march/april 2007
international construction cost index
The five most expensive countries to
build in are Greece, Great Britain,
Denmark, Norway, and Sweden
according to our 2007 survey.
Greece maintains the top spot for a
second year. Great Britain moves
from fourth to second. Switzerland
fell out of the top five and Norway
moved into the group making
Scandinavia the most expensive
region. Exchange rate fluctuations
were the primary cause for position
shuffling of the other top countries.
The ranking of the five least
expensive countries to build in was
nearly unchanged from 2006. This
year they are India, Malaysia, China,
Thailand and Brazil—replacing the
UAE. High inflation pushed the UAE
index above Brazil’s index.
Average year-on-year construction
price inflation is 5.5 percent—higher
than 4.0 percent last year. All
locations reported higher prices.
Japan had the smallest increase of
only 1.3 percent. The booming
market in the UAE resulted in an
increase of 29 percent. Higher prices
in the UAE contributed to about half
of the average increase over last
year, but many locations reported
higher costs.
Ten countries reported annual
inflation over the 5.5 percent group
average. Mexico was the only other
location in double digit inflation—
11.5 percent. Regionally, inflation
averaged about 5 percent in the
Americas, nearly 7 percent in the
Asia/Pacific and almost 5 percent in
Europe.
Inflation relative to the US
determines changes in parity values.
Fourteen countries had inflation
higher than the US. Seventeen
reported lower inflation. The average
volume 19, issue 2
increase relative to the US for all 10.4 percent. During the past year,
locations was 0.6 percent. Japan the US dollar experienced minimal
had the lowest relative change and gains against the currencies of
the UAE had the highest. Japan and Mexico.
Depreciation of the US dollar Shifts in the parity and exchange
continued during the past year after rate values produced the following
a brief period of gain early last year. index changes:
A weaker dollar raises index values,
` Index values increased for 30
unless offset by relative inflation.
countries. The average index
Typically, foreign exchange market
increase for all locations is 8.6
fluctuations are far more significant
percent. With its large currency
in any one period than relative
appreciation, Thailand’s index
inflation.
increased over 21 percent. The
The Thailand baht gained nearly UAE had the largest index
17 percent against the US dollar increase—23 percent—due to its
over the year. The euro—eleven high inflation.
countries in our comparison—gained
` Only two locations had index
9.8 percent against the dollar. Since
values decrease—Japan and
2002, the euro has gained over 50
Puerto Rico. Japan had the
percent of its value against the
largest decrease—3.8 percent.
dollar. Other notable currency gains
Relative inflation was the primary
include the New Zealand dollar—
cause of the decrease.
14.8 percent, the Australian dollar—
12.4 percent, the Czech koruna— ` The USA ranking remains at 17.
11.9 percent, the British pound—
11.2 percent and the Polish zloty—
continued on page 4
table 1: cost model parameters
one-story manufacturing facility, owner-built, owner-occupied
statistics office manufacturing total
gross floor area 47,344 sf / 4,400 m2 102,220 sf / 9,500 m2 149,564 sf / 13,900 m2
floor-roof height 16 ft / 4.90 m 28 ft / 8.55 m --
volume 761,385 cf / 21,560 m3 2.9 mcf / 81,225 m3 3.6 mcf / 102,785 m3
perimeter -- -- 1,821 ft / 555 m
exterior wall area 8,070 sf / 750 m2 26,093 sf / 2,425 m2 34,163 sf / 3,175 m2
specifications office manufacturing
foundations spread footing spread footing
structure girders girders
bay size 20 ft x 20 ft / 6 m x 6 m 39 ft x 59 ft / 12 m x 18 m
roof adhered single-ply EPDM adhered single-ply EPDM
exterior wall metal siding metal siding
fenestration aluminum w/ insulated glass none
finishes standard minimal
mechanical heated, vented & air conditioned heated, vented
electrical recessed fluorescent light fixtures metal halide high bay light fixtures;
copper bus duct
table 2: industrial building purchasing parities / index
date: March 2006
country index city parity range exchange rate index inflation rate tax rate
Europe
Austria Vienna 0.87 - 1.01 0.75 EUR 125.3 2 to 3 % 20%
Belgium Brussels 0.85 - 0.97 0.75 EUR 121.3 2 to 3 % 21%
Czech Republic Prague 17.9 - 20.85 21.04 CSK 92.1 3 to 4 % 19%
Denmark Copenhagen 7.45 - 8.51 5.59 DKK 142.8 2 to 4 % 25%
Finland Helsinki 0.95 - 1.08 * 0.75 EUR 135.3 * 1 to 3 % 22%
France Paris 0.93 - 1.06 * 0.75 EUR 132.7 * 2 to 4 % 19.6%
Germany Frankfurt 0.91 - 1.03 0.75 EUR 129.3 2 to 5 % 19%
Great Britain London 0.68 - 0.78 0.51 GBP 143.2 5 to 6 % 17.5%
Greece Athens 1.03 - 1.18 0.75 EUR 147.3 7 to 8 % 19%
Ireland Dublin 0.94 - 1.07 0.75 EUR 134.0 1 to 4 % 13.5%
Italy Milan 0.83 - 0.94 0.75 EUR 118.0 2 to 4 % 20%
Netherlands Amsterdam 0.84 - 0.96 0.75 EUR 120.0 3 to 5 % 19%
Norway Oslo 7.92 - 9.08 6.09 NOK 139.6 5 to 8 % 25%
Poland Warsaw 2.90 - 3.38 * 2.90 PLZ 108.2 * -- 22%
Portugal Lisbon 0.76 - 0.87 * 0.75 EUR 108.7 * -- 6%
Russia Moscow 1.05 - 1.22 1.00 USD 113.5 10 % 18%
Spain Madrid 0.64 - 0.74 0.75 EUR 92.0 2 to 4 % 16%
Sweden Stockholm 9.12 - 10.42 7.00 SEK 139.5 1 to 2 % 25%
Switzerland Zurich 1.56 - 1.80 1.22 CHF 138.0 3 to 7 % 7.6%
Americas
Brazil Sao Paulo 1.32 - 1.53 2.05 BRL 69.5 3 to 6 % 15%
Canada Toronto 0.99 - 1.13 1.16 CAD 91.7 4 to 6 % 8%
Mexico Mexico City 7.48 - 8.75 11.02 MXP 73.6 8 to 10 % 15%
Puerto Rico San Juan 0.83 - 0.97 1.00 USD 90.0 3 to 8 % 0%
USA Chicago 1.00 – 1.00 1.00 USD 100.0 4 to 5 % 9%
Asia/Pacific
Australia Melbourne 1.22 - 1.40 1.24 AUD 105.8 4 to 5 % 10%
China 1 Shanghai 3.68 - 4.47 7.74 CNY 52.6 3 to 4 % 17.5%
India Bangalore 16.61 - 19.45 43.44 INR 41.5 2 to 5 % 12.5%
Japan Tokyo 127.69 - 148.98 117.93 JPY 117.3 1 to 2 % 5%
Malaysia Kuala Lumpur 1.40 - 1.69 * 3.46 MYR 44.7 * -- 0%
New Zealand Auckland 1.18 - 1.36 * 1.40 NZD 90.6 * -- 12.5%
Singapore Singapore 1.07 - 1.24 1.52 SGD 76.1 5 to 10 % 5%
Thailand Bangkok 18.88 - 22.04 * 32.59 THB 62.8 * -- 7%
UAE Dubai 2.51 - 3.08 3.67 AED 76.1 15 to 30% 0%
1
mostly domestic materials * provisional

table notes
about the parity/index
We publish comparisons based on a 13,900
square meter (150,000 square foot), single
story manufacturing facility. Table 1 provides
characteristics of model building.
Faithful+Gould and associated companies
price a "market basket" of 26 items to
represent all building construction items. We
permit substitutions of some items
appropriate for the local market, but not
quantitative changes.
` Masonry and plaster partitions may be
substituted for metal stud and gypsum
board partitions.
` Pile foundations may not be substituted for
spot foundations, even though some
locations might require them.
Prices are trade contractors’ in-place prices,
including labor, material, equipment,
overhead and profit. To produce a composite
comparison, we weight each item according
to its contribution to total cost. Pricing in-place
rates, rather than basic construction inputs
(material, labor and equipment), inherently
measures differences in productivity, and to
some extent differences in market and
bidding conditions.
Any cost comparison has limitations. A model
building approach will not include changes to
the design for local regulatory and code
requirements, seismic design guidelines,
design styles and climate influences. Our
comparison excludes factors such as these
that can have a significant affect on cost
because they are difficult to determine using a
single model building approach.
We exclude many capital cost items, such as:
` site work
` furnishings and equipment
` process related requirements
` land and associated costs
` design and management fees
` financing
` value added or use taxes or any other
recoverable tax
parity and index
An index measures the relative price
difference between locations using a common
currency. International indexes use exchange
rates to make the comparison.
Currency exchange is not a comparative
measure of the relative value of goods and
services, but an equilibrium measure of
continued on page 3
 use March 2007 exchange rates. The table
table 3: historic price change includes projections of construction price
inflation (April to April) and lists taxes for each
base date: 1st quarter 2000 (100.0) country. Most are Value Added Taxes (VAT)
or Goods and Services Taxes (GST)—
country 3 qtr 04 1 qtr 05 3 qtr 05 1 qtr 06 3 qtr 06 1 qtr 07 excluded in the parity/index values since in
Europe some instances they may be reimbursable.
Sales taxes applied only to materials are
Austria 112.5 112.9 112.9 113.9 115.6 115.9 included (e.g., USA) since they are not
Belgium 112.2 112.7 113.8 115.8 117.0 118.8 reimbursable.
Czech Republic 110.5 112.7 114.8 115.5 116.6 119.0 A few countries had changes to VAT rates
Denmark 115.1 117.7 119.1 120.5 122.7 124.5 over the year. Germany increased the rate to
Finland 108.4 108.4 111.1 111.8 112.9 113.4 19 percent from 16 percent. The Czech
France 114.4 119.2 121.6 124.5 126.4 130.1 Republic lowered its rate to 19 percent from
22 percent. GST in Canada is now 8 percent.
Germany 101.0 102.3 103.3 105.7 106.2 113.1
Great Britain 125.3 129.1 132.9 131.6 135.6 137.3 Table 3 shows local price change. First
quarter of 2000 is the base period (100.0).
Greece 132.1 136.3 141.1 147.1 147.1 154.9 Locations with n/a were added after our base
Ireland 116.0 118.2 120.0 122.1 123.3 128.1 period.
Italy 117.7 118.4 119.9 122.2 123.7 126.1
using the parity/index
Netherlands 119.3 121.6 124.0 125.8 129.0 129.7 Assume you need the cost of a manufacturing
Norway 114.5 114.4 116.1 120.3 123.3 130.8 facility in India and know a similar facility
Poland 117.8 120.3 123.2 125.0 127.1 135.0 costs USD 1,000 per square meter in the US.
Portugal 113.2 115.5 116.6 118.9 121.1 127.9 Use the parity value in Table 2 to calculate
Russia 123.6 114.2 115.0 120.4 124.6 130.3 costs in Indian Rupees (INR).
Spain 116.3 118.1 119.5 122.1 125.7 126.3 ` Using low parity: 16.61 x USD 1,000 or
Sweden 117.9 117.9 121.5 120.3 120.9 125.4 INR 16,610 per square meter
Switzerland 107.5 108.0 109.1 110.3 112.5 115.6 ` Using high parity: 19.45 x USD 1,000 or
Americas INR 19,450 per square meter
Brazil 154.7 157.7 165.5 167.8 172.4 177.5 ` Using average parity: 18.03 x USD 1,000
Canada 122.8 125.0 128.1 132.7 137.4 139.5 or INR 18,030 per square meter
Mexico 130.9 134.1 138.8 139.8 155.2 155.9 If you need the costs in US Dollars, convert to
Puerto Rico n/a n/a n/a n/a n/a n/a USD by dividing the cost (in INR) by the
exchange rate:
U.S.A 114.1 118.8 122.4 126.7 134.3 132.9
Asia/Pacific ` INR 18,030 / 43.44 = USD 415
Australia 121.4 127.1 129.9 133.7 137.1 138.0 The index calculates costs in Dollars (USD) in
a single step using the exchange rates stated
China 105.7 107.7 109.9 109.9 111.5 113.5
in the table.
India n/a n/a n/a n/a n/a n/a
` Using average index from Table 2: 41.5
Japan 102.2 101.5 104.0 103.5 106.3 104.8
percent x USD 1,000 = USD 415 per
Malaysia 110.6 115.8 119.9 119.9 122.9 125.8 square meter
New Zealand 125.5 128.1 133.8 135.1 139.2 143.2 Convert the USD cost calculated by the index
Singapore 115.1 114.5 114.5 116.6 116.6 122.4 to INR by multiplying by the exchange rate:
Thailand 119.3 124.2 126.7 128.6 132.4 136.3
` USD 415 x 43.44 = INR 18,028 per square
UAE n/a n/a n/a n/a n/a n/a meter
The previous examples demonstrate the how
applying the exchange to a parity value
notes
building in the US costs USD 1,000 per
square meter and the same building in China transforms it into an index value. An index
costs CNY 4,300 per square meter, the value is the parity divided by the exchange
continued from page 2
building parity is 4.30 (4,300 / 1,000). You rate expressed as a percentage. (Index value
supply and demand for each currency. Market must spend 4.30 Yuan for every Dollar to = (Parity value / Exchange rate) x 100.) For
driven exchange rates, not relative construct the same building. Parity makes it India:
construction cost inflation, often varies more easy to use whatever exchange rate is
during project planning and execution for an ` Low index: (16.61 / 43.44) x 100 or 38.2
appropriate your project timeframe and
international project. Their volatility compels percent
corporate policies when same currency
us to think differently about international comparisons are required. ` High index: (19.45 / 43.44) x 100 or 44.8
comparisons. Indexes lead to thinking of percent
comparisons as a fixed percentage—a the tables
Table 1 summarizes the physical Many companies use exchange rates that are
dangerous path for international indexes.
characteristics of our model building. It is an different from the current public market.
Often, international indexes do not show the
owner-built, owner-occupied single-story Suppose corporate finance dictates an
exchange rates used. Parities, like
manufacturing facility with a significant exchange rate of 40.00 INR = 1 USD, not the
International Construction Intelligence,
amount of office space. current rate of 43.44.
remove exchange rates from comparisons.
Table 2 provides parity ranges and an index ` New average index value: (18.03 INR /
Parity provides a measure of construction
for the average parity. We show ranges, as 40.00) x100 = 45.1
value, which changes with relative
construction inflation, not exchange rates as there is nothing definitive about any ` India would be 45.1 percent of U.S. costs,
would an index. It measures the rate of international construction cost comparison. not 41.5 as shown in the tables using the
currency conversion that equalizes We use the US (Chicago) as the base current exchange rate.
purchasing between currencies. Suppose a location for comparison. Index calculations
the us dollar doldrums
The US dollar continues to lose
ground in the foreign exchange
markets. With near record lows
against the euro,
a surging dollar
seems unlikely in
the near future.
So, the question
for many is, “How much lower can
the dollar go?”
exchange rates index
to USD
1.10
1.00
0.90
0.80
0.70
0.60
EUR
AUD
0.50
4/02 4/03 4/04 4/05
cost index
continued from page 1
Construction investment periods will
span years, not months. Currency
values are volatile. Therefore,
swings in exchange rates during a
project are virtually certain. Parity
comparison provides a more
consistent comparison.
The construction industry typically
uses “location factors” to calculate
expected construction cost for a
location when there is a known cost
at some other location. Most index
sources focus on locations in a
single country so exchange rates
and parity are of no concern.
A model-building index allows
comparison of the exact same
building at different locations. In
reality, the building will change for a
variety of reasons, such as local
industry practices, codes and
regulations. Therefore, the cost
Foreign companies considering regional circulation
capital investments in the US should contacts
have a very favorable view of the For subscription information, contact our
present situation. regional representative.
Americas, Africa,
Many factors are
Asia/Pacific Canada
contributing to the
ATLANTA TORONTO (Hanscomb)
sinking dollar. Investors Tom Wiggins Paul Westbrook
Phone 1 404 874 3638 Phone 1 416 487 3811
see weakness in the US tom.wiggins@fgould.com westbrook@hanscomb.com
economy in comparison to strengths Europe, CIS Middle East
and higher interest rates of the LONDON DUBAI
Alison Preston Brent Sather
European and Asian economies. Phone 44 207 121 2121 Phone 971 4 405 9100
The increasing government debt and alison.preston@fgould.com brent.sather@fgould.com
the growing trade imbalance of the
US concern investors. They have information sources
expectations of higher returns in In addition to the Faithful+Gould and Atkins
other markets and are shifting employees worldwide, we gratefully
acknowledge the assistance of the following
investments from the US. companies for providing information for use
US trade imbalance, particularly with in International Construction Intelligence:
China, continues to be a problem. Padghams, Australia; ATyP, Austria; BoPro,
China continues to tightly control the Belgium; ProjectGlobal Ltda., Brazil;
Hanscomb, Ltd., Canada; Savant
value of the Yuan creating tension International, Czech Republic and Russia;
between the two countries and fear COWI AS, Denmark; ISS Proko Oy,
of protectionist policies. Finland; Cammisar Consulting, Germany;
GBP KKZ Consultants, Greece; Europa Risorse,
JPY The result of both is less foreign Italy; PAE Design and Facility Management,
Japan; IGG, Netherlands; PUBM Quantity
4/06 4/07
currency in the US and more US
Surveyor (WM) Sdn Bhd, Malaysia; AS
dollars in other countries. Bygganalyse, Norway; Aconsa y Asociados
Consultores, Mexico; Watts and Partners,
Spain; AB Bygganalys, Sweden; Comcon
Services (Thailand) Co., Ltd, Thailand
relationship predicted by the model-
based index may not hold true.
reports from respondents
A couple of comments from or
respondents are worth noting.
Singapore is experiencing problems
with sand and aggregate supplies constructive expertise
from Indonesia. The issue could From our offices around the world,
resolve itself quickly, but costs in Faithful+Gould (www.fgould.com) works to
Singapore are higher by a factor of help you to maximize and protect your
investment, ensuring that your big idea
three due to the problem. The becomes a tangible, working reality. To
survey reflects these higher costs. learn more about how we can assist with
your international construction project or
German speaking central Europe details about how to contact us visit
experienced a sharp rise in prices fgould.com.
during the last year. Building output
increase 5.1 percent in Germany—a
sharp contrast to the previous ten
years. This trend is expected to
continue in 2007, affecting Germany
and Switzerland. Expect labor cost Faithful+Gould is a member
increases and more difficulty finding of the ATKINS Group.
labor this year.
Published by Faithful+Gould, 817 West Peachtree Street, Suite 500, Atlanta, GA 30308,
and Reed Construction Data, 63 Smiths Land, Kingston, MA 02364.
Editors: Tom Wiggins, Faithful+Gould; John Ferguson, Reed Construction Data. For
subscription information, contact International Construction Intelligence at 404.874.3638
or tom.wiggins@fgould.com.
ISSN: 1060-8206