Manila ranks 81st among 100 most expensive cities in construction

The latest Arcadis 2023 International Construction Costs (ICC) report entitled 'New Horizons' reveals that Manila ranked 81st in the study of comparative construction costs across 100 global cities.

Asian cities such as Hong Kong, Tokyo and Macau are among the top expensive cities to build in, together with Geneva (1st), London (2nd), New York (3rd) and San Francisco (4th). Meanwhile, five of the least expensive cities in the index are found in Malaysia, Vietnam and India.

Manila's ranking held steady from last year's index, but annual inflation hit its highest level in 14 years, pushing construction prices upwards. And although pandemic-related restrictions eased in 2022, labor shortages, material costs and rising fuel prices still posed challenges to the construction industry.

“The construction market in the Philippines faced multiple challenges, including inflation, labor shortages, high fuel costs and material prices. Despite these obstacles, the industry was able to adapt well by implementing measures such as bundling packages for different projects to save time and cost, using locally sourced materials that meet standards, and early collaboration with suppliers to ensure the availability of required items and goods on site. Moving forward, challenges are expected to persist, but the industry is likely to continue to innovate and find new ways to mitigate high costs and maximize efficiency,” said Arcadis Country Sales/Client Development Director Joycelyn Pagcatipunan.

The 2023 Arcadis ICC index covers 100 of the world's cities across six continents. The cost comparison was developed covering 20 different building types, including residential, commercial and public sector developments, and is based on a survey of construction costs, a review of market conditions and the professional judgement of Arcadis' global team of experts. The calculations are based in USD and indexed against the price range for each building type relative to Amsterdam.

The cost data behind the ICC rankings also accounts for changes to specification, with low carbon design having an impact on construction pricing. Short-term cost uplifts associated with upgraded specifications in both the UK and Europe can range from 5-7% for new homes and 7-10% for commercial buildings.

However, with the need to mitigate against climate change and more stringent carbon reduction targets, sustainable buildings in prime locations are increasingly in high demand. This is resulting in the application of a 'green premium' when it comes to how the most sustainable assets are being valued.

This means that, when prioritizing expenditure, owners and investors need to take a long-term view that will be critical to preserving value. It will be important to balance current asset, owner and occupier needs with the additional costs associated with, for example, complying with future energy performance and decarbonization standards, and mitigating against the effect of climate change exposure.

A 'do nothing' approach — although often perceived as lower cost and lower risk — has the potential to accelerate what Arcadis has termed the 'obsolescence horizon', driven by net-zero requirements.

Arcadis Environmental Sustainability Associate Director Katherine Ann Resurreccion said: “Sustainability in real estate has become a norm among top developers in the Philippines. EDGE has recently become popular due to its relatively inexpensive certification fees and a more streamlined certification process compared to the more well-known LEED and BERDE; WELL remains the go-to standard for health and wellness. Certifications are still more prevalent in buildings located in prime locations regardless of building type. However, this might change as a result of the SEC ruling that requires annual sustainability reporting for publicly listed companies. We anticipate more organizations to take on sustainability endeavors for their buildings and townships, not necessarily certifications but other low-key methods like energy optimization, switching to renewable energy and carbon offsetting.”

Arcadis is a leading global design and consultancy organization for natural and built assets.