With our Build to Rent conference returning for a 15th time on 27th November, we caught up with two of our inspirational panel – Marion Baeli and Félicie Krikler.

Marion Baeli is Principal, Sustainability Transformation at 10 Design. Specialising in retrofit techniques, adaptive reuse strategies and low-energy design, she brings in over 20 years of expertise regarding the design and delivery of large-scale, complex projects that span the whole spectrum of housing as well as office sectors. 

She is a renowned author on low-energy design decarbonisation strategies and recognised for her award-winning book on residential retrofits and recent research on building performance evaluation of 10 year old deep residential retrofits in collaboration with CIBSE. Additionally, she sits on the board of the UK PassivHaus Trust, contributes to the Westminster Council’s Design Review Panel, serves as a frequent guest lecturer at London Universities (UCL, Imperial College), and acts as an architecture award judge for the RIBA, Architects’ Journal and Architecture Today.

Félicie Krikler is an experienced architect with both French and British qualifications. She specialises in residential-led urban regeneration and has been instrumental in the design of many of Assael’s key projects since joining in 2000. Alongside being one of our Build to Rent experts, Félicie has been leading on several research initiatives including a Social Value Toolkit in conjunction with the RIBA, ‘later living’ design, and the development of Assael’s urban design and landscape division.  

Félicie is also a judge for a number of design awards (British Homes Awards, Love to Rent and Building Awards), a member of Croydon’s Design Review Panel, and part of the newly formed ARL co-living committee. She was also elected on RIBA council in September 2023.

Here’s what they had to say about the Build to Rent sector, and more.

To kick things off, could you outline some of the strategic approaches we can take to address the housing shortage?

M: Certainly. There are two main aspects, the densification of urban areas and the repurposing of non-residential buildings into homes. We have seen a pivotal approach in recent years in the densification of urban areas to help  tackle housing shortages across the country. This means we need to build up, not out, which helps avoid putting extra strain on rural areas and biodiversity and avoids costly extension of existing infrastructure. Densification is about optimising the urban environment to accommodate more housing, but also being mindful of environmental impacts, like loss of green spaces, the urban heat island effect through increased quantity of hard surfaces and excessive overdevelopment which could lead to overcrowding and stress. The other opportunity at hand is the transformation of existing buildings into homes, especially the underutilised commercial spaces, which could be uses as residential units, and could also aligns with lesser need for central office spaces in a  post-covid, remote-work era.

F: Adding to that, it’s important to recognise that no single solution exists for the housing crisis. It’s a matter of exploring multiple development and redevelopment options, from creating new towns to repurposing existing structures, all with a focus on energy efficiency and minimal environmental impact. Even a controversial idea like flexibility of space standards in housing could be considered, as these can make housing more affordable and efficient in the right settings.

 

What differentiates the Build to Rent (BTR) sector from other housing development models?

F:  The BTR sector is fundamentally about the long-term management of assets. Unlike traditional for-sale developers, BTR developers are deeply invested in the operational costs and long-term appeal of the properties because these factors directly impact the asset’s value over time. They focus on creating living spaces that not only look great but foster a sense of community, interaction and neighbourliness . They are designed to be attractive to residents but with maintenance and management costs in mind.

M:  On an environmental point of view, the BTR format has a strong interest in the buildings to be energy efficient so that they can be as cheap to run as possible, simple to operate but robust and long lasting, and be comfortable for maximum occupant satisfaction and help with revenue security. There is a real opportunity here to create outstandingly efficient buildings which is unfortunately not always the case with speculative build to rent developments. This is something we observe in building performance evaluation.

 

How important is retrofitting in the current landscape of building and development?

F:  Retrofitting is extremely important, especially given the urgent need to address climate change. By focusing on retrofitting existing buildings, we can significantly reduce the overall environmental impact of the construction sector. This includes updating buildings to be more energy-efficient, which not only helps in reducing operational carbon but also in enhancing the buildings’ long-term viability and desirability.

M:  Furthermore, policies could be adapted to encourage retrofitting by emphasising the value of buildings’ embodied carbon. For instance, if planning authorities required new developments to offset their whole lifecycle carbon costs, not just operational emissions, it could shift the focus towards more sustainable practices like retrofitting as the benefit from re-using existing construction would have a cost benefit

 

Are greener buildings becoming a more significant factor in the attractiveness of rental properties?

F:  Yes, there’s a clear trend toward sustainability being a decisive factor for renters. Studies indicate a growing percentage of renters consider energy efficiency crucial due to its impact on living costs. There’s also a significant interest in features like recycling facilities and proximity to green spaces, which are tangible benefits that renters value highly.

M:  The rising energy costs have definitely sharpened focus on  building’s energy demand levels. Homes that are energy-efficient are no longer just an ineffective EPC sticker on a sales brochure; they have become a prime concern for homes owners. This shift is reflected in both regulatory measures and market demands, pushing developers to prioritise energy efficiency coupled with decarbonisation not just as a marketing tool but as a fundamental aspect of development long term value adding strategy.

Any final thoughts?

M: The value of assets is no longer solely determined by aesthetics and amenities; it is now crucial to provide low utility bills and year-round comfort (including increasingly hot summers). Moving forward, given that the industry accounts for 39% of the country’s carbon emissions, the construction sector must prioritize the existing building stock. These buildings were constructed thanks to the emancipation of fossil fuel energy at the time, and we must avoid doubling these emissions through demolition and new construction. Another realisation is also appearing in the reuse of existing building and the difficulty in turning some into other uses, which is that all buildings should be flexible. This means designing new build or amending existing ones into structures and spaces that can cater to various uses over time, enhancing their longevity and functionality. We should think about buildings as adaptable frameworks that can evolve as societal needs change.

F:  Exactly, and emphasising the circular economy in construction will be crucial. This involves designing now for future reuse and considering disassembly in the process; allowing materials to be reused and reducing the need for new resources. It’s about creating buildings that can serve future generations just as effectively, fostering a truly sustainable approach to construction, creating relevant and adaptable urban environments for years to come.

 

To learn more about the Build to Rent sector, book your ticket to our Build to Rent conference.

With our Operational Resi Conference on the 10th September we caught up with one of our inspirational panel participants, Richard Valentine-Selsey.

Richard is Head of European Living Research at Savills. He is primarily focused on providing thought leadership and consultancy advice on the residential investment market and alternative sectors, including student housing, co-living, healthcare and retirement living across Europe. He is also leading on research into modern methods of construction.

Here’s what he had to say about the future of rental living.

 

Can you tell us about the evolution of rental living as an investment prospect within the UK?

It started 12 years ago when the Montague report was published. There was a realisation that we needed to do something to bring institutional investment into the residential sector. We couldn’t be purely reliant upon individual buy-to-let landlords, which started the thought process in investors minds around bringing living, as a whole, back into their portfolios.

They’d been active in the student sector for some while but the report kick started the desire to enter the build-to-rent and resi sector. Especially with the kind of changes we’ve seen with in the run up to COVID and post COVID and the retrenchment from the traditional commercial sectors. That kind of mantra of logistics, living and life science becoming the key three for investors looking forward. That’s shifted where investors are looking to allocate their investment portfolios.

This has led to a number of people looking to enter this market and come up with stock that they can invest in. Investment into residential really kicked off with the emergence of multifamily towers in London and regional cities but then came the realisation that renters don’t just live in cities and there’s renters across the country. So that’s opened up a whole new spread of areas they can look at.

While that has been going on we’ve also seen the emergence of co-living models that are a hybrid between student housing and multifamily accommodation. This is where investors have been exploring the need to provide buildings with a high level of service but with the compromise of slightly less private space. As a result they can offer a more affordable city centre property in an area that people might not be able to afford to live on their own or have their own private space but still get access to all those amenities whilst offering the flexibility that you don’t get with a six to twelve month tenancy in a “normal” rental property.

The big challenge we’ve got in the UK is there is not enough institutional-grade stock on the market. As a result investors have to go and build it, which means the need to find a contractor to work with and someone to get planning and develop it for them.

This means that there’s more money chasing opportunities than there are opportunities around. The challenge we’ve had in the last 18 months has been that the cost of debt has slowed down the ability for some of these deals to happen or have taken longer to get through. There’s also the consideration that with build costs going up it’s harder to build at a competitive price.

It’s interesting to note that 2023, despite all the issues, was the second largest level of investment into build-to-rent since we started recording it back in 2011.

The other evolution which we touched on a bit earlier is the diffusion of investment across the country. Five to six years ago, the vast majority of investment went into London and then the big six regional cities. Investors were very cautious to go to places where they didn’t know for sure that there was a supply and demand imbalance that would create rental demand and wanted to know that the market was substantial. Half of local authorities in the UK now have some level of build-to-rent or single family housing in operation or the pipeline.

Investors are realising that there are opportunities to move across the country and build portfolios rather than just being stuck and restricted to being in a very large regional centre.

There’s also a generational shift in the type of products that investors are looking to go into. We’ve moved on from the first days of buying stock that was designed for build to sell. Now investors are considering the design, the layout, the amenity space of the building to make sure it is meets the needs of the renter and is optimised for operational efficiency. .

We’re now onto generation two of the purpose built model where we’re seeing the overlaying of a genuine full-service solution where renters are receiving a genuinely different product than just renting from a buy-to-let landlord.

We’re also seeing greater investor comfort with larger schemes. In the early days most investors were testing the water with around 100 units. Now there are schemes of upwards of five hundred units on a single scheme where the investor is no longer concerned about the concentration risk of renting these properties. Investors have realised, and seen in the data, that there is enough demand for the property as long as it’s priced correctly.

Furthermore, a single site with 700 units is much more efficient than operating 7 smaller sites of 100 units dotted all over the place.

 

What will the next phase of the evolution be?

The next phase will see the true blending of users across sites and a refreshed focus on mixed living rather than “I just do multifamily” or “I just do student accommodation”. A good example of this is Unite, the UK’s largest student housing operator, where they have now diversified and purchased their first of multifamily block in London.

This next phase will see the full life cycle living piece of taking someone from student housing and then all the way through until they need to go into senior living or purchase somewhere else.

Also we’ll see continual change in who it is that’s driving this forward and who the investors are. The UK has been very attractive to overseas investment for many years. We’ve continued to see new interests coming in from US, Asia and Europe looking to enter the UK market and come into the living sectors.

With the kind of rebalancing of portfolios away from traditional commercial investment, the money will go into resi. The challenge will be, can we build enough stock quickly enough to get these projects going? Also will we get the planning permissions through and will the construction be able to happen?

We found in our most recent European Living Investor Survey, which came out in March, that access, stock and scalability were put as high risk factors for people interested in delivering on their investment ambitions. They’re cognizant that there isn’t necessarily enough of the stock that they want to buy for them to become significantly active.

 

Where should investors put their money?

The $100 million question!

I would probably be putting my money into the single family market. Right now there is a great opportunity for investors to be working with developers and the house building sector to help accelerate the delivery of large sites.

I would also look at student housing. The well-publicised challenges facing many university cities (in terms of housing their students) where they’re hit by both the limited delivery of new PRS over the last decade or so, with the falling number of available properties.

Now, notwithstanding some of the challenges facing universities at the moment, if you choose the right cities with the right university partners, there is significant demand that will continue to be there.

 

What are your top three pieces of advice for people attending the event?

1. Come with an open mind to think about, and challenge, what your preconceptions are of rental living.
2. Come armed with questions and issues that you want to find out about and don’t be afraid to put someone on the spot.
3. Think about how you and your business can help to drive forward the sector and push out to the wider public what we need to be doing to continue to grow.

 

Any final thoughts?

We’ve come through the worst of the stormy weather and there is light on the horizon with the economy looking better and interest rates likely to come down this year, which I think will unlock more opportunities. Now is the time to get your ducks in a row to get the market moving through the second-half of this year.

 

To learn more about Operational Resi Living, join us at the UK’s leading Rented Residential Living Property Conference

For more information, please see the event website here

With the 15th annual Student Housing Investment Conference round the corner, we caught up with the chairperson for the conference, Martin Hadland, to explore the future of student housing.

Martin is the Co-Founder and Managing Director of Student First Group (SFG), a London based specialist advisor, investor, developer and asset manager in the student accommodation and property sectors. Martin and Richard Gabelich founded SFG in 2018 to use their collective, unique and diverse student accommodation and property experience to facilitate transactions and generate innovative solutions. SFG advise on both off-campus/direct let property and on-campus infrastructure partnership models always with the aim of maximising the student experience in both physical design and operating environment.

Martin has over 35 years’ experience working for and advising Universities, property brokers and advisors.  He has worked for universities, some of the leading property consultants in the UK and as Commercial Director for a global student accommodation developer/operator..

Here’s what he had to say about the future of student housing.

 

Where do operators and investors see the market evolving over the coming year?

In the evolving landscape of student housing in the UK, operators and investors are navigating a market marked by contrasting forces of supply and demand, alongside shifting attitudes towards higher education and living away from home. The sector faces a persistent imbalance, with demand outstripping supply in many areas, suggesting that rents are likely to continue rising. However, this trend is juxtaposed with a growing sentiment among UK undergraduates questioning both the value of pursuing university education and the financial viability of studying away from home, which can add significantly to their first-year living expenses.

Amid these dynamics, universities have been required to maintain tuition fees for home undergraduates at a maximum of £9,250 for several years, a policy that initially seemed sustainable but has become increasingly strained as inflation rates have surged. This situation has left universities in a predicament, as they struggle to manage significantly rising costs without corresponding increases in revenue. In response, many have exercised restraint in raising accommodation prices, aiming to alleviate some of the financial pressures on students.

Despite a general consensus that students prefer not to incur higher costs, the market has continually introduced more expensive accommodation options, which have consistently reached full occupancy in most locations. This indicates an historic discrepancy between what students wish to pay and what they are actually willing to pay, with the market gradually moving towards the upper end of this spectrum and uncertainty creeping in as to where we now are. The sector, like others, faces upward cost pressures from construction, land acquisition, and operational expenses, including utilities and labour which means rents are only moving in one direction.

The student housing sector is also affected by changes in the private rental market, particularly the House in Multiple Occupation (HMO) segment, which has seen a decline in private landlords due to regulatory reforms around tax deductibility of debt service costs. The anticipated Renters’ Reform Act introduces uncertainties for landlords, including the removal of fixed-term tenancies and allowing tenants to give 2 months notice, which poses specific challenges for student landlords.

Furthermore, rising mortgage rates have led to a decrease in the number of HMOs, with CBRE estimating 400,000 fewer HMO properties available nationally  between 2019 and 2023. The extent to which this impacts student housing is unclear, but the trend suggests a significant shift. The HMO market typically houses returning students, and if there is any election by landlords to move out of the sector, then accommodation pressures will continue to increase.  Additionally, the Build-to-Rent (BTR) sector has increasingly accommodated students, with many properties housing a substantial percentage of student tenants.

In summary, the UK student housing market is at a crossroads, influenced by various economic, regulatory, and social factors. The sector presents opportunities for growth and innovation but also requires careful consideration of emerging challenges and changing student preferences. Operators and investors must navigate these complexities to meet demand, manage costs, and align with the evolving needs and expectations of their student customers.

With planning challenges, rising build costs, and an increasing cost of borrowing, are there now concerns about the viability of UK Development?

The landscape of UK development, especially in the context of planning challenges, escalating construction costs, and rising borrowing expenses, is becoming increasingly complex. Planning processes are perceived as both more difficult, longer and costlier, a trend that is particularly pronounced in London. Local boroughs are adapting and responding to the London Plan’s initial iteration by tailoring policies to meet their specific needs, which has added layers of complexity to planning and development.

The sector has faced significant viability challenges due to the increases in the various costs referred to above. These challenges have led to a noticeable slowdown in the pace of planning applications and approvals since pre-Pandemic times. However, there has been a shift in this trend in the latter half of 2023 and into early 2024, with an uptick in schemes being proposed. This resurgence is partly attributed to the industry adjusting to the regulatory landscape shaped by the Building Safety Act and the certainty that now exists around that. The Act’s implications have prompted developers to rethink their projects, especially traditional residential towers in areas like the London Docklands, where new safety requirements such as the need for a second staircase have made some designs unfeasible for mainstream residential use. As a result, there is an emerging trend of these projects being reimagined as mixed-use developments that combine affordable housing, mainstream housing, and student accommodation, which can more easily accommodate the design requirements.

Additionally, demand for development appears to be on the rise, signalling a potentially vibrant period ahead for the sector.

Despite the significant challenges posed by planning difficulties, increased construction and borrowing costs, and the impact of new regulations, there is cautious optimism for the future of UK development. The sector is adapting to these challenges through innovative approaches to project design and a renewed focus on mixed-use developments. This adaptability suggests that concerns about the viability of UK development may be mitigated as the industry moves forward.

How important is ESG and sustainability with each portfolio and how can we repurpose existing stock to meet modern environmental targets?

The importance of Environmental, Social, and Governance (ESG) principles and sustainability within property portfolios has become a central focus in the student housing sector, particularly in how existing buildings can be repurposed to meet contemporary environmental targets. This shift in focus is significantly influenced by the growing awareness of embedded carbon in existing structures, a factor that was less scrutinised in development practices five years ago. Nowadays, there is a concerted effort to retain and repurpose buildings, especially those constructed with materials like concrete that have high levels of embedded carbon, marking a departure from the previous inclination to demolish and rebuild.

Institutions and developers are increasingly adopting and applying methodologies akin to the Passive House standard, which emphasises energy efficiency, to refurbish existing properties. This approach aligns with a broader commitment to the ESG agenda, as demonstrated by initiatives like Unite’s extensive refurbishment projects that prioritise ESG considerations. These efforts highlight a recognition of the importance of sustainability in property development and management.

However, the challenge lies in balancing the environmental benefits of repurposing buildings with their operational performance and financial viability. Buildings from the 1970s and 1980s, for instance, may not perform as efficiently as new constructions, even after extensive refurbishments. This discrepancy raises questions about the cost-effectiveness of refurbishing older buildings, the potential rental income from such properties, and their lifespan post-refurbishment.

The ESG agenda is also subject to an “acceleration curve,” where standards and expectations are rapidly evolving. The belief that the current pace of improvement will remain static over the next decade is optimistic. Standards are expected to tighten further, placing additional pressure on refurbishment projects to adopt cutting-edge sustainability measures to extend the useful life of assets. This pressure is likely to intensify with the introduction of new legislation or mandates from funders requiring compliance with specific sustainability standards.

Moreover, the government’s stance on certain environmental policies, such as the phase-out of fossil fuel boilers by 2030, appears to be softening. This change may impact the urgency and direction of sustainability efforts in the sector.

ESG and sustainability are increasingly pivotal in the student housing sector, driving a shift towards repurposing existing stock to meet modern environmental targets. While this approach presents challenges in balancing performance, cost, and sustainability goals, the evolving landscape of environmental standards and legislation underscores the necessity for forward-thinking strategies in property development and refurbishment.

Students are also driving change through looking at the environmental credentials of the halls they select, although it is too early to assess the extent to which this influences choice of accommodation (is it more important than location and what value is there attached to it in rents) and how does it rank as a selection factor alongside other accommodation facets such as a gym, fast wifi, social/amenity space. 

What kind of stock will the UK market demand in coming years in terms of build, design and amenities?

The UK student housing market is poised for diversification in the coming years, reflecting a wide spectrum of preferences in building design, amenities, and overall student living experiences. The current landscape features a vast array of accommodation types, ranging from older stock with shared bathrooms and minimal social spaces to modern developments offering en-suite rooms, studios, and extensive amenity space, some delivering over 1.5 square meters per person. Despite this variety, there is no concrete data pinpointing students’ exact preferences and the premium they are willing to pay for specific features.

Location continues to be a paramount factor for many students, often prioritising convenience to campus over luxurious amenities. Nonetheless, the importance of Environmental, Social, and Governance (ESG) considerations is rapidly ascending the list of student priorities. It suggests a growing expectation for sustainability to be integrated into the operational aspects of buildings rather than imposing additional responsibilities on the residents.

The market is experiencing a period of reflection and adjustment, weighing the balance between amenity offerings and the economic implications of such features, including how they affect the overall cost and pricing of accommodations. This introspection is partly driven by development pressures and a re-evaluation of aspects like the optimal size of communal clusters and the efficient use of building areas to hit a satisfactory price point for students.

As the market matures, it’s becoming increasingly segmented, indicating that students’ choices are becoming more nuanced, with preferences varying widely among specific customer cohorts and individuals.  The Property Marketing Strategists have just completed their report on the specific requirements of international students as an example of this.  This diversity allows developers and operators to cater to specific segments of the market, offering tailored solutions that align with different budgets and lifestyle choices.

Universities, often advisory clients in the context of student housing, are exploring strategies to optimise their nomination agreements with housing providers to ensure value for money. This involves comparing accommodations with varying levels of amenities to understand how these differences impact rental pricing.

Emerging platforms like Student Crowd, play a critical role in providing students with data to make informed choices about their housing. Such platforms contribute to a better understanding of student preferences and market demands.

The UK student housing market is evolving towards greater diversity and segmentation, driven by a blend of student preferences for location, sustainability, and specific amenities. This evolution is accompanied by a maturing market understanding, enabling students to make more informed choices based on a comprehensive understanding of what they value most in their living arrangements.

 

Where are the key opportunity areas moving forward, looking both at location and also at the product?

The future of the UK student housing sector reveals key opportunities rooted in partnerships, evolving market demands, and strategic location choices. A significant development is the burgeoning collaboration between universities and the private sector, particularly in the realms of design, build, fund, and operate (DBFO) projects. These joint ventures are becoming increasingly prevalent, driven in part by the influence of the London Plan, which has mandated closer cooperation between educational institutions and developers. This synergy has given rise to what could be humorously termed “university Tinder,” a service that matches developers with universities to facilitate mutual support through the planning process, thereby benefiting both parties.

This growing trend towards partnership highlights a shift towards more integrated and mutually beneficial relationships in the development of student accommodations. Additionally, there’s an ongoing debate about the demand for  building more studio apartments within student housing complexes, a trend balanced against the need for diverse housing options to satisfy different student preferences and budgets, and the impact of building less studios on project viability.

Another pivotal area of opportunity is the exploration of new locations for development, extending beyond traditional urban centres to more cost-effective areas. The increasing consideration of projects in locations previously deemed peripheral (we have been approached about locations in London’s zone 6 like Croydon and Dagenham, underscores a broader trend of expanding the geographical scope of student housing investments. This move is partly a response to soaring land costs in central areas, pushing developers to seek feasible alternatives that can still attract student populations.  The question around how far students are prepared to travel and still feel that they have the London experience needs constant re-evaluation.

The emphasis on location parallels the maturation of the student housing market, likened to the evolution seen in the hotel industry, where there is always room for new entrants provided they offer something distinct or superior. This dynamic could lead to a redistribution of demand, favouring accommodations closer to educational institutions and potentially impacting the viability of properties in less desirable locations over time.

Furthermore, planning authorities are increasingly playing a mediating role, encouraging developers to consult with universities early in the planning stage. This approach fosters a collaborative environment where educational institutions can have a say in developments affecting their student populations, from influencing design considerations to ensuring developments align with student needs and affordability concerns.

The key opportunity areas for the UK student housing sector moving forward involve deepening partnerships between universities and private developers, exploring new locations for development to navigate economic feasibility, and maintaining a focus on strategic siting relative to educational institutions. These trends indicate a sector poised for innovative growth, emphasising collaboration, strategic location selection, and a responsive approach to evolving market demands and student preferences.

 

Where are the Joint Venture opportunities in the UK Market?

Joint venture opportunities in the UK student housing market are increasingly centered around sector-specific collaborations rather than specific geographic locations. Our ongoing research, dubbed internally as “the mother of all strategies,” draws insights from 20 university accommodation strategies developed over the last 20 months. This comprehensive analysis reveals commonalities across universities, including a mix of accommodation types, with many institutions possessing older halls that feature shared bathrooms or early versions of en-suite arrangements, large cluster sizes, and halls that are often in suboptimal condition. These findings highlight the financial pressures universities face, compounded by significant academic capital commitments that limit their capacity to invest in residential offerings—a crucial component of maintaining competitive edge.

To address these challenges, universities are actively seeking partnerships with the private sector to inject capital and expertise into their accommodation strategies. Three emerging models for such collaborations include:

 

1. Nomination Agreements. These are becoming more prevalent, encouraged partly by the London Plan, which positively requires collaborative relationships among developers, legal teams, and universities. However, the challenge with hard nomination agreements, which obligate the university to fill accommodation spaces, is their impact on the university’s balance sheet. As a result, there’s a shift towards soft nominations that do not require balance sheet commitments.
2. Straight Property Deals. These arrangements bypass public procurement processes if they do not contain service level agreements or other service provisions. This exemption allows universities to consider a different selection mechanism compared to the traditional Design, Build, Fund, Operate (DBFO) projects, which involve comprehensive service agreements.
3. Local Authority and Public Sector Landowner Involvement. Ambitious local authorities and public sector landowners are increasingly interested in student accommodation for its stable income and annual inflationary uplifts. This interest is exploring the potential of integrating student housing into their investment portfolios, especially for landowners assessing parcels for suitability for student accommodation developments.

 

The involvement of local authorities and public sector landowners in inner-city developments signifies a broader trend of joint ventures extending beyond the private sector, incorporating public and semi-public entities into the development process. These collaborations offer a promising avenue for addressing the accommodation needs of universities while contributing to the local economy and urban development.

The future of joint venture opportunities in the UK student housing market lies in innovative partnership models that transcend traditional boundaries. By leveraging the strengths of both the private and public sectors, these collaborations aim to enhance the quality, affordability, and sustainability of student accommodation across the UK, responding to the evolving needs of universities and their students.

Any final thoughts?

In these dynamic times, there are ample reasons for optimism within the UK’s student housing sector. Forecasts suggest a favourable economic environment ahead, with expectations of declining interest rates and inflation. This backdrop is further bolstered by demographic trends, notably a projected increase in the number of 18-year-olds reaching a peak in 2030, which anticipates an additional influx of approximately 100,000 18 year olds in the next five to six years. While international student recruitment has slightly dipped, it remains robust, adding to the sector’s growth potential.  These predictions are broad brush national figures and need analysis for regional nuances.  Also, student number projections are based on assumptions around immigration policy and participation rate in Higher Education which might change with Degree Apprenticeships and the ongoing debate about the value of an undergraduate degree in certain subjects. 

Source: ONS

However, challenges persist, particularly in accommodating the growing student population. Issues of housing availability, especially for second and third-year students, have become pronounced, as evidenced by the housing pressures in cities like Durham. This situation raises critical questions about the roles of universities and the private sector in providing sufficient, affordable accommodation for returning students amidst uncertainties in international student numbers and the burgeoning domestic undergraduate population.

Looking ahead, the sector may experience stability in rental prices, contingent on inflation control. This stability presents an opportunity for developers to introduce more sustainable housing solutions. Yet, hurdles remain, including planning complexities, variable policy landscapes across regions, and the economic viability of refurbishing or repurposing existing student accommodations. The investment market shows a preference for high-quality new builds over older, repurposed properties, reflecting differing levels of risk and expected returns.

An interesting facet of the future landscape is the potential for cross-sector integration within the housing market. Historical models, such as 50-year concession deals, highlight the evolving nature of student housing as part of a broader living ecosystem, which might benefit from more flexible and inclusive planning approaches. For instance, experiences from places like Vienna, where housing developments serve multiple demographics and purposes, suggest that the UK could explore more open planning models. These could include intergenerational living arrangements, blending student housing with other residential formats to enrich community life and enhance mutual understanding among diverse groups.

In summary, the UK student housing sector stands at a crossroads of opportunity and challenge. The path forward involves navigating demographic trends, economic conditions, and planning complexities, all while embracing innovative housing solutions that cater to a diverse student population. The sector’s capacity to adapt and evolve in response to these factors will be crucial in shaping its future trajectory, making it an exciting and dynamic field to watch.

 

 

To learn more about student housing, book your ticket to our conference here.

https://www.studenthousingevent.com/

In the UK, the residential real estate sector is witnessing a significant transformation, driven by the imperative to address climate change and enhance social well-being. This evolution is characterised by a profound shift in Environmental, Social, and Governance (ESG) strategies, reflecting a broader commitment to sustainability and social impact. This blog delves into how developers are innovating to generate positive community benefit and are working tirelessly to reduce the carbon footprint of residential construction through various sustainable practices.

 

Social impact projects: pioneering positive change

 

Developers across the UK are increasingly embedding social impact projects into their core business strategies, recognising their role in fostering community well-being and resilience. These initiatives range from affordable housing schemes and community engagement programs to investments in local infrastructure and services. By prioritising social value, developers are not just building homes; they are nurturing vibrant, sustainable communities.

 

Affordable housing and community engagement

 

A pivotal area of focus is the development of affordable housing, aimed at addressing the acute shortage of accessible and cost-effective living spaces. By integrating affordable units into new developments, companies are directly contributing to alleviating the housing crisis, making communities more inclusive.

 

Developers are engaging with local communities through consultations and participatory planning processes. This inclusive approach ensures that new developments meet the real needs of residents, fostering a sense of ownership and belonging. Initiatives such as public spaces, community centres, and local job creation further cement the relationship between developers and the communities they serve.

 

 

Investment in local infrastructure

 

Beyond housing, significant investments are being made in local infrastructure, including schools, healthcare facilities, and green spaces. These projects not only enhance the quality of life for residents but also contribute to the economic and social vitality of local areas. By supporting sustainable local development, real estate companies are playing a crucial role in shaping resilient communities that can thrive in the face of future challenges.

 

Reducing the carbon footprint of residential construction

 

The construction sector is a major contributor to carbon emissions, but the tide is turning. Developers are adopting innovative strategies to minimise the environmental impact of residential construction, focusing on embodied carbon, the circular economy, and the reduction of construction waste.

 

Embodied carbon and circular economy

 

Embodied carbon refers to the CO2 emissions associated with the materials and processes involved in building construction, from extraction and manufacturing to transportation and installation. By prioritising materials with lower embodied carbon, such as timber or recycled steel, developers can significantly reduce the environmental footprint of new homes.

 

The circular economy model is gaining traction in the construction industry, emphasising the reuse and recycling of materials. This approach not only reduces waste but also conserves resources and minimises the demand for new materials. Developers are exploring ways to incorporate circular principles into their projects, from designing buildings for disassembly to using reclaimed materials in construction.

 

Reducing construction waste and innovating construction methods

 

The construction industry is notorious for generating significant waste, but innovative waste management strategies are beginning to make a difference. Developers are implementing rigorous waste sorting and recycling protocols, aiming for zero waste to landfill. The adoption of pre-fabrication and modular construction techniques is helping to reduce on-site waste, as components are manufactured to precise specifications in controlled factory settings.

 

Innovation in construction methods also plays a vital role in reducing the carbon footprint. Techniques such as 3D printing and the use of sustainable building materials like hempcrete are pushing the boundaries of what is possible, offering greener alternatives to traditional construction methods.

 

The road ahead

 

The evolution of ESG strategies in the UK’s residential real estate sector reflects a growing recognition of the industry’s responsibility to the planet and its people. By championing social impact projects and embracing sustainable construction practices, developers are not only mitigating their environmental impact but also enhancing the social fabric of the communities they serve.

 

This shift towards sustainability and social responsibility is not just a trend but a fundamental change in how residential real estate is conceived, developed, and inhabited. As we move forward, it is imperative that these initiatives continue to evolve, driven by innovation, collaboration, and a steadfast commitment to creating a better, more sustainable future for all.

 

The residential real estate sector is at the forefront of a transformative journey, redefining the meaning of home and community in the 21st century. Through the lens of ESG, developers are paving the way for a future where the built environment harmonises with the natural world, and where communities are empowered to flourish. This evolution of ESG strategies is not merely a response to the challenges of today but a visionary approach to building the sustainable, resilient, and inclusive societies of tomorrow.

Partnerships are increasingly recognised as a vital mechanism for adding value to the housing sector, particularly in addressing the affordable housing crisis in cities like London. The synergy between public and private entities, as explored in recent reports and analyses, reveals a multifaceted approach to tackling housing challenges.

 

Key elements of successful partnerships

In the realm of addressing the affordable housing crisis, the role of partnerships is becoming increasingly critical. The Future of London’s report, “Affordable Housing: Overcoming crisis through collaboration,” underscores this point by emphasising the essential need for cooperation between varied entities such as public bodies, private investors, and housing associations. This cooperation extends beyond just pooling resources; it involves aligning diverse objectives to focus on the shared goal of augmenting the availability of affordable housing. This alignment is not a simple task, given the different goals and operational models of these entities, but it is crucial for tackling the complexity of the housing crisis in a city like London.

 

The role of innovative finance models in these partnerships cannot be overstated. Traditional financing methods often fall short in addressing the unique challenges of affordable housing. This is where models like the Equity Impact Project or community land trusts come into play. They offer a means to ensure that investments in affordable housing are not only financially sustainable but also socially impactful. The report suggests drawing lessons from global initiatives, such as Nigeria’s Family Homes Funds, to glean insights into effective housing finance strategies. These international examples provide a broader perspective on how diverse financing tools can be adapted to local contexts, offering innovative solutions that might not be immediately apparent when looking only within traditional frameworks.

 

Another crucial aspect is leveraging the existing housing stock. This strategy involves retrofitting older buildings and employing technology to enhance the efficiency of housing allocation. For instance, projects like LB Waltham Forest’s Eco Show Home demonstrate the potential of existing resources being optimised for greater affordability and sustainability. Such initiatives show that with creative thinking and collaboration, existing buildings can be transformed to meet modern standards of efficiency and comfort, contributing to solving the housing crisis without the need for extensive new construction.

 

Community engagement and co-production are also vital components of these partnerships. When local communities are actively involved in the planning and execution of housing projects, the resulting developments are more likely to meet the actual needs and preferences of the residents. This approach goes beyond the traditional developer-led model, creating spaces that are not only physically but also socially sustainable. By incorporating the views and experiences of those who will live in these spaces, projects can achieve a deeper level of social value and long-term viability.

 

In summary, the success of partnerships in the housing sector hinges on a multifaceted approach: aligning the objectives of diverse stakeholders, innovating in financing, smartly utilising existing resources, and ensuring community involvement in the development process. This holistic approach not only addresses the immediate needs of housing but also contributes to building resilient and inclusive communities.

Challenges and considerations

One of the most significant hurdles in public-private partnerships in the housing sector, is the alignment of divergent objectives among the involved parties. Public entities typically prioritise social impact, focusing on community benefits, affordability, and sustainable development. On the other hand, private investors often have profitability and return on investment as their primary goals. This divergence can create challenges in forming and executing partnerships effectively.

 

To overcome these challenges, it’s crucial to find common ground and develop a shared vision. This process involves open communication and a mutual understanding of each partner’s goals and constraints. It’s about balancing the social responsibility of providing affordable housing with the economic realities of investment and development. For instance, a shared vision could involve recognising that long-term social stability and community development can lead to sustainable economic gains for private investors, while public entities understand the need for projects to be financially viable to attract and maintain private investment.

 

Moreover, fostering a culture of transparency and openness in sharing both successes and failures within the sector is vital for continuous learning and improvement. Public-private partnerships in housing are complex and often venture into uncharted territories, meaning that not all initiatives will be successful. However, by openly discussing what worked and what didn’t, stakeholders can learn from each experience. This transparency helps build trust among partners and stakeholders, leading to more effective strategies and collaboration.

 

By sharing these experiences, the sector as a whole can evolve, avoiding the repetition of past mistakes and better identifying strategies that lead to successful outcomes. Such an approach promotes innovation and adaptability, which are crucial in addressing the dynamic challenges of the housing sector. Aligning diverse objectives and embracing a culture of openness and learning are key to the success of public-private partnerships in housing.

 

The broader impact

The emphasis on partnerships in the housing sector reflects a broader shift in addressing urban challenges. By combining the strengths of different sectors, these partnerships offer a more holistic and efficient approach to tackling the housing crisis. They serve as a model for other cities facing similar issues, demonstrating the power of collaboration in achieving significant social and economic goals.

The value added by partnerships in the housing sector is multifaceted, encompassing financial innovation, efficient use of resources, community engagement, and the alignment of diverse objectives. As these partnerships evolve, they hold the promise of creating more sustainable, affordable, and inclusive housing solutions in urban areas.

To learn more about affordable housing, book your ticket to our conference here.

As we prepare for the Care Homes and Retirement Living Conference scheduled for 22nd November, we were fortunate to speak with Iain Lock. He serves as the event’s chair and is also the Managing Director of Health at Avison Young.

Iain is a Chartered Surveyor of over 40 years’ experience and has specialised in the healthcare sector for the past 34 years. He is a past Director of Christie & Co and Savills and is now Managing Director of Health at Avison Young, one of the largest teams in the sector in the UK. As an experienced advisor, agent and valuer Iain has been involved in significant transactions for clients including operators, developers, lenders and investors, covering trading business assets, investments and developments. He is an RICS Registered Valuer.

He has a particular interest in the retirement living with care markets and acts for many of the main participants in this growing sector.

Here’s what he had to say about the current situation in the retirement living with care sector.

How is the retirement living with care sector currently performing?

The first thing to say is that this sector is strongly aligned to the residential market. As a result, the sales of apartments within schemes will reflect what the residential market is doing. That doesn’t mean that prices necessarily fall or that demand isn’t there, it just means that the ability for the elderly to make the move is somewhat slowed. Currently, sales have slowed and when that happens, the sector is holding more stock. Its finance costs are increasing as a result and because of the deferred management fee mechanism that’s in the leases, it means income slows as a result of a reduction in resales. And that’s what we’re seeing at the present time.

That has a knock-on effect to the speed of new development which will be slowed whilst the operators, developers and investors are waiting to sell the stock that they’ve already developed or the stock that’s coming through the construction pipeline.

We’re seeing fewer land deals taking place and this obviously has an impact on price. Vendors are not selling because they can’t get the right value. So, they’re holding back and buyers are holding back because they think land price should come down and vendors are not prepared to sell at a lower price. As a result, we’re seeing a period of stagnation in the new land acquisition market.

Finally, there is great consternation over construction costs – the inflation in costs that’s been going on for the last 18 months or so is still there. It’s difficult to know if you go to tender precisely what you can achieve and that has a build cost impact. It also makes it more difficult to predict profit so we’re seeing fewer new builds which has an impact on the whole sector.

 

What can we expect in 2024?

I think we’ll see a slow start to 2024 in terms of activity around new development, sales and land acquisition. You’d like to think that that might start to ease as we go through 2024, particularly if the residential market starts to pick up a little bit, if interest rates come down, then I think we will see it freeing up at the top end of the market, which is where a lot of the elderly market sit.

There’s no doubt that investors want to press on in this sector. Money has been raised and the market wants to start utilising this money in profitable projects. You know, this isn’t, this isn’t something that’s going to stop this market. The current economic outlook is putting a dampener on it rather than stopping it. It will come back.

The demand is there and there’s great confidence in this sector overall, but it’s not currently bucking the current economic trend.

 

Does need in the private sector marry up with take up and if not, why?

The subject of how well the private sector aligns with the demand for care home and retirement properties is complex. One key variable is ‘need,’ which becomes crucial in the planning process, particularly when considering building on Greenbelt land. From a commercial standpoint, the location of such facilities must also be in sync with the need.

We use various metrics to assess need, such as the Housing LIN Toolkit, which is preferred by local authorities, and the ‘Activities of Daily Living’ metric by the King’s Fund. We also draw comparisons with countries like the U.S., Australia and New Zealand, where such properties are more widely adopted. Our findings suggest a prevalence rate for retirement living with care accommodation of 3-5% for the 65+ population would reflect the need (GLA). The UK is at about one tenth of that at present.

Despite this apparent need, the actual take-up rate of these facilities doesn’t match up. There are several reasons for this discrepancy. Firstly, people are cautious about moving out of their family homes and take time to make such a significant life change. Secondly, homeowners aim to sell their existing property at the best possible price, which isn’t always feasible.

Another factor is the quality and design of the stock being built. Questions remain about whether the size, quality, and outside space meet consumer expectations, especially after the COVID-19 pandemic highlighted the importance of outdoor spaces. Improving these aspects could make the units more attractive and help align take-up with need.

Raising awareness is another challenge. The sector must not only prove the need for these facilities but also make the public aware of what they offer. Increased awareness would naturally spur more development, lowering finance costs and enabling quicker construction of new facilities.

Lastly, we must consider tenure choices. The sector is examining whether the types of tenures offered are broad enough to attract a diverse demographic. This is an area that requires more work and flexibility.

In summary, while there’s a substantial and quantifiable need for retirement living with care accommodation, several factors, from decision-making timelines to design and public awareness, contribute to the slower-than-expected take-up. Both commercial and societal angles need closer examination to better align supply with demand.

 

Are the tenure choices available those that the elderly market most desire?

Tenure choices for elderly housing in the UK have largely been influenced by legislation and investment trends. Initially, the focus was on selling units to recycle capital for future developments. Recently, however, there’s been a partial shift toward rental models, appealing to investors seeking steady cash flows.

Despite this attempted shift, the majority of the market—those who have built wealth through home ownership—are hesitant to rent. These individuals, often too young to require any significant level of care, prefer the security and benefits of ownership. Therefore, the current emphasis on selling rather than renting seems aligned with this demographic’s preferences.

However, there’s a gap in addressing the needs of the ‘mid-market,’ those who cannot qualify for affordable housing but can’t afford high-priced facilities either. Current entry costs often exceed £400,000, a stark contrast to the average house price of around £270,000-£280,000. Solutions like shared ownership or ‘life tenancy’ arrangements, where one buys an equity share or a set number of years of occupation, are being considered to address this gap. These models could offer a more flexible approach, but they come with their own challenges, especially in accurately predicting how long tenants will stay.

ARCO is exploring legislative changes to offer more diverse tenure options, which is crucial for matching the high demand with adequate supply. The disconnect between need and take-up is partly due to limited tenure options and solving this could pave the way for better alignment between supply and demand in the sector.

 

Is the sector set to expand, can it be the next “big beds sector”?

While the sector is drawing attention from investors in markets like hotels, student housing, and build-to-rent, it’s not poised to become the next ‘big beds’ sector anytime soon. This is primarily because the decision-making process for elderly individuals differs significantly from students or young renters. The elderly market is not yet ready to embrace mass renting, which is currently the investment focus.

That said, it’s essential to resolve tenure, pricing, and take-up issues for significant expansion. Also, delivering care services adds complexity, as most investors are not hands-on care providers. Partnering with care operators, especially when higher levels of care are needed, remains a challenge. Unlike the student housing sector, which saw rapid transformation from substandard to premium accommodation, growth in the elderly housing with care sector will likely be incremental.

Another critical element is that the industry still needs to find an optimal operating model that combines care, hospitality, and deferred management fee income. Although the sector has been growing steadily, it’s still in its infancy in many aspects. Investors may find this sector attractive but are still struggling to fully engage, partly because of these unique challenges.

While the sector is expected to grow, it faces unique hurdles, from customer preferences to care delivery, that prevent it from aligning closely with other ‘big beds’ sectors. Although there are obstacles, the growth potential remains, but it will require more time and innovation to reach its full promise.

 

Any final thoughts?

Looking ahead to 2024, I expect the year to be easier than 2023 but still challenging, particularly in its early months. The economy will grapple with inflation and high interest rates, which will induce caution across all property markets, including elderly housing. While investment is waiting on the side-lines, it may take another year to see significant ‘green shoots’ in this sector.

However, I’m optimistic that pent-up demand from the elderly population will eventually fuel rapid growth. Many have delayed moves due to economic uncertainty, but this demand won’t disappear. It will only be deferred, and when it does come flooding back, it will expedite the sector’s recovery, much like what we observed in 2013-14.

It’s crucial to highlight the broader implications of a sluggish elderly housing market. When the elderly stay in their homes without proper care, the strain extends beyond just this sector. The impact ripples across healthcare systems, resulting in more frequent hospital visits and a slower discharge rate due to lack of at-home care. Moreover, it results in ‘house blocking,’ where larger family homes remain occupied by the elderly, affecting housing availability for younger families.

Although the sector faces near-term challenges, there’s significant pent-up demand that promises future growth. This growth is not only beneficial for the sector but also essential for the broader economy and healthcare system. We need to continue nurturing this sector for the well-being of society as a whole.

 

To learn more about care homes and retirement living, book your ticket to our conference here.

What can the UK Residential Sector learn from other countries in terms of delivery, product and perception?

As we gear up for our Residential MMC (Modern Methods of Construction), conference on 12th October, we had the opportunity to interview Ele George. She is the chair for the event and the Founding Director of Elevate.

Ele George is an Engineer with a passion for all things innovative. As a long-time ‘MMC’ evangelist and award-winning sustainability leader, Ele advocates that holistic system-thinking based approaches to design, development, manufacturing and construction are the answer. After two decades of experience specialising in sustainable construction, and in the belief that we need to build in a better way, Ele founded built environment consultancy, Elevate, in 2021. Elevate aims to tackle challenges facing the sector including poor productivity, lack of technological adoption, skills shortage, and the climate emergency. Her current clients allow her to work with a wide range of stakeholders to develop sustainable innovative solutions.

 

What are the most significant benefits of adopting MMC in the UK?

Before we look at this, there is a massive caveat that just because you adopt MMC doesn’t mean you’re going to achieve the benefits of MMC. It needs deploying correctly. A key way to do this is to engage with the main contractor and supply chain early on in the process. By doing this you can clearly scope responsibilities and discuss expertise, ensuring that deployment has the best possible chance of success. If this process is adhered to, the benefits include an increase in speed of delivery, safety and arguably the most significant – a measurable environmental and sustainability impact.

One less well-documented benefit (which will be also covered at the conference) is the increase of social value. Examples of this include offering people with disabilities employment in factories, or shift patterns for those with caring commitments. These are just 2 small examples, the potential for additional social value is huge.

Finally, when there is more data available, we should see that the building performance of MMC is much higher than traditional methods.

 

What is at the cutting edge of product and technology?

There are so many amazing innovations in this sector. Things like AI and robots are one end of the spectrum where we’re seeing innovation that includes generating and building components for homes. We’re also seeing fully 3D printed homes!

Collaboration is the most important, and exciting, element here. The people at the cutting edge are collaborating with competitors so that they can offer an increasing number of products, focused on where their expertise lies. People are looking for solutions that are interoperable so by collaborating, risk is diluted and the possibility for growth is amplified.

 

Why is the UK behind?

We’re not necessarily behind overall, in fact we’re ahead in some areas.

We are behind some of our European counterparts with our approach to embodied carbon and bio-based materials. For example, we’ve seen an increased drive in European and North American markets to develop capabilities for using materials such as straw, and timber to good effect.

In the UK we’re not thinking about this enough. 

In London, for instance, there’s (understandably) a lot of mistrust about using timber but there needn’t be. Of course, there’s a place for steel and concrete, but there are other materials that we need to consider such as cork, hemp and bamboo, and other countries are leading the sector with this way of thinking. The regulatory landscape in the UK still favours tried and tested carbon-intensive materials, making the use of bio-based materials more complex and expensive. This is disincentivising innovation and use despite demand for lower carbon products obviously increasing. The French government has established legislation requiring all new public buildings to be built from at least 50% bio-based materials from 2024.

France, Belgium, Germany and the Netherlands are using manufactured panel systems for multiple types of projects including schools and residential schemes. They’re even using the same components for retrofitting. We are still developing this option in the UK, currently.

We are ahead of the curve with our strategic policy making and planning and our approach to adopting DfMA, platforms and digital twins (which I will come to in a moment). The UK developed the MMC definition framework, which has now been adopted by a number of countries across Europe, and including even further afield in Australia and New Zealand.

 

Who’s ahead of the curve with MMC?

Those thinking about “kit of parts” – instead of only thinking about a large format panels and modules, it’s parts that can come together to form the overall solution. This is where collaboration is so vital. By creating kit that can be used in conjunction with other components, MMC can be viewed more holistically, creating better end products. We’re not quite there yet but there are companies leading the way. Those that are prepared to create kits that works with other solutions are the ones that are going to succeed.

 

Why is MMC so important for retrofit as well as new build, and why does this element sometimes get forgotten?

I’ve spent two decades in the new build arena so I’m guilty of focusing on them historically, but over the last two years I’ve been focusing on retrofit – taking lessons from new build to retrofit. There’s a massive impact from older buildings on the environment and people’s health and wellbeing. We need to retrofit 28 million homes by 2050 if we’re going to hit net zero. (UKGBC)

On top of this, with the cost-of-living crisis people have, rightly, been looking at their energy bills more, so retrofitting is of crucial importance. Money isn’t the only concern that people have. We’ve become increasingly aware of health and wellbeing, with a particular focus on air quality at home (which also has a financial impact on the NHS). By retrofitting homes people will save money and improve their wellbeing.

Embodied carbon would also be lower as those houses are already built and don’t need demolishing and starting again, which is a huge plus for the environment. Retrofit might not be the most popular choice, especially when compared to the allure of a brand-new building. However, its benefits are profound. Not only can it significantly lower energy costs and transform homes into comfortable, healthy spaces as mentioned earlier, but it also has the potential to uplift entire communities without the need for displacement that comes with demolition.

Due to the significant contribution that the embodied carbon of buildings makes to the climate emergency, there is a need to introduce legislation towards mandatory reporting of carbon emissions in the built environment, along with limiting embodied carbon emissions on projects.  

The introduction of Part Z, legislation that mandates the reporting of (and set limits on) embodied carbon emissions in the built environment, will help to focus the attitudes away from preference for new build and onto retrofitting (where this is a viable option). Such regulations becoming a legal requirement as part of Building Regulations will help to ensure that everyone plays by the same ‘sustainability’ rules. This is to ensure that the whole impact of a building is accounted for and we have clear and measurable ways of achieving the emissions reductions needed to get to net zero.

 

What’s missing from the MMC framework?

A key part of MMC is offsite construction of modules, panels and components as described in the MMC definition framework, but there’s so much more to ‘MMC’ than that.  For example, DfMA or design for manufacturing assembly (and disassembly) is about embedding efficiency throughout a product’s life-cycle, including design, production/manufacturing process, transportation to site and assembly on site. Platform approaches apply DfMA principles to offer interoperable, repeatable common components.

We need to be more productive with both our design and construction processes. We don’t need to keep reinventing the wheel to make MMC work. By making a lean, repeatable process costs will be kept low and the chance of hitting net zero is increased.

Overarching all of this is a digitalised approach containing the vital golden thread of information that is needed to ensure the building is designed, built, used, and maintained (and eventually deconstructed) in a safe, sustainable, and cost-effective way. Digital twins are transforming the way we design, operate, and experience buildings. Leveraging real-time data analytics of user-behaviour, interactive simulations, and predictive capabilities, digital twins allow building users to optimise building performance, enhance user experiences and create sustainable, future-proof and resilient spaces.

In my opinion, ‘MMC’ isn’t complete without integrating digital transformation. Every building should come with its unique data set or a ‘building passport’ to optimise its use.

  

Any final thoughts?

We need to adopt MMC through a systems-thinking lens. There are multiple problems that all need to be addressed at once and we need to be mindful that we’re not trying to solve one issue to the detriment of another. By taking a holistic, collaborative approach we are more likely to solve, or at least address, wicked problems like our aging housing stock, pressurised NHS, the skills shortage and the climate and biodiversity crises.

To learn more about MMC, view our dedicated site and book your ticket to our Residential MMC conference here.

As the global climate crisis continues to unfold, it’s never been more critical to implement sustainable practices in every sector of our society.

One method increasingly adopted by local authorities to enhance their sustainability strategy is the concept of Biodiversity Net Gain (BNG). However, there seems to be a considerable misunderstanding of what BNG entails, its potential benefits, and how it can be effectively deployed. This article seeks to demystify this concept.

What is Biodiversity Net Gain (BNG)?

Biodiversity Net Gain, at its core, is an approach designed to improve biodiversity in a particular area after a development project. It involves ensuring that the ecological environment is in a better state post-development than it was pre-development. The term ‘biodiversity’ encapsulates all aspects of life, focusing on the variety of organisms, their genetic differences and the intricate ecosystems they form.

How does it work?

A critical aspect of BNG is the use of a metric to measure biodiversity both before and after a development project. This metric helps to quantify the impact on biodiversity and offers an objective way of demonstrating net gain. If the metric shows that biodiversity will be adversely impacted by a project, developers are required to make alterations to their plans, incorporate mitigation strategies, or create new habitats to offset the loss.

To further this cause, the UK government is working to make Biodiversity Net Gain mandatory for development projects. As per the proposed measures, developers will need to show at least a 10% increase in biodiversity post-development, thus encouraging more thoughtful and sustainable project planning and execution.

What are the benefits of Biodiversity Net Gain?

BNG is not just beneficial for the environment. It also brings a host of advantages for local authorities. By adopting a BNG approach, local authorities can ensure their developments contribute positively to the local environment, boost their reputation as eco-conscious entities and enhance community relations. Furthermore, it encourages developers to be proactive in their conservation efforts, stimulating creativity and innovation in sustainable development practices.

However, implementing Biodiversity Net Gain is not without its challenges. It requires a comprehensive understanding of local ecosystems, extensive planning, careful implementation and accurate evaluation. The effectiveness of BNG is highly dependent on these aspects, with poorly planned or executed strategies potentially causing more harm than good.

Learning from successful BNG initiatives is crucial for local authorities looking to adopt this approach. For instance, the Warwickshire County Council has set an excellent example, using BNG to guide development while considering local biodiversity objectives. Their strategic approach has led to not only a significant improvement in local biodiversity but also an increase in community engagement and public support.

Despite the challenges, Biodiversity Net Gain is a powerful tool, offering a practical way to contribute positively to the environment and climate goals while also reaping social benefits. It represents a significant stride in sustainable development and provides a pragmatic and measurable means of ensuring that local development projects leave the environment in a better state than they found it. As we continue to confront the climate crisis, such innovative and forward-thinking strategies will play an increasingly important role.

As developers increasingly adopt BNG, they have a unique opportunity to show they’re not only protecting the environment but also positioning themselves as leaders in sustainability, demonstrating their commitment to both their communities and the broader global context. Ultimately, this will help to build a more sustainable future for us all.

 

Want to know more about BNG and its necessity for sustainable development? Why not attend our UK Resi Planning Conference, in its 17th year. Book your ticket today.

Now is the time for modern methods of construction (MMC) in the Residential Market.

With momentum building towards our Residential MMC conference on the 12th of October, we spoke with Rob Littlewood, Partner at Akerlof.

Despite falling into construction cost management by chance rather than choice, after 18 years in the industry, Rob hasn’t looked back.

A fervent adopter of pre-manufactured solutions, Rob is enthusiastic to modernise delivery through the use of technology, which has led him to harness the power of automation to create cost estimates, cost plans and even bills of materials in manufacturing.

 

Can you give us an overview of what exactly modern methods of construction entails?

MMC is really an umbrella term used broadly to describe contemporary innovation. It includes new technology, off-site manufacture and more efficient processes to deliver more effectively. Historically the term MMC has had a really broad range of terminology that’s been used interchangeably, confusing the market. In 2019 what was the MHCLG developed a definition framework which categorised the different types of MMC into seven key areas. It’s great as it enabled a future-proofed range of MMC used in homebuilding to be better understood with consistent terminology. It spans all types of pre-manufacturing, site-based materials and process innovation.

 

What are the advantages of modern methods of construction?

I think to some extent it depends on the context and what it is you are trying to achieve. A lot of people still tend to think about the potential benefits at a project level and refer often to the opportunity it brings to deliver faster, to a greater quality and with greater certainty. Set in the right context, and as an appropriate response to value drivers, this is absolutely correct, but equally, shoehorning higher levels of pre-manufactured value (PMV) into a project or client organisation that isn’t suited, or indeed ready, is potentially harmful to overall outcomes. However, done right and the realisation of benefits could be huge, including those at industry and societal level as well, such as health and safety, reduced carbon, waste reduction and mitigation of the massive skills and supply shortage that our industry faces. There are also parts of MMC that feed into the levelling up agenda – projects being delivered in one place could have 50% or more of its PMV constructed in a series of different factories across the country, supporting the distribution of wealth across the UK. The challenge is responding appropriately to the competing tension between UK political ambition, and more localised objectives such as local employment provisions which might be pre-requisites to being granted planning consent.

 

Why is 2023 so important for this?

We’re part of an industry and sector that has some big picture challenges within what can be quite a complex operating environment. The last year saw rampant inflation, major global events, and an ever-changing consumer landscape which have all combined to create a market that’s exposed a lot of our usual practices as largely inadequate. Viability in resi is now the most challenging it’s been for some time and the sector needs to think a bit differently to square the circle around cost, expectation and new regulation.

From work I’ve been involved in, most standardised dwelling designs with accompanying FFE platforms will respond to 80% or more of a developer’s pipeline. So residential delivery in 2023 will start to look different – I think we will start to see more and more investment into product platforms. My suspicion is that ‘business as usual’ may no longer be acceptable to developers and investors, so there will be a drive to move to new approaches offering high variety & certainty with lower carbon through digital product development and an MMC supply chain that sits alongside.

From what I’ve seen, sustainability and performance of the type many large-scale developers and investors are stating they will achieve, will also almost certainly require the efficiency and waste reduction which comes with higher levels of pre-manufacture.

 

How do you address concerns about the quality and durability of buildings constructed using modern methods of construction, particularly in comparison to traditionally built structures?

There’s no doubt that non-traditional building brings challenges in terms of demonstrating that homes built via alternative methods will be both durable and of the very highest quality.

Residential projects which utilise MMC have a greater propensity to be manufactured at least to some extent off-site. So, buildings or components can be produced under controlled factory conditions using the latest digital measuring and control technology. Quality control is therefore much easier to achieve than among all the variables on live construction sites.

Due diligence is if course critical and it’s important to consider what warranties are available to cover a particular supplier (E.g. LABC, NHBC, Premier, Checkmate), and that products have no less than 60 year durability (equivalent to two mortgage terms).

There are accreditations, such as BOPAS (Buildoffsite Property Assurance Scheme) which provide reassurance to clients that products are readily saleable for a minimum of 60 years and have been through a rigorous quality checks to be granted this.

But even with all this in place, there is still ‘practical deployment’ – combining off-site with on-site still needs cultural and practical alignment, or the opportunity for achieving the very highest quality benefits won’t crystalise and market confidence will suffer as a consequence.

 

How do you see technology playing a role in modern methods of construction? Are there any particular technologies that you believe will be transformative?

The adoption of technology is fundamental to enabling an MMC approach and there’s a big difference between what is really a ‘site offsite’ and genuinely modernised manufacture and assembly.

I believe we’re starting to see some great examples of technology doing the ‘heavy lifting’ so we can focus all our creative minds in a different way.

Real ‘advanced manufacturing’ will form part of a completely digitalised process – if we can get to a greater level of maturity around generative design, which is linked to automated, full digital twin generation, itself linked to robotic and computer controlled digital manufacturing, which is then all wrapped by enterprise resource planning……that’s the future and it’s this, with other emerging technologies which has the potential to really transform the construction industry.

 

What does the future hold for MMC?

Recent, well publicised MMC business failures risk damaging market confidence, but I think the future remains bright, as most of these were not necessarily based on failings in the sector. We’re still seeing significant investment in MMC from a range of sources which include major players – this week saw the announcement from TopHat of further £70m investment from both Aviva and Persimmon, which is a major show of confidence in the Cat 1 MMC market.

MMC is also starting to become a bit more characterised by the vertical integration of tier ones or house builders and I see this increasing. Great examples like JRL modular, BAM, ISG, Sisk and Hill Group are all showing commitment to different systems and suppliers which suggests a growing proportion of new homes will be delivered via MMC in the coming years. Demand is strong and growing, driven now more than ever by a desire to build more sustainably and efficiently.

There is always a slight danger in my view that people will see MMC as a silver bullet and in doing so it we risk looking too narrowly at the potential benefits. Adoption of greater levels of MMC in the future can and will contribute to some of the systemic challenges we face as a sector, but at the same time the question shouldn’t always be ‘what MMC Categories will make my building fastest or cheapest’. It should be 1) what are we trying to achieve? and then 2) how do we tailor our approach to delivery to give us the best chance of meeting those objectives?

‘Greatest pre-manufactured value’ won’t always win, but selecting appropriate MMC categories in the context of both the project and funding drivers will start to pay dividend as maturity in the sector increases.

 

Any final thoughts?

My view is that it’s a very challenging, but exciting time for the industry. If we can collectively use our supply chains and expertise in a way that refines delivery in the construction sector, I can see a much brighter place over the next five years.

But manufacturing business models need to be alive to the realities of residential development in order to thrive. The activity in the market, particularly the consolidation through Contractors, signals a maturing of the sector and one which we can expect to grow in confidence over the coming years. I’m looking forward to seeing where it goes from here.

 

To learn more about MMC, bookmark the link below – info on the conference agenda and booking your ticket will be updated in the coming weeks.

https://www.ldevents.net/resi-MMC/

Ahead of our 14th annual Student Housing Conference on 9th May 2023, we spoke with Richard Ward, Head of Research at StuRents, to discuss the current state of the student housing market.

Richard Ward heads up the research team at StuRents and focuses solely on the student accommodation sector.

Since joining StuRents in 2016, Richard has become a leading commentator in the student housing sector and regularly presents StuRents’ proprietary data to industry stakeholders, including investors, developers, lenders, and operators.

Richard is also responsible for providing data and analyses to StuRents’ customers, helping clients to gain unrivalled insights into the sector. Richard is passionate about improving the quality of data in the sector to help contribute to more informed decision-making.

How has demand in student housing changed since the onset of Covid?

During Covid years, we saw some universities taking on too many students. This was primarily due to grade inflation – with many getting higher grades than predicted. Due to this, some of the more prestigious universities took on more pupils than they would have done pre or post pandemic.

As a consequence, post-Covid, we saw a scaling back of recruitment to counteract this, so year-on-year numbers look like they’re contracting at higher tariff institutions.

Interestingly, this reduction has been at the expense of domestic students, whilst the international student base continues to grow. One reason for this is likely to be the higher tuition fees internationals pay, whilst those for domestic students have been capped, making the former a more attractive proposition for universities, particularly in an inflationary environment.

For example, 2022 saw a decline in UK acceptances of 0.6%, yet at the same time, international acceptances increased by 15.7%. China and India are two big markets, with acceptances from China up by over 20% and their Indian counterparts up by 130% compared to 2019.

This has the potential to change the demand profile for purpose-built student accommodation (PBSA).

What impact has this had on the availability of student beds?

The impact has been significant. On a micro level, for the first time, the University of Glasgow has taken away their first-year accommodation guarantee. This is problematic, to say the least. Students have been put in a difficult position, which could impact the reputation of a prestigious university.

On a more macro level, demand has been outstripping supply due to the increase in student numbers.

Is the pipeline changing to meet demand?

Yes and no. Planning application has definitely slowed, and we’re at relatively low levels by historical standards. In 2016, there were a lot more applications being submitted and approved. Since then, it has slowed. (Finding land, build costs, financing, and alternative use cases are all factors.)

Source: StuRents

In practical terms, this means that the number of beds being put forward has declined. It’s a perfect storm as demand is going up, but the growth in supply is falling. And while there are locations bucking this trend, the UK market is not growing fast enough.

If we look again at a micro level, Norwich has seen an increase in PBSA supply of >10% this year, but demand hasn’t increased. On a national level, though, demand is outstripping supply.

Another area of concern is that of the price points of new beds. Most of the new supply must be at a higher price point to make it viable, which prices out a lot of the domestic market. Therefore, much of the new stock is highly reliant upon the international market. For domestic students, this is a major issue. UK demand is growing, but where are those domestic students going to live?

The other interesting thing about pipeline is that a lot of the beds are studios. Generally, Chinese students do prefer this setup, but they are only a fraction of the market. Domestic students want larger, cluster-style accommodation, which for the most part, is not being proposed in the required numbers.

What does the future hold for student accommodation?

Rising demand and restricted supply growth are likely to lead to continued rental growth, with cash-strapped domestic students likely to be hit the hardest. For investors, understanding local market conditions is crucial as the national picture is not represented across all locations.

Any final thoughts?

China is the largest international market, but with India closing the gap, it will be interesting to see how these changes will impact on what types of accommodation will be needed.

Another potential challenge is the future changes to EPC requirements. This will mean that any HMO has to have a rating of minimum C. If landlords are not able to upgrade their properties in time, there is a potential for the supply of student accommodation to tighten, which will affect domestic students more than international as many domestic students prefer the setup of an HMO.

Overall, there are some huge issues facing domestic students, specifically around affordability, but with demand continuing to increase, investors could do worse than examining this marketplace.

 

To learn more about student housing, book your ticket to our 14th annual Student Housing Conference here.