Though construction spending cooled slightly last year, New York City remains the most expensive place to build in the world with an average cost of $362 per square foot.

That’s a 3.5 percent year-over-year increase, and another 3.5 percent hike is expected in 2018, according to Turner & Townsend’s 2018 International Construction Market Survey.

San Francisco closely followed New York with an average cost of $347 per square foot, and Hong Kong ranked third with $344 per square foot.

In New York, high-rise office buildings were among the priciest to build at an average $565 per square foot. High-rise apartment buildings cost an average $302 per square foot.

Construction spending fell 12 percent from 2016’s record high, totaling $45.3 billion last year. Meanwhile, shortages in skilled labor continued to drive up costs.

“The industry skills shortage is one of the pivotal drivers of rising costs, felt at both a local and global levels,” John Robbins, Turner & Townsend’s managing director in the U.S. said in a statement. “We need to seize current market opportunity to attract new young talent back into skilled trades, incentivize the supply chain with more innovative and partnering contracting models, and invest in digital tools and modern techniques that will maximize productivity.”

New York had the second-highest average hourly-rate with $98.30, though the report only calculated the rates for union labor, which tends to be higher than that of nonunion workers. The highest paid worker included in the report was “site foreman” with an average hourly rate of $145. Workers in Zurich had the highest average hourly rate at $104 per hour.