The Global Construction Market Intelligence (GCMI) report 2025 reveals construction cost inflation is projected to soften across the European Union and Switzerland – from 2.9 percent to 2.4 percent for the region as a whole.  Efforts from central banks to bring down consumer price inflation have contributed to this – as policymakers work toward achieving the European Central Bank’s 2.0 percent target.

While cooling inflation can point to slowing demand, Turner & Townsend’s report argues that the trend instead reflects a more adaptable sector which has learned lessons from shocks including COVID-19 and the war in Ukraine.  This resilience means the industry is well-placed to support significant investment planned as part of pan-European efforts to bolster growth and security.

A commitment by European NATO allies in June to invest 5.0 percent of GDP in defence is expected to drive construction demand in related sectors including advanced manufacturing, housing and infrastructure.  The report points to key industrial heartlands in Germany, France and Italy as the main beneficiaries of these investments.  High-growth domestic industries including life sciences, data centres and corporate occupier also remain buoyant, contributing to a positive pipeline of construction activity.

Overall, costs across the region remain high despite a softening in the rate of inflation.  Switzerland, with traditionally high construction costs, continues to top the European cost table with an average cost to build of €4,978 per m2.  Zurich and Geneva sit at third and fourth place in the global rankings, behind New York (€5,309 per m2) and San Francisco (€5,087 per m2) but ahead of London (€4,977 per m2).

Dublin sits fourth in the European rankings, at an average cost of €3,692, reflecting a sustained pipeline of commercial and data centre investment.  Munich and Frankfurt – as key industrial and commercial hubs – follow at fifth and sixth place within Europe.

Digital and tech investment play a critical role in the region’s outlook.  With increasing demand for digital technologies, including the rapid development and adoption of generative AI, there are strong prospects for further data centre growth.

However, Turner & Townsend’s report highlights continued strain on supply chains, especially in specialist sectors.  Markets like Zurich and Geneva are experiencing lead-in times exceeding 41 weeks for vital data centre components like switch gears, while half of respondents currently face similar lead-in times for generators.  Skilled labour also remains a challenge for all European markets.  100.0 percent of GCMI respondents reported insufficient talent for mechanical, engineering and plumbing jobs.  Europe already has relatively high labour costs globally – Switzerland’s hourly wage at €109.0 is the second most expensive in the world.

In this context, Turner & Townsend is advising clients to work closely with supply chains at a more local and regional level to manage risk over time.  This includes assessing nearshoring as an approach to protecting a more consistent supply of materials and talent.

Martin Londra, head of real estate and major programmes, Europe, at Turner & Townsend said: “Europe’s bounce back following geopolitical and global economic setbacks in recent years is encouraging.  The continent is learning lessons in improving its resilience and self-sufficiency – putting it in a stronger position to withstand new potential disruption from increased uncertainty posed by international tariffs and a changing global order.

“The GCMI indicates that public sector efforts to drive investment and create a stable economic landscape for businesses is helping to fuel activity and investment in the construction sector.

“This, combined with renewed commitments to scale up industrial, defence and residential development offers new opportunities on the horizon.

“Making the most of this means building up and then carefully managing supply chains to ensure there is sufficient capacity for the growing demand and to avoid a sharp uptick in cost inflation.  This increased management of the supply chain and taking a programmatic approach will be key for making sure this renewed focus on industrial and defence does not smother growth in other sectors, such as data centres and traditional real estate.”

From analysis of 99 markets globally, the GCMI shows the US maintaining a strong hold on the top rankings of the most expensive places to build.  Five US cities are in the top ten.  New York is in first place, with an average cost of €5,309 per m2, followed by San Francisco at €5,087.  Los Angeles (€4,424) is sixth, with Chicago seventh (€4,340) and Philadelphia in ninth (€4,255).

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