Modular technology solutions will be vital in helping institutions build greener portfolios, says Andrew Shepherd, managing director of modular home builder TopHat
Institutional investors – whether banks, insurance companies or pension funds – have been investing heavily in residential property for the past five or more years. But as they find themselves responding to tighter ESG scrutiny post-Covid, investors must quickly find ways to reduce the emissions associated with their credit portfolios and portfolios – paving the way for a new era of precision-engineered 3D modular homes.
The built environment contributes to 42% of UK carbon emissions
The carbon associated with traditional housing construction and operation is huge. The UK Green Building Council estimates that the built environment contributes 42% of the UK’s total CO2 equivalent output, while the Climate Change Committee estimates that operational emissions – those emitted by utilities such as electricity, heating and water – of homes represent an additional 20%.
3D modular homes – where energy-efficient houses and apartments are manufactured on production lines – provide institutions with a fast, high-quality, green solution to grow housing portfolios and generate long-term, secure revenue streams, while making real progress on their ESG commitments.
Take for example build-to-rent, the spawn of residential construction over the past few years. Sensing an opportunity to take advantage of strong long-term market fundamentals – such as a larger renter demographic and rapidly declining affordability levels for prospective home buyers – corporates have flocked to the sector, investing £4.1bn in 2021 alone, according to CBRE.
Investors must provide assets that are green and future-proof
These market conditions present a significant opportunity for 3D units, especially given the fact that, according to Knight Frank, investors will deploy £75 billion of capital into residential buildings over the next five years.
Tightening building and energy standards mean that without expensive refurbishment programmes, wallets are darkening at an alarming rate. That’s why investors now need to focus on providing assets that are both green and future-proofed against upcoming government regulations – such as changes to Part L. And as we’ve seen from the recent furore surrounding Marks & Spencer’s decision to ax its flagship store on Oxford Street, embodied carbon remains the elephant in the room.
For those delivering residential assets, modular technology is proving to be a green haven for investors and a real solution to the UK’s lack of forward-looking housing stock. In fact, TopHat’s use of low-impact timber in construction only embodies 35% of RIBA’s 2030 carbon targets.
Because TopHat homes come with air source heat pumps as standard, energy costs are much lower than traditional homes and energy efficiency is much higher. Combined with photovoltaic cells and homes can be operated at a fraction of the cost of traditionally built homes.
It is also 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 the 3D module gives uniformity to the entire construction operation, and the use of precision engineering and control of data points almost eliminates construction waste on a large scale.
That is why we chose to open the largest modular housing complex in Europe. The 650,000 sq ft facility – equivalent to the size of 11 football pitches – will be able to create one house per hour. Once operational in 2023, the cutting-edge, high-tech facility will deliver 4,000 homes a year to a mix of investors, developers, housing associations and councils.
As government policy continues to reflect the needs of a net-zero future, 3D modular enables both people’s homes and investors’ capital to be future-proofed against a progressively green policy environment.
The need for this is urgent. With increasingly stringent financial disclosure agreements now covering both carbon intensity and climate risk, the use of modular technology will begin to drive climate reporting. Institutions backed by large capital groups hold the keys to decarbonising the housing sector by unlocking innovative methods of housing construction. By partnering with innovative building companies with precision sensor modular technology embedded in their organizational structure, investors can meet their own ESG goals and deliver high-quality, low-carbon homes to help solve the wider housing and environmental crisis.