- New York City now ranks as the world’s most expensive place to build, with average costs at $534 PSF, according to Turner & Townsend.
- Labor shortages and rising material prices are fueling construction inflation, which could hit 5% in several US cities this year.
- Nearly half of industry experts expect supply chains to worsen over the next 12 months due to trade shifts and competition for resources.
NYC Leads Global Construction Costs
According to the Commercial Observer, Turner & Townsend’s 2025 report places New York City at the top of 99 global cities for construction costs. Builders now face an average of $534 PSF. San Francisco follows at $512, with Los Angeles at $445.
High labor rates and a lack of skilled workers are driving up these costs. More than two-thirds of the firm’s survey respondents said worker shortages remain a major challenge.
Supply Chains Under Strain
The construction sector in North America has stayed relatively stable. Still, changing trade policies are starting to cause problems.
Almost half of respondents expect supply chains to deteriorate in the next year. Labor and materials are getting harder to source as different sectors compete for the same limited resources.
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Inflation and Competition
Construction inflation in the US ended 2024 at 4.7%. Turner & Townsend now expects that figure to rise to 5% in some markets.
Demand from data centers in places like Austin and Atlanta is pulling labor and materials away from other sectors. Residential construction, in particular, is feeling the pinch.
Lisa Woodruff, Turner & Townsend’s North America real estate lead, said the industry has handled tariff challenges well so far. But she warned that growing competition for skilled labor could threaten project delivery and cost stability.
Refurbishment Over New Development
In space-constrained markets like New York and Chicago, developers are shifting focus. Retrofit and refurbishment projects are gaining traction as space for new builds shrinks.
Turner & Townsend recommends that clients explore digital solutions and alternative delivery models to manage costs and improve efficiency.
Future Outlook
Despite the rising costs and looming supply chain issues, the report offers a hopeful outlook. Woodruff said firms that innovate and adapt will find strong opportunities ahead.
