Modular technology solutions will be crucial when it comes to helping institutions build greener portfolios, says Andrew Shepherd, managing director of modular home builder TopHat
Institutional investors – be they banks, insurance companies or pension funds – have invested heavily in residential real estate over the past five years or so. However, as they respond to increased post-Covid ESG scrutiny, investors must quickly find ways to reduce the emissions associated with their loan books and portfolios – paving the way for the new era of precision-engineered 3D modular homes.
The built environment contributes 42% of the UK’s carbon emissions
The carbon associated with the traditional construction and operation of homes is enormous. The UK Green Building Council estimates that the built environment accounts for 42% of all UK CO2 emissions, while the Committee on Climate Change puts operational emissions – emitted by utilities such as electricity, heating and water – from households for a further 20% .
3D modular homes – where energy-efficient homes and apartments are manufactured along production lines – offer institutions a fast, high-quality, green solution for growing housing portfolios and generating long-term, secure income streams, while making real progress on their ESG commitments.
Take Build-to-Rent, the flagship of residential construction in recent years, as an example. According to CBRE, companies have recognized an opportunity to take advantage of strong long-term market fundamentals – such as .
Investors need to deliver assets that are green and future-proof
These market conditions present a significant opportunity for 3D Modular, particularly given that investors are set to invest £75bn in residential property over the next five years, according to Knight Frank.
Tighter building and energy standards are causing portfolios to brown at an alarming rate without costly retrofit programs. As such, investors must focus now on providing assets that are both environmentally friendly and future-proof against upcoming government regulations — like changes to Part L. Embodied Carbon, the elephant remains in the room.
For those delivering residential property, modular technology is proving to be a green haven for investors and a real solution to the UK’s lack of future-proof housing stock. In fact, TopHat’s use of green wood in construction embodies only 35% of RIBA’s 2030 carbon targets.
Since TopHat houses are equipped with air source heat pumps as standard, energy costs are much lower than traditional houses and energy efficiency is much higher. Combined with photovoltaic cells, houses can be operated at a fraction of the cost of conventionally built houses.
Additionally, it’s widely accepted that houses with the lowest energy bills are likely to do best for investors because tenants are better able to afford to live in them.
The scalability of 3D Modular gives consistency throughout the home build, and the use of precision engineering and data point control nearly eliminates construction waste on a large scale.
That’s why we decided to open Europe’s largest modular residential complex. The 650,000-square-foot facility — the size of 11 football fields — will be able to build one house per hour. Once operational in 2023, the high-tech, state-of-the-art facility will deliver 4,000 homes per year for a mix of investors, developers, housing associations and municipalities.
As government policies continue to reflect the requirements of a net-zero future, 3D Modular enables both people’s homes and investors’ capital to be future-proofed against an increasingly green policy landscape.
The need for this is urgent. Due to increasingly strict financial disclosure agreements, which now also include CO2 intensity and climate risk, the use of modular technology will determine climate reporting. Institutions backed by large pools of capital hold the key to decarbonizing homes by unlocking innovative home construction methods. By partnering with innovative builders with modular precision sensor technology integrated into their organizational structure, investors can achieve their own ESG goals and deliver high-quality, low-carbon homes to help solve the broader housing and environmental crisis.