Modular technology solutions will be vital in helping institutions build greener portfolios, says Andrew Shepherd, managing director of modular housebuilder TopHat
Institutional investors – whether they be banks, insurance companies or pension funds – have been investing heavily into residential over the last five or so years. But as they find themselves responding to greater ESG scrutiny post-Covid, investors are having to quickly find ways to lower the emissions linked to their loan books and portfolios – paving the way for the new era of precision-engineered 3D modular homes.
The built environment contributes to 42% of UK carbon output
The carbon associated with the traditional construction and operation of housing is huge. The UK Green Building Council estimates that the built environment contributes 42% of the UK’s entire equivalent output of CO2, while the Committee on Climate Change estimates operational emissions – those emitted through utilities such as electricity, heating and water – from homes account for a further 20%.
3D modular homes – where energy-efficient houses and apartments are manufactured along production lines – provide institutions with a fast, high-quality, green solution to growing residential portfolios and generating long-term, secure income streams while simultaneously making real progress on their ESG commitments.
Let’s take build-to-rent, the poster child of residential over the last few years, as an example. Sensing an opportunity to capitalise on strong long-term market fundamentals – such as a greater demographic of renters and fast-shrinking affordability levels for would-be homebuyers – corporates have ploughed into the sector, investing £4.1bn in 2021 alone, according to CBRE.
Investors must deliver assets that are green and futureproof
These market conditions provide a significant opportunity for 3D modular, especially given the fact that, according to Knight Frank, investors will deploy £75bn of capital into residential over the next five years.
Tightening building and energy standards mean that, without costly retrofit programmes, portfolios are browning at an alarming rate. Therefore, investors must now focus on delivering assets that are both green and futureproofed from incoming government regulations – like changes to Part L. And as we’ve seen from the recent furore over Marks & Spencer’s decision to flatten its flagship store on Oxford Street, embodied carbon remains the elephant in the room.
For those delivering residential assets, modular technology is proving a green paradise for investors, and a real solution to the UK’s lack of future-proofed housing stock. In fact, TopHat’s use of low-impact timber in construction only embodies 35% of the RIBA’s 2030 embodied carbon targets.
As TopHat homes come with air source heat pumps as standard, the energy costs are much lower than traditional homes and the energy efficiency is much higher. Combined with photovoltaic cells and homes can be run at a fraction of the cost of traditionally built homes.
Furthermore, it is well accepted that homes with the lowest energy bills are likely to perform best for investors as tenants can better afford to live in them.
The scalability of 3D modular gives a uniformity to the whole housebuilding operation and the use of precision-engineering and data point control nearly eliminates construction waste at a major scale.
This is why we have chosen to open Europe’s largest modular housing facility. The 650,000 sq ft facility – equivalent to the size of 11 football pitches – will be capable of creating one house an hour. Once operational in 2023, the cutting-edge, hi-tech facility will deliver 4,000 homes a year for a mix of investors, developers, housing associations and councils.
As government policy continues to reflect the needs of a net zero future, 3D modular allows both people’s homes and investor capital to be futureproofed against a progressively green policy landscape.
The need to do so is pressing. Due to increasingly stringent Financial Disclosure Agreements now also encompassing carbon intensity and climate risk, the use of modular technology will come to rule climate reporting. Institutions, backed by large pools of capital, hold the keys to decarbonising residential by unlocking innovative methods of housebuilding. By partnering with innovative construction companies with precision sensor modular technology baked into their organisational fabric, investors can comply with their own ESG objectives and deliver high-quality, low-carbon homes to assist in solving the wider housing and environmental crisis.
Andrew Shepherd
Managing director
TopHat
