Manila ranks 83rd in construction cost index

Manila edged down in rankings in the latest Arcadis 2024 International Construction Costs (ICC) report from 81st in 2023 to 83^rd in 2024.

Arcadis, a global design and consultancy organization for natural and built assets, said that compared to last year’s result, Manila saw a slight improvement in its ranking among the most expensive cities to build in globally.

“Despite dropping two spots from 81st to 83rd, construction costs remain high,” Arcadis said. This slight shift in ranking was likely due to even steeper cost increases in other cities, it said.

Joycelyn Pagcatipunan, sales director at Arcadis Philippines, said the Philippine construction market mirrored the global trend of stabilization and recovery.

“However, we need to continue being agile and proactive for any scenarios once infrastructure projects in the Philippines gain further traction. These could include challenges in construction programs, timeline, and securing skilled construction engineers and operatives in a tighter market, among others. In this environment, embracing technology and data-driven decision-making will be crucial for effectively managing risks and ensuring project success,” she said.

The report said the Philippine construction sector continues to grapple with its own challenges as inflation reached 6 percent in 2023, and combined with supply chain disruptions, pushed material prices up.

High labor costs also contribute to the overall expense of construction projects. As a result, developers and contractors continue to adapt to the evolving market landscape to ensure project viability, it said.

Monina Munsayac, executive director for cost and commercial management at Arcadis Philippines, said that despite the challenges faced by the construction sector in 2023, “we remain optimistic about its resilience this year and beyond.”

“The upcoming infrastructure initiatives are promising prospects, as well as the continued demand for sustainable projects which aim to meet the country’s sustainability goals. Regardless of the year's trajectory brought about by this infrastructure push and other market factors, the Philippine construction industry is poised to adapt by implementing a range of strategies, including enhanced procurement strategies, the integration of digital tools and a continuous focus on cost optimization,” Munsayac said.

The index covers 100 of the world’s large cities across six continents. The cost comparison was developed to span 20 different building types, including residential, commercial and public sector developments and was based on a survey of construction costs, a review of market conditions and the professional judgement of Arcadis’ global team of experts.

The calculations were based in US dollar and indexed against the price range for each building type relative to Amsterdam.

It said that 2023 was a difficult year across the world, with high borrowing costs undercutting the positive impact of infrastructure investment in many countries.

Arcadis noted the rapid acceleration of investment into the advanced manufacturing and technology sector, including data centers, pharmaceutical facilities, gigafactories and wafer fabs.