London skyscrapers under pressure as construction costs mount
The cost of building London skyscrapers has soared by 40 per cent in five years as pressure on the capital’s high-rise property market mounts.
The average cost of building a tower in the capital has increased from between £3,800 and £4,300 per square metre in 2020 to between £5,200 and £6,500 last year, according to Turner & Townsend data shared exclusively with CityAM.
Office space in London is becoming scarcer as building new high-rises becomes more expensive, with less than one per cent vacancy in the City and West End core areas, according to estate agents Knight Frank.
The 40 per cent increase in London’s high-rise building costs, calculated by professional services firm Turner & Townsend, is a steeper rise than in global competitors including New York (30 per cent), Seoul (30 per cent) and Tokyo (35 per cent).
The total cost of building a skyscraper in London is three times higher than in Seoul, and ten times higher than in Mumbai.
London’s historical resistance to tall buildings was overcome at the turn of the century and the capital is now in its fifth wave of high-rise construction, Turner & Townsend said.
Only one skyscraper to be built this year
The capital’s skyscraper economy reached its peak in 2019, when 16 high-rise buildings were completed.
But Turner & Townsend expect only one tall building, EDGE London Bridge, to be built in London this year, before completions edge up again to four in 2027 and two the following year.
EDGE London Bridge, designed by architects Pilbrow & Partners, will offer 275,000 sq ft across 26 storeys, and will stand at 107m.
This will make 2026 the slowest year for high-rise completions since 2015, when the 149-metres-tall Guy’s Tower hospital building was constructed in Southwark.
Steve Watts, global and UK tall buildings lead, said: “With elevated construction costs further pressured by continuing inflation, as well as unfriendly financing conditions and softened yields, viability is now the most pressing issue.”
The six cities profiled in the consultancy’s report are each facing high construction costs, constrained supply chains and a skill shortage, Watts said.
But the difficulty of building high rises around the dense, historic buildings in London’s Square Mile creates particular costs, he said.
He told CityAM: “London’s always had a challenging planning environment which people used to view quite negatively – it was difficult to negotiate.
“But that’s now moved on to a point where those hurdles are still there, but there’s a lot more discussion between the City Corporation and developers and their teams now so that by the time you get close to the planning decision, the risks have been much more covered off.”