements.

Global Head of Sales for Places at Arcadis, Kathleen Abbot, said that while real estate markets are cyclical, it must be understood that current challenges in addressing carbon neutrality and climate resilience “will not go away”, because the decarbonization of the real estate sector “will only expand”.

“High construction prices and rising interest rates are a huge barrier to action, but doing nothing is not an option when laws, investment standards and customer expectations are rising,” he said. underlined, betting on “a directed investment that protects value, improves ‘net-zero’ performance and ensures the longevity of assets and portfolios in the long term”.

Arcadis believes that owners and investors must take steps to protect their investment and meet future standards related to energy efficiency and carbon reduction.

In this sense, the report highlights the growing demand for ‘net-zero’ buildings and the scope of ‘green premium’ buildings, which add additional value to more sustainable assets, according to the report. In addition, he adds that sustainable investment will be the key to preserve and protect buildings against the obsolescence horizon, the estimated time in which they will become obsolete in terms of energy efficiency and available technology.

Regarding Spain, the study indicates that the construction market grew by 3.8% in 2022 despite significantly high inflation in key construction materials for the Spanish sector, such as concrete, steel and plastic pipes. .

Although the real estate sector decreased by 2%, it was offset by the growth of the infrastructure sector, where inflation was also fought through the reassessment of projects and the acquisition and purchase of materials in abundance, points out Arcadis.

Regarding inflation, the report recalls that it reached its highest point in 2022, with between 8% and 10%, “which has created uncertainty for investors, who also faced an increase in financing costs and faced very long waiting times.

The forecast for the year 2023 is that inflation will fall again to around 3%-5% and, in addition, fluctuation mechanisms have been introduced that “help experts in the market and in the real estate field to make informed decisions about the purchase , sale or investment of real estate”, he adds.

Likewise, the company has highlighted that the General State Budget for 2023 includes 17,000 million euros for investments in housing, transport and projects related to sustainability and water.

Arcadis has also mentioned the “growing interest” in rental housing, as well as the investment strategies focused on different cities in Spain, “instead of focusing on more saturated markets such as Madrid or Barcelona.”

The head of Arcadis Cost Management in Spain and Portugal, Emilio García, has stated that, by 2023, “data centers, the health sector and logistics will continue to be the key growth industries, taking advantage of the momentum they gained last year past”. “However, the shortage of skilled labor will remain prominent and could affect delivery times,” he has warned.