The construction industry represents 6 percent of global GDP according to the International Construction Market Survey for 2017.
However, productivity growth in the construction industry over the past decade has been slower than the global average due to several barriers including skills shortage, technology and the common bottleneck that is capital due to the usually high construction costs. This presents various opportunities and with opportunities come opportunity costs.
East Africa, generally the fastest-growing region of the continent is ripe for development. According to the recently released Africa Construction report by Deloitte, the value of projects in East Africa in 2017 totaled 32.6 billion which represents, a drop from the previous year.
In this article, we highlight the construction costs in the major cities for three East African countries; Kenya, Uganda and Tanzania using the international building costs per m2 from the report. So let’s talk costs.
In Kenya’s capital, the least costly category for construction was basic warehouse or factory units which cost $337 per square metre. This is deceptively low as a large warehouse distribution centre or a high-tech factory would cost $471 and $962 per sqm respectively. Construction of car parks are also cost-friendly based on the numbers as a multi-story underground car park costs $394 per sqm while a multi-story above-ground car park would cost $361 per sqm.
For interests in the education sector, construction of primary and secondary education facilities cost $433 per sqm while building universities and colleges cost $481 per sqm. For commercial property, the cost of constructing offices in a business park was $577 per sqm. Medium A-grade offices in the CBD with up to 20 floors cost $625 whereas for high-rise prestigious offices in the CBD, and investors would have to put in $789 per sqm.
Hotels cost more than hospitals to build. A 3-star travelers hotel costs $933 per sqm to build, a 5-star luxury hotel, however, costs much more at $1236 per sqm while a resort-style property costs $1250 per sqm. Comparatively, a daycare centre (including basic surgeries) costs $817 per sqm and a regional hospital costs $962 per sqm. A general hospital e.g. a teaching hospital costs $1159 per sqm. It remains to be seen whether the number of hospitals will exceed the number of hotels in the country.
Residential construction forms the bulk of the construction in the country. The numbers follow like so. The cheapest to construct are aged care/affordable units which cost $433 per sqm. These are followed by individual detached or terrace style houses of medium standard which cost $500 per sqm while individual detached houses of prestigious standards cost $721 per sqm. Medium standard townhouses and low-rise apartments both cost $529 per sqm while high-rise apartments cost $625 per sqm.
In retail, a neighbourhood supermarket would cost $529 per sqm while a large shopping centre including a mall costs $625 as of 2017. A prestigious car showroom would cost $646 per sqm.
Airports are the most expensive to build with a basic service low-cost carrier terminal costing $1834 per sqm while a full-service domestic terminal costs $2567 per sqm. According to the report, steel beams cost the most at $1635 per tonne for a job requiring over 100 tonnes. Labour costs are range between $4 for the general labourers to $14 for the site foremen. The cost escalation is expected to be 1% during the 2017-2018 year. Generally, contractors earn a profit of 8.5%. (Next, we will discuss Uganda and Tanzania)
Latest; Kenya Construction Costs, 2018